Pluristem Therapeutics Inc. — Form 10-Q summary
Reporting period: Quarter and nine months ended March 31, 2012 (fiscal third quarter of 2012), unaudited. The filing identifies the registrant as Pluristem Therapeutics Inc. Amounts below are U.S. dollars in thousands unless otherwise noted.
Business context
Pluristem is a development-stage biotherapeutics company developing placenta-derived cell therapies. It reported no product sales and expects continuing operating losses. Its United Therapeutics license covers development and commercialization of a PLX-cell product for pulmonary arterial hypertension (PAH).
Financial results and liquidity
| Metric | Three months ended Mar. 31, 2012 | Nine months ended Mar. 31, 2012 | Comparable 2011 period |
|---|---|---|---|
| Revenue | $230 | $615 | $0 |
| Net R&D expense | $2,916 | $6,839 | $1,547 / $4,123 |
| General and administrative expense | $1,924 | $4,836 | $1,152 / $3,154 |
| Operating loss | $4,610 | $11,060 | $2,699 / $7,277 |
| Net loss | $4,174 | $10,659 | $2,613 / $7,123 |
| Basic and diluted loss per share | $0.09 | $0.24 | $0.07 / $0.26 |
Revenue was license-fee recognition under the United Therapeutics agreement, not product sales. The $5,000 non-refundable license payment is recognized over an estimated 5.5-year development period; the company recognized $615 over nine months. The filing provides no gross margin measure; the business had no product-sales revenue.
Cash and cash equivalents were $11,605 at March 31, 2012, down $31,224 from June 30, 2011. The company also held $21,896 in short-term bank deposits and $6,042 in available-for-sale securities. Current assets were $41,455, current liabilities $4,854, and working capital $36,601. Stockholders’ equity was $37,901; accumulated deficit was $61,612. No borrowing debt is shown on the balance sheet.
Nine-month cash flows: $2,345 used in operations, $29,276 used in investing (primarily placement of funds in deposits and securities), and $397 provided by financing, mainly warrant and option exercises. Operating cash use was partly offset by United Therapeutics payments and grant support. The filing says management believes available cash is sufficient for at least 12 months, but anticipates needing additional funding before operating cash flow can materially reduce reliance on existing resources.
Changes and notable items
- Nine-month net R&D expense rose 66% year over year; quarterly net R&D expense rose 88%. Management cited increased in-house activity, clinical and preclinical trial costs, hiring 46 employees since March 2011, and timing of OCS grant approval.
- G&A increased 53% for nine months and 67% for the quarter, driven largely by higher stock-based compensation and costs associated with the United Therapeutics agreement.
- Weighted-average shares for the nine-month period increased to 43.6 million from 27.9 million, reflecting prior offerings and subsequent share issuances. At March 31, 44.5 million shares were outstanding; 18.4 million warrants and options and 2.6 million unvested restricted units were also outstanding, creating potential dilution.
- In April 2012, the FDA cleared a Phase II trial of PLX-PAD for intermittent claudication. The company also reported Phase I CLI follow-up results, comparing its 85.2% 12-month amputation-free survival rate in 27 patients with 66.8% historical data; the trials were open-label and had no control groups.
- In April 2012, the OCS approved a grant of NIS 11.8 million (approximately $3.1 million) for R&D expenses through December 2012. Grants carry royalty repayment obligations of 3%–5% on qualifying product and service sales until the grant amount plus interest is repaid.
Outlook, risks, and commitments
Management does not expect product-sale revenue in the next 12 months and states products may not be ready for sale for at least three years, if at all. Near- and medium-term revenue may come from licensing, but is expected to be unlikely to exceed operating costs. Additional financing may be required; the company says it is seeking funding, including grants, and has an effective shelf registration statement.
The United Therapeutics agreement includes up to $37,500 in regulatory milestones, potential manufacturing-facility expense reimbursement of up to $10,000 subject to conditions, development-cost reimbursement, and future royalties and product supply economics. These amounts are contingent, not assured revenue. The filing also reports a new GMP facility lease of approximately five years with an extension option, and bank guarantees of about $263 for the facility and $83 for a rented machine. Approximately $511 was pledged to secure hedging transactions, a credit line, and guarantees. Management warns that actual results may differ from forward-looking statements; development, clinical, regulatory, funding, and manufacturing outcomes remain uncertain.
Investor verification checklist
- Confirm the filing period: the report is for the quarter ended March 31, 2012, not 2011.
- Review the composition and availability of cash, deposits, and securities, and assess the stated 12-month runway against operating needs and planned facility and trial spending.
- Check the recognition and remaining balance of United Therapeutics payments, the conditions on milestones and reimbursements, and whether development-cost reimbursements are reflected as expected.
- Verify OCS grant receipt, eligible expenses, and royalty repayment terms; distinguish the April approval from cash received.
- Assess clinical evidence and FDA trial status, particularly the limitations of uncontrolled Phase I data and the risks to planned development.
- Evaluate potential dilution from warrants, options, restricted stock units, and any future shelf registration issuance.