PluriStem Therapeutics Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2017, with comparative annual results for fiscal 2016 and 2015. Although the request identifies “2016 Q4,” this filing is the FY2017 annual report; its unaudited fourth-quarter data are for the quarter ended June 30, 2017. Financial amounts below are in U.S. dollars.
Business context
PluriStem is a clinical-stage biotechnology company developing placenta-derived cell therapies using its proprietary three-dimensional manufacturing technology. Its lead programs include PLX-PAD for critical limb ischemia (CLI) and recovery after femoral neck fracture, and PLX-R18 for acute radiation syndrome (ARS) and incomplete hematopoietic recovery after transplantation. The company had no product sales in FY2017.
During the year, PluriStem began a multinational Phase III CLI trial, initiated a Phase I PLX-R18 trial for incomplete hematopoietic recovery after transplantation, and completed enrollment of 172 patients in its Phase II intermittent claudication study. It reported that study results were expected in the first half of 2018.
Key financial metrics
| Metric | FY2017 | FY2016 |
|---|---|---|
| Revenue | $0 | $2.847 million |
| Research and development, net of grants | $21.092 million | $19.580 million |
| General and administrative expenses | $6.927 million | $6.486 million |
| Operating loss | $28.019 million | $23.319 million |
| Net loss | $27.814 million | $23.246 million |
| Basic and diluted loss per share | $0.32 | $0.29 |
| Cash used in operating activities | $21.611 million | $18.522 million |
| Cash and cash equivalents at year-end | $4.707 million | $6.223 million |
| Cash, deposits and marketable securities | $26.106 million | $32.208 million |
| Current assets / current liabilities | $29.016 million / $5.414 million | $35.596 million / $5.775 million |
Gross margin is not meaningful for FY2017 because the company reported no revenue or cost of revenue. The balance sheet lists $1.869 million of long-term liabilities and $5.414 million of current liabilities; it does not present a separate borrowing balance. Total stockholders’ equity was $30.251 million, down from $38.156 million. Accumulated deficit reached $189.571 million.
For the quarter ended June 30, 2017, operating loss was $6.586 million, net loss was $7.016 million, and loss per share was $0.07. The filing’s quarterly table does not report revenue for that quarter.
Changes versus the prior year
- Revenue fell to zero from $2.847 million. FY2016 revenue primarily reflected recognition of a deferred upfront payment after United Therapeutics terminated its license agreement in December 2015.
- Net loss increased by $4.568 million, and operating cash use increased by $3.089 million. The company cited the lost FY2016 revenue, higher net R&D costs, and a $767,000 other-than-temporary impairment charge on marketable securities.
- Net R&D costs rose 8% to $21.092 million, including higher clinical-study and consultant costs and lower IIA grant participation, partly offset by Horizon 2020 funding and lower materials use.
- Cash and cash equivalents declined by $1.516 million. A January 2017 public offering generated $15.718 million in net proceeds, but operating activities used $21.611 million.
Outlook, risks and unusual items
- Going concern: The independent auditor included an explanatory paragraph stating that recurring losses and limited liquidity raise substantial doubt about the company’s ability to continue as a going concern. Management estimated available liquidity would fund operations only into the first quarter of fiscal 2019. The company said additional funding would be required and it did not expect product-sales revenue in the next 12 months.
- Funding and dilution: In July 2017, the company established an at-the-market (ATM) program permitting up to $80 million of share sales; as of September 5, 2017, it had sold 455,731 shares at an average $1.20 per share. These sales and future financing could dilute shareholders. The FY2017 offering also included warrants to purchase 8.449 million shares at $1.40 per share.
- Grants and partnerships: Horizon 2020 awarded approximately €7.6 million for the CLI program, including a direct allocation to PluriStem. A separate €7.4 million femoral-neck-fracture grant was announced in September 2017, subject to final agreements. The proposed Japan joint venture with Sosei CVC remained subject to definitive agreements; PluriStem’s proposed interest was 35%, with approximately $11 million in proposed investment by Sosei and other investors.
- Development and regulatory risk: Product candidates remain investigational. Clinical failure, delays, inability to obtain approvals or reimbursement, manufacturing issues, and dependence on collaborators and suppliers could materially affect prospects. Accelerated regulatory pathways do not assure approval or faster commercialization.
- Other exposures: The company recognized a $767,000 securities impairment and reported currency exposure, including to the Israeli shekel. IIA grants carry continuing technology-transfer restrictions and contingent royalties, generally 3%–4% of sales until repayment of grant amounts plus interest. Contractual obligations totaled $4.598 million, primarily operating leases and severance commitments.
- Management and the auditor reported effective internal control over financial reporting as of June 30, 2017. The filing reported no legal proceedings and no off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether subsequent filings show adequate financing beyond management’s stated first-quarter FY2019 liquidity horizon, and the resulting share dilution.
- Current cash, deposits, marketable securities, operating cash burn, and any changes to the going-concern assessment.
- Progress, enrollment, interim or final results, and regulatory status of the Phase III CLI program and other clinical trials.
- Whether the Sosei CVC Japan joint venture reached definitive agreements and whether announced Horizon 2020 grants were finalized and received.
- The composition and liquidity of marketable securities, including the CHA share investment, and any further impairment or foreign-exchange effects.
- Potential future IIA royalties and restrictions, and the actual financial terms and share impact of equity offerings and outstanding warrants.