Longeveron Inc. 2022 Q3 Form 10-Q Summary
Business context and reporting period
Longeveron is a clinical-stage biotechnology company developing Lomecel-B, an allogeneic medicinal signaling cell therapy, for hypoplastic left heart syndrome, aging frailty and Alzheimer’s disease. The unaudited filing covers the three and nine months ended September 30, 2022, compared with the corresponding 2021 periods.
Financial condition and key metrics
| Metric | Three months ended Sept. 30 | Nine months ended Sept. 30 |
|---|---|---|
| Revenue | $0.3 million, versus $0.2 million | $1.1 million, versus $1.1 million |
| Gross profit | $0.1 million, versus $0.2 million | $0.6 million, versus $0.5 million |
| Gross margin | Approximately 35%, versus 71% | Approximately 50%, versus 48% |
| Operating loss | $5.2 million, versus $4.9 million | $12.8 million, versus $13.4 million |
| Net loss | $5.2 million, versus $4.9 million | $14.4 million, versus $13.0 million |
| Basic and diluted loss per share | $0.25, versus $0.25 | $0.69, versus $0.70 |
| Net cash used in operating activities | Not separately provided | $11.7 million, versus $8.4 million |
- Clinical trial revenue was $0.9 million for the first nine months, up 58%, while grant revenue declined 57% to $0.2 million. Revenue is primarily from the Bahamas Registry Trial and grants; the Company has no FDA-approved product.
- Cash and cash equivalents were $13.6 million at September 30, 2022, down from $25.7 million at December 31, 2021. Short-term investments were $8.7 million, providing approximately $22.3 million of cash and investments combined.
- Working capital was approximately $19.5 million. Total assets were $30.5 million and stockholders’ equity was $24.6 million.
- The Company reported no conventional debt or credit facility. Liabilities primarily consisted of operating lease liabilities of approximately $2.7 million present value, a $1.4 million estimated lawsuit liability, and other operating liabilities.
- Accumulated deficit was $58.3 million. The Company has recurring operating losses and negative operating cash flow.
Material changes versus the prior comparable periods
- Third-quarter revenue increased 14% to $0.3 million, driven by a 28% increase in clinical trial revenue, but gross profit declined 44% because related costs increased faster than revenue.
- For the first nine months, revenue was essentially flat. Higher clinical trial revenue offset lower grant revenue.
- Research and development expense increased 14% for the nine-month period to $6.1 million, primarily reflecting higher non-grant-funded clinical activity, trial expenses and manufacturing costs.
- General and administrative expense declined 23% to $6.5 million, primarily because equity-based compensation decreased by approximately $2.3 million.
- Selling and marketing expense increased to $0.8 million from $0.1 million, largely due to investor and public relations expenses.
- Operating cash use increased by $3.3 million, while 2021 benefited from $26.7 million of IPO financing. In 2022, financing cash flow was a $0.3 million use, primarily for taxes on vested RSUs.
- The nine-month net loss included a $1.4 million accrual for a proposed securities class-action settlement. The 2021 period included $0.3 million of PPP loan forgiveness, which did not recur.
Guidance, outlook, risks and unusual items
- Management expects operating losses and cash needs to continue as clinical development, manufacturing scale-up, regulatory and intellectual-property activities advance.
- Management stated that existing cash and cash equivalents should fund operating expenses and capital expenditures through the first half of 2024. The notes state that cash and investments should fund requirements for at least the next 12 months; actual runway may be shorter than estimated.
- The Company expects to require additional capital and has no credit facility or committed financing source. Future equity or debt financing could dilute stockholders or impose restrictive covenants.
- The ELPIS II Phase 2a HLHS trial continued enrolling toward 38 patients, with all seven planned sites activated. The Japan Aging Frailty Phase 2 trial initiated in October 2022, and the Alzheimer’s Phase 2a trial reached full enrollment of 48 patients in October 2022.
- The 70-patient ARDS Phase 1 trial was discontinued because changes in the disease landscape made enrollment infeasible. The filing states that COVID-19 disruptions had not materially affected the completed Phase 2b Aging Frailty, Phase 1 Vaccine, Phase 1 Alzheimer’s or Phase 1 HLHS studies.
- The proposed securities litigation settlement of approximately $1.4 million remained subject to court approval. The Company accrued the amount as of September 30, 2022, and expected approval in 2023.
- Deferred revenue included approximately $0.4 million related to the discontinued MSCRF-TEDCO ARDS program, which is expected to be reversed when the funds are returned.
- As of September 30, 2022, the Company had 301,763 unvested RSUs, 402,036 outstanding stock options and approximately $3.2 million of remaining unrecognized equity-based compensation.
Most important facts for investors to verify
- Whether clinical-trial enrollment, data readouts and regulatory interactions for HLHS, aging frailty and Alzheimer’s progress as planned.
- The pace of operating cash burn and whether the stated cash runway through the first half of 2024 remains achievable.
- The timing, structure and dilution associated with any required future financing.
- The final court-approved amount and timing of payment for the securities litigation settlement.
- Whether clinical trial revenue from the Bahamas Registry Trial is sustainable and how the decline in grant funding affects future revenue.
- The impact of the ARDS program discontinuation, deferred-revenue reversal and ongoing clinical and manufacturing commitments.