PolarityTE Reports First Calendar Quarter 2019 Results
SALT LAKE CITY, May 10, 2019 — PolarityTE, Inc. (Nasdaq: PTE), a biotechnology company developing and commercializing regenerative tissue products and biomaterials, today reported financial results for the first calendar quarter of 2019. PolarityTE will host a conference call and webcast today, May 10, 2019 at 8:00am ET. Please see details below.
Highlights
| ● | 81 patients treated in Q1; 47% quarter over quarter increase | |
| ● | 42 paid cases in Q1; 17% quarter over quarter increase | |
| ● | 39 trial evaluation products in Q1; 105% quarter over quarter increase | |
| ● | 100 “active” users; 67% quarter over quarter increase | |
| ● | 433 “in-process” sites; 30% quarter over quarter increase | |
| ● | 14 abstracts accepted for presentation in Q1 | |
| ● | Publication of the first peer-reviewed journal article for SkinTE in the International Wound Journal | |
| ● | 5 clinical trials or pilot evaluation trials either currently enrolling or having completed enrollment | |
| ● | Close out of initial inspection of Salt Lake City, UT manufacturing facility by FDA with Voluntary Action Indicated (“VAI”) classification |
Denver Lough, MD, PhD, Chairman & CEO said, “I am excited about what the future holds for PolarityTE. We are building a long-term growth story focusing on advancing physician experience and adoption during our regional market release and the advancement of clinical trials to help support continued adoption. We are proud of the continued recognition and validation of SkinTE as evidenced by the abstracts accepted at multiple medical conferences, as well as the first peer-reviewed journal article on SkinTE published in the International Wound Journal.”
Financial Results for the First Calendar Quarter of 2019
Total revenue for the three months ended March 31, 2019 was $1.5 million, of which $0.3 million was from sales of SkinTE and $1.2 million was associated with PolarityTE’s contract research operations.
Research and development expenses for the three months ended March 31, 2019 were $5.4 million versus $5.6 million for the three months ended March 31, 2018. Research and development expenses for the three months ended March 31, 2019 included $1.1 million of stock-based compensation which is a non-cash charge, versus $1.7 million for the three months ended March 31, 2018.
General and administrative expenses for the three months ended March 31, 2019 were $17.2 million versus $7.6 million for the three months ended March 31, 2018. The increase in general and administrative expenses was primarily due to increased headcount, salaries, and related costs, including $9.0 million of stock-based compensation, which is a non-cash charge for the three months ended March 31, 2019. The Company believes this investment in talented human capital and infrastructure is sufficient to support increased manufacturing and sales for the near future.
During the three months ended March 31, 2019, the Company continued to build out and train its sales force in anticipation of the commercial launch of SkinTE. Consequently, selling and marketing expenses for the three months ended March 31, 2019 were $4.0 million, of which $0.2 million was non-cash charges for stock-based compensation related to recent new hires.
Net loss for the three months ended March 31, 2019 was $25.6 million compared with a net loss of $11.8 million for the three months ended March 31, 2018. This increased loss was driven by increased head count, manufacturing and commercial infrastructure and stock-based compensation. The Company has grown from under 30 employees to over 160 employees during this period.
Cash and Liquidity as of March 31, 2019
As of March 31, 2019, cash, cash equivalents and short-term investments were $44.7 million compared with cash, cash equivalents and short-term investments of $61.8 million on December 31, 2018. Additionally, the Company raised approximately $28.7 million through the issuance of equity in an underwritten offering after March 31, 2019.
In the three months ended March 31, 2019, cash used in operations was $16.6 million. This compares to $3.8 million in the three months ended March 31, 2018. The first quarter of 2019 contained certain cash expenses that are unlikely to recur during subsequent quarters and, therefore, the Company anticipates that cash used in operations will decline in subsequent quarters during 2019.
Based on product development and commercialization plans, the Company believes existing cash, cash equivalents and short-term investments will be adequate to meet capital needs for at least the next 12 months.
Commercial and Operational Updates
In the first quarter of 2019, at total of 81 patients were treated with SkinTE, representing a 50% increase versus the total number of patients treated in Q4 of 2018. “Paid for” deployments represented 42 of the 81 total cases, while “Product Evaluation” deployments accounted for 39 cases. The number of Product Evaluation cases in Q1 of 2019 exceeded the total number of Product Evaluation cases in the preceding 3 quarters combined, and more than doubled from Q4 of 2018 to Q1 of 2019. There were 42 paid cases in Q1 of 2019, an increase of 20% versus Q4 of 2018. The chronic wound market, in particular, has witnessed the strongest adoption of the wound markets we currently serve.
Clinical Updates
There are currently five ongoing or completed clinical trials or pilot evaluation trials for SkinTE:
| ● | Head-to-Head Trial Evaluating SkinTE for the Treatment of Burns: Actively enrolling and we have not observed any adverse reactions to date. | |
| ● | Venous Leg Ulcer Pilot Evaluation Trial: To date, all patients treated with SkinTE who had venous leg ulcers that failed standard of care treatment showed wound closure within 12 weeks following a single application of SkinTE. | |
| ● | Diabetic Foot Ulcer Pilot Evaluation Trial: 10 of the 11 patients achieved complete closure within 12 weeks with a single application of SkinTE, and one patient was excluded due to an unrelated infection of previously-placed foot hardware. | |
| ● | Venous Leg Ulcer Multi-Center Randomized Clinical Trial vs Standard of Care: Currently enrolling. | |
| ● | Diabetic Foot Ulcer Multi-Center Randomized Clinical Trial vs Standard of Care: Currently enrolling. |
Regulatory Updates
The U.S. Food and Drug Administration (FDA) has closed out the July 2018 inspection of the Company’s Salt Lake City, UT manufacturing facility, and classified the inspection as Voluntary Action Indicated, or “VAI.” Based on FDA’s definitions regarding its inspection classifications, a VAI classification means that while FDA found and documented certain conditions during its inspection, FDA is not prepared to take or recommend administrative or regulatory action with respect to such inspectional observations. As the Company has previously reported, following its July 2018 inspection, FDA issued certain inspectional observations on Form FDA 483. As is customary under FDA policy, now that the July 2018 inspection has been closed out, the FDA has released its Establishment Inspection Report, or “EIR.” The EIR, like the Form 483, was drafted by the inspectors immediately following the inspection and is dated August 2, 2018. This is before the Company responded to any of the inspectors’ initial observations. The Company responded to those observations and engaged in a productive dialog with the FDA. Following the Company’s submission of its responses, FDA classified the July 2018 inspection of our Salt Lake City Manufacturing site as VAI. The Company is pleased that the initial inspection of its Salt Lake City, UT manufacturing facility has been closed out with a favorable inspection classification, and looks forward to continuing to manufacture its human cellular and tissue-based products, including SkinTE™, which is impacting patients’ lives on a daily basis, as evidenced by recent presentations and publications of data.
Conference Call Information
Today, May 10, 2019 at 8:00am Eastern Time, the Company will host a conference call and webcast with Q&A. The conference call can be accessed by calling 1-800-289-0438 (U.S. and Canada) or +44 (0)330 336 9105 (International), with confirmation code 3828997 and referencing “PolarityTE First Quarter 2019 Earnings Call”. A webcast of the conference call can be accessed by using the link below.
Link to Webcast
A replay of the earnings conference call will be available for 30 days, beginning approximately one hour after the conclusion of the call and can be found by visiting PolarityTE’s website at https://www.polarityte.com/news-media/events or by clicking on the link above.
About PolarityTE®
PolarityTE is focused on transforming the lives of patients by discovering, designing and developing a range of regenerative tissue products and biomaterials for the fields of medicine, biomedical engineering and material sciences. Rather than manufacturing with synthetic and foreign materials within artificially engineered environments, PolarityTE manufactures products from the patient’s own tissue and uses the patient’s own body to support the regenerative process. From a small piece of healthy autologous tissue, the Company creates an easily deployable, dynamic and self-propagating product designed to regenerate the target tissues. PolarityTE’s innovative method is intended to promote and accelerate growth of the patient’s tissues to undergo a form of effective regenerative healing. Learn more at www.PolarityTE.com – Welcome to the Shift®.
About SkinTE™
SkinTE is a human cellular and tissue-based product derived from a patient’s own skin intended for the repair, reconstruction, and replacement of skin tissue.
SkinTE is intended to be used by physicians or other appropriate healthcare providers for homologous uses of skin tissues/integument. Patients who have suffered from an event, disease, process or acquired deficit that results in the functional loss or void of skin/integument systems can receive SkinTE as an adjunct and/or in place of split-thickness skin grafting, full-thickness grafting, temporizing skin coverage and/or skin substitute products. SkinTE is for autologous use only. Aseptic technique during harvest and deployment of SkinTE is mandatory. SkinTE is marketed as an HCT/P regulated by the FDA solely under Section 361 of the Public Health Service Act and 21 CFR 1271.
Forward Looking Statements
Certain statements contained in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. They are generally identified by words such as “believes,” “may,” “expects,” “anticipates,” “intend,” “plan,” “will,” “would,” “should” and similar expressions. Readers should not place undue reliance on such forward-looking statements, which are based upon the Company’s beliefs and assumptions as of the date of this release. The Company’s actual results could differ materially due to risk factors and other items described in more detail in the “Risk Factors” section of the Company’s Annual Reports and other filings with the SEC (copies of which may be obtained at www.sec.gov). Subsequent events and developments may cause these forward-looking statements to change. The Company specifically disclaims any obligation or intention to update or revise these forward-looking statements as a result of changed events or circumstances that occur after the date of this release, except as required by applicable law. Our actual results could differ materially due to risk factors and other items described in more detail in the “Risk Factors” section of the Company’s Annual Reports and other filings with the SEC (copies of which may be obtained at www.sec.gov).
POLARITYTE, the POLARITYTE logo, WHERE SELF REGENERATES SELF, WELCOME TO THE SHIFT, and SKINTE are trademarks or registered trademarks of PolarityTE, Inc.
CONTACTS:
Investors:
Rich Haerle
PolarityTE, Inc.
ir@PolarityTE.com
(385) 831-5284
Hans Vitzthum
LifeSci Advisors, LLC
Hans@LifeSciAdvisors.com
(617) 535-7743
Media:
Jenna Mathis
PolarityTE, Inc.
JennaMathis@polarityTE.com
(800) 656-6194
POLARITYTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| March 31, 2019 | December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 34,948 | $ | 55,673 | ||||
| Short-term investments | 9,706 | 6,162 | ||||||
| Accounts receivable | 788 | 712 | ||||||
| Inventory | 309 | 336 | ||||||
| Prepaid expenses and other current assets | 1,844 | 1,432 | ||||||
| Total current assets | 47,595 | 64,315 | ||||||
| Non-current assets: | ||||||||
| Property and equipment, net | 16,528 | 13,736 | ||||||
| Operating lease right-of-use assets | 4,960 | – | ||||||
| Intangible assets, net | 873 | 924 | ||||||
| Goodwill | 278 | 278 | ||||||
| Other assets | 378 | 913 | ||||||
| Total non-current assets | 23,017 | 15,851 | ||||||
| TOTAL ASSETS | $ | 70,612 | $ | 80,166 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 5,344 | $ | 6,508 | ||||
| Other current liabilities | 2,550 | 316 | ||||||
| Current portion of long-term note payable | 529 | 529 | ||||||
| Deferred revenue | 90 | 170 | ||||||
| Total current liabilities | 8,513 | 7,523 | ||||||
| Long-term note payable, net | 494 | 479 | ||||||
| Operating lease liabilities | 3,566 | – | ||||||
| Other long-term liabilities | 1,446 | 131 | ||||||
| Total liabilities | 14,019 | 8,133 | ||||||
| Commitments and Contingencies | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock - 25,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2019 and December 31, 2018 | – | – | ||||||
| Common stock - $.001 par value; 250,000,000 shares authorized; 21,749,239 and 21,447,088 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 22 | 21 | ||||||
| Additional paid-in capital | 424,955 | 414,840 | ||||||
| Accumulated other comprehensive income | 53 | 36 | ||||||
| Accumulated deficit | (368,437 | ) | (342,864 | ) | ||||
| Total stockholders’ equity | 56,593 | 72,033 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 70,612 | $ | 80,166 | ||||
POLARITYTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share and per share amounts)
| For the Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| Net revenues | ||||||||
| Products | $ | 297 | $ | 3 | ||||
| Services | 1,168 | – | ||||||
| Total net revenues | 1,465 | 3 | ||||||
| Cost of sales: | ||||||||
| Products | 273 | 1 | ||||||
| Services | 503 | – | ||||||
| Total costs of sales | 776 | 1 | ||||||
| Gross profit | 689 | 2 | ||||||
| Operating costs and expenses | ||||||||
| Research and development | 5,352 | 5,572 | ||||||
| General and administrative | 17,195 | 7,573 | ||||||
| Sales and marketing | 3,953 | – | ||||||
| Total operating costs and expenses | 26,500 | 13,145 | ||||||
| Operating loss | (25,811 | ) | (13,143 | ) | ||||
| Other income (expense) | ||||||||
| Interest income, net | 70 | 36 | ||||||
| Other income, net | 168 | – | ||||||
| Change in fair value of derivatives | – | 1,850 | ||||||
| Loss on extinguishment of warrant liability | – | (520 | ) | |||||
| Net loss | (25,573 | ) | (11,777 | ) | ||||
| Deemed dividend – accretion of discount on Series F preferred stock | – | (698 | ) | |||||
| Deemed dividend – exchange of Series F preferred stock | – | (7,057 | ) | |||||
| Cumulative dividends on Series F preferred stock | – | (191 | ) | |||||
| Net loss attributable to common stockholders | $ | (25,573 | ) | $ | (19,723 | ) | ||
| Net loss per share, basic and diluted: | ||||||||
| Net loss | $ | (1.18 | ) | $ | (1.26 | ) | ||
| Deemed dividend – accretion of discount on Series F preferred stock | – | (0.07 | ) | |||||
| Deemed dividend – exchange of Series F preferred stock | – | (0.75 | ) | |||||
| Cumulative dividends on Series F preferred stock | – | (0.02 | ) | |||||
| Net loss attributable to common stockholders | $ | (1.18 | ) | $ | (2.10 | ) | ||
| Weighted average shares outstanding, basic and diluted: | 21,594,699 | 9,377,211 | ||||||
POLARITYTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands)
| For the Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| Net loss | $ | (25,573 | ) | $ | (11,777 | ) | ||
| Other comprehensive income: | ||||||||
| Unrealized gain on available-for-sale securities | 17 | – | ||||||
| Comprehensive loss | $ | (25,556 | ) | $ | (11,777 | ) | ||
POLARITYTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands, except share and per share amounts)
| For the Three Months Ended March 31, 2019 | ||||||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||
| Number | Amount | Capital | Income | Deficit | Equity | |||||||||||||||||||
| December 31, 2018 | 21,447,088 | $ | 21 | $ | 414,840 | $ | 36 | $ | (342,864 | ) | $ | 72,033 | ||||||||||||
| Stock-based compensation expense | – | – | 10,327 | – | – | 10,327 | ||||||||||||||||||
| Stock option exercises, net | 228,937 | 1 | 1,126 | – | – | 1,127 | ||||||||||||||||||
| Vesting of restricted stock units, net | 73,214 | – | – | – | – | – | ||||||||||||||||||
| Shares withheld for tax withholding on vesting of restricted stock | – | – | (1,338 | ) | – | – | (1,338 | ) | ||||||||||||||||
| Other comprehensive income | – | – | – | 17 | – | 17 | ||||||||||||||||||
| Net loss | – | – | – | – | (25,573 | ) | (25,573 | ) | ||||||||||||||||
| March 31, 2019 | 21,749,239 | $ | 22 | $ | 424,955 | $ | 53 | $ | (368,437 | ) | $ | 56,593 | ||||||||||||
| For the Three Months Ended March 31, 2018 | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Number | Amount | Number | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| December 31, 2017 | 1,656,838 | $ | 109,104 | 7,082,836 | $ | 7 | $ | 157,395 | $ | (269,920 | ) | $ | (3,414 | ) | ||||||||||||||
| Issuance of common stock in connection with: | ||||||||||||||||||||||||||||
| Conversion of Series A preferred stock to common stock | (1,602,099 | ) | (391 | ) | 363,036 | – | 391 | – | – | |||||||||||||||||||
| Conversion of Series B preferred stock to common stock | (47,689 | ) | (4,020 | ) | 794,820 | 1 | 4,019 | – | – | |||||||||||||||||||
| Conversion of Series E preferred stock to common stock | (7,050 | ) | (104,693 | ) | 7,050,000 | 7 | 104,686 | – | – | |||||||||||||||||||
| Exchange of Series F preferred stock and dividends to common stock | – | – | 1,003,393 | 1 | 13,060 | – | 13,061 | |||||||||||||||||||||
| Extinguishment of warrant liability | – | – | 151,871 | – | 3,045 | – | 3,045 | |||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | 7,445 | – | 7,445 | |||||||||||||||||||||
| Deemed dividend – accretion of discount on Series F preferred stock | – | – | – | – | (698 | ) | – | (698 | ) | |||||||||||||||||||
| Cumulative dividends on Series F preferred stock | – | – | – | – | (191 | ) | – | (191 | ) | |||||||||||||||||||
| Series F preferred stock dividends paid in common stock | – | – | 11,708 | – | 306 | – | 306 | |||||||||||||||||||||
| Net loss | – | – | – | – | – | (11,777 | ) | (11,777 | ) | |||||||||||||||||||
| March 31, 2018 | – | $ | – | 16,457,664 | $ | 16 | $ | 289,458 | $ | (281,697 | ) | $ | 7,777 | |||||||||||||||
POLARITYTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| For the three months ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (25,573 | ) | $ | (11,777 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation expense | 10,289 | 7,445 | ||||||
| Change in fair value of derivatives | – | (1,850 | ) | |||||
| Depreciation and amortization | 676 | 318 | ||||||
| Loss on extinguishment of warrant liability | – | 520 | ||||||
| Amortization of intangible assets | 51 | – | ||||||
| Amortization of debt discount | 15 | – | ||||||
| Change in fair value of contingent consideration | 20 | – | ||||||
| Other non-cash adjustments | (7 | ) | – | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (76 | ) | – | |||||
| Inventory | 27 | – | ||||||
| Prepaid expenses and other current assets | (412 | ) | (108 | ) | ||||
| Operating lease right-of-use assets | 355 | – | ||||||
| Other assets | – | (137 | ) | |||||
| Accounts payable and accrued expenses | (1,929 | ) | 1,648 | |||||
| Other current liabilities | 425 | – | ||||||
| Deferred revenue | (80 | ) | – | |||||
| Operating lease liabilities | (343 | ) | – | |||||
| Other long-term liabilities | (4 | ) | – | |||||
| Net cash used in operating activities | (16,566 | ) | (3,941 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | (1,539 | ) | (3,042 | ) | ||||
| Purchase of available-for-sale securities | (5,220 | ) | – | |||||
| Proceeds from maturities of available-for-sale securities | 1,700 | – | ||||||
| Net cash used in investing activities | (5,059 | ) | (3,042 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from stock options exercised | 1,127 | – | ||||||
| Payment of contingent consideration liability | (109 | ) | – | |||||
| Principal payments on financing leases | (118 | ) | – | |||||
| Net cash provided by financing activities | 900 | – | ||||||
| Net (decrease) in cash and cash equivalents | (20,725 | ) | (6,983 | ) | ||||
| Cash and cash equivalents - beginning of period | 55,673 | 12,517 | ||||||
| Cash and cash equivalents - end of period | $ | 34,948 | $ | 5,534 | ||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||
| Conversion of Series A, B, E preferred stock to common stock | $ | – | $ | 109,104 | ||||
| Exchange of Series F preferred stock for common stock | – | 13,061 | ||||||
| Extinguishment of warrant liability | – | 2,525 | ||||||
| Unpaid liability for acquisition of property and equipment | 170 | 363 | ||||||
| Deemed dividend – accretion of discount on Series F preferred stock | – | 698 | ||||||
| Cumulative dividends on Series F preferred stock | – | 191 | ||||||
| Series F preferred stock dividends paid in common stock | – | 306 | ||||||
| Unpaid tax liability related to net share settlement of restricted stock units | 1,338 | – | ||||||
| Unrealized gain on short-term investments and cash equivalents | 17 | – | ||||||
| Reclassification of stock based compensation expense that was previously classified as a liability to paid-in capital | 38 | – | ||||||
