IGC Pharma, Inc. (India Globalization Capital, Inc.) — Form 10-Q
Reporting period: Three and six months ended September 30, 2022 (fiscal Q2 and first half of fiscal 2023). Unaudited figures are in U.S. dollars; financial statement amounts below are in thousands unless otherwise noted. The company operates Life Sciences and Infrastructure segments.
Financial performance and position
| Metric | Three months ended Sept. 30, 2022 | Six months ended Sept. 30, 2022 | Prior-year comparable |
|---|---|---|---|
| Revenue | $202 | $414 | $56 quarter; $133 six months |
| Gross profit / margin | $135 / 67% | $277 / 67% | $38 / 68% quarter; $64 / 48% six months |
| Operating loss | $(2,488) | $(5,290) | $(4,348) quarter; $(6,542) six months |
| Net loss | $(2,442) | $(5,227) | $(4,344) quarter; $(6,132) six months |
| Basic and diluted loss per share | $(0.05) | $(0.10) | $(0.09) quarter; $(0.13) six months |
| Operating cash flow | Not presented quarterly | $(3,882) | $(4,153) six months |
- First-half revenue was 96% Life Sciences ($397) and 4% Infrastructure ($17). Life Sciences revenue included $230 from wellness and lifestyle products and $167 from white-label services. Infrastructure revenue was $17, versus $18 a year earlier.
- At September 30, cash and cash equivalents were $6,623, short-term investments were $193, and working capital was $9,817. Cash declined $3,837 from March 31, 2022.
- Total assets were $21,958 and total liabilities were $1,814. The company reported $142 of long-term loans and approximately $3 of short-term EIDL borrowing; operating lease liabilities totaled $403. The EIDL bears 3.75% interest.
- Six-month investing cash flow was positive $24, including $277 of proceeds from property, plant and equipment sales, offset by $193 invested in short-term investments and $60 of patent costs. Financing cash flow was positive $101, primarily from ATM equity issuance; the comparable prior period included $4,145 of net equity proceeds.
Changes versus the prior comparable period
- Revenue increased 261% for the quarter and 211% for the six months, from a low base, primarily reflecting increased Life Sciences product and white-label sales.
- Six-month gross margin rose to 67% from 48%; quarterly margin was nearly unchanged at 67% versus 68%.
- SG&A fell to $1,855 for the quarter and $3,405 for the six months, down 55% and 42%, respectively. Management attributed the decrease to adjustment of one-time expenses and lower legal and marketing costs.
- R&D rose to $768 for the quarter and $2,162 for the six months, increases of 178% and 200%, respectively, as IGC-AD1’s Phase 2 work and TGR-63 preclinical studies progressed.
- Six-month net loss narrowed to $5,227 from $6,132. The prior-year period included $430 of PPP loan forgiveness income and a $37 investment impairment; current-period other income was $63 versus $447.
Outlook, risks and notable items
- Management said available cash, cash equivalents, short-term investments and other short-term liquidity arrangements should cover working capital and other needs for the next 12 months, while also stating it would raise funds as able and continues to use its ATM program. Operating cash use was $3,882 in the first half.
- No quantified revenue, earnings or cash-flow guidance was provided. Management anticipates higher R&D spending as the IGC-AD1 Phase 2 trial advances and patient sign-ups progress, and as TGR-63 development continues.
- IGC-AD1 is in a Phase 2 trial for agitation associated with Alzheimer’s dementia; TGR-63 remains preclinical. Clinical outcomes, ability to fund trials, FDA approval and commercialization are key uncertainties. The company also warns of potential regulatory and intellectual-property risks, including risks involving hemp-based products.
- Management said COVID-19-related restrictions continued to adversely affect infrastructure operations in India and Hong Kong; Indian monsoon conditions also hinder construction activity. Inflation creates uncertainty around product costs. Foreign-currency translation reduced first-half comprehensive income by $401.
- The USPTO granted a second Alzheimer’s-treatment patent on September 20, 2022. The company also reported a $40 inventory write-off, a sale of Puerto Rico property for approximately $485 net proceeds and a $5 gain, and disposal of approximately $1.3 million of fully depreciated assets.
- Potential dilution includes 5.8 million granted but unissued restricted stock units and an ATM sales agreement authorizing up to $75 million of stock sales. The filing reported 53,058,061 common shares outstanding at September 30, 2022.
- Apogee Financial Investments and John Clarke litigation remained pending; the company said it denies liability and intends to defend the remaining claims. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Key investor verification points
- Check the latest IGC-AD1 Phase 2 enrollment, trial timing and results, and the development status and funding needs for TGR-63.
- Assess cash runway against the first-half operating cash burn, planned R&D spending and the company’s stated reliance on potential financing.
- Determine whether recent Life Sciences revenue growth is repeatable, given the small revenue base and limited Infrastructure contribution.
- Review potential dilution from RSUs, options and the ATM program, including shares issued after the reporting date.
- Monitor collection of $751 in claims receivable, which management said could be challenging within 12 months, and developments in the Apogee litigation.