PolarityTE Reports First Calendar Quarter 2019 Results

Published: May 10, 2019

SALT LAKE CITY, May 10, 2019 /PRNewswire/ -- 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.

PolarityTE (PRNewsfoto/PolarityTE, Inc.)

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; 31% 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 47% 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 2 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 17% 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

414,840

(342,864)

72,033

Stock-based compensation expense

–

10,327

–

10,327

Stock option exercises, net

228,937

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

–

Net loss

–

(25,573)

March 31, 2019

21,749,239

424,955

(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

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

4,019

–

Conversion of Series E preferred stock to common stock

(7,050)

(104,693)

7,050,000

104,686

–

Exchange of Series F preferred stock and dividends to common stock

–

1,003,393

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)

March 31, 2018

–

16,457,664

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		–

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SOURCE PolarityTE, Inc.

Company Codes: NASDAQ-NMS:PTE

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PolarityTE Reports First Calendar Quarter 2019 Results