PolarityTE Reports Second Quarter Financial Results and Provides Business Update

PolarityTE Reports Second Quarter Financial Results and Provides Business Update




PolarityTE Reports Second Quarter Financial Results and Provides Business Update

PolarityTE to host conference call and webcast today, August 12, 2021, at 4:30 p.m. ET

SALT LAKE CITY–(BUSINESS WIRE)–PolarityTE, Inc. (Nasdaq: PTE), a biotechnology company developing regenerative tissue products and biomaterials, today provided a business update and reported financial results for the second quarter ended June 30, 2021.

Recent Business Updates

  • Submitted an Investigational New Drug application (IND) for SkinTE® on July 23, 2021, for the proposed indication of treatment of chronic cutaneous ulcers
  • Reported SkinTE met primary and secondary endpoints in final analysis from Diabetic Foot Ulcer (DFU) trial
  • Received notice of allowance for additional patent, bringing the Company’s total number of allowed and granted utility patents worldwide to 12 – 10 abroad and 2 in the United States

In response to the IND submission the Company recently received requests from the FDA’s Clinical and CMC reviewers for additional information and the Company provided initial responses to those requests. The Company appreciates the FDA’s feedback and believes it is generally in line with what the Company anticipated following its pre-IND interactions with the FDA.

Financial Updates for the Quarter Ended June 30, 2021

  • Total revenues were $2.54 million in Q2:21 compared to $4.71 million in Q1:21
  • SkinTE revenues were $1.20 million in Q2:21 (April 1, 2021 through cessation of SkinTE sales on May 31, 2021) compared to $1.73 million in Q1:21
  • Contract services revenues were $1.34 million in Q2:21 compared to $2.98 million in Q1:21
  • Cash used in operations for Q2:21 was $4.1 million, or an average of $1.4 million per month, representing a 38% reduction from Q1:21

Transition to a Clinical Stage Biotech Company

As part of the transition to a clinically focused biotech company and consistent with the conclusion of FDA’s enforcement discretion for certain human cells, tissues, and cellular and tissue-based products under Section 361 of the Public Health Service Act (361 HCT/Ps), the Company ceased commercial sales of SkinTE on May 31, 2021, and has made substantial reductions in costs associated with its commercial operations. The Company previously provided guidance for an IND submission in the second half of 2021 and on July 23, 2021 the Company submitted to the FDA an IND for SkinTE for the treatment of chronic cutaneous ulcers.

David Seaburg, Chief Executive Officer, commented, “We have made great strides to position the Company for the future, most recently with the submission of an IND, and I could not be more impressed by the organization’s commitment to this achievement. We are also incredibly encouraged by the recent outreach and support from physicians and patients after ceasing sales of SkinTE, and we will work expeditiously in the pursuit of a Biologic License Application (BLA).” Mr. Seaburg continued, “The second quarter includes the final two months of SkinTE sales prior to the end of FDA’s enforcement discretion and further solidifies our view that there is sizable market opportunity for SkinTE.”

Financial Results for the Quarter Ended June 30, 2021

There have been significant changes in items affecting the Company’s results of operations for the six-month period ended June 30, 2021, compared to the six-month period ended June 30, 2020, due to:

  • The decision in April 2020 to file an IND with the FDA for SkinTE and, as a result, transition from a commercial stage company to a clinical stage company;
  • The COVID-19 testing business that began in the last week of May 2020 that generated significant services revenues through March 2021, but has since substantially diminished; and
  • The COVID-19 pandemic, which had a negative impact on revenues from the sale of SkinTE and IBEX services in the six-month period ended June 30, 2020, but not in the six-month period ended June 30, 2021.

As a result of the foregoing developments, the Company made a number of changes to its operations that impacted results of operations. These included reductions in the Company’s work force in March and May 2020 and on June 1, 2021, and reducing the services and infrastructure needed to support a larger work force and commercial sales effort.

Net revenues increased $4.0 million, or 127%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, and $0.3 million, or 12%, for the three months ended June 30, 2021, compared to the same period in 2020. The Company effectuated a substantial reduction in force for commercial operations in May 2020, which together with the effect of COVID-19 on selling product to healthcare institutions caused the Company to adopt a sales strategy in May 2020 that focused on regions and facilities where there were repeat users of SkinTE. As a result of this strategy, product net revenues increased by 27% for the three-months ended June 30, 2021, compared to the same period in 2020, even though the Company ceased product sales at the end of May 2021. Net revenues from services remained essentially unchanged for the three months ended June 30, 2021, compared to the same period in 2020, but the mix of business activity generating those revenues changed from a majority of service revenues generated by COVID-19 testing in the second quarter of 2020 to a majority of service revenues generated by pre-clinical research services in 2021.

Cost of sales increased $1.7 million, or 121%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, and $0.04 million, or 5%, for the three months ended June 30, 2021, compared to the same period in 2020. Cost of sales for products revenues decreased 27% period over period for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, and decreased 25% period over period for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, even though revenues were higher in 2021 for both the six and three-month periods, which is attributable to the economies of scale the Company achieved by selling product for larger wound sizes in 2021 compared to 2020. Cost of sales for services revenues increased 237% period over period for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, and increased 18% period over period for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, which is primarily attributable to the cost of sales pertaining to the COVID-19 testing service that only began in the last week of May 2020, including a write-off of inventory for the COVID-19 testing business in the first quarter of 2021 due to the substantial decrease in that business during the quarter.

Operating costs and expenses decreased $9.6 million, or 31%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, and $2.2 million, or 18%, for the three months ended June 30, 2021, compared to the same period in 2020.

Operating loss decreased $12.0 million, or 42%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, and $2.5 million, or 22%, for the three months ended June 30, 2021, compared to the same period in 2020. Net loss decreased $5.1 million, or 20%, for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, and $9.5 million, or 75%, for the three months ended June 30, 2021, compared to the same period in 2020. When the Company’s PPP Loan was forgiven in June 2021, it recognized a gain on extinguishment of debt in the amount of $3.6 million. For the six months ended June 30, 2021, this gain was offset by a day one loss on warrants issued in January 2021 of $5.2 million plus a loss on the change in fair value of common stock warrant liability of $2.2 million, which are primarily responsible for other expense of $3.8 million for the six months ended June 30, 2021, and the $3.8 million difference between the Company’s operating loss and net loss for the six months ended June 30, 2021.

The table below details adjusted net loss, which is a non-GAAP measure that shows net loss before fair value adjustments relating to the Company’s common stock warrant liability and warrant inducement loss. The Company believes this measure is useful to investors because it eliminates the effect of non-operating items that can significantly fluctuate from period to period due to fair value remeasurements. For purposes of calculating non-GAAP per share metrics, the same denominator is used as that which was used in calculating net loss per share under GAAP.

Adjusted Net Loss Attributable to Common Stockholders

(in thousands – unaudited non-GAAP measure)

 

 

 

For the Three Months Ended

June 30,

 

 

For the Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP Net Loss

 

$

(3,188

)

 

$

(12,677

)

 

$

(20,598

)

 

$

(25,717

)

Change in fair value of common stock warrant liability

 

 

(1,807

)

 

 

1,591

 

 

 

2,220

 

 

 

(2,941

)

Inducement loss on sale of liability classified warrants

 

 

 

 

 

 

 

 

5,197

 

 

 

 

Non-GAAP adjusted net loss attributable to common stockholders – basic

 

$

(4,995

)

 

$

(11,086

)

 

$

(13,181

)

 

$

(28,658

)

Gain from change in fair value of warrant liabilities

 

 

(107

)

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted net loss attributable to common stockholders – diluted

 

$

(5,102

)

 

$

(11,086

)

 

$

(13,181

)

 

$

(28,658

)

GAAP net loss per share attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

(0.33

)

 

$

(0.26

)

 

$

(0.72

)

Diluted

 

$

(0.04

)

 

$

(0.33

)

 

$

(0.26

)

 

$

(0.72

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted net loss per share attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.06

)

 

$

(0.29

)

 

$

(0.17

)

 

$

(0.80

)

Diluted

 

$

(0.06

)

 

$

(0.29

)

 

$

(0.17

)

 

$

(0.80

)

Cash and Liquidity as of June 30, 2021

As of June 30, 2021, the Company had $32.6 million in cash and cash equivalents and working capital of approximately $30.5 million. The Company believes the cash and cash equivalents on the Company’s balance sheet will fund its business activities through the end of 2021 and into, but not beyond, the third quarter of 2022. In the second quarter of 2021 cash used in operating activities was $4.1 million, or an average of $1.4 million per month, compared to $6.6 million cash used in operating activities, or an average of $2.2 million per month, in the first quarter of 2021 and compared to $11.6 million cash used in operating activities, or an average of $3.9 million per month, in the second quarter of 2020.

Conference Call and Webcast Details

The conference call can be accessed by calling 1-800-581-5838 (U.S. and Canada) or +44 (0)330 336 9104 (International), with confirmation code 210912 and referencing “PolarityTE Second Quarter 2021 Earnings Call.” A webcast of the conference call can be accessed by using the link below.

Earnings Call Webcast – CLICK HERE

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 methods are intended to promote and accelerate growth of the patient’s tissues to undergo a form of effective regenerative healing. PolarityTE’s products, including SkinTE, are in the development stage, and are not approved or available for clinical use. Learn more at www.PolarityTE.com – Welcome to the Shift®.

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 the impact of the COVID-19 pandemic, future clinical studies, and FDA regulatory matters, which cannot be predicted, and the 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.

POLARITYTE, the POLARITYTE logo, SKINTE, WHERE SELF REGENERATES SELF and WELCOME TO THE SHIFT are registered trademarks of PolarityTE, Inc.

POLARITYTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

June 30, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

32,614

 

 

$

25,522

 

Accounts receivable, net

 

 

2,042

 

 

 

3,819

 

Inventory

 

 

76

 

 

 

883

 

Prepaid expenses and other current assets

 

 

2,286

 

 

 

992

 

Total current assets

 

 

37,018

 

 

 

31,216

 

Property and equipment, net

 

 

8,684

 

 

 

10,550

 

Operating lease right-of-use assets

 

 

1,756

 

 

 

2,452

 

Intangible assets, net

 

 

447

 

 

 

542

 

Goodwill

 

 

278

 

 

 

278

 

Other assets

 

 

227

 

 

 

472

 

TOTAL ASSETS

 

$

48,410

 

 

$

45,510

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

3,924

 

 

$

4,148

 

Other current liabilities

 

 

2,509

 

 

 

2,106

 

Current portion of long-term notes payable

 

 

 

 

 

2,059

 

Deferred revenue

 

 

86

 

 

 

168

 

Total current liabilities

 

 

6,519

 

 

 

8,481

 

Common stock warrant liability

 

 

14,059

 

 

 

5,975

 

Operating lease liabilities

 

 

550

 

 

 

1,476

 

Other long-term liabilities

 

 

514

 

 

 

723

 

Long-term notes payable

 

 

 

 

 

1,517

 

Total liabilities

 

 

21,642

 

 

 

18,172

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred stock – 25,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock – $.001 par value; 250,000,000 shares authorized; 80,742,443 and 54,857,099 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

 

81

 

 

 

55

 

Additional paid-in capital

 

 

525,496

 

 

 

505,494

 

Accumulated deficit

 

 

(498,809

)

 

 

(478,211

)

Total stockholders’ equity

 

 

26,768

 

 

 

27,338

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

48,410

 

 

$

45,510

 

POLARITYTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except share and per share amounts)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

1,195

 

 

$

944

 

 

$

2,924

 

 

$

1,372

 

Services

 

 

1,342

 

 

 

1,322

 

 

 

4,322

 

 

 

1,827

 

Total net revenues

 

 

2,537

 

 

 

2,266

 

 

 

7,246

 

 

 

3,199

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

207

 

 

 

275

 

 

 

448

 

 

 

615

 

Services

 

 

717

 

 

 

607

 

 

 

2,641

 

 

 

783

 

Total cost of sales

 

 

924

 

 

 

882

 

 

 

3,089

 

 

 

1,398

 

Gross profit

 

 

1,613

 

 

 

1,384

 

 

 

4,157

 

 

 

1,801

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

4,190

 

 

 

3,164

 

 

 

6,621

 

 

 

6,537

 

General and administrative

 

 

4,941

 

 

 

5,211

 

 

 

11,312

 

 

 

15,816

 

Sales and marketing

 

 

1,099

 

 

 

2,024

 

 

 

2,625

 

 

 

5,718

 

Restructuring and other charges

 

 

11

 

 

 

2,084

 

 

 

436

 

 

 

2,536

 

Total operating costs and expenses

 

 

10,241

 

 

 

12,483

 

 

 

20,994

 

 

 

30,607

 

Operating loss

 

 

(8,628

)

 

 

(11,099

)

 

 

(16,837

)

 

 

(28,806

)

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on extinguishment of debt

 

 

3,612

 

 

 

 

 

 

3,612

 

 

 

 

Change in fair value of common stock warrant liability

 

 

1,807

 

 

 

(1,591

)

 

 

(2,220

)

 

 

2,941

 

Inducement loss on sale of liability classified warrants

 

 

 

 

 

 

 

 

(5,197

)

 

 

 

Interest expense, net

 

 

(39

)

 

 

(65

)

 

 

(77

)

 

 

(77

)

Other income, net

 

 

60

 

 

 

78

 

 

 

121

 

 

 

225

 

Net loss

 

$

(3,188

)

 

$

(12,677

)

 

$

(20,598

)

 

$

(25,717

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

(0.33

)

 

$

(0.26

)

 

$

(0.72

)

Diluted

 

$

(0.04

)

 

$

(0.33

)

 

$

(0.26

)

 

$

(0.72

)

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

80,602,931

 

 

 

38,428,289

 

 

 

78,392,881

 

 

 

35,724,141

 

Diluted

 

 

81,162,256

 

 

 

38,428,289

 

 

 

78,392,881

 

 

 

35,724,141

 

POLARITYTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net loss

 

$

(20,598

)

 

$

(25,717

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

3,124

 

 

 

3,784

 

Depreciation and amortization

 

 

1,437

 

 

 

1,549

 

Amortization of intangible assets

 

 

95

 

 

 

95

 

Amortization of debt discount

 

 

 

 

 

13

 

Bad debt expense

 

 

134

 

 

 

 

Inventory write-off

 

 

697

 

 

 

 

Gain on extinguishment of debt – PPP loan

 

 

(3,612

)

 

 

 

Change in fair value of common stock warrant liability

 

 

2,220

 

 

 

(2,941

)

Inducement loss on sale of liability classified warrants

 

 

5,197

 

 

 

 

Loss on restructuring and other charges

 

 

269

 

 

 

 

Loss on abandonment of property and equipment

 

 

 

 

 

1,529

 

Loss on sale of property and equipment

 

 

7

 

 

 

 

Other non-cash adjustments

 

 

 

 

 

(21

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,643

 

 

 

(384

)

Inventory

 

 

110

 

 

 

(29

)

Prepaid expenses and other current assets

 

 

(1,294

)

 

 

(1,189

)

Operating lease right-of-use assets

 

 

666

 

 

 

899

 

Other assets

 

 

245

 

 

 

3

 

Accounts payable and accrued expenses

 

 

(221

)

 

 

(2,109

)

Other current liabilities

 

 

(14

)

 

 

9

 

Deferred revenue

 

 

(82

)

 

 

(1

)

Operating lease liabilities

 

 

(728

)

 

 

(903

)

Net cash used in operating activities

 

 

(10,705

)

 

 

(25,413

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(18

)

 

 

(1,170

)

Proceeds from sale of property and equipment

 

 

10

 

 

 

 

Purchase of available-for-sale securities

 

 

 

 

 

(14,144

)

Proceeds from maturities of available-for-sale securities

 

 

 

 

 

16,945

 

Proceeds from sale of available-for-sale securities

 

 

 

 

 

16,171

 

Net cash (used in) provided by investing activities

 

 

(8

)

 

 

17,802

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from term note payable and financing arrangements

 

 

1,028

 

 

 

4,629

 

Principal payments on term note payable and financing arrangements

 

 

(359

)

 

 

(830

)

Principal payments on financing leases

 

 

(272

)

 

 

(243

)

Net proceeds from the sale of common stock and warrants

 

 

 

 

 

24,276

 

Net proceeds from the sale of common stock, warrants and pre-funded warrants

 

 

9,884

 

 

 

 

Proceeds from the sale of new warrants

 

 

1,002

 

 

 

 

Proceeds from warrants exercised

 

 

6,671

 

 

 

 

Proceeds from pre-funded warrants exercised

 

 

8

 

 

 

 

Cash paid for tax withholdings related to net share settlement

 

 

(188

)

 

 

(6

)

Proceeds from stock options exercised

 

 

3

 

 

 

31

 

Proceeds from ESPP purchase

 

 

28

 

 

 

40

 

Net cash provided by financing activities

 

 

17,805

 

 

 

27,897

 

Net increase in cash and cash equivalents

 

 

7,092

 

 

 

20,286

 

Cash and cash equivalents – beginning of period

 

 

25,522

 

 

 

10,218

 

Cash and cash equivalents – end of period

 

$

32,614

 

 

$

30,504

 

 

Contacts

Investors:
Rich Haerle

VP, Investor Relations

PolarityTE, Inc.

ir@PolarityTE.com
(385) 315-0697