BioCardia, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. The unaudited statements are consolidated. BioCardia is a clinical-stage regenerative medicine company developing cardiovascular cell therapies, including CardiAMP and CardiALLO, and sells enabling device products. The October 2016 merger materially changed the company’s capital structure; prior-period per-share data is therefore not directly comparable.
Financial performance and position
| Metric | Q1 2017 | Q1 2016 / comparator |
|---|---|---|
| Revenue | $137,000 | $178,000 |
| Cost of goods sold | $175,000 | $226,000 |
| Gross loss | $38,000 | $48,000 |
| Research and development | $1.033 million | $441,000 |
| Selling, general and administrative | $1.804 million | $587,000 |
| Operating loss | $2.875 million | $1.076 million |
| Net loss | $2.876 million | $1.496 million |
| Net loss per share, basic and diluted | $0.01 | $0.08 |
| Cash used in operating activities | $2.278 million | $748,000 |
Revenue declined about 23% year over year, mainly due to lower product sales. Gross loss was about $38,000, or approximately 28% of revenue. R&D rose about $592,000, primarily for planning and initiating the CardiAMP Phase III trial. SG&A rose about $1.2 million, mainly reflecting public-company costs, salaries and share-based compensation. The net loss per share comparison is affected by the post-merger share count: weighted-average shares were approximately 457.7 million in Q1 2017 versus 18.9 million in Q1 2016.
Cash and cash equivalents were $19.032 million at March 31, 2017, down from $21.352 million at December 31, 2016. Total assets were $19.780 million; total liabilities were $1.430 million, including $1.368 million in current liabilities. Stockholders’ equity was $18.350 million. No convertible notes or warrants were outstanding at quarter-end; the prior notes converted in connection with the merger. The company had an accumulated deficit of $63.0 million. Q1 investing cash use was $64,000 and financing cash provided was $22,000.
Outlook, risks and other notable items
- CardiAMP’s FDA-accepted Phase III pivotal trial for ischemic systolic heart failure began treating patients in February 2017; management expects top-line data in 2019. An IDE submission for a post-myocardial indication was anticipated in 2017.
- The company anticipated preparing an IND submission for a Phase II CardiALLO heart-failure trial. It expects R&D spending to increase as CardiAMP enrollment and treatment continue and CardiALLO development advances. Management expected 2017 product revenue and cost of goods sold to be broadly consistent with 2016.
- Management stated that March 31 cash was expected to fund operations for at least 12 months from the financial statements’ issuance date. It also expects operating losses and negative operating cash flows for at least several years and anticipates needing additional capital. Funding may dilute shareholders, impose debt restrictions, or require the company to surrender rights; unavailable funding could force program delays, reductions or discontinuation.
- Disclosure controls and procedures were deemed ineffective as of March 31, 2017 due to a material weakness in internal control over financial reporting previously described in the 2016 Form 10-K. Management nevertheless concluded the interim financial statements fairly present the company’s position and results in all material respects.
- The company reported no currently pending legal proceedings believed to be material, no defaults upon senior securities, and no off-balance-sheet arrangements. The $750,000 TEDCO grant is restricted to a research project; $285,000 remained recorded as a grant liability pending qualifying expenditures.
- Share-based compensation was $622,000 for the quarter versus $30,000 a year earlier. At March 31, 2017, 45.8 million options and 736,000 unvested restricted stock units were outstanding; potential common shares were excluded from diluted loss per share as anti-dilutive.
Investor verification points
- Confirm current cash, cash runway assumptions and plans or terms for additional financing.
- Track CardiAMP trial enrollment, execution, regulatory milestones and the expected 2019 data timing; verify CardiALLO IND and trial progress.
- Review the material weakness, remediation steps and subsequent assessments of disclosure controls and internal control.
- Assess the drivers and sustainability of rising R&D, SG&A and share-based compensation, along with outstanding options and potential dilution.
- Verify product-sales trends, grant restrictions and qualifying expenditures, and the timing and requirements for adoption of new accounting standards.