Pluristem Therapeutics Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2014. The filing also provides quarterly results, including the quarter ended June 30, 2014; it is not a 2013 Q4 filing as indicated in the request metadata. Amounts below are in U.S. dollars; the financial statements are presented in thousands unless stated otherwise.
Business context
Pluristem is a development-stage cell-therapy company focused on placenta-derived, off-the-shelf PLX products. Its candidates target ischemic and inflammatory conditions, including peripheral arterial, orthopedic, pulmonary, hematological and women’s health diseases. The company reported one operating segment and no product sales.
Financial results and liquidity
| Metric | FY2014 | FY2013 |
|---|---|---|
| Revenue | $0.379 million | $0.679 million |
| Gross profit | $0.368 million | $0.659 million |
| Research and development, net | $19.542 million | $17.233 million |
| General and administrative expense | $8.676 million | $5.649 million |
| Operating loss | $27.850 million | $22.223 million |
| Financial income, net | $0.918 million | $1.068 million |
| Net loss | $26.932 million | $21.155 million |
| Basic and diluted loss per share | $0.42 | $0.38 |
| Net cash used in operating activities | $19.121 million | $16.887 million |
FY2014 gross margin was approximately 97%, but revenue was small and entirely related to the United Therapeutics license agreement. Revenue recognition declined after the estimated development period was extended following the clinical hold. Operating and net losses widened as research and development and administrative spending increased.
At June 30, 2014, cash and cash equivalents were $4.493 million; short-term bank deposits were $19.451 million, restricted cash and short-term deposits $4.914 million, and marketable securities $29.961 million. These categories totaled approximately $58.819 million. Current assets were $61.987 million and current liabilities $7.397 million, yielding working capital of $54.590 million. Total assets were $74.023 million, total liabilities $11.900 million and stockholders’ equity $62.123 million. The filing does not clearly identify conventional interest-bearing debt; it reports no off-balance-sheet arrangements.
Operating cash use was partly offset by $12.624 million of financing cash flow, primarily $10.644 million of net ATM share-sale proceeds and warrant exercises. Cash and cash equivalents fell $4.514 million year over year. The company reported 68.601 million shares outstanding at fiscal year-end, versus 59.197 million a year earlier; 69.279 million were outstanding as of September 2, 2014.
Material changes and developments
- Net R&D spending rose 13% to $19.542 million; gross R&D spending increased to $24.938 million, partly offset by $5.396 million of OCS and other participation. Management cited expanded internal activity, staffing, materials, depreciation, rent and maintenance.
- G&A expense increased 54%, primarily due to higher stock-based compensation and staffing. FY2014 stock-based compensation expense was approximately $5.851 million.
- Revenue fell 44% to $0.379 million. The United agreement’s $5 million upfront license fee is recognized over the development period; no regulatory milestone payments had been achieved by June 30, 2014. Up to $37.5 million of milestones remain contingent, along with other potential reimbursements and royalties under the agreement.
- The December 2013 CHA reciprocal equity investment involved Pluristem issuing 2.5 million shares for 1,011,504 CHA shares. Pluristem reported a $13 million fair value for its CHA investment at year-end, including unrealized gains recorded in other comprehensive income.
- The ATM agreement generated $10.644 million net proceeds during FY2014 and was terminated on September 11, 2014.
Outlook, clinical developments and principal risks
- Management expected no product-sale revenue in the next 12 months and stated products were unlikely to be ready for sale for at least three years, if at all. It expected R&D to remain the principal expense and said additional financing may be needed, while also believing available resources would fund operations for at least 12 months.
- A Phase I/II study of PLX-PAD for gluteal-muscle recovery after hip replacement met its primary efficacy endpoint at six months (p=0.0067); second-year safety follow-up was expected in July 2015. The filing does not provide a clear effect-size value in the supplied text.
- The international Phase II intermittent claudication study had been placed on FDA clinical hold in June 2013 after a serious hypersensitivity reaction requiring hospitalization. The hold was lifted in September 2013, with other authorities lifting their holds during September and October. The event delayed development and extended the United-funded development period.
- Other programs included a United-sponsored Phase I PAH trial in Australia, CHA-supported South Korean development for intermittent claudication and critical limb ischemia, preclinical work in acute radiation syndrome and pre-eclampsia, and planned rotator-cuff research. These remain subject to clinical and regulatory uncertainty.
- Key risks include continued losses and cash burn, potential dilution or difficulty obtaining financing, clinical failure or adverse events, regulatory delays, dependence on collaborators and third-party suppliers, competition, intellectual-property challenges, reimbursement uncertainty, foreign-exchange and investment-value fluctuations, and disruption from political or military conditions in Israel. The company also disclosed OCS royalty and technology-transfer restrictions; outstanding contingent OCS royalties were approximately $14.072 million before interest, payable from qualifying product sales.
- The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of June 30, 2014.
Important facts for investors to verify
- Current cash, deposits and marketable securities, their liquidity and valuation, and whether funding is sufficient relative to operating cash burn.
- Progress, enrollment, safety findings and regulatory status of the clinical programs, particularly the intermittent claudication study and the reported hypersensitivity event.
- Whether United or CHA achieves milestones, continues development and fulfills agreement commitments; confirm the terms and status of any South Korean commercialization joint venture.
- Share-count changes, outstanding warrants and equity awards, and the dilution impact of future financing.
- The composition and market value of the CHA investment, related currency hedge exposure, and the terms and repayment implications of OCS grants.