Fluidigm Corporation (identified in the request as Standard BioTools Inc.) — Q2 2013 Form 10-Q
Entity and period: The filing is by Fluidigm Corporation, for the quarter and six months ended June 30, 2013. It describes a business developing, manufacturing, and selling microfluidic systems, instruments, consumables, and related assays for life-science and agricultural-biotechnology applications. The filing does not identify the registrant as Standard BioTools Inc.
Financial performance and position
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Total revenue | $17.5 million | $12.9 million | $32.0 million | $23.9 million |
| Product revenue | $17.3 million | $12.8 million | $31.5 million | $23.5 million |
| Operating loss | $4.0 million | $4.4 million | $9.1 million | $10.7 million |
| Net loss | $4.0 million | $4.6 million | $7.6 million | $11.3 million |
| Net loss per share | $0.16 | $0.22 | $0.30 | $0.55 |
| Product margin | 72% | 69% | 71% | 68% |
- Q2 revenue increased 35% year over year; six-month revenue increased 34%. Instrument revenue growth was principally attributed to preparatory systems, including the C1 system; consumables growth reflected higher IFC volumes. EP1 instrument sales were lower.
- Q2 research and development expense rose 25% to $5.0 million, and selling, general and administrative expense rose 23% to $11.6 million. For the six months, those expenses were $9.2 million and $22.7 million, respectively. Increased staffing and commercial expansion were major drivers.
- Six-month net loss included a $1.8 million gain from the sale of the company’s Verinata investment. The company received $3.1 million in proceeds and could receive up to $3.2 million more if future milestones are achieved.
- Cash and cash equivalents were $32.3 million at June 30, 2013; investments were $51.2 million. Working capital was $71.1 million and total assets were $112.0 million. Cash plus investments totaled approximately $83.5 million.
- Six-month operating cash use was $3.5 million, compared with $10.6 million a year earlier. Investing activities used $25.1 million, largely reflecting investment purchases; financing activities provided $2.4 million, mainly from stock-option exercises. Cash decreased $26.4 million during the period.
- No long-term debt was outstanding. The $10.0 million asset-secured credit line was undrawn at quarter end, subject to covenants and borrowing-base terms; the company reported compliance with covenants.
Changes, outlook, and notable items
- Product margin improved year over year, which management attributed to improved IFC production yields and utilization, lower production costs, and product mix that included the higher-margin C1 system.
- Management expected instrument and consumables unit sales to increase over time as it expanded its customer base and geographic coverage and introduced products. It also cautioned that selling prices may fluctuate with market conditions, mix, and currency movements.
- Management expected R&D and SG&A spending to increase as it continued product development and expanded commercial, support, and administrative capabilities. It estimated existing cash, cash equivalents, and investments would cover working-capital and capital-expenditure needs for at least 18 months, while warning that lower cash generation or higher spending could require additional financing.
- The company acquired Helicos sequencing-related patents, applications, and licenses for $1.0 million, plus approximately $0.2 million of transaction costs. The assets were capitalized and expected to be amortized over seven to ten years.
- The headquarters lease was amended to expand space and extend the term to April 2020, with a five-year renewal option. Disclosed future minimum lease payments totaled $9.8 million. The filing says its earlier Q1 2013 lease-obligation table had overstated obligations for 2016 and thereafter and provides corrected amounts.
- A possible loss contingency of up to $1.0 million related to certain intellectual-property obligations was described as possible but not probable; no amount was accrued. The company was pursuing separate false-advertising and unfair-competition litigation against NanoString in California and Singapore.
- Key risks included continuing losses, uncertain adoption of emerging applications, quarterly sales volatility, competition and pricing pressure, reliance on single-source suppliers and Singapore manufacturing, foreign-exchange exposure, intellectual-property and regulatory risks, and possible need for future capital. Management reported disclosure controls effective at the reasonable-assurance level and no material change in internal control over financial reporting during Q2.
Important facts for investors to verify
- Confirm the issuer identity: this 10-Q names Fluidigm Corporation, whereas the request names Standard BioTools Inc.
- Track whether revenue growth and improving product margins persist, particularly given instrument-sales variability and lower EP1 sales.
- Monitor operating cash use, expense growth, capital spending, and the assumptions behind management’s stated 18-month liquidity outlook.
- Verify any additional Verinata milestone proceeds and the impact of the Helicos intellectual-property acquisition.
- Assess exposure from the NanoString litigation, the possible intellectual-property contingency, manufacturing and supplier concentration, and the extended headquarters lease.