PluriStem Therapeutics Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended December 31, 2017 (fiscal 2018 second quarter). The financial statements are unaudited; amounts below are U.S. dollars, generally in millions unless noted.
Business context
PluriStem develops placenta-based cell therapy candidates for ischemic, inflammatory and hematologic conditions. Its lead programs include PLX-PAD for critical limb ischemia (CLI) and recovery after femoral neck fracture, and PLX-R18 for acute radiation syndrome and other indications. The company had only $50,000 of revenue in the period, from PLX cell sales for research use, and said it does not expect product-sale revenue in the next 12 months.
Financial performance and position
| Metric | Six months ended Dec. 31, 2017 | Comparable 2016 period |
|---|---|---|
| Revenue | $0.050 | None |
| Gross profit | $0.048 | None |
| Net R&D expense | $10.315 | $10.200 |
| General and administrative expense | $5.683 | $3.010 |
| Operating loss | $15.907 | $13.210 |
| Net loss | $15.614 | $12.934 |
| Net loss per share | $0.15 | $0.16 |
| Cash used in operating activities | $10.018 | $9.699 |
For the quarter alone, revenue was $50,000 and net loss was $8.229 million, compared with no revenue and a $6.610 million net loss in the quarter ended December 31, 2016. Quarterly net loss per share was $0.08 in both periods. The filing reports no meaningful commercial gross-margin trend given the very small revenue base.
At December 31, 2017, cash and cash equivalents were $8.581 million, short-term bank deposits $15.975 million, and marketable securities $10.736 million, for the company’s stated cash position of $35.292 million. Current assets were $37.074 million, current liabilities $5.797 million, working capital $31.277 million, and stockholders’ equity $36.961 million. Accumulated deficit was $205.185 million. The filing does not report interest-bearing debt; liabilities disclosed are primarily payables, accruals, severance and other long-term liabilities.
Financing activities provided $15.925 million during the six months, primarily from a $13.646 million net public-offering proceeds, $1.026 million net ATM proceeds and $1.160 million from warrant exercises. Investing activities used $2.033 million. Shares outstanding increased to 109.338 million at December 31, 2017 from 96.939 million at June 30, 2017.
Material changes and unusual items
- Six-month net loss rose $2.680 million year over year, principally reflecting higher G&A expenses, which increased 89%; management attributed the increase to stock-based compensation, payroll and corporate activity costs. Net R&D expense rose 1%.
- Stock-based compensation totaled $3.108 million for the six months, versus $0.907 million a year earlier. The filing also reported $7.822 million of unamortized employee and director restricted-stock compensation to be recognized over an average of approximately 3.5 years.
- The company recorded an $0.850 million other-than-temporary impairment loss on marketable securities. Other comprehensive income was $3.379 million for the six months, primarily reflecting unrealized securities gains; it is distinct from net income.
- After quarter-end, PluriStem sold its remaining CHA Biotech investment in January 2018 for approximately $10.5 million net proceeds and reported a $6.2 million net gain. It also sold 626,800 shares under its ATM program at an average $1.57 per share for approximately $0.986 million gross proceeds.
Outlook, risks and contingencies
Management estimated that resources at December 31, together with the CHA-sale proceeds and ATM share sales through January, would fund operations into the fourth quarter of fiscal 2019. This is an estimate, not a guarantee. The company says it will need additional liquidity to support commercialization, R&D and clinical trials; it is pursuing equity issuance, licensing and grants and may implement cost reductions if it cannot raise sufficient capital. Management warned that failure to obtain funding could severely impair the company’s ability to remain viable.
Clinical and regulatory progress remains uncertain. The filing describes an ongoing multinational Phase III PLX-PAD CLI study, planned pivotal studies in femoral neck fracture and ARS (subject to funding), and other early-stage programs. In January 2018, the FDA cleared an expanded-access program for a limited number of CLI patients. The filing also notes that definitive agreements for a proposed Japan PLX-PAD joint venture had not been finalized.
Contingent royalty obligations include approximately $25.806 million of IIA grant-related royalties, payable only from qualifying product or service sales, plus applicable interest; a $9,000 Smart Money grant-related obligation; and royalties under the GvHD clinical-study agreement capped at approximately $250,000. No off-balance-sheet arrangements were reported. The company stated it had recurring operating losses and negative operating cash flows since inception.
Most important facts for investors to verify
- Whether the stated runway through Q4 fiscal 2019 remains achievable, considering the operating cash burn and reliance on further funding.
- Actual proceeds and accounting treatment of the January 2018 CHA sale and ATM share issuance, and the resulting cash runway and dilution.
- Enrollment, interim analysis and outcomes for the Phase III CLI study, as well as timing and funding for other planned pivotal trials.
- Future G&A and stock-compensation expense, and the extent to which grants offset clinical and R&D costs.
- Terms and status of the proposed Japan joint venture and any licensing or commercialization agreements.