BioCardia, Inc. — Q3 2018 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. Unaudited results are in thousands of dollars, except per-share amounts. BioCardia is a clinical-stage regenerative medicine company; its lead programs are investigational CardiAMP therapies, alongside approved enabling-device products that generate modest revenue.
Financial performance and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $84 | $130 | $522 | $379 |
| Net product revenue | $52 | $88 | $223 | $298 |
| Collaboration revenue | $32 | $42 | $299 | $81 |
| Cost of goods sold | $109 | $147 | $401 | $525 |
| Research and development | $2,262 | $1,700 | $6,248 | $4,028 |
| Selling, general and administrative | $1,283 | $1,322 | $4,315 | $4,708 |
| Operating loss | $(3,570) | $(3,039) | $(10,442) | $(8,882) |
| Net loss | $(3,544) | $(3,001) | $(10,345) | $(8,822) |
| Basic and diluted loss per share | $(0.09) | $(0.08) | $(0.27) | $(0.23) |
- Margins: Cost of goods sold exceeded product revenue, producing a gross loss of $57,000 for Q3 and $178,000 for the nine months (approximately negative 68% and 34% of total revenue, respectively). These figures include product and collaboration revenue in the denominator.
- Cash flow: Operating cash used was $7.823 million in the first nine months, versus $6.146 million in 2017. Investing cash used was $51,000; financing provided $5,000. Cash declined $7.869 million to $4.820 million.
- Balance sheet at September 30: Cash and cash equivalents were $4.820 million; current assets $5.348 million; current liabilities $2.532 million; working capital $2.816 million; total assets $5.556 million; and stockholders’ equity $2.944 million. Accumulated deficit was $82.719 million.
- Debt and liquidity: The balance sheet reports no borrowings. Management said available cash was expected to fund operations into Q1 2019. It disclosed substantial doubt about the company’s ability to continue as a going concern beyond one year from issuance of the statements without additional capital.
Changes versus the prior comparable period
- Nine-month revenue rose $143,000, principally from collaboration programs; product revenue fell $75,000. Q3 revenue declined $46,000, reflecting lower product sales and lower collaboration revenue.
- Nine-month R&D expense increased $2.220 million, mainly due to the CardiAMP Heart Failure trial and CardiALLO development. Operating loss widened $1.560 million and net loss widened $1.523 million.
- Nine-month SG&A fell $393,000, while cost of goods sold declined $124,000 with lower product sales volumes. Operating cash use increased $1.677 million.
- BioCardia adopted revenue standard Topic 606 on January 1, 2018, using the cumulative-effect method; opening accumulated deficit was reduced by $76,000. Prior-period amounts were not restated, which affects comparability of collaboration revenue.
Outlook, commentary and risks
- Management expected losses and negative operating cash flows to continue for several years and R&D spending to increase as CardiAMP trial enrollment accelerates and CardiAMP and CardiALLO development continues. It expected 2018 revenue to increase moderately from 2017, largely due to first-half collaboration revenue, and anticipated lower SG&A in Q4 2018 versus Q4 2017.
- At the filing date, management anticipated completion of CardiAMP Heart Failure trial enrollment in Q3 2019; first dosing in the CardiAMP chronic myocardial ischemia trial in Q1 2019; and a CardiALLO IND submission in Q4 2018. These were expectations, not assurances.
- Management reported preliminary six-month results for the first 10 open-label CardiAMP Heart Failure patients, including improvement in six-minute walk distance and heart-failure class. Nine-month improvements were described as clinically meaningful but not statistically significant; one patient’s follow-up was affected by a major adverse cardiac event. The small open-label cohort is not definitive pivotal-trial evidence.
- Management anticipated Q4 2018 FDA submissions for the AVANCE steerable introducer and a Q1 2019 submission for the Morph “DNA” steerable guide, with potential clearance before the end of Q2 2019.
- BioCardia planned to raise additional capital, potentially through debt or equity. Financing may not be available on acceptable terms; equity or convertible debt could dilute shareholders, while alternative partnerships could require relinquishing rights. If funds are insufficient, the company may cut or delay programs, license rights, or cease operations. The financial statements include no adjustments for the going-concern uncertainty.
- Other items: inventory write-downs and related adjustments were $15,000 for the nine months; there were no material market-risk changes, no reported off-balance-sheet arrangements, and management reported disclosure controls were effective. The filing states there were no currently pending legal proceedings believed material.
Important facts for investors to verify
- Whether BioCardia raised sufficient capital after the stated $4.820 million cash balance and Q1 2019 runway estimate, and on what terms.
- Subsequent cash burn, trial costs, enrollment progress and timing of CardiAMP and CardiALLO regulatory and clinical milestones.
- Whether the first-10-patient preliminary findings are replicated in adequately powered, controlled pivotal-trial results.
- How Topic 606 affected collaboration revenue timing and whether collaboration income is recurring or milestone-dependent.
- Potential dilution from financing and equity compensation; 38,277,908 common shares were outstanding as of November 2, 2018, with 5,549,106 options and 267,359 unvested restricted stock units reported at September 30.