BioCardia, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. The unaudited filing covers a clinical-stage regenerative medicine company developing cardiovascular and pulmonary cell therapies, alongside catheter and delivery-system products. Financial amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q1 2020 | Q1 2019 / prior date |
|---|---|---|
| Revenue | $38,000 | $216,000 |
| Cost of goods sold | $4,000 | $106,000 |
| Gross profit / margin | $34,000 / 89.5% | $110,000 / 50.9% |
| Research and development | $2.786 million | $2.166 million |
| Selling, general and administrative | $1.857 million | $1.631 million |
| Operating loss | $4.609 million | $3.687 million |
| Net loss | $4.594 million | $3.665 million |
| Basic and diluted loss per share | $0.67 | $0.86 |
| Cash used in operating activities | $2.993 million | $2.465 million |
| Cash and cash equivalents | $2.587 million at March 31, 2020 | $5.585 million at December 31, 2019 |
| Total assets / liabilities | $4.384 million / $5.667 million | $7.678 million / $5.308 million at December 31, 2019 |
| Stockholders’ equity (deficit) | $(1.283) million | $2.370 million at December 31, 2019 |
Revenue was primarily from product sales and collaboration agreements. Gross margin increased as cost of goods sold fell faster than revenue, but reflected very low sales and a product-family transition. The company reported no financing cash inflows in the quarter. Balance-sheet liabilities included operating lease liabilities of $1.016 million in total and $689,000 of deferred revenue; the filing reports no conventional borrowings outstanding at March 31.
Changes versus the prior comparable period
- Revenue fell $178,000, or about 82%, as catheter sales declined during the planned transition to the AVANCE product family and partnering activity generated less revenue.
- Operating loss widened by $922,000. R&D rose $620,000, primarily with CardiAMP trial execution, CardiALLO and other development, personnel and stock compensation; SG&A rose $226,000, including option-repricing compensation, insurance and professional fees.
- Operating cash use increased by $528,000. Cash declined $2.998 million during Q1, and accumulated deficit reached $105.664 million.
- Q1 loss per share was lower than in 2019 despite a larger net loss, principally alongside a higher weighted-average share count (6.832 million versus 4.248 million).
Outlook, developments and risks
- Funding and going concern: Management said March 31 cash was insufficient to fund operations beyond Q2 2020 without additional capital. The filing states substantial doubt about the company’s ability to continue as a going concern within one year after issuance of the financial statements. Management planned to pursue debt and/or equity financing, but said availability and terms were uncertain. Failure to raise funds could require spending cuts, program delays, licensing of rights or cessation of operations.
- Operating outlook: Management expected R&D to increase modestly year over year in 2020 and SG&A to decrease modestly for the remainder of the year. Product revenue was expected to remain limited; collaboration revenue was expected to increase modestly, subject to partner activity. These expectations were exposed to COVID-19 disruption.
- Clinical programs: The CardiAMP Heart Failure Phase III trial was active at 25 sites, with 74 patients enrolled. A March 2020 DSMB review found no safety concerns and recommended continuation. Management anticipated a Q4 2020 DSMB review, including a futility analysis, but COVID-19-related limits on elective procedures and follow-up visits could delay trial progress. The CardiAMP chronic myocardial ischemia pivotal trial had an FDA-approved IDE, with site activation underway. The company was seeking FDA acceptance of a CardiALLO heart-failure IND and planned an IND for potential COVID-19-related ARDS treatment.
- COVID-19: Most staff began working remotely on March 17; manufacturing resumed April 6. Management warned of possible productivity, trial, regulatory and commercialization delays, as well as difficulty raising capital amid market disruption.
- Subsequent financing: On May 1, 2020, a subsidiary received a $506,413 unsecured PPP loan at 1% interest. It may be eligible for forgiveness for qualifying expenses; otherwise it matures in two years, with payments deferred for six months.
- Nasdaq listing: On April 15, Nasdaq notified the company that its December 31, 2019 stockholders’ equity of $2.37 million was below the $2.5 million minimum. The company had until June 1 to submit a compliance plan; possible delisting could adversely affect liquidity, share price and financing access.
- Controls and legal matters: Disclosure controls were deemed ineffective due to an unremediated material weakness involving insufficient technical resources to review complex, non-routine accounting and disclosures. The company described remediation efforts. It was also pursuing litigation related to patents and the sale of nVision Medical; a director-controlled entity agreed to fund litigation costs on a non-recourse basis in exchange for specified proceeds if any are recovered. No settlement had occurred as of the filing.
Most important facts for investors to verify
- Whether the company secured sufficient financing after the stated Q2 2020 cash runway, and the resulting dilution, debt terms or other conditions.
- Whether Nasdaq accepted a compliance plan and whether the company regained the minimum equity requirement.
- Actual COVID-19 effects on trial enrollment, patient follow-up, IND timing, manufacturing and catheter demand.
- Progress and outcomes of the CardiAMP and CardiALLO programs, including the anticipated CardiAMP DSMB review.
- PPP loan forgiveness and compliance, and the status and economics of the related-party litigation funding and pending litigation.
- Whether the material weakness was remediated and disclosure controls improved.