ClearPoint Neuro, Inc. (filing registrant: MRI Interventions, Inc.) — 2018 Q3 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. The filing describes a medical-device business focused on MRI-guided minimally invasive procedures. ClearPoint was its commercial brain-procedure system; ClearTrace, a heart-procedure product candidate, remained suspended and was not cleared for commercial sale.
Financial results
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Total revenue | $1.81 million | $1.72 million | $5.08 million | $5.70 million |
| Gross margin | 69% | 60% | 66% | 61% |
| Operating loss | $(1.21) million | $(1.33) million | $(4.27) million | $(4.50) million |
| Net loss | $(1.43) million | $(1.43) million | $(4.95) million | $(5.09) million |
| Net loss per share, basic and diluted | $(0.13) | $(0.14) | $(0.45) | $(0.75) |
Q3 revenue increased 5% year over year, while nine-month revenue declined 11%. For the nine-month period, product revenue fell 14%, including a 10% decrease in functional neurology disposables and a 54% decrease in capital equipment sales. Service and other revenue rose 50%, partly reflecting new biologics and drug-delivery services. The company attributed weaker ClearPoint case-related sales to disruption among third-party laser-ablation providers and limited MRI-suite approval for a new deep-brain-stimulation system. Q3 gross margin improved mainly from lower overhead as a share of sales and a more favorable product mix; the nine-month improvement also reflected mix.
Cash, liquidity and debt
- Cash and cash equivalents were $3.71 million at September 30, 2018, down from $9.29 million at December 31, 2017. Current assets were $7.53 million and current liabilities were $2.02 million.
- Cash used in operations was $4.05 million for the first nine months of 2018, compared with $4.25 million in 2017. Investing activities used $63,000. Financing activities used $1.47 million: the company repaid the $2.0 million Brainlab senior note and received $532,000 from warrant exercises.
- Remaining note principal totaled $4.975 million, payable in 2020: $1.975 million of 12% 2014 secured notes, whose maturity was extended to September 2020, and $3.0 million of 3.5% 2010 secured notes, due November 2020. The notes are secured by company assets; the 2014 notes have priority over the 2010 notes. Balance-sheet carrying values are lower because of unamortized discounts and financing costs.
- The company reported a $106 million accumulated deficit and stated it expects to continue consuming cash for at least the next 12 months. Management said additional financing would be necessary; if sufficient financing cannot be obtained, substantial doubt would arise about the company’s ability to continue as a going concern.
Outlook, risks and notable items
- Management anticipated higher ClearPoint revenue from increased use at existing sites and installations at new sites, with operating-expense growth modest relative to anticipated revenue growth. It cautioned that these expectations are uncertain and did not provide numeric guidance.
- Potential financing through equity, debt, a credit facility or a strategic collaboration could be unavailable or cause dilution. The filing does not provide a clear cash-runway estimate.
- Other risks include market adoption, regulatory and product-development uncertainty, customer access to capital, competition, dependence on key suppliers, and product-liability exposure. Some manufacturing components have few alternative suppliers.
- The Brainlab note repayment terminated related conversion and warrant features; 2013 warrants also expired. No derivative liabilities remained at September 30, 2018. The repayment removed the Brainlab note but used $2.0 million of cash.
- After quarter-end, one affected laser-ablation provider regained FDA clearance in October 2018. The filing also lists October 16, 2018 license/collaboration and distribution agreements with Clinical Laserthermia Systems AB; full terms are not provided in the filing text supplied here.
- Management reported effective disclosure controls as of September 30, 2018 and no material changes in internal control over financial reporting during the quarter. No legal proceedings were reported; the filing stated there were no material changes to the risk factors in the 2017 Form 10-K.
Important facts for investors to verify
- Whether ClearPoint case volumes and disposable sales recovered following the cited FDA actions and MRI-use clearance developments.
- Cash burn, financing needs and available funding relative to the 2020 note maturities; confirm the terms and subsequent status of any financing or strategic agreements.
- Whether anticipated new-site installations and greater use at existing sites translated into sustained revenue growth, particularly given lower nine-month product and capital-equipment sales.
- The economics, obligations and commercial progress under the October 2018 Clinical Laserthermia Systems agreements.