TLSI

Business Context and Reporting Period

Trisalus Life Sciences, Inc. (TLSI) is a commercial-stage medical device and Phase I clinical-stage pharmaceutical company. The company focuses on its Pressure Enabled Drug Delivery (PEDD) technology, marketed via the TriNav infusion system for liver and pancreatic cancers, and the development of nelitolimod, an immuno-oncology therapeutic. This Form 10-Q covers the quarterly and nine-month periods ended September 30, 2024. The company is classified as a smaller reporting company and an emerging growth company.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 41.5% quarter-over-quarter (QoQ) and 65.5% year-over-year (YoY) for the nine-month period, driven by increased sales of the TriNav device.
• Operating Expenses: Research and Development (R&D) expenses decreased significantly by 55.6% QoQ and 33.3% YoY (nine months), primarily due to reduced clinical trial expenses for nelitolimod. Conversely, Sales and Marketing expenses increased 30.9% QoQ and 64.7% YoY (nine months) due to headcount expansion.
• Non-Cash Gains: The company recorded a $2.4 million gain from the change in fair value of the contingent earnout liability for the quarter, compared to a $19.9 million gain in the prior year quarter. This volatility is driven by the company's stock price.
• Debt Financing: In April 2024, the company drew $25.0 million under a new Credit Agreement with OrbiMed, resulting in increased interest expense compared to the prior period.

Guidance, Outlook, Risks, and Unusual Items

• Going Concern: Management has identified substantial doubt regarding the company's ability to continue as a going concern for the next 12 months. Existing cash and cash equivalents are insufficient to fund projected liquidity requirements without additional financing.
• Liquidity Strategy: The company relies on the Standby Equity Purchase Agreement (SEPA) with Yorkville (up to $30 million available) and potential delayed draws from the OrbiMed Credit Agreement (up to $25 million additional, subject to revenue targets) to fund operations through the end of 2025.
• Clinical Outlook: The company does not intend to proceed to Phase II trials for uveal melanoma, intrahepatic cholangiocarcinoma, or hepatocellular carcinoma based on preliminary data. The PERIO-3 clinical trial for pancreatic cancer is ongoing, with data expected in 2025.
• Internal Controls: The company has identified material weaknesses in internal control over financial reporting, including issues related to accounting for complex financial instruments, patent costs, and the Business Combination. Remediation efforts are underway.
• Reimbursement: A new permanent HCPCS code for TriNav became effective January 1, 2024, replacing the expired transitional pass-through payment. There is no assurance that reimbursement rates will remain favorable.

Investor Verification Checklist

• Cash Runway: Verify the sufficiency of the $11.3 million cash balance against the burn rate and the likelihood of accessing the remaining $25 million from OrbiMed or selling shares under the SEPA.
• Revenue Targets: Confirm if the company is on track to meet the revenue thresholds required to unlock the delayed draw commitments from OrbiMed ($30 million and $50 million trailing 12-month revenue targets).
• Internal Control Remediation: Monitor the progress of remediation for the identified material weaknesses in financial reporting to ensure future filing reliability.
• Reimbursement Stability: Assess the actual impact of the new HCPCS code on hospital adoption and reimbursement rates for the TriNav device.
• Dynavax Obligations: Review the potential future milestone payments (up to $158 million) and royalties owed to Dynavax for nelitolimod, which are contingent on regulatory and commercial success.