Pluri Inc. annual report, FY2016

Business context and reporting period

This is Pluristem Therapeutics Inc.’s Form 10-K for the fiscal year ended June 30, 2016—not a filing for calendar 2015 Q4. The filing identifies the registrant as Pluristem Therapeutics Inc. The company develops placenta-derived cell therapy candidates and had no marketed products; its lead programs targeted critical limb ischemia (CLI), recovery after femoral-neck-fracture surgery, and acute radiation syndrome (ARS).

Financial results and liquidity

Amounts below are U.S. dollars in millions unless stated otherwise.

FY2016 revenue was entirely from the United Therapeutics license agreement. After United terminated the agreement in December 2015, Pluristem recognized the remaining deferred upfront license fee; this was not product-sales revenue. The filing reports no product-sales revenue expected in the following 12 months.

At June 30, 2016, cash and cash equivalents were $6.223 million; current assets were $35.596 million and current liabilities $5.775 million, for working capital of $29.821 million. Marketable securities were $17.415 million and short-term bank deposits $8.570 million; $0.542 million was restricted. The filing reports no conventional funded debt balance. It discloses $6.359 million of contractual obligations, primarily leases, and a contingent IIA royalty obligation of approximately $21.017 million plus interest, payable from qualifying future sales.

Material changes versus the prior comparable period

• Revenue increased by $2.468 million due to recognition of the remaining United upfront fee following termination of that agreement; the termination returned PAH development rights and related data to Pluristem.
• Net loss narrowed by $1.431 million, while net R&D expense increased 2% as lower IIA participation offset lower stock-based compensation.
• Cash and cash equivalents declined by $16.403 million, to $6.223 million. Operating cash use remained substantial; FY2016 investing activities provided $1.312 million and financing activities provided $0.807 million.
• FY2016 quarterly data show Q4 revenue of zero and a net loss of $6.205 million. Most annual revenue was recognized in the December 2015 quarter.

Outlook, commentary, and key risks

• Management said available funds were sufficient for at least 12 months, but also said additional funding might be needed before operations generate material cash. Funding sources included equity issuance, grants, licensing, and sales of marketable securities.
• Management expected R&D to remain the largest operating expense and did not expect product-sales revenue in the next 12 months. Licensing revenue could occur, but management expected it would likely not exceed operating costs in the short to medium term.
• After year-end, the EU awarded a Horizon 2020 consortium grant of €7.6 million (about $8.4 million) for the CLI program; €1.9 million (about $2.1 million) was allocated directly to Pluristem, with further potential benefit through consortium spending.
• Management planned to initiate pivotal PLX-PAD CLI studies in early 2017 and described potential initial approval in two to three years. These were forward-looking targets, dependent on regulatory clearance and trial execution. The company also planned a Phase III femoral-neck-fracture study; NIH/NIAID-supported PLX-R18 dose-selection studies for ARS had begun.
• Principal risks include clinical-trial failure or delay, regulatory uncertainty, need for additional capital and possible shareholder dilution, limited commercialization experience, reimbursement and market acceptance, manufacturing and supplier risks, competition, foreign-exchange exposure, and operations concentrated in Israel.
• The United license termination ended the company’s principal reported revenue source. The company also disclosed no legal proceedings and no off-balance-sheet arrangements. Auditors issued unqualified opinions on the financial statements and internal controls; management reported controls effective at June 30, 2016.

Important facts for investors to verify

• Confirm the company’s actual liquidity and runway, including cash burn, restricted funds, marketable-security liquidity, and the assumptions underlying management’s 12-month funding statement.
• Review the terms, timing, and conditions of the EU grant and the extent of Pluristem’s direct funding versus indirect consortium benefits.
• Track regulatory clearances, trial initiation, enrollment, and clinical results for CLI, femoral-neck fracture, and PLX-R18; projected timelines are not assured.
• Assess prospective financing needs, potential dilution, and the timing and likelihood of licensing or other non-dilutive revenue.
• Reconcile reported balance-sheet values: selected financial data lists total assets of $45.835 million, while the audited balance sheet reports $45.941 million. The filing also cites a $32.208 million cash position in a note, versus $32.750 million when cash, deposits, restricted funds, and marketable securities in the balance sheet are summed; clarify the definitions and figures.