Pulse Biosciences, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited financial statements; amounts below are in millions of dollars unless stated otherwise.
Business context and strategy
Pulse develops Nano-pulse Stimulation (NPS) technology, also called nanosecond pulsed field ablation (nsPFA). After discontinuing CellFX dermatology system sales, the company is concentrating development on atrial fibrillation (AF), including a surgical cardiac ablation clamp and an electrophysiology catheter. It reported no revenue in Q3 or the first nine months of 2023.
Key financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0.709 |
| Research and development | $7.472 | $4.517 | $19.998 | $16.744 |
| Sales and marketing | $0 | $2.020 | $0 | $11.251 |
| General and administrative | $3.780 | $3.088 | $11.043 | $11.373 |
| Total expenses | $11.252 | $18.025 | $31.041 | $50.021 |
| Operating loss | $(11.252) | $(18.025) | $(31.041) | $(49.312) |
| Net loss | $(10.566) | $(18.039) | $(30.277) | $(49.308) |
| Basic and diluted loss per share | $(0.19) | $(0.49) | $(0.66) | $(1.50) |
Gross and operating margins are not meaningful with no current revenue. Q3 expense comparisons are affected by the absence of 2022 inventory write-offs and sales/marketing costs following the strategic shift. Nine-month 2022 cost of revenue included a $7.4 million obsolete-inventory write-off.
Cash, liquidity and obligations
- Cash and cash equivalents were $50.386 million at September 30, 2023, down from $61.139 million at December 31, 2022. Current assets were $51.623 million and current liabilities $5.432 million.
- Cash used in operations for the first nine months was $26.259 million, versus $39.048 million in 2022. Investing used $0.078 million; financing provided $15.584 million. Ending cash declined by $10.753 million.
- The $65 million related-party loan from Executive Chairman and majority stockholder Robert W. Duggan, plus accrued interest, was extinguished in May 2023 through issuance of 10,022,937 common shares at $6.51 per share. The loan carried 5% interest. No amount remained due under it at quarter-end.
- Lease liabilities totaled $9.384 million, including $1.016 million current. There was no other debt reported at September 30.
- Management said existing cash was expected to fund planned operations for at least 12 months from the November 13, 2023 filing date, while also stating the company expects to seek additional capital and cannot assure financing will be available on acceptable terms.
Material changes, outlook and risks
- Research and development spending rose 19% for the nine-month period, to $19.998 million, while total expenses fell 38% to $31.041 million, mainly reflecting discontinued dermatology sales and lower sales/marketing and cost-of-revenue expense. Net loss narrowed by $19.031 million.
- The company reported $14.828 million of warrant-exercise proceeds during the nine months. The share count increased from 37.235 million at year-end 2022 to 54.991 million at September 30, 2023, including shares issued to settle the Duggan loan.
- Management expected to submit a 510(k) application for the cardiac clamp before Q2 2024 and said it expected to be positioned to begin a first-in-human catheter feasibility study before Q2 2024. The catheter is expected to require the FDA’s PMA pathway. These are expectations, not assured milestones.
- Preliminary thyroid-nodule study results: the first ten subjects reportedly tolerated treatment without reported pain or serious side effects; 90-day imaging showed treated portions had resorbed without reported scarring or fibrosis. The company planned expanded enrollment and parameter optimization; the filing cautions preliminary results may change.
- Principal risks include the lack of revenue and continued losses, need for future financing and potential dilution, uncertain clinical and regulatory outcomes, limited cardiac preclinical experience, competition, supplier dependence, and uncertain product adoption and reimbursement. The company noted that inadequate funding could require cuts to development, trials, staffing or operations.
- A former CFO’s arbitration seeks severance and other remedies. The company disputes the claims; it said a loss was not probable and it could not estimate a possible loss range.
- Controls and procedures were reported effective as of September 30, 2023; no material change in internal control over financial reporting was identified.
Important facts for investors to verify
- Cash burn, the assumptions underlying the stated 12-month runway, and the timing and terms of any additional financing.
- Progress against the anticipated cardiac-clamp 510(k) submission and catheter first-in-human study milestones, including FDA feedback and required evidence.
- Final, fully followed-up thyroid-study findings and subsequent clinical evidence supporting NPS safety and effectiveness in cardiac tissue.
- Share dilution and related-party governance: Duggan owned approximately 67% of common stock as of the filing, and the company may issue additional securities.
- The status and potential financial impact of the former CFO arbitration and the company’s continuing lease commitments.