PluriStem Therapeutics Inc. — Form 10-Q Summary
Period clarification: The supplied filing is for the quarter ended March 31, 2018 (the third quarter of fiscal 2018), not 2017 Q3 as stated in the request metadata. Figures below are in U.S. dollars; financial statement amounts are generally in millions unless noted otherwise.
Business context
PluriStem is a clinical-stage biotherapeutics company developing placenta-derived cell therapies, principally PLX-PAD and PLX-R18, for ischemic, inflammatory and hematologic conditions. The financial statements are unaudited and cover the three and nine months ended March 31, 2018, compared with the same periods in 2017. The company reported only $0.05 million of revenue for the nine-month period, from PLX-cell sales for research use, and no product sales revenue is expected in the next twelve months.
Financial highlights
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Revenue | $0 in 2018 and 2017 | $0.05 million in 2018; $0 in 2017 |
| Net R&D expense | $6.38 million vs. $6.34 million | $16.70 million vs. $16.54 million |
| General and administrative expense | $2.67 million vs. $1.89 million | $8.35 million vs. $4.90 million |
| Operating loss | $9.05 million vs. $8.22 million | $24.96 million vs. $21.43 million |
| Financial income, net | $7.52 million vs. $0.36 million | $7.81 million vs. $0.64 million |
| Net loss | $1.53 million vs. $7.86 million | $17.15 million vs. $20.80 million |
| Basic and diluted loss per share | $0.01 vs. $0.09 | $0.16 vs. $0.25 |
The improved net loss primarily reflects higher financial income, including gains associated with selling the company’s CHA investment and marketable securities—not improved operating performance. Operating losses increased year over year. No gross margin trend is meaningful given the very small amount of research-use revenue.
At March 31, 2018, cash and cash equivalents were $5.94 million and short-term bank deposits were $27.44 million, for a reported combined cash position of $33.38 million. Current assets were $35.71 million and current liabilities $7.81 million, yielding working capital of $27.90 million. Total assets were $42.97 million; stockholders’ equity was $33.23 million and accumulated deficit was $206.72 million. The balance sheet presents no conventional borrowings; listed liabilities are principally payables, accruals and other liabilities.
Operating cash use was $15.59 million in the nine months, versus $15.22 million a year earlier. Investing activities used $0.49 million and financing activities provided $17.31 million. Financing included $13.65 million net proceeds from an October 2017 share offering and $2.41 million from ATM share sales. Shares outstanding increased to 110.87 million at March 31, 2018, from 96.94 million at June 30, 2017.
Material changes and unusual items
- G&A expense rose 71% for the nine months, attributed mainly to higher stock-based compensation, payroll and corporate activity costs. Net R&D expense increased 1%; management cited payroll, materials and lower IIA participation, partly offset by greater EU grant participation and lower subcontractor or stock-compensation costs.
- The company sold its remaining CHA shares in January 2018 for approximately $10.5 million net proceeds, recording a $6.2 million gain. It also sold most marketable securities for approximately $21.9 million and recorded an $8.44 million net gain; an $0.85 million other-than-temporary impairment partly offset financial income.
- Other comprehensive income/loss included marketable-security valuation and reclassification effects; nine-month total comprehensive loss was $19.14 million.
- IIA grants received over time carry contingent royalties generally equal to 3% of qualifying product sales until the grant balance and interest are repaid. The reported contingent royalty balance was $25.81 million; payment depends on qualifying sales.
Outlook, risks and contingencies
Management said the March 31 cash position was expected to fund operations into the first quarter of fiscal 2020. This estimate depends on operating and capital-spending assumptions. The company said it needs additional liquidity for product commercialization and continued R&D and clinical trials, and may need cost reductions if it cannot raise sufficient capital. Funding sources include equity issuance, grants and potential licensing agreements; management cautioned that adequate financing is not assured and failure to obtain funds could severely impair viability.
Key pipeline developments described include an ongoing multinational Phase III PLX-PAD trial in critical limb ischemia, FDA clearance in April 2018 for a Phase III hip-fracture study, and FDA IND clearance in April 2018 for PLX-R18 in acute radiation syndrome. The company also reported a limited expanded-access program for PLX-PAD in critical limb ischemia. These are development milestones, not evidence of approval or commercial revenue. Management anticipated no product-sales revenue during the next twelve months.
Further uncertainties include clinical-trial outcomes and timing, regulatory approvals, grant availability, execution of licensing or collaboration arrangements, foreign-exchange exposure, and potential dilution from future equity financing. The filing says there were no off-balance-sheet arrangements. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the reporting period: this is fiscal Q3 2018, ended March 31, 2018, despite the request’s 2017 Q3 label.
- Review cash burn and the assumptions behind management’s estimated runway into Q1 fiscal 2020, including the need for additional funding.
- Separate operating performance from the one-time gains on the CHA investment and marketable securities when assessing the lower net loss.
- Track clinical-trial progress, enrollment, readouts and regulatory decisions; the cited clearances do not establish efficacy or approval.
- Assess dilution and remaining financing capacity after the 2017 offerings and ATM sales, and review the terms of any future capital raising.
- Review grant-related royalty obligations, collaboration terms and other commitments, including the contingent IIA balance.