Fluidigm Corporation (NASDAQ: FLDM) — FY2011 Form 10-K
Filing identity and period: The supplied filing is Fluidigm Corporation’s annual report for the fiscal year ended December 31, 2011, filed March 23, 2012. The request metadata names Standard BioTools Inc.; that name does not appear as the registrant in this filing. The report includes fourth-quarter results, but is not a standalone Q4 filing. All amounts below are U.S. dollars.
Business context
Fluidigm develops and sells microfluidic instruments, chips, assays and reagents for life science research and agricultural biotechnology, with development efforts in single-cell genomics and molecular diagnostics. It reported more than 500 systems sold across over 25 countries. Its instruments and chips for commercial sale were manufactured in Singapore.
Financial highlights
| Metric | FY2011 | FY2010 |
|---|---|---|
| Total revenue | $42.9 million | $33.6 million |
| Product revenue | $40.6 million | $30.5 million |
| Product margin | 67% | 62% |
| Operating loss | $18.6 million | $14.6 million |
| Net loss | $22.5 million | $16.9 million |
| Net loss attributable to common stockholders | $32.4 million | $16.9 million |
| Operating cash flow | $(17.5) million | $(11.5) million |
Revenue grew 28%; product revenue rose 33%. Consumables increased 58% to $15.4 million, attributed to a larger installed base and the 2011 launch of assays. Instrument revenue rose 22% to $25.2 million, with sales volume up 19%, primarily from Access Array. Product margin improved as instrument component and chip manufacturing costs declined and instrument average selling prices increased.
Operating expenses were $48.2 million, including $31.3 million of selling, general and administrative expense, $13.9 million of research and development, and a $3.0 million litigation settlement charge. The $32.4 million common-stockholder loss includes a $9.9 million deemed dividend from changing the Series E preferred-stock conversion price; net loss from operations was $22.5 million.
Liquidity, debt and cash flow
At year-end, cash and cash equivalents were $13.6 million and investments were $41.4 million; working capital was $49.9 million and total assets were $79.3 million. The 2011 IPO generated approximately $77.0 million net proceeds. Financing cash flow was $70.4 million; investing cash flow was $(45.1) million, largely reflecting net investment purchases. Long-term debt was $10.1 million, of which $8.9 million was current; the company reported no balance on its $7.0 million bank line of credit. Contractual debt payments due in 2012 were approximately $9.0 million, including a $2.3 million additional payment.
Management said existing cash and cash equivalents were expected to meet working-capital and capital-expenditure needs for at least 18 months. This is a forward-looking estimate, not a guarantee; the company continued to use cash in operations.
Fourth-quarter performance and changes
Q4 2011 revenue was $13.0 million, compared with $10.4 million in Q4 2010. Q4 2011 net loss attributable to common stockholders was $3.5 million, compared with a $3.1 million net loss in Q4 2010. For FY2011, the operating loss widened as operating expenses increased, particularly SG&A, which rose 33% to $31.3 million amid hiring, public-company costs and legal and professional fees. The company’s IPO also converted preferred stock to common stock and strengthened reported liquidity.
Outlook, risks and unusual items
- Management expected instrument and consumable unit sales to continue growing, while noting instrument average selling prices could vary with product mix. It expected R&D and SG&A expenses to rise, and grant revenue to decline as Singapore Economic Development Board agreements ended, partly offset by CIRM funding.
- The company had not forecast when it would become profitable and warned that it could continue to incur substantial losses and negative operating cash flow.
- Novartis Vaccines & Diagnostics collaboration: Fluidigm received $3.3 million in milestone payments after achieving initial technical-feasibility milestones. The partner’s option to license the technology was due by April 30, 2012; continuation, licensing and commercialization were uncertain. The arrangement restricted Fluidigm’s ability to develop or sell products in specified fields without Novartis.
- The $3.0 million Life Technologies litigation settlement was expensed in 2011. A separate $2.0 million payment bought specified limits on certain patent litigation and was recorded as an asset and amortized over four years. The report stated there were no material legal proceedings outstanding.
- Key risks included dependence on Singapore manufacturing and limited-source suppliers, potential production disruption and yield issues, competition and uncertain adoption, long sales cycles, foreign-exchange exposure, and possible future FDA oversight if products are used for clinical diagnostics. The company said its products were then sold for research use only and were not FDA-cleared for diagnostic use.
- Management reported effective disclosure controls and internal control over financial reporting as of December 31, 2011. The independent auditor audited the financial statements but was not engaged to audit internal control effectiveness.
Important facts for investors to verify
- Confirm the issuer identity: this is Fluidigm Corporation’s 2011 10-K, not a filing under the name Standard BioTools Inc.
- Review the quality and repeatability of revenue growth, especially consumables growth, installed-base utilization, and instrument product mix.
- Assess cash burn against management’s stated 18-month liquidity outlook and the scheduled 2012 debt payments.
- Track the Novartis option and development collaboration, including any subsequent license, milestones, restrictions or termination.
- Evaluate manufacturing concentration, supplier qualification, and any regulatory changes affecting research-use-only products or laboratory-developed tests.