BioCardia, Inc. — Q2 2017 Form 10-Q
Reporting period: Three and six months ended June 30, 2017; financial statements are unaudited. Amounts below are in thousands of dollars except per-share data. BioCardia is a clinical-stage regenerative medicine company developing cardiovascular cell therapies. Its lead candidate, CardiAMP, entered a U.S. Phase III pivotal heart-failure trial in December 2016; CardiALLO is its second therapeutic candidate. The company also earns modest revenue from enabling and delivery products.
Key financial results
| Metric | Q2 2017 | Q2 2016 | First half 2017 | First half 2016 |
|---|---|---|---|---|
| Total revenue | $112 | $144 | $249 | $322 |
| Cost of goods sold | $203 | $156 | $378 | $382 |
| Gross profit (loss) | $(91) | $(12) | $(129) | $(60) |
| Gross margin | (81)% | (8)% | (52)% | (19)% |
| Research and development | $1,295 | $497 | $2,328 | $938 |
| Selling, general and administrative | $1,582 | $869 | $3,386 | $1,456 |
| Operating loss | $(2,968) | $(1,378) | $(5,843) | $(2,454) |
| Net loss | $(2,945) | $(1,978) | $(5,821) | $(3,474) |
| Net loss per share, basic and diluted | $(0.01) | $(0.11) | $(0.01) | $(0.19) |
Gross profit and margin are calculated from reported revenue less cost of goods sold; rounding may affect percentages. 2016 weighted-average shares were substantially lower than in 2017 following the 2016 merger and exchange-ratio recapitalization, so per-share comparisons are not directly informative.
Cash, liquidity and debt
- At June 30, 2017, cash and cash equivalents were $15.1 million and short-term investments were $1.8 million, compared with cash of $21.4 million and no short-term investments at December 31, 2016. Current assets totaled $17.5 million; current liabilities were $1.6 million.
- First-half cash flows: $4.4 million used in operations, $1.9 million used in investing (including $1.8 million of short-term investment purchases and $0.1 million of property and equipment), and $22,000 provided by financing. Cash declined $6.2 million to $15.1 million.
- Total liabilities were $1.7 million; the balance sheet reports no outstanding debt. The 2015 convertible notes had converted into common stock in connection with the merger. Stockholders’ equity was $16.1 million and accumulated deficit was $66.0 million.
Changes versus prior comparable periods
- Q2 revenue fell $32,000 year over year; first-half revenue fell $73,000. Management attributed the decline primarily to lower Morph product sales volumes. Collaboration revenue increased, but did not offset lower product revenue.
- Operating losses widened by $1.6 million in Q2 and $3.4 million in the first half. Management cited CardiAMP Phase III trial planning and launch costs, higher staffing and share-based compensation, and added public-company infrastructure costs.
- First-half operating cash use increased by approximately $2.5 million year over year, principally reflecting greater spending on trials, development programs and supporting infrastructure.
- Share-based compensation was $1.3 million in the first half of 2017 versus $58,000 a year earlier. The filing also reports 48.1 million options outstanding and 1.2 million restricted stock units at June 30.
Outlook, risks and notable matters
- Management estimates current cash and short-term investments can fund operations into Q3 2018. Additional capital will be needed to continue developing CardiAMP and CardiALLO beyond that point. The company plans to seek financing, potentially through debt or equity, but gives no assurance it can obtain sufficient funding.
- Management expects operating losses and negative operating cash flows for at least several years. It expects R&D costs to rise as CardiAMP enrollment and treatment proceed and CardiALLO development advances; SG&A is expected to increase moderately from Q2 levels during the remainder of 2017. Product sales are expected to remain consistent, with modestly lower 2017 net product revenue than in 2016.
- Management expected CardiAMP Phase III top-line data in 2019, anticipated an FDA IDE submission for CardiAMP in a post-heart-attack indication in 2017, and anticipated an IND submission for a CardiALLO Phase II trial in 2018. These are forward-looking expectations, not assured outcomes.
- If financing is unavailable, BioCardia may need to cut costs, delay or scale back development, relinquish rights through third-party arrangements, or cease operations. Equity financing could dilute shareholders; debt or partnering could impose restrictive terms or require giving up valuable rights.
- Disclosure controls and procedures were deemed ineffective as of June 30, 2017 because of a material weakness in internal control previously described in the 2016 Form 10-K. Management nevertheless concluded the financial statements fairly present the company’s financial position, results and cash flows in all material respects. No material control changes were reported during the quarter.
- The filing reports no currently pending legal proceedings believed to be material, no defaults upon senior securities, and no off-balance-sheet arrangements.
Important facts for investors to verify
- Cash runway assumptions and the timing, amount and terms of financing needed after the anticipated Q3 2018 runway.
- CardiAMP Phase III enrollment, trial execution, regulatory milestones and the projected 2019 top-line data timing; also the proposed CardiALLO and post-heart-attack program timelines.
- Whether product revenue stabilizes as management expects, given lower Morph sales and gross losses on product revenue.
- Remediation status and continued disclosure of the material weakness in internal control.
- Potential dilution from outstanding options, restricted stock units and future equity or convertible financing.