Filing summary
Entity mismatch: The request identifies Viridian Therapeutics, Inc., but the supplied Form 10-Q is for Signal Genetics, Inc. The filing covers the quarter ended September 30, 2016 and was signed October 26, 2016. The summary below reflects the supplied filing, not Viridian Therapeutics.
Business context and reporting period
Signal Genetics describes itself as a U.S. commercial-stage molecular diagnostics company. Its principal revenue source was the MyPRS test for multiple myeloma; it also reported research testing and pharmaceutical services revenue. The filing presents unaudited results for the three and nine months ended September 30, 2016, compared with the corresponding 2015 periods.
Financial performance and liquidity
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Net revenue | $889,000 | $501,000 | $2.581 million | $1.879 million |
| Cost of revenue | $599,000 | $577,000 | $1.856 million | $2.016 million |
| Gross profit (loss), approximate | $290,000 | $(76,000) | $725,000 | $(137,000) |
| Gross margin, approximate | 32.6% | (15.2%) | 28.1% | (7.3%) |
| Operating loss | $(1.816) million | $(3.128) million | $(7.035) million | $(8.230) million |
| Net loss | $(1.839) million | $(3.152) million | $(7.104) million | $(8.348) million |
| Basic and diluted loss per share | $(0.17) | $(0.39) | $(0.66) | $(1.15) |
- For the first nine months, operating cash outflow was $5.354 million, versus $5.599 million in 2015. Investing cash outflow was $3,000; financing cash outflow was $124,000. Cash declined by $5.481 million to $5.351 million.
- At September 30, cash and cash equivalents were $5.351 million, current assets $6.512 million, current liabilities $2.853 million, and working capital approximately $3.7 million. Total assets were $7.541 million and stockholders’ equity $4.686 million.
- Debt included a $1.105 million unsecured related-party note, bearing 8% interest and due on demand, plus a $25,000 capital lease obligation. The filing reports $139,000 accrued interest payable on the related-party note.
Material changes versus the prior comparable periods
- Q3 revenue rose 77%; nine-month revenue rose 37%. Clinical test billings to U.S. hospital patients and direct-billed customers increased 54% in Q3 and 70% year to date.
- Nine-month total tests billed fell 17%, as research testing—primarily associated with UAMS—declined 87% by volume and 85% by revenue. Clinical test growth more than offset that decline in reported revenue.
- Nine-month net revenue included $229,000 of favorable changes to prior-period estimates; Q3 included $6,000. The company attributed revenue growth partly to higher estimated average selling prices for non-contracted payors, based on collection experience.
- Operating and net losses narrowed, and gross margin turned positive, reflecting higher clinical revenue and lower cost of revenue as a percentage of sales. Nine-month R&D expense increased 59%, mainly due to sponsored research; selling and marketing expense fell 20%, and G&A expense fell 5%.
- Cash fell from $10.832 million at December 31, 2015 to $5.351 million at September 30, 2016. Unlike the first nine months of 2015, the 2016 period had no proceeds from public stock offerings.
Outlook, risks, and unusual items
- Going concern: Management said available cash would not fund its operating plan for the full 12 months after filing and expected to maintain current operations only into the second quarter of 2017. It stated that substantial doubt existed about the company’s ability to continue as a going concern.
- To fund operations beyond that point, the company said it would need additional equity or debt, debt conversion, a strategic partnership or similar transaction, or a combination. Management cautioned that financing could be difficult to obtain on acceptable terms. Failure to secure funding or a transaction could require expense cuts, curtailed operations, asset sales or licensing, a sale of the company, or liquidation.
- Management’s growth priorities included broader market and payor coverage, expanding MyPRS indications, pharmaceutical collaborations, and additional diagnostic offerings. A key challenge was obtaining contracts with payors beyond Medicare and Arkansas Blue Cross Blue Shield.
- Risks cited include dependence on payor reimbursement and estimated collections, test adoption and competition, customer concentration, and reliance on a single supplier for testing inventory. DSO increased to 78 days from 53 days at year-end 2015, which management linked to growth in receivables, particularly from slower-paying non-contracted payors.
- The filing provides no revenue or earnings guidance. Management stated that no material capital-expenditure commitments were in place.
Important facts for investors to verify
- Confirm the intended issuer: this filing is for Signal Genetics, Inc., not Viridian Therapeutics, Inc.
- Assess the going-concern disclosure, expected cash runway, and the feasibility and timing of proposed financing or strategic alternatives.
- Review receivable aging, collection trends, DSO, contractual allowances, and the $229,000 year-to-date favorable prior-period revenue estimate change.
- Evaluate whether growth in clinical testing and pharmaceutical services can offset the sharp decline in research testing and address payor-contraction and customer-concentration risks.
- Review the terms and demand status of the related-party note, including accrued interest, and the company’s dependence on a single inventory supplier.