BioCardia, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. Unaudited results; dollar amounts below are in millions unless stated otherwise. BioCardia is a clinical-stage regenerative medicine company developing cardiovascular cell therapies and enabling delivery devices.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | 9M 2019 | 9M 2018 |
|---|---|---|---|---|
| Revenue | $0.194 | $0.084 | $0.495 | $0.522 |
| Operating loss | $(3.227) | $(3.570) | $(10.678) | $(10.442) |
| Net loss | $(3.792) | $(3.544) | $(11.208) | $(10.345) |
| Net loss per share | $(0.63) | $(0.83) | $(2.13) | $(2.43) |
- At September 30, cash and cash equivalents were $8.910, versus $5.358 at December 31, 2018. Current assets were $9.237 and current liabilities $4.044. Accumulated deficit was $97.568.
- Operating cash use for the first nine months was $6.189, compared with $7.823 in 2018; investing cash use was $0.144. Financing provided $9.885, mainly from the stock-and-warrant offering and convertible notes. Ending cash was $8.910.
- Q3 revenue comprised $0.001 product revenue and $0.193 collaboration revenue. Nine-month revenue comprised $0.139 product revenue and $0.356 collaboration revenue. No meaningful consolidated margin trend is established by these low and mixed revenue levels.
- At quarter-end, operating lease liabilities totaled $1.260 ($0.508 current and $0.752 noncurrent); undiscounted lease payments were $1.432. The $0.625 convertible notes issued in July, plus interest, converted into shares and warrants in August.
Changes versus comparable periods
- Q3 revenue rose $0.110 year over year, primarily from increased collaboration activity, while nine-month revenue fell $0.027, reflecting lower catheter sales partly offset by collaboration revenue.
- Q3 operating loss narrowed by $0.343, with lower R&D and cost of goods sold. Nine-month operating loss widened by $0.236 as R&D and SG&A rose overall.
- Q3 net loss increased by $0.248 and nine-month net loss by $0.863. 2019 included $0.521 loss on extinguishment of convertible notes and $0.112 interest expense, partly offset by a $0.052 fair-value gain. These items were absent in 2018.
- Net cash used in operations declined by $1.634 year over year for the nine-month period. Management attributed this partly to deferred board compensation, equity-settled prior-year bonuses, and changes in customer deposits and deferred revenue.
- The August public offering and September over-allotment generated approximately $9.27 in net proceeds, and common shares outstanding increased to 6,825,183 from 4,845,697 at year-end. The company also uplisted its common stock and warrants to Nasdaq in August.
Outlook, operations and key risks
- Going concern and funding: Management stated that $8.910 of cash was not sufficient to fund operations for one year from issuance of the statements; substantial doubt exists about the company’s ability to continue as a going concern over that period. Losses and negative operating cash flows are expected to continue. Additional capital is needed, with no assurance it can be raised on acceptable terms. Potential responses include expense reductions, delaying or narrowing development, licensing or relinquishing rights, or ceasing operations.
- CardiAMP Heart Failure Trial: The Phase III trial was enrolling at 24 sites, with 58 patients enrolled. A September DSMB review found no safety concerns and recommended continuation. FDA approved an IDE supplement allowing specified control-arm crossover and company coverage of patient copays. Management said enrollment remains the main challenge, a significant acceleration is needed to complete the trial in 2020, and the first randomized efficacy data review is anticipated in Q4 2020.
- Other programs: The CardiAMP chronic myocardial ischemia trial has FDA approval but had not started. Management expected to seek FDA acceptance of a CardiALLO Phase I/II IND in Q2 2020. These are plans, not assurances of initiation or regulatory approval.
- Business outlook: Management expected revenue to increase in Q4 2019 and modestly year over year. It anticipated modest R&D increases and relatively consistent Q4 SG&A, with modest annual SG&A growth. It also warned that development and clinical-trial costs are expected to rise and that future funding needs depend on trial progress, regulatory outcomes and other factors.
- Controls: Disclosure controls were deemed ineffective at September 30 because of a material weakness: inconsistent and untimely review of accounting and disclosure for non-routine transactions. Remediation steps were underway, but effectiveness was not assured.
- Legal contingency: BioCardia is litigating with former employee Surbhi Sarna and Boston Scientific over patent ownership, alleged misappropriation and proceeds from the sale of nVision Medical. BioCardia seeks, among other relief, constructive trusts and damages; the filing does not quantify potential recovery or exposure.
- Other items: Termination of the OPKO consulting agreement in August accelerated recognition of remaining compensation on OPKO’s option. The company also identified inventory write-down risk related to product demand and the transition to the Morph AVANCE product family.
Investor verification points
- Verify current cash runway, cash burn assumptions and the timing, amount and terms of any additional financing.
- Track CardiAMP enrollment, trial completion expectations and the planned Q4 2020 DSMB efficacy review.
- Confirm progress toward CardiALLO IND acceptance and any start date for the chronic myocardial ischemia trial.
- Monitor dilution and warrant overhang following the offering and note conversion; 2,435,808 common stock warrants were reported outstanding at September 30.
- Assess remediation of the material weakness and follow developments in the patent litigation, including any financial impact.