ClearPoint Neuro, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. ClearPoint Neuro develops and commercializes technology for minimally invasive brain procedures guided by intra-procedural MRI. Financial statements are unaudited; amounts below are in U.S. dollars.
Financial results and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $3.41 million | $2.48 million | $7.44 million | $5.59 million |
| Gross profit / margin | $2.29 million / 67% | $1.68 million / 68% | $4.90 million / 66% | $3.86 million / 69% |
| Operating loss | $3.41 million | $1.48 million | $5.59 million | $2.68 million |
| Net loss | $3.74 million | $1.66 million | $6.28 million | $3.72 million |
| Basic and diluted loss per share | $0.17 | $0.11 | $0.31 | $0.24 |
- Q2 product revenue increased 44% to $2.36 million; service and other revenue rose 25% to $1.05 million. For the first half, product revenue increased 45% to $5.53 million and service and other revenue increased 8% to $1.92 million.
- At June 30, cash and cash equivalents were $61.52 million, versus $20.10 million at December 31, 2020. Current assets were $68.51 million and current liabilities $4.39 million.
- Operating cash use was $5.85 million for the first half, versus $4.04 million a year earlier. Investing cash use was negligible; financing provided $47.28 million, principally from a February public offering that yielded $46.8 million net.
- Total liabilities were $24.36 million, including $17.50 million carrying value of secured convertible notes and $2.67 million in operating lease liabilities. Notes mature in 2025; $17.5 million aggregate principal was outstanding at June 30. Total stockholders’ equity was $47.97 million; accumulated deficit was $125.80 million.
- Common shares outstanding were 22.32 million at June 30, up from 17.05 million at year-end. The February offering issued 2.13 million shares; a noteholder converted $7.5 million principal plus accrued interest into approximately 1.26 million shares in May.
Changes versus prior comparable periods
- Revenue growth reflected resumed elective procedures and increased product and biologics/drug-delivery activity. ClearPoint system cases rose 96% year over year in Q2 to 249, and 50% for the first half to 463; management attributed the comparison partly to COVID-related disruption in 2020.
- Q2 net loss more than doubled, and first-half net loss increased 69%, as operating expenses rose faster than revenue. First-half R&D increased 126%, sales and marketing 31%, and general and administrative expense 46%.
- Gross margin declined three percentage points for the first half, primarily due to higher overhead allocated to sales; Q2 margin declined one percentage point, reflecting revenue mix.
- First-half interest expense declined to $0.57 million from $1.04 million, primarily due to lower expense after conversion of one note, partly offset by the Second Closing Note.
Outlook, commentary and risks
- No formal revenue or earnings guidance is provided. Management expects recurring product and service revenue to grow over time and gross margin to increase over time, but notes that results depend on adoption, product development and other uncertain factors.
- Management said June 30 cash was sufficient to fund operations and obligations for at least the next 12 months. The company has incurred continuing losses and expects it may continue to incur operating losses while expanding commercialization and development.
- Management did not expect meaningful therapy-product revenue in 2021 and was targeting a limited market release in 2022, subject to product refinement and regulatory clearance.
- COVID-19 and the Delta variant could again disrupt elective procedures, clinical trials, hospital spending and capital purchases. The company said hospital capital-equipment activity remained below pre-pandemic levels; customer clinical-trial timelines were uncertain.
- A related-party customer accounted for 21% of Q2 sales and 19% of first-half sales. The filing reports no customer receivable balance above 10% of total receivables at June 30.
- Other identified risks include market acceptance, regulatory and product-development uncertainty, reliance on key suppliers and collaborators, and potential product liability. Approximately $56.7 million of cash held at banks exceeded FDIC-insured limits.
- The company early-adopted ASU 2020-06 on January 1, 2021; this reversed a $3.1 million debt discount and corresponding additional paid-in capital amount. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether post-pandemic procedure volumes and ClearPoint adoption can sustain revenue growth, and whether the reported case growth reflects durable demand.
- How the related-party customer relationship, its share of sales and associated development-service revenue may affect future results.
- The terms, conversion features, security and 2025 maturity of the remaining secured notes, and potential dilution from notes, options and warrants.
- Cash burn relative to the stated 12-month liquidity assessment, particularly as operating expenses and development spending increase.
- The timing and regulatory status of therapy products, and whether partners’ clinical trials progress as expected.