Filing identity and reporting period
Important discrepancy: The request identifies Lisata Therapeutics, Inc. and 2015 Q3, but the supplied filing is Caladrius Biosciences, Inc.’s Form 10-Q for the quarter ended September 30, 2016. The figures below summarize the supplied filing, not the requested company or period. Share and per-share figures reflect a one-for-ten reverse stock split effective July 28, 2016.
Caladrius combined a cell-therapy development and manufacturing services business, PCT, with its own clinical-stage pipeline. PCT was 80.1% owned at quarter-end; Hitachi Chemical held 19.9%. The lead clinical candidate was CLBS03, a Phase 2 Treg therapy for adolescents with recent-onset type 1 diabetes.
Financial performance and position
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | 2016: $9.32 million; 2015: $5.89 million | 2016: $25.11 million; 2015: $14.93 million |
| Gross profit (margin) | 2016: $0.71 million (8%); 2015: $1.08 million (18%) | 2016: $3.22 million (13%); 2015: $0.95 million (6%) |
| Operating loss | 2016: $6.86 million; 2015: $10.38 million | 2016: $25.42 million; 2015: $54.14 million |
| Net loss | 2016: $7.29 million; 2015: $11.39 million | 2016: $27.22 million; 2015: $47.78 million |
| Loss attributable to common stockholders; loss per share | 2016: $6.88 million; $1.09 | 2016: $26.70 million; $4.45 |
| Cash used in operating activities | 2016 nine months: $20.29 million; 2015: $30.53 million |
At September 30, 2016, cash and cash equivalents were $18.61 million, working capital was approximately $11.4 million, and total assets were $57.28 million. Current liabilities were $18.55 million. Oxford Finance debt was approximately $5.65 million, including $2.32 million current; notes payable totaled approximately $0.97 million. The balance sheet also reported $19.4 million of redeemable securities related to Hitachi’s PCT interest; this is classified outside stockholders’ equity, not as conventional debt.
Material changes and notable items
- Revenue grew 58% in the quarter and 68% for the nine-month period, driven mainly by PCT clinical services and reimbursable expenses. Nine-month clinical manufacturing revenue increased to $12.2 million from $6.9 million.
- Quarterly gross margin fell to 8% from 18%. The company deferred recognition of about $0.6 million of clinical manufacturing billings because collection from one customer was not reasonably assured. Nine-month gross margin improved to 13% from 6%.
- Operating costs declined 27% for the nine months. Lower R&D and selling, general and administrative costs were partly offset by higher cost of revenues. The 2015 comparison included a $9.4 million impairment of CLBS10-related in-process R&D; that program was discontinued.
- Cash used in operations improved year over year, but financing was material to liquidity: the company received $19.4 million for Hitachi’s PCT investment, $4.0 million from a registered offering, and $6.6 million from the initial tranche of a concurrent private placement during the period. It repaid $3.0 million of Oxford debt in September.
- Oxford debt carried an 8.5% annual interest rate; interest-only payments were scheduled through December 2016, with principal and interest payments beginning January 2017. The loan matures September 1, 2018. The company reported covenant compliance at quarter-end.
Outlook, risks and contingencies
Management anticipated needing additional capital to expand PCT, develop CLBS03, cover operating expenses, and service debt. It expected to use cash on hand, business revenue, further private-placement proceeds, and potential Aspire Capital sales, partnerships, grants, or other financing. Management warned that unavailable or unfavorable financing could require delaying or discontinuing CLBS03 development or business expansion, and could raise substantial doubt about the company’s ability to continue as a going concern.
The September private placement included an expected $6.0 million remainder of its initial tranche, which management expected in Q4 2016, and a further $8.4 million tranche subject to conditions including enrollment of 70 CLBS03 trial subjects. The filing also described Hitachi-related cash and license payments, with remaining amounts expected before year-end; the precise remaining aggregate amount is not presented consistently enough in the supplied text to state with confidence.
In the CLBS03 Phase 2 trial, enrollment of the initial 19 patients was completed in August 2016. Following a satisfactory safety review, enrollment of the remaining 92 resumed. An interim analysis was planned after approximately half the patients reached six months of follow-up. Key risks include clinical and regulatory uncertainty, patient enrollment, customer collectability and concentration, capital availability, and execution of the Hitachi collaboration. Three customers represented 43% of nine-month revenue. The filing reported no material change to previously disclosed risk factors, no material legal-proceeding update, and no off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm that the intended filing is Caladrius Biosciences’ 2016 Q3 10-Q; the request metadata instead names Lisata Therapeutics and 2015 Q3.
- Verify subsequent receipts of the expected $6.0 million initial private-placement balance and whether the conditional $8.4 million tranche closed.
- Track cash burn, liquidity, and the timing and terms of any additional financing, including potential dilution.
- Monitor CLBS03 enrollment, the interim analysis, and trial costs, along with PCT revenue growth, gross margins, and collection of deferred customer billings.
- Review Oxford debt repayment obligations and the terms and potential consequences of Hitachi’s redeemable interest and put rights.