Business context and reporting period
The supplied filing is Fluidigm Corporation’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2011—not a filing under the name Standard BioTools Inc. Fluidigm developed, manufactured and marketed microfluidic instruments and consumables for life-science and agricultural-biotechnology markets. It reported one operating segment.
Financial results and position
Amounts below are in millions of dollars except per-share data and percentages.
| Metric | Q3 2011 | Q3 2010 | Nine months 2011 | Nine months 2010 |
|---|---|---|---|---|
| Total revenue | $10.6 | $8.5 | $29.9 | $23.2 |
| Product revenue | $10.2 | $7.2 | $28.3 | $20.9 |
| Product margin | 67% | 66% | 68% | 62% |
| Operating loss | $(4.1) | $(3.1) | $(15.6) | $(12.6) |
| Net loss | $(4.5) | $(3.4) | $(19.0) | $(13.8) |
| Net loss attributable to common stockholders | $(4.5) | $(3.4) | $(28.9) | $(13.8) |
| Net loss per common share, basic and diluted | $(0.22) | $(1.78) | $(1.70) | $(7.37) |
Revenue increased 25% in Q3 and 29% for the nine-month period year over year. Product growth reflected higher instrument sales and consumables demand, including assays launched in Q2 2011. Nine-month product margin improved as a share of sales, mainly from lower instrument costs and higher instrument average selling prices. Q3 selling, general and administrative expense rose 43% to $8.1 million; nine-month expense rose 32% to $23.3 million. Research and development expense was broadly flat.
For the nine months, operating cash use was $15.3 million, versus $9.2 million in 2010; investing cash use was $50.1 million, largely reflecting purchases of securities and a $2.0 million payment to Life Technologies; and financing provided $71.4 million. At September 30, cash and cash equivalents were $11.9 million and available-for-sale securities were $47.0 million. Working capital was $56.4 million. Long-term debt was $11.6 million, including $8.6 million current and $3.0 million non-current on the balance sheet; the company also had a $7.0 million bank line of credit with no balance outstanding. Total liabilities were $23.5 million. Accumulated deficit was $218.3 million.
Material changes and unusual items
- Fluidigm completed its IPO in February 2011, receiving approximately $77.0 million net proceeds. Preferred stock converted into common stock, and stockholders’ equity moved from a $189.2 million deficit at year-end 2010 to $59.2 million positive at September 30, 2011. Common shares outstanding increased substantially.
- A January 2011 reduction in the Series E preferred-stock conversion price produced a $9.9 million deemed dividend, increasing nine-month loss attributable to common stockholders but not net loss.
- A $3.0 million litigation-settlement expense was recorded for the June 2011 resolution of patent litigation with Life Technologies. Fluidigm separately paid $2.0 million in July for limited-term protections against specified patent litigation; this was recorded as an asset and is being amortized over four years.
- Nine-month interest expense included a $1.2 million non-cash write-off of debt discount when the January notes were repaid. Preferred-stock warrant remeasurement and expiration also affected reported non-operating results; the warrants were converted, exercised or expired in connection with the IPO.
Outlook, commentary and risks
Management expected instrument and consumables unit sales to continue increasing as the customer base and geographic coverage expanded, while noting that instrument average selling prices could vary with product mix and currency. It expected grant revenue to decline as Singapore grant periods ended, partly offset by a new $1.9 million California grant recognized over three years from May 2011. Management anticipated increased SG&A and potentially higher R&D and capital spending, including manufacturing-capacity expansion. It believed existing cash and cash equivalents would cover working-capital and capital-expenditure needs for at least 18 months, but warned additional financing might be required and might not be available on acceptable terms.
The company had incurred persistent losses and negative operating cash flow and did not predict when, or whether, it would become profitable. Key risks included customer adoption and variable sales cycles; competition and technology change; reliance on a single Singapore manufacturing site and certain single-source suppliers; reagent availability and intellectual-property rights; potential regulatory changes for research-use products and laboratory-developed tests; international, foreign-exchange and customer-budget exposure; and further funding needs. The filing said disclosure controls were effective at a reasonable-assurance level, with no material quarterly change in internal control over financial reporting, and reported no material legal proceedings then pending.
Important facts for investors to verify
- Confirm entity and filing identity: the provided document is titled Fluidigm Corporation’s 2011 Form 10-Q, while the request metadata names Standard BioTools Inc.
- Assess whether revenue growth and improved nine-month product margin can continue alongside operating losses and rising operating cash use.
- Review cash burn, the maturity and payment schedule of the 13.5% long-term loan, and management’s stated 18-month liquidity estimate.
- Verify the effects and remaining terms of the Life Technologies settlement and license arrangements, including the four-year litigation protection and royalty provisions.
- Monitor execution and cost of Singapore manufacturing expansion, grant-revenue decline, and the disclosed intellectual-property, reagent-supply, customer-adoption and regulatory risks.