PluriStem Therapeutics Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2017 (fiscal 2017 third quarter). The unaudited consolidated financial statements are in U.S. dollars, in thousands unless otherwise noted. The filing describes a clinical-stage developer of placenta-based cell therapies; it reports no product revenue in the 2017 periods.
Financial results and liquidity
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Revenue | $0 in 2017; $0 in 2016 | $0 in 2017; $2,847 in 2016 |
| Net research and development expense | $6,337 in 2017; $5,756 in 2016 | $16,537 in 2017; $15,221 in 2016 |
| General and administrative expense | $1,886 in 2017; $1,639 in 2016 | $4,896 in 2017; $4,672 in 2016 |
| Operating loss | $8,223 in 2017; $7,395 in 2016 | $21,433 in 2017; $17,146 in 2016 |
| Net loss | $7,864 in 2017; $7,203 in 2016 | $20,798 in 2017; $17,041 in 2016 |
| Basic and diluted loss per share | $0.09 in both periods | $0.25 in 2017; $0.21 in 2016 |
- Gross margin is not meaningful for 2017 because the company had no revenue or cost of revenue. The $2,847 of revenue in the prior-year nine-month period came from recognition of a remaining upfront payment under the terminated United Therapeutics agreement.
- Net cash used in operating activities was $15,221 for the nine months, versus $12,978 in the prior-year period. Investing activities used $1,411; financing activities provided $15,728, mainly from the January 2017 equity and warrant offering.
- At March 31, 2017, cash and cash equivalents were $5,319; short-term deposits $12,329; marketable securities $14,842; and restricted current cash and deposits $574. Cash, cash equivalents, short-term deposits and marketable securities totaled approximately $32,490. Working capital was $28,474; total current assets were $34,603 and current liabilities $6,129.
- Total assets were $43,538, total liabilities $7,915, and shareholders’ equity $35,623. The filing shows no conventional interest-bearing debt balance. Accumulated deficit was $182,555.
Changes versus prior comparable periods
- Nine-month net loss increased by $3,757, chiefly reflecting the absence of the prior-year United agreement revenue and higher net R&D expenses; higher financial income partly offset the increase. Quarterly net loss rose by $661.
- Net R&D expense increased 9% for the nine months and 10% for the quarter, mainly due to clinical-study consultants and subcontractors and increased stock-based compensation. IIA and Horizon 2020 grant participation and lower materials use partly offset the increases.
- G&A expense increased 5% for the nine months and 15% for the quarter, reflecting corporate activity and, for the quarter, higher stock-based compensation.
- The January offering raised $17,250 gross and $15,718 net, issuing 14,081,633 common shares and warrants to purchase 8,448,980 shares. Shares outstanding were 96,171,868 at March 31, compared with 80,268,999 at June 30, 2016.
Outlook, developments and risks
- Management said it expected existing resources to fund operations for at least 12 months from the financial statement date, while also noting that cash needs would rise and additional funding might be needed. The company did not expect product-sale revenue in the next 12 months; licensing revenue was possible but expected to be below operating costs in the short and medium term.
- The company planned to pursue a pivotal, approximately 250-patient Phase III trial of PLX-PAD for critical limb ischemia (CLI), with enrollment anticipated in the first half of 2017. U.K., U.S. and German regulatory clearances to begin the trial were reported. The company also described plans for a Phase III femoral-neck-fracture trial and a Phase I PLX-R18 trial for incomplete hematopoietic recovery after transplantation.
- A Horizon 2020 consortium grant of approximately $8.4 million was awarded for the CLI program, including approximately $2.1 million allocated directly to PluriStem; approximately $965 had been received by March 31, 2017. The company said the grant would cover a significant portion of program costs.
- A binding term sheet contemplated a Japanese joint venture with Sosei CVC for PLX-PAD development and commercialization, with PluriStem to hold 35% and investors to provide approximately $11 million for 65%. Definitive agreements were still planned, not reported as completed.
- A proposed approximately $30 million investment by Innovative Medical remained subject to definitive agreements and clarification of Chinese outbound-investment policy. The term sheet contemplated shares and warrants as well as investor governance and other rights; the transaction was not reported as closed.
- IIA research grants carry contingent royalties generally of 3%–4% on sales of products or services derived from supported technology until grant amounts are repaid, with applicable interest. The disclosed contingent royalty balance was approximately $24,295, excluding LIBOR interest; no royalties are due absent such sales.
- Key risks include continued operating losses, dependence on external financing and grants, clinical-trial and regulatory uncertainty, and the possibility that proposed licensing or investment transactions do not close. Management identified forward-looking statements as subject to substantial risks and uncertainties.
Important facts for investors to verify
- Whether management’s stated 12-month funding runway remains supported by cash, deposits, securities, grants and spending, particularly given operating cash use of $15,221 over nine months.
- Actual timing, enrollment and results of the PLX-PAD CLI Phase III trial and other planned clinical programs; trial plans and regulatory pathways are not evidence of approval or commercial success.
- Whether the Sosei CVC joint venture and Innovative Medical investment progressed from term sheets to definitive, completed transactions, and their final terms and financing impact.
- The availability and timing of Horizon 2020, IIA and other grant funding, and the implications of the contingent IIA royalty obligation.
- The impact of the January 2017 offering and outstanding warrants on dilution; also note that the filing reports 96,331,182 shares outstanding as of May 3, 2017, versus 96,171,868 at March 31.