Nuwellis, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; compared with the same period in 2021. Nuwellis develops and commercializes the Aquadex ultrafiltration system for patients with fluid overload. Figures below are in U.S. dollars; financial statement amounts are in thousands unless noted.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Net sales | $1.926 million | $1.918 million | +$8,000; +0.4% |
| Gross profit / margin | $1.102 million / 57.2% | $966,000 / 50.4% | Margin +6.8 percentage points |
| Operating expenses | $5.518 million | $6.184 million | −10.8% |
| Operating loss | $(4.416) million | $(5.218) million | Loss narrowed |
| Net loss | $(4.473) million | $(5.221) million | Loss narrowed |
| Basic and diluted loss per share | $(0.42) | $(1.62) | Improved; weighted average shares rose to 10.538 million from 3.242 million |
| Cash used in operating activities | $4.827 million | $5.382 million | Use decreased $555,000 |
| Cash and cash equivalents | $19.300 million | $24.205 million at Dec. 31, 2021 | Down $4.905 million |
Gross margin improved mainly because of favorable product mix and lower inventory revaluation expense. SG&A fell 15.8%, reflecting cost optimization and lower nonrecurring prior-period costs; R&D rose 16.8% due to new-product investment and increased regulatory activity. Net sales were nearly flat; management attributed the slight increase to utilization and order timing.
Financial position and liquidity
- At March 31, 2022, current assets were $23.895 million and current liabilities were $3.392 million; total assets were $26.107 million and total liabilities were $4.394 million.
- Liabilities primarily comprise operating and finance lease obligations; the filing reports no material capital-expenditure commitments and no off-balance-sheet arrangements.
- Cash used in investing activities was $70,000, principally for equipment. Financing activities used $6,000, consisting of finance-lease payments; there were no offering proceeds in Q1 2022.
- Accumulated deficit was $257.4 million. Management expects continued losses and operating cash outflows, but believes existing capital resources can support its operating plan through June 30, 2023. It cautions that additional financing may be needed and may not be available on favorable terms or at all.
Outlook, risks and notable items
- Management’s growth strategy depends on wider Aquadex adoption, customer training, and effective manufacturing, marketing and distribution. The filing provides no numerical revenue or earnings guidance.
- COVID-19-related hospital access limits, sales-process disruption, supply or staffing constraints, and uncertainty in capital markets could affect demand, operations and financing; the magnitude and duration remain uncertain.
- Two customers accounted for 14% and 10% of Q1 2022 sales; one customer represented 13% of receivables at quarter-end.
- A $428,160 nonrefundable technology license fee under a Koronis Biomedical collaboration was expensed in 2021 and is payable in 12 monthly installments starting June 2022. The collaboration concerns development of an integrated continuous renal replacement therapy device, with an NIH grant supporting the project.
- Management reported no material change in previously disclosed risk factors, no current legal proceedings, and effective disclosure controls as of March 31, 2022.
Important facts for investors to verify
- Whether sales growth and Aquadex adoption improve beyond the nearly flat Q1 result, including the effects of customer concentration and hospital access.
- Actual cash burn and whether the stated runway through June 30, 2023 remains achievable; monitor financing needs and potential dilution.
- Whether the higher gross margin is sustained and how R&D investment translates into product development, regulatory progress and commercial results.
- Potential ongoing effects of COVID-19 on customer demand, operations, supply and access to capital.