Nuwellis, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; financial statements are unaudited. Nuwellis develops and commercializes the Aquadex ultrafiltration system for patients with fluid overload unresponsive to medical management.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data and margins.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Net sales | $2.075 | $2.213 | $3.901 | $4.139 |
| Gross profit / margin | $1.147 / 55.3% | $1.063 / 48.0% | $2.214 / 56.8% | $2.165 / 52.3% |
| Operating expenses | $6.169 | $5.364 | $13.087 | $10.882 |
| Operating loss | $(5.022) | $(4.301) | $(10.873) | $(8.717) |
| Net loss | $(4.845) | $(4.286) | $(11.330) | $(8.759) |
| Basic and diluted loss per share | $(3.65) | $(40.67) | $(9.23) | $(83.12) |
| Net cash used in operating activities | Not stated by quarter | $(11.358) | $(8.765) |
At June 30, cash and cash equivalents were $8.896 million, versus $17.737 million at December 31, 2022; marketable securities were nil, down from $0.569 million. Total current assets were $13.748 million and current liabilities were $3.825 million. Total liabilities were $4.479 million, including operating and finance lease liabilities; the filing reports no material debt balance. Stockholders’ equity was $11.074 million. Cash declined by $8.841 million in the first half. The company raised $2.1 million net through its at-the-market (ATM) stock program during that period.
Changes versus comparable periods
- Q2 sales fell 6.2% year over year, mainly from lower console sales, partly offset by increased circuit sales. First-half sales fell 5.8%, primarily due to lower U.S. console sales.
- Q2 gross profit increased despite lower sales; cost of goods sold declined 19.3%, partly because the prior-year period included a $0.1 million non-cash inventory write-off. First-half gross profit rose to $2.214 million from $2.165 million.
- Q2 SG&A rose 9.6% and R&D rose 36.0%; first-half SG&A rose 17.1% and R&D rose 32.5%. Higher staffing, consulting, marketing and professional costs, including DaVita agreement-related expenses, contributed to SG&A growth; pediatric device development drove R&D growth.
- Net loss widened year over year for both Q2 and the first half. First-half operating cash use increased to $11.358 million from $8.765 million.
Outlook, risks and notable items
- Funding and going concern: Management said existing capital resources were expected to support its operating plan through December 31, 2023, but the filing states that substantial doubt exists about the company’s ability to continue as a going concern through at least twelve months from the report date. Nuwellis expects further losses and says additional financing may be required; there is no assurance it can raise capital on favorable terms or at all.
- DaVita collaboration: A June 2023 supply and collaboration agreement provides for a pilot of Aquadex therapy at selected hospital and outpatient locations, expected to launch by the end of Q4 2023 and run through May 31, 2024. DaVita may elect to extend the agreement for up to 10 years. A warrant for up to 1,289,081 shares, subject to vesting milestones and an ownership cap, was unvested at June 30; no related expense had been recorded.
- Potential dilution: The ATM program issued 657,333 shares in May and June for approximately $2.1 million net. Separately, 660,046 warrants from the October 2022 offering had converted into common shares by June 30 with no proceeds to the company. The filing lists 1,308,271 warrants and 114,004 options excluded from diluted loss per share as anti-dilutive. Common shares outstanding were 1,864,265 at June 30 and August 7.
- Other developments and risks: The CFO notified the company of her resignation effective September 1, 2023; the company intended to appoint its Senior Finance Director as CFO effective September 2. Management cited product adoption, hospital personnel training, sales execution, product development, clinical evidence, financing availability and regulatory matters as risks. No material changes to previously disclosed risk factors were reported. The company reported no current legal proceedings and said disclosure controls were effective at period end.
Important facts for investors to verify
- Cash runway and financing plans, particularly given the stated going-concern doubt and expected operating losses.
- Whether console sales stabilize and whether the DaVita pilot launches as expected and leads to an extension or meaningful revenue.
- Progress and spending on pediatric device development, and the timing and evidence supporting broader Aquadex adoption.
- Potential share dilution from future equity raises, outstanding warrants and options, and the milestone-based DaVita warrant.
- The impact of the CFO transition and any subsequent changes to liquidity, operating plans or forecasts; the filing provides no formal financial guidance.