PluriStem Therapeutics Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2019. The filing is an annual report, not a 2018 Q4 report; its financial comparisons are primarily with fiscal 2018. Financial statement amounts below are in U.S. dollars. Per-share and share data reflect the 1-for-10 reverse split effective July 25, 2019.
Business context
Pluristem is a clinical-stage biotechnology company developing placenta-derived cell therapies using proprietary 3D cell-expansion technology. Its lead programs are PLX-PAD for critical limb ischemia (CLI) and recovery after hip-fracture surgery, and PLX-R18 for acute radiation syndrome (ARS) and incomplete blood-cell recovery following hematopoietic cell transplantation. The company had no marketed products and generated only minimal research-use sales.
Financial results and liquidity
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | $0.054 million | $0.050 million |
| Gross profit | $0.052 million | $0.048 million |
| Net R&D expense | $26.427 million | $22.629 million |
| General and administrative expense | $9.157 million | $11.193 million |
| Operating loss | $35.532 million | $33.731 million |
| Net loss | $35.307 million | $26.126 million |
| Net loss per share | $2.90 | $2.50 |
| Cash used in operating activities | $29.453 million | $21.380 million |
| Cash, cash equivalents and restricted cash at year-end | $5.186 million | $9.887 million |
| Total current assets | $26.371 million | $32.036 million |
| Total current liabilities | $8.158 million | $8.548 million |
Revenue consisted of sales of PLX cells for research use. Gross margin was high on this very small revenue base and is not representative of product economics. The company reported $24.795 million in cash, cash equivalents, short-term deposits, and restricted and long-term deposits combined at June 30, 2019. Working capital was positive at $18.213 million, while accumulated deficit reached $251.004 million. The filing does not provide a clear material interest-bearing debt balance; reported liabilities primarily comprise payables, accruals, severance, and other liabilities.
Changes versus the prior year
- Net loss widened by approximately $9.2 million, mainly because net financial income fell to $0.225 million from $7.605 million. FY2018 financial income included a substantial gain from the sale of marketable securities.
- Net R&D expense rose 17% to $26.427 million, reflecting higher clinical-trial subcontractor costs and materials use, lower IIA participation, and increased stock compensation, partly offset by grants and lower payroll costs related to exchange rates.
- G&A expense declined 18% to $9.157 million, primarily due to lower stock-based compensation and corporate and payroll costs.
- Operating cash use increased by approximately $8.1 million. Year-end cash, cash equivalents, and restricted cash declined $4.701 million despite $23.582 million of financing cash inflows.
- Financing included $19.464 million net proceeds from April 2019 equity and warrant offerings and $4.003 million net proceeds from share sales under equity sales agreements, diluting existing shareholders.
Outlook, developments, and risks
- Funding and going concern: Management estimated that June 2019 liquidity, together with proceeds received under the Jefferies sales agreement in July and August 2019, would fund operations into the first quarter of fiscal 2021. The auditor’s report includes a going-concern explanatory paragraph, citing recurring losses and limited liquidity. Management says additional capital, licensing income, grants, or other funding will be needed; there is no assurance of success. The company did not expect significant product-sales revenue in the next 12 months.
- Clinical plans: PLX-PAD Phase III trials were underway for CLI and hip-fracture recovery. The company reported enrollment above 50% in the CLI study in April 2019, enabling an interim efficacy analysis after one-year follow-up. It expected European CLI follow-up completion in the first half of 2020, U.S. follow-up in the first half of 2021, and hip-fracture efficacy follow-up in the second half of 2020; results were expected shortly afterward. These are forward-looking targets, not reported outcomes.
- PLX-R18: The company planned to seek U.S. government support for additional ARS animal studies and targeted BARDA funding for a pivotal trial in 2020. Its Phase I HCT study had enrolled the second cohort and received approval to proceed to the final cohort. July 2019 animal-study results reported improved survival in a DoD study; these are preclinical findings, not evidence of human efficacy.
- Manufacturing and partnerships: Pluristem reported development of a serum-free formulation, initially intended for PLX-R18 and later PLX-PAD, but implementation and supplier-independence remained uncertain. Chart Industries held an exclusive license to market and manufacture its thawing device outside Greater China; commercial sales had not begun and no royalties had been recognized.
- Key risks: Clinical failure or delay, regulatory uncertainty, inability to raise capital, dilution from future share issuance, limited commercialization experience, dependence on third-party trial sites and suppliers, competition, reimbursement uncertainty, patent challenges, currency exposure, and possible disruption at the company’s Israel-based facilities. IIA-funded technology is subject to continuing transfer restrictions and royalty obligations if relevant products are sold.
- Other notable items: The company issued warrants with the April 2019 offering, exercisable for five years at $7 per share. The reverse stock split took effect after year-end. Management and the auditor reported effective internal control over financial reporting as of June 30, 2019; the financial statements received an unqualified audit opinion apart from the separate going-concern explanatory paragraph.
Important facts for investors to verify
- Current cash runway, restricted funds, and actual proceeds raised after June 30, 2019; reconcile these with management’s estimate of funding into Q1 FY2021.
- Updated enrollment, interim analysis, follow-up schedules, and regulatory requirements for both PLX-PAD Phase III trials.
- Whether additional ARS studies and any pivotal trial receive government funding, and how preclinical results translate to human development.
- Actual cash burn, grant receipts, cost-reduction actions, and financing needs versus the reported $29.453 million operating cash outflow.
- Potential dilution from future equity sales, outstanding warrants, and equity compensation plans.
- Whether the serum-free manufacturing process is validated and whether Chart begins commercial sales that could generate royalties.