Filing summary
Entity mismatch: The request identifies Viridian Therapeutics, Inc., but the supplied Form 10-Q is for Signal Genetics, Inc. It covers the quarter and six months ended June 30, 2016, and was signed August 15, 2016. The figures below summarize the supplied filing, not Viridian Therapeutics.
Business context and reporting period
Signal Genetics was a commercial-stage molecular diagnostics company whose revenue primarily came from its MyPRS multiple myeloma test. The filing reports second-quarter and first-half 2016 results against the comparable 2015 periods. Financial amounts below are in U.S. dollars; financial-statement amounts are rounded to millions unless stated otherwise.
Financial performance and position
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Net revenue | $0.874m | $0.734m | $1.692m | $1.378m |
| Cost of revenue | $0.628m | $0.678m | $1.257m | $1.439m |
| Gross profit (margin) | $0.246m (28%) | $0.056m (8%) | $0.435m (26%) | $(0.061)m (-4%) |
| Operating expenses | $3.358m | $3.224m | $6.911m | $6.480m |
| Operating loss | $(2.484)m | $(2.490)m | $(5.219)m | $(5.102)m |
| Net loss | $(2.507)m | $(2.562)m | $(5.265)m | $(5.196)m |
| Net loss per share | $(0.23) | $(0.33) | $(0.49) | $(0.77) |
| Cash used in operating activities | Not stated by quarter | Not stated by quarter | $(4.230)m | $(3.295)m |
Revenue increased 19% in Q2 and 23% in the first half. Net loss was slightly lower in Q2 but slightly higher for the first half. First-half test billings fell 31% overall, despite an 80% increase in clinical-patient and direct-customer billings, as UAMS research test billings fell 90%.
At June 30, 2016, cash and cash equivalents were $6.501m, down from $10.832m at year-end 2015. Working capital was $5.4m; current assets were $7.966m and current liabilities $2.597m. The related-party note payable was $1.105m, unsecured, bearing 8% interest and due on demand; accrued interest was $117,000. Capital lease obligations were $46,000, with the lease scheduled to expire in January 2017. Stockholders’ equity was $6.437m.
Material changes and management commentary
- Clinical and direct-customer revenue rose to $774,000 in Q2 from $329,000, and to $1.547m for the first half from $553,000. Management attributed growth to more hospital customers, increased testing from existing customers, and higher estimated selling prices for non-contracted payors.
- Reported net revenue included favorable prior-period estimate changes of $82,000 in Q2 and $224,000 in the first half of 2016. Contractual allowances were 59% of gross revenue, up from 50% in the comparable periods of 2015.
- UAMS research-services revenue declined 90% in both comparison periods as UAMS had less funding; management expected further declines in revenue sourced from UAMS.
- Research and development expense increased 72% in Q2 and 119% in the first half, primarily due to sponsored research to validate MyPRS in multiple myeloma and its precursor conditions. Selling and marketing expense decreased 3% in Q2 but rose 6% for the first half; general and administrative expense rose 4% and 6%, respectively.
- Net favorable revisions to non-contracted-payor revenue estimates, test volume, and customer mix are important to interpreting the revenue increase. Days sales outstanding rose to 71 from 53 at December 31, 2015, which management attributed to growth in receivables, including slower-paying non-contracted payors.
Outlook, risks, and unusual items
Going concern: Management stated that available cash was insufficient for the full 12 months after filing and estimated that current operations could be maintained through June 2017. The company said substantial doubt existed about its ability to continue as a going concern, citing its cash position, market conditions, and depressed share price. It would need additional financing, debt conversion, a strategic transaction, or a combination to fund operations beyond that point. If unsuccessful, it might reduce or curtail operations, sell or license assets, sell the company, liquidate assets, or cease operations. The financial statements contain no adjustments for a possible failure to continue as a going concern.
No specific revenue or earnings guidance was provided. Management described growth plans that included expanding MyPRS reimbursement coverage, customer reach, research and pharmaceutical collaborations, and test offerings. Key risks include reimbursement approval and payment levels, adoption of MyPRS, competing tests, reliance on estimates and collections from non-contracted payors, customer concentration, and reliance on a single supplier for testing inventory. No material capital expenditure commitments were reported.
Most important facts for investors to verify
- Confirm the intended issuer: the supplied filing is Signal Genetics, not Viridian Therapeutics.
- Assess the going-concern warning, management’s June 2017 cash runway estimate, and the company’s ability to obtain financing or a strategic transaction.
- Review the quality and collectability of non-contracted-payor revenue, including the $224,000 first-half favorable prior-period estimate changes and the increase in days sales outstanding.
- Track whether clinical customer growth can offset the continuing decline in UAMS research revenue and whether new reimbursement coverage is secured.
- Verify the terms and status of the $1.105m related-party note due on demand, accrued interest, and outstanding capital lease obligations.