SI-BONE, Inc. — 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. Although the request identifies 2018 Q4, this is an annual filing; the provided filing text does not give standalone fourth-quarter financial results.
Business context
SI-BONE develops and sells the iFuse system, a minimally invasive implant and instrument system for sacroiliac joint fusion. Revenue is substantially derived from iFuse. The company reported more than 37,000 procedures performed since launch, and 6,659 procedures in 2018 versus 5,739 in 2017. Its 2018 IPO raised approximately $113.6 million net.
Financial performance and liquidity
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $55.4 million | $48.0 million |
| Gross profit / gross margin | $50.5 million / 91% | $42.9 million / 89% |
| Operating expenses | $62.5 million | $60.2 million |
| Operating loss | $12.0 million | $17.4 million |
| Net loss | $17.5 million | $23.0 million |
| Net loss per share, basic and diluted | $2.20 | $6.65 |
| Cash used in operating activities | $14.5 million | $17.5 million |
Revenue grew 15%, primarily from U.S. sales, which rose to $50.1 million from $43.4 million; international revenue increased to $5.2 million from $4.6 million. The net loss narrowed, while gross margin improved by two percentage points. Operating expenses increased 4% overall, with sales and marketing up 7%.
At year-end, cash and cash equivalents were $25.1 million and short-term investments were $97.1 million. Current assets were $136.0 million against current liabilities of $9.0 million. Debt was $40.0 million principal, or $39.0 million net of debt discount. The term loan carries a fixed 11.5% rate, is secured by substantially all assets including intellectual property, and has an interest-only period through September 2020. Management said available cash, cash equivalents, and short-term investments were expected to fund operations and capital needs for at least 12 months.
Material changes and notable items
- Coverage expanded: payors covering 256.5 million U.S. lives regularly reimbursed for iFuse at year-end, up from 162 million in 2017. The filing describes 26 private payors with exclusive iFuse coverage; it also gives differing counts of payors with positive or announced coverage in different sections.
- The October 2018 IPO converted preferred shares to common stock and materially strengthened the balance sheet. The company also completed a 1-for-18 reverse stock split.
- Investing cash outflow was $97.8 million, mainly reflecting purchases of short-term investments with IPO proceeds; this was not comparable to operating cash burn. Operating cash use improved by $3.0 million.
- The company remained loss-making, with a $157.2 million accumulated deficit and no positive operating cash flow to date.
- A February 2019 putative TCPA class action alleges unsolicited fax invitations to healthcare providers. SI-BONE intends to defend the case; the filing says the outcome and potential loss could not yet be estimated.
Outlook, risks, and contingencies
Management expects continued investment in sales and marketing, product development, and public-company operations, and anticipates operating losses for the foreseeable future. No specific revenue or earnings guidance is provided. Management cites improved reimbursement coverage as a potential growth driver, but notes that procedure growth may lag coverage decisions and that some major payors still do not cover the procedure.
Key risks include dependence on a single product and procedure; competing devices and pricing pressure; uncertain or changing reimbursement; reliance on limited and single-source suppliers, including Orchid for iFuse implants and RMS for iFuse-3D; regulatory, clinical, product-liability, and intellectual-property risks; and the company’s continuing losses. The Pharmakon loan requires minimum liquidity and, beginning with the quarter ended March 31, 2019, compliance with either specified revenue or EBITDA targets. Failure to meet either alternative could make the debt immediately due. The company reported compliance with covenants at December 31, 2018.
The filing reports no legal proceeding that management considered likely to have a material adverse effect at the filing date, while separately disclosing the newly filed TCPA action. Auditors issued an unqualified opinion on the financial statements. Management concluded disclosure controls were effective; the 2018 10-K did not include management’s internal-control effectiveness report because of the newly public company transition period.
Investor verification priorities
- Track revenue growth, procedure volume, and the pace at which expanded payor coverage converts into cases and collections.
- Reconcile the filing’s different payor counts and verify the status and practical scope of exclusive coverage policies.
- Monitor cash burn, operating losses, liquidity, and compliance with the loan’s quarterly revenue-or-EBITDA tests and $5 million minimum cash requirement.
- Assess supplier continuity and capacity, particularly the single-source implant manufacturing dependencies.
- Follow developments in the TCPA class action, clinical evidence for iFuse-3D, reimbursement restrictions, and competing products.