Pluristem Therapeutics Inc. — Form 10-Q summary
Reporting period: The filing covers the quarter and six months ended December 31, 2019, the second quarter of Pluristem’s fiscal 2020—not calendar 2019 Q2. Financial statement amounts are in U.S. dollars, thousands, except per-share data. Statements are unaudited.
Business context and results
Pluristem develops placenta-derived cell therapy candidates for ischemic, inflammatory and hematologic conditions. It reported only limited research-use product sales; it does not expect significant product sales revenue in the next 12 months.
| Metric | Three months ended Dec. 31, 2019 | Six months ended Dec. 31, 2019 | Comparable 2018 period |
|---|---|---|---|
| Revenue | $23 | $23 | $50 quarter; $54 six months |
| Gross profit | $22 | $22 | $48 quarter; $52 six months |
| Net R&D expense | $4,640 | $10,022 | $6,256 quarter; $13,020 six months |
| General and administrative expense | $1,750 | $3,563 | $2,123 quarter; $4,333 six months |
| Operating loss | $6,368 | $13,563 | $8,331 quarter; $17,301 six months |
| Net loss per share | $0.40 | $0.86 | $0.75 quarter; $1.52 six months |
The statements of operations report quarterly net loss of $6,370; MD&A instead states $6,974. Six-month net loss was $13,509, compared with $17,469 a year earlier. Gross profit remained small relative to operating expenses; revenue consisted of PLX cells sold for research use.
Cash, liquidity and capitalization
- At December 31, 2019, cash and cash equivalents were $7,300; short-term deposits $8,780; restricted cash and short-term deposits $571; and long-term deposits and restricted deposits $409. Management described total cash and deposits, including restricted balances, as approximately $17,060.
- Working capital was $12,236, with current assets of $19,227 and current liabilities of $6,991. Stockholders’ equity was $15,910; accumulated deficit was $264,513.
- Operating activities used $13,542 in the six months, versus $16,773 in the prior-year period. Investing activities provided $10,660, primarily from short-term deposit withdrawals; financing activities provided $5,967, mainly net proceeds from stock sales. Cash, cash equivalents and restricted cash increased by $3,085.
- No conventional borrowings are disclosed. Operating lease liabilities totaled $2,003, of which $964 was current. The company had pledged $971 of cash and deposits to secure derivatives, a credit line and bank guarantees.
- Shares outstanding rose to 16,934,417 at December 31 from 15,082,852 at June 30, 2019. The company sold 1,644,118 shares under its sales agreement during the six months, receiving net proceeds of $5,967. From January 1 through February 6, 2020, it sold another 925,480 shares at an average $3.95 per share; management said January proceeds were approximately $3.7 million.
Changes, outlook and risks
Six-month net R&D expense fell 23% year over year and G&A expense fell 18%; management attributed the reductions chiefly to lower materials, subcontractor, payroll and stock-based compensation costs. Lower grant participation partly offset R&D savings. Management cited salary reductions for the CEO and Executive Chairman and a lower average employee count as factors in lower G&A expense. Net loss improved year over year, while weighted-average shares increased, reflecting prior equity issuances and other share activity.
Management estimated that liquidity at December 31 plus January 2020 sales-agreement proceeds would fund operations into the second quarter of fiscal 2021. It said additional liquidity will be required to support commercialization, R&D and clinical trials, and that the estimate depends on operating-plan assumptions. Funding options include equity sales, licensing or collaboration agreements, and grants; the filing gives no assurance that sufficient funding will be secured. A cost-reduction plan may be needed if additional capital is unavailable. The company reported recurring operating losses and negative operating cash flows since inception and warned that failure to raise funds could severely affect its viability.
Pluristem was conducting Phase III PLX-PAD trials for critical limb ischemia and recovery after hip-fracture surgery. It reported 75% enrollment in the critical-limb-ischemia study and expected follow-up milestones in 2020 and 2021; it reported 50% enrollment in the hip-fracture study and expected to complete enrollment in the third quarter of 2020. These are management expectations, not assured outcomes. PLX-R18 was in development for acute radiation syndrome and incomplete hematopoietic recovery; further development, funding and regulatory outcomes remain uncertain.
Other notable items include approximately $27,515 of contingent IIA royalty liability, excluding applicable interest, payable only if qualifying product sales occur; additional contingent royalty obligations under other grant programs; and adoption of the lease accounting standard, which recognized lease assets and liabilities without material impact on net loss or cash flows. A German subsidiary was formed in January 2020. The company said disclosure controls were effective and reported no material change in internal control over financial reporting.
Most important facts for investors to verify
- Resolve the filing’s inconsistent quarterly net-loss figure: $6,370 in the financial statements versus $6,974 in MD&A.
- Assess the assumptions underlying the stated liquidity runway into fiscal Q2 2021, including burn rate, restricted funds and subsequent equity proceeds.
- Monitor financing needs, future equity issuance and dilution, as well as the availability and timing of grants or licensing proceeds.
- Track clinical-trial enrollment, follow-up, results and regulatory milestones against management’s projected timelines.
- Review contingent royalty obligations, lease commitments and any new funding or collaboration arrangements.