Filing identity and reporting period
Important metadata mismatch: The supplied filing is Isoray, Inc.’s Form 10-Q for the quarter ended March 31, 2022, filed May 12, 2022. It is not a Perspective Therapeutics filing or a 2021 Q3 filing. The summary below reflects only the supplied Isoray filing.
Isoray manufactures and sells Cesium-131 brachytherapy seeds (Cesium Blu) for cancer treatment. Financial amounts below are in U.S. dollars, in thousands, unless otherwise noted. The quarter is the company’s fiscal third quarter; year-to-date figures cover the nine months ended March 31.
Financial performance and position
| Metric | Three months ended March 31, 2022 | Prior-year quarter | Nine months ended March 31, 2022 | Prior-year nine months |
|---|---|---|---|---|
| Net sales | $2,910 | $2,600 | $8,290 | $7,343 |
| Gross profit | $1,441 | $1,362 | $3,690 | $3,775 |
| Gross margin | 49.5% | 52.4% | 44.5% | 51.4% |
| Operating expenses | $2,817 | $2,128 | $8,975 | $6,128 |
| Operating loss | $(1,376) | $(766) | $(5,285) | $(2,353) |
| Net loss | $(1,347) | $(745) | $(5,194) | $(2,326) |
| Loss per share | $(0.01) | $(0.01) | $(0.04) | $(0.03) |
- Quarterly revenue increased 12%; nine-month revenue increased 13%. Growth included prostate brachytherapy and other applications, with other sales up 28% for the quarter and 31% year to date.
- Quarterly gross profit rose 6%, but nine-month gross profit declined 2%. Higher isotope, materials, labor and depreciation costs reduced margins; the company cited unused excess isotope associated with sales below forecast.
- Research and development, sales and marketing, and general and administrative expenses all increased year over year. Nine-month share-based compensation rose to $933 from $260.
- Net cash used in operating activities was $4,819 for the nine months, versus $1,719 a year earlier. Investing activities used $161; financing provided $56, primarily from option exercises. The prior-year period included substantial equity-offering and warrant proceeds.
- At March 31, 2022, cash and cash equivalents were $58,904; working capital was $60,802 and the current ratio was 32.08. Total liabilities were $2,912, including lease liabilities of $588. The filing presents no borrowings or other funded debt.
- Total assets were $66,113 and stockholders’ equity was $63,201. Cash, cash equivalents and restricted cash together were $59,086.
Material changes and operating developments
- For the nine months, prostate brachytherapy revenue rose 8%; other revenue rose 31%. Prostate procedures remained affected by COVID-related delays, hospital staffing shortages and physician vacations.
- The company raised seed prices in November 2021 to help offset higher input costs. Management attributed prostate revenue growth to pricing and increased seed sales, including higher utilization at existing accounts and sales to new accounts.
- Revenue from GT Medical Technologies, including minimum-order fees, was approximately 13% of sales for both the quarter and nine-month period. A November 2021 amendment shifted GammaTile assembly to GT Medical, with Isoray supplying seeds.
- The company purchased additional enriched barium carbonate for Cesium-131 production. Inventory includes $562 of non-current inventory, including enriched barium; two March 31 purchase agreements totaled approximately $1.83 million, with delivery expected by June 30, 2022.
- Cash declined from $63,828 at June 30, 2021, to $58,904 at March 31, 2022. The company’s share count was 142,040,266 at March 31 and May 9, 2022.
Outlook, risks and contingencies
- Management stated existing cash and cash equivalents were expected to fund projected operating needs for the next 12 months. It forecast a 25% fiscal 2022 revenue increase but reported that it had missed that growth target during the first nine months.
- Management’s estimate of reaching cash-flow break-even in three to four years is conditional on achieving and sustaining targeted growth, including GammaTile revenue, and assumes no extraordinary expenses. The filing gives no assurance these assumptions or targets will be met.
- Isoray relies on Russian suppliers for Cesium-131. As of the filing, it reported no missed isotope shipments or material supply interruptions, but sanctions, banking restrictions and transportation disruptions related to the Russia-Ukraine conflict had complicated payment and shipping. The company was seeking alternative banking arrangements and monitoring supplier and sanctions exposure.
- Customer concentration is material: approximately 46% of nine-month revenue depended on three customers, and one customer group accounted for approximately 27%. The filing warns that loss of a major customer could materially affect revenue. GT Medical represented 13.4% of nine-month revenue.
- Hospitals’ COVID-related priorities and nurse staffing constraints continued to delay or cancel procedures. Management said nine-month revenue remained below the average monthly prostate revenue achieved before the pandemic.
- Potential additional financing may involve equity, strategic collaborations or debt; management cautioned that future equity financing could be dilutive and potentially issued at a discount. The new production facility remains on hold; construction timing or a decision to proceed has not been determined.
- Research initiatives include studies of Cesium-131 combined with immunotherapy and a filed patent application for a directional-dosing device. A Sirius MRI marker product was in a performance evaluation, with full market release expected later in fiscal 2022, subject to uncertainty.
- Medicare continued to reimburse brachytherapy under fee-for-service after its exclusion from the Radiation Oncology Model; the future timing and design of that model remain uncertain. No legal proceedings or off-balance-sheet arrangements were reported.
Most important facts for investors to verify
- Confirm the intended issuer and period: the provided document identifies Isoray, Inc. and the quarter ended March 31, 2022, not Perspective Therapeutics or 2021 Q3.
- Track isotope supply, payments, transportation and the status of the Russian supplier relationships and enriched-barium purchases.
- Assess whether revenue growth can meet management’s fiscal 2022 target and whether procedures recover from pandemic-related delays and staffing constraints.
- Monitor gross margins and operating cash use as isotope, production and operating costs increase.
- Review major-customer concentration, especially the dependence on three customers and the contribution from GT Medical.
- Evaluate the assumptions underlying the 12-month liquidity statement and conditional three-to-four-year cash-flow break-even estimate, including the potential need for dilutive financing.