PlasmaTech Biopharmaceuticals, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; financial statements are unaudited. The filing is by PlasmaTech Biopharmaceuticals, Inc. (not Abeona Therapeutics Inc.); it reports a May 5, 2015 agreement to acquire Abeona Therapeutics LLC, subject to closing conditions.
Business context and results
PlasmaTech is an emerging biopharmaceutical company developing products based on nanopolymer and salt diafiltration (SDF) technologies. MuGard, its marketed oral-mucositis product, is licensed across several territories. Other programs include ProctiGard, which received FDA 510(k) clearance in 2014, and SDF-based plasma biologics in development or process validation.
| Metric | Q1 2015 | Q1 2014 | Change / context |
|---|---|---|---|
| License revenue | $151,000 | $146,000 | Up $5,000 |
| Royalty revenue | $107,000 | $62,000 | Up $45,000, or about 73% |
| Total revenue | $258,000 | $208,000 | Up $50,000, or about 24% |
| Operating expenses | $2.260 million | $1.536 million | Up $724,000 |
| Operating loss | $2.002 million | $1.328 million | Widened by $674,000 |
| Net loss | $2.000 million | $859,000 | Net loss allocable to common stockholders was $2.000 million versus $1.584 million |
| Loss per common share | $0.10 | $3.06 | 2014 share count was unusually low; 2015 weighted-average shares were 19.984 million versus 518,000 |
| Operating cash flow | $(3.163) million | $(125,000) | Greater cash use, including a $1.258 million reduction in accounts payable and accrued expenses |
Margins are not separately reported; the filing provides no gross-profit figure. Revenue remained small relative to operating costs. The 2014 comparison included a $583,000 gain on the preferred-stock derivative and $725,000 of preferred dividends; those items did not recur in Q1 2015. Q1 2015 operating expenses rose largely due to A1PI development and increased staffing, legal and investor-relations costs; lower stock-based compensation partly offset these increases.
Financial position and liquidity
- Cash and cash equivalents were $7.948 million at March 31, 2015, down from $11.520 million at December 31, 2014. Cash used in investing activities was $9,000, and $400,000 of short-term debt was repaid.
- Working capital was $6.950 million at March 31, versus $8.657 million at December 31, a decrease of $1.707 million. The MD&A’s description of the prior-period figure as a “deficit” conflicts with the balance-sheet amounts, which show positive working capital at both dates.
- Total liabilities were $9.958 million, including $4.000 million payable to the SDF licensor and $5.320 million of deferred revenue. Short-term notes payable were zero at quarter-end; the $400,000 year-end balance was repaid in January.
- Accumulated deficit was $298.074 million. The company has a history of operating losses and negative operating cash flow.
Outlook, developments and risks
- Management said cash resources, the April 2015 financing, MuGard royalties and expected license receipts were expected to fund the current operating level through the end of 2016, while also warning that additional financing could be needed within 12 months. The company cannot assure sustained profitability or sufficient future revenue.
- After quarter-end, the company closed a $7 million common-stock placement on April 23 and a $10 million placement on May 11, receiving $9.2 million net from the latter. The May financing included warrants for 625,000 shares at $10 per share; placement-agent warrants were also issued.
- The proposed Abeona merger would issue 3,979,761 shares at closing and could involve up to $9 million in additional performance milestones, payable in stock or cash at PlasmaTech’s option. Closing remained subject to customary conditions.
- Hanmi received Korean marketing approval for MuGard on March 31, 2015. A Phase II UCLA trial evaluating MuGard for stomatitis in breast-cancer patients began enrollment in March.
- Key uncertainties include clinical and regulatory outcomes, commercialization and partner performance, the ability to raise capital, and execution of the SDF technology and proposed merger. The filing describes a continuing material weakness in internal controls related to limited accounting staffing and segregation of duties; management said disclosure controls were not effective, although it believed the weakness did not affect current-period financial statement accuracy.
- A shareholder-related lawsuit remained pending after an amended complaint; PlasmaTech filed a motion to dismiss in March 2015 and said it would contest the claims. No other material pending legal proceedings were reported.
Important facts for investors to verify
- Whether the Abeona merger closed, the final share issuance and any milestone terms or payments.
- Cash runway and actual cash burn after the April and May financings, including the impact of ongoing development spending.
- MuGard royalty growth, partner launches and sales, and progress and results of the UCLA trial.
- Regulatory, process-validation and development progress for SDF-based A1PI and IVIG programs.
- Remediation of the material weakness in internal controls and developments in the pending litigation.