Pulse Biosciences, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; financial statements are unaudited. Pulse is a pre-revenue bioelectric medicine company developing its CellFX System, based on Nano-Pulse Stimulation technology, initially targeting dermatology applications.
Financial performance and position
| Metric | Q1 2019 | Q1 2018 or prior period |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $10.410 million | $8.724 million |
| Net loss | $10.078 million | $8.668 million |
| Net loss per share, basic and diluted | $0.49 | $0.51 |
| Cash used in operating activities | $7.330 million | $5.018 million |
| Cash, cash equivalents and investments at period end | $52.801 million | $59.583 million at Dec. 31, 2018 |
| Current assets / current liabilities | $53.351 million / $3.115 million | $60.362 million / $3.108 million at Dec. 31, 2018 |
Research and development expense increased 84% to $5.842 million, reflecting higher compensation, prototype, clinical-trial and product-development costs. General and administrative expense declined 18% to $4.401 million, principally because of lower stock-based compensation and professional fees. Interest income rose to $332,000 from $56,000, mainly due to higher invested balances. Revenue and gross margin are not applicable because the company had no product sales. The filing reports no borrowings; lease liabilities totaled $1.619 million after adoption of the new lease standard.
Investing activities used $35.731 million, primarily reflecting purchases of available-for-sale securities, rather than operating expenditure. Cash and cash equivalents declined to $8.536 million as funds were shifted into investments. The company reported stockholders’ equity of $59.114 million and a $85.796 million accumulated deficit at March 31.
Material changes and outlook
Net loss widened by $1.410 million year over year as increased R&D exceeded lower G&A. Operating cash use also increased. Management expected R&D and G&A to rise substantially during 2019 as clinical activity, product development and commercialization infrastructure expanded.
Management stated that existing cash, cash equivalents and investments were expected to fund projected operating requirements for at least 12 months from the May 2, 2019 filing date, while also stating that additional capital would be needed in the future. Potential funding sources include equity, debt, collaborations and licensing; availability and terms are uncertain and equity issuance could dilute shareholders. No specific revenue or earnings guidance was provided.
Pulse submitted a 510(k) application for CellFX in February 2019. On April 30, after quarter-end, the FDA issued an additional-information request that questioned the proposed predicate device. The company said its response was likely to add time and require additional testing, potentially including clinical trials, and it was considering alternatives including a De Novo request. Commercial launch depends on regulatory clearance.
Key risks include continued losses and dependence on external financing; uncertain clinical and regulatory outcomes; no commercial products or revenue; potential delays or additional costs from FDA requirements; and risks involving product adoption, reimbursement, manufacturing, intellectual property and competition. The company reported no pending legal matters it believed would have a material adverse effect, while noting litigation outcomes are inherently uncertain. Disclosure controls were deemed effective as of March 31, 2019.
Important facts for investors to verify
- Subsequent FDA correspondence, the chosen regulatory pathway, and expected timing, testing and costs to obtain clearance.
- Actual cash burn and liquid resources, including investment maturities, relative to management’s stated 12-month funding outlook and future capital needs.
- Progress, enrollment, safety and final results of clinical studies supporting CellFX and proposed indications.
- Whether planned commercial infrastructure and clinical expansion cause expenses to rise as management anticipated, and whether financing would be required on dilutive or restrictive terms.
- Commercial adoption, manufacturing readiness, reimbursement prospects and any material legal, intellectual-property or other contingencies.