Pluristem Therapeutics Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2013, the company’s fiscal third quarter. The filing is unaudited. Unless indicated otherwise, amounts below are U.S. dollars in millions.
Business context
Pluristem is a development-stage biotherapeutics company developing placenta-derived PLX cell therapies. It reported that all revenue came from its United Therapeutics agreement; it had no product sales. The company expects continued operating losses as it develops products and builds in-house manufacturing capacity.
Financial results and liquidity
| Metric | Three months ended March 31, 2013 | Three months ended March 31, 2012 | Nine months ended March 31, 2013 | Nine months ended March 31, 2012 |
|---|---|---|---|---|
| Revenue | $0.194 | $0.230 | $0.584 | $0.615 |
| Gross profit | $0.188 | $0.224 | $0.566 | $0.597 |
| Operating loss | $(5.933) | $(4.610) | $(15.007) | $(11.060) |
| Net loss | $(5.680) | $(4.174) | $(14.165) | $(10.659) |
| Basic and diluted loss per share | $(0.10) | $(0.09) | $(0.26) | $(0.24) |
- Gross margin was approximately 97% in both the quarter and nine-month period, reflecting low reported cost of revenue; revenue was small relative to operating expenses.
- For the nine months, net research and development expense rose 66% to $11.313 million. Management attributed the increase to expanded internal R&D, clinical and preclinical trials, higher staffing and laboratory costs, and lower grant participation. General and administrative expense fell 12% to $4.260 million, mainly due to lower stock-based compensation.
- Cash used in operations was $11.874 million for the nine months, versus $2.345 million a year earlier. Investing activities used $5.661 million; financing provided $35.967 million, including $34.106 million net proceeds from the September 2012 offering.
- At March 31, cash and cash equivalents were $27.821 million, short-term deposits $22.960 million, and marketable securities $9.045 million. Current assets were $61.110 million against current liabilities of $5.765 million, yielding working capital of $55.345 million. Total assets were $74.337 million and stockholders’ equity $64.019 million.
- The balance sheet reports no interest-bearing debt; current and long-term liabilities principally comprise payables, deferred revenue, severance and other liabilities.
Material changes and financing
- Revenue declined 5% for the nine-month period and 16% for the quarter. Net loss increased approximately 33% for the nine months and 36% for the quarter year over year.
- The September 2012 public offering of units raised $34.106 million net. The company also had a December 2012 at-the-market sales agreement allowing up to $95 million in stock sales, but reported no sales under it to date.
- Shares outstanding increased from 46.448 million at June 30, 2012 to 58.675 million at March 31, 2013, primarily reflecting the offering, warrant and option exercises, and equity compensation.
- Property and equipment increased to $11.501 million from $5.019 million, alongside investment in the company’s new facility. The landlord agreed to contribute approximately $0.8 million toward construction costs.
Outlook, risks and unusual items
- Management said available cash should fund operations for at least 12 months, while also stating that additional funding may be needed before operations generate meaningful cash. It expects R&D and administrative costs to grow and does not expect product-sale revenue in the next 12 months; products may not be ready for sale for at least three years, if at all.
- Near- and medium-term revenue is expected principally from licensing and similar arrangements and is unlikely to exceed operating costs. The company plans to rely on existing cash, licensing, grants and potential securities issuances.
- The Office of the Chief Scientist grant approval was delayed; no new annual grant participation was recognized in the quarter, compared with $0.505 million in the prior-year quarter. Grant funding carries royalties of 3%–5% on sales of products and services derived from funded technology until grant amounts plus interest are repaid.
- Accumulated deficit was $79.912 million. Management cautioned that losses are expected to continue and that there is no assurance of achieving or sustaining profitability. Forward-looking plans are subject to clinical, regulatory, manufacturing, funding and other risks.
- Financial income was affected by foreign-exchange movements and hedging. The company reported a $0.179 million derivative asset at March 31, 2013; securities’ unrealized losses were assessed as not other-than-temporary, and no impairment charge was recorded.
Important facts for investors to verify
- Cash runway assumptions and the expected pace of operating cash use, given nine-month operating cash use of $11.874 million and management’s at-least-12-month liquidity statement.
- Timing and availability of OCS grants, other non-dilutive funding, and any use of the $95 million at-the-market facility.
- Clinical and preclinical program progress, manufacturing-facility costs and readiness, and the timing and conditions for any product commercialization.
- Share-count disclosure: the balance sheet reports 58,674,520 shares at March 31, while the cover page reports 58,638,520 shares outstanding as of April 30, 2013; confirm the figures and explain the difference.
- Terms and remaining obligations under the United Therapeutics agreement, grant royalty provisions, and outstanding offering warrants.