Spectral Announces Third Quarter 2020 Results
Corporate Highlights:
- Dialco’s DIMI receives FDA 510(k) clearance for use in hospital and clinical settings – a significant step in the full regulatory development of DIMI
- Tigris trial sites increased to eleven, with additional sites identified
- Company to host Virtual Investor Day on December 4th, 2020
TORONTO, Nov. 11, 2020 (GLOBE NEWSWIRE) -- Spectral Medical Inc., (“Spectral” or the “Company”)(TSX: EDT), a late stage theranostic company advancing therapeutic options for sepsis and septic shock and targeting the renal replacement therapy (“RRT”) market through its wholly owned subsidiary Dialco Medical Inc. (“Dialco”), today announced its financial results for the third quarter ended September 30, 2020.
Financial Review
Revenue for the three-months ended September 30, 2020 was $418,000 compared to $534,000 for the same three-month period last year. For the nine-months ended September 30, 2020, revenue was $1,566,000 compared to $2,122,000 in the corresponding period in 2019. The majority of the decrease is due to the timing of orders for product revenue and the non-recurring technology transfer revenue. This was mitigated by an increase in royalty revenue, and revenue from the exclusive distribution agreement with Baxter International Inc. (“Baxter”).
Operating costs for the quarter-ended September 30, 2020, were $1,995,000 compared to $1,935,000 for the corresponding period in 2019. Operating costs for the nine-months ended September 30, 2020 were $8,517,000, an increase of $2,949,000 from $5,568,000 for the nine-month period ended September 30, 2019. The increase is a result of the ramping up of the Company’s Phase III clinical trial, whereby costs vary depending on the timing and level of patient enrolment. In addition, there was an increase in share compensation expense, due to options being granted earlier in 2020 that had higher share option valuations compared to the share option valuation for share options issued in 2019. Salaries and benefits also increased for the nine-months ended September 30, 2020 due to the addition of the Company’s CFO, who joined in August 2019. Furthermore, as previously stated, the Company incurred one-time costs associated with a legacy financial advisory services agreement relating to the commercial transaction agreement completed with Baxter and the withdrawn prospectus offering in March 2020. Lastly, there was a 6% decline in the CAD/USD exchange rate in the period from March 31, 2020 to September 30, 2020, which resulted in a foreign exchange loss in the second and third quarter, partially reversing the foreign exchange gain recorded in the first quarter of 2020. The CAD/USD exchange rate was relatively consistent throughout 2019.
The Company continues to maintain a low cost operating structure for its base business operations.
For the three-months ended September 30, 2020, the Company reported a loss of $1,577,000 ($0.007 loss per share) compared to a loss of $1,401,000 ($0.006 loss per share) for the three-months ended September 30, 2019. Loss for the nine-months ended September 30, 2020 was $6,951,000 ($0.030 loss per share) compared to a loss of $3,446,000 ($0.015 loss per share) for the same period in the prior year.
The Company concluded the third quarter of 2020 with cash of $7,576,000 compared to $1,435,000 cash on hand as of December 31, 2019. This cash balance reflects the non-refundable US$5,000,000 (CA$6,629,000) upfront rights payment from Baxter, which was received in the first quarter, as well as the net proceeds of $4,316,000 received on the public offering, reduced by operating cash outflows.
The total number of common shares outstanding for the Company was 236,605,745 as at September 30, 2020.
Corporate Highlights During & Subsequent to Third Quarter Ended September 30, 2020
Tigris Trial
The Company continues to focus on finalizing the Tigris trial within the reasonably shortest timelines, and has implemented mitigation strategies to reduce or eliminate the timing delays due to COVID-19, including:
- August 2020 – United States Federal Food and Drug Agency (“FDA”) approved a protocol amendment to Spectral’s Tigris trial allowing for an increase in the number of clinical sites to 15 from the 10 in the initial protocol. The increase in number of sites should have a positive impact with access to a potentially much larger population of eligible patients.
- September 2020 – All nine Tigris sites resumed their research activities and were actively screening.
- November 2020 – The Company has eleven Tigris sites initiated, and has identified remaining sites to increase to fifteen clinical sites.
Dialco
In August 2020, Dialco was granted 510(k) clearance by the FDA for DIMI to treat patients with acute and/or chronic renal failure with or without fluid overload using hemodialysis (“HD”), hemodiafiltration (“HDF”), hemofiltration (“HF”) and/or ultrafiltration (“UF”) in hospital or clinical settings. This is the first major step of the full regulatory development of DIMI. Further advances will be clearance for home and peritoneal dialysis (“PD”) use. The overall 510(k) clearance process was completed in less than nine months including review, and time to address and resolve deficiencies, despite the COVID 19 pandemic. This FDA 510(k) clearance is significant for Dialco. Not only is it an important first step in the full regulatory development of DIMI, but it also opens up significant commercial markets and opportunities which could result in significant revenue growth for Dialco.
DIMI’s recent FDA 510(k) clearance adds to Dialco’s portfolio of regulatory approvals. Dialco’s SAMI, a continuous renal replacement therapy (“CRRT”) device received FDA 510(k) clearance in December 2017.
Board Appointment
In August 2020, John E. Nosenzo was appointed to the Company’s board of directors. Mr. Nosenzo brings deep commercialization expertise in the healthcare sector, and joins the board at this pivotal time in the Company’s development. His experience in the medical device sector in the U.S. will help guide Spectral’s commercial activities for our diagnostic and therapeutic approach to septic shock as well as Dialco’s commercialization in the area of renal replacement therapy.
Base Shelf Prospectus
In July 2020, the Company filed a $50 million base shelf prospectus as a measure to maintain financing flexibility. The decision to file the base shelf prospectus shortly after closing the June 2020 financing was to take advantage of significantly reduced prospectus drafting costs, as well as potentially reducing the regulatory review burden. The base shelf prospectus provides Spectral with the flexibility to access the capital markets as potential corporate development opportunities arise, including potential commercial scale-up activities, acquisitions and in-licensing opportunities.
Virtual Investor Day
The Company will be holding an interactive Virtual Investor Day hosted by Management, and scheduled for Friday, December 4th, 2020. Details and agenda will be provided in the coming weeks.
About Spectral
Spectral is a Phase III company seeking U.S. FDA approval for its unique product for the treatment of patients with septic shock, Toraymyxin™ (“PMX”). PMX is a therapeutic hemoperfusion device that removes endotoxin, which can cause sepsis, from the bloodstream and is guided by the Company’s Endotoxin Activity Assay (EAA™), the only FDA cleared diagnostic for the risk of developing sepsis.
PMX has been approved for therapeutic use in Japan and Europe, and has been used safely and effectively on more than 200,000 patients to date. In March 2009, Spectral obtained the exclusive development and commercial rights in the U.S. for PMX, and in November 2010, signed an exclusive distribution agreement for this product in Canada. Approximately 330,000 patients are diagnosed with severe sepsis and septic shock in North America each year.
Spectral, through its wholly owned subsidiary, Dialco Medical Inc. (“Dialco”), is also commercializing a new proprietary platform, “SAMI”, targeting the renal replacement therapy (“RRT”) market. Dialco is also seeking regulatory approval for “DIMI” which is based on the same RRT platform, but will be intended for home hemodialysis use.
Spectral is listed on the Toronto Stock Exchange under the symbol EDT. For more information please visit www.spectraldx.com.
Forward-looking statement
Information in this news release that is not current or historical factual information may constitute forward-looking information or forward looking statements within the meaning of securities laws. Implicit in this information, particularly in respect of the future outlook of Spectral and anticipated events or results, are assumptions based on beliefs of Spectral's senior management as well as information currently available to it. While these assumptions were considered reasonable by Spectral at the time of preparation, they may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including the availability of funds and resources to pursue R&D projects, the successful and timely completion of clinical studies, the ability of Spectral to take advantage of business opportunities in the biomedical industry, the granting of necessary approvals by regulatory authorities including but not limited to the ongoing impact of COVID-19. Actual results could differ materially from what is currently expected, and readers are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, the Company disclaims any obligation to update or revise any forward-looking statements. Reference is also made to the other risks and uncertainties that may affect the Company which are more fully described in Spectral’s Annual Information Form dated March 26, 2020 and other filings of Spectral with the securities regulatory authorities which are available at www.sedar.com.
The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this statement.
For further information, please contact:
| Dr. Paul Walker | Mr. Chris Seto | Ali Mahdavi |
| President and CEO | CFO and COO | Capital Markets & Investor Relations |
| Spectral Medical Inc. | Spectral Medical Inc. | 416-962-3300 |
| 416-626-3233 ext. 2100 | 416-626-3233 ext. 2004 | am@spinnakercmi.com |
| pwalker@spectraldx.com | cseto@spectraldx.com |
Spectral Medical Inc.
Condensed Interim Consolidated Statements of Changes in Financial Position
(Unaudited)
(in thousands of Canadian dollars)
| September 30 2020 | December 31 2019 | ||||
| $ | $ | ||||
| Assets | |||||
| Current assets | |||||
| Cash | 7,576 | 1,435 | |||
| Trade and other receivables | 330 | 271 | |||
| Inventories | 343 | 276 | |||
| Prepayments and other assets | 412 | 155 | |||
| Contract asset | - | 519 | |||
| 8,661 | 2,656 | ||||
| Non-current assets | |||||
| Right-of-use-asset | 649 | 719 | |||
| Property and equipment | 441 | 368 | |||
| Intangible asset | 250 | 263 | |||
| Total assets | 10,001 | 4,006 | |||
| Liabilities | |||||
| Current liabilities | |||||
| Trade and other payables | 1,778 | 1,002 | |||
| Current portion of contract liabilities | 668 | - | |||
| Current portion of lease liability | 83 | 77 | |||
| 2,529 | 1,079 | ||||
| Non-current liabilities | |||||
| Lease liability | 605 | 667 | |||
| Non-current portion of contract liabilities | 5,515 | - | |||
| Total liabilities | 8,649 | 1,746 | |||
| Equity | |||||
| Share capital | 71,777 | 66,837 | |||
| Contributed surplus | 7,981 | 7,981 | |||
| Share-based compensation | 6,738 | 6,183 | |||
| Warrants | 2,418 | 1,870 | |||
| Deficit | (87,562 | ) | (80,611 | ) | |
| Total equity | 1,352 | 2,260 | |||
| Total liabilities and equity | 10,001 | 4,006 | |||
Spectral Medical Inc.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
(Unaudited)
(in thousands of Canadian dollars, except for share and per share data)
| Three-months ended September 30 | Nine-months ended September 30 | ||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||
| $ | $ | $ | $ | ||||||||
| Revenue | 418 | 534 | 1,566 | 2,122 | |||||||
| Expenses | |||||||||||
| Changes in inventories of finished goods and work-in-process | 72 | 67 | 84 | 278 | |||||||
| Raw materials and consumables used | 47 | 107 | 351 | 254 | |||||||
| Salaries and benefits | 1,014 | 954 | 3,505 | 2,614 | |||||||
| Consulting and professional fees | 418 | 423 | 3,612 | 1,064 | |||||||
| Regulatory and investor relations | 87 | 160 | 318 | 437 | |||||||
| Travel and entertainment | 6 | 104 | 109 | 266 | |||||||
| Facilities and communication | 95 | 84 | 262 | 219 | |||||||
| Insurance | 62 | 57 | 186 | 180 | |||||||
| Depreciation and amortization | 79 | 71 | 223 | 211 | |||||||
| Interest expense on lease liability | 8 | 8 | 25 | 27 | |||||||
| Foreign exchange (gain) loss | 110 | (35 | ) | (144 | ) | 70 | |||||
| Other income | (3 | ) | (65 | ) | (6 | ) | (59 | ) | |||
| (Gain) loss on disposal of property and equipment | - | - | (8 | ) | 7 | ||||||
| 1,995 | 1,935 | 8,517 | 5,568 | ||||||||
| Loss and comprehensive loss for the period | (1,577 | ) | (1,401 | ) | (6,951 | ) | (3,446 | ) | |||
| Basic and diluted loss per common share | (0.007 | ) | (0.006 | ) | (0.030 | ) | (0.015 | ) | |||
| Weighted average number of common shares outstanding – basic and diluted | 236,605,745 | 225,816,183 | 231,109,027 | 225,695,029 | |||||||
Spectral Medical Inc.
Condensed Interim Consolidated Statements of Changes in Equity
(Unaudited)
(in thousands of Canadian dollars)
| Issued capital | Contributed surplus |
Share-based compensation |
Warrants | Deficit | Total equity |
|||||||
| Number | $ | $ | $ | $ | $ | $ | ||||||
| Balance, January 1, 2019 | 225,591,183 | 66,646 | 7,981 | 5,564 | 1,930 | (75,751 | ) | 6,370 | ||||
| Warrants exercised | 225,000 | 150 | - | - | (49 | ) | - | 101 | ||||
| Loss and comprehensive loss for the period | - | - | - | - | - | (3,446 | ) | (3,446 | ) | |||
| Share-based compensation | - | - | - | 560 | - | - | 560 | |||||
| Balance, September 30, 2019 | 225,816,183 | 66,796 | 7,981 | 6,124 | 1,881 | (79,197 | ) | 3,585 | ||||
| Share options exercised | 10,500 | 7 | - | (3 | ) | - | - | 4 | ||||
| Warrants exercised | 50,000 | 34 | - | - | (11 | ) | - | 23 | ||||
| Loss and comprehensive loss for the period | - | - | - | - | - | (1,414 | ) | (1,414 | ) | |||
| Share-based compensation | - | - | - | 62 | - | - | 62 | |||||
| Balance, December 31, 2019 | 225,876,683 | 66,837 | 7,981 | 6,183 | 1,870 | (80,611 | ) | 2,260 | ||||
| Balance, January 1, 2020 | 225,876,683 | 66,837 | 7,981 | 6,183 | 1,870 | (80,611 | ) | 2,260 | ||||
| Public offering | 8,500,000 | 3,528 | - | - | 788 | - | 4,316 | |||||
| Share options exercised | 1,129,062 | 677 | - | (248 | ) | - | - | 429 | ||||
| Warrants exercised | 1,100,000 | 735 | - | - | (240 | ) | - | 495 | ||||
| Loss and comprehensive loss for the period | - | - | - | - | - | (6,951 | ) | (6,951 | ) | |||
| Share-based compensation | - | - | - | 803 | - | - | 803 | |||||
| Balance, September 30, 2020 | 236,605,745 | 71,777 | 7,981 | 6,738 | 2,418 | (87,562 | ) | 1,352 | ||||
Spectral Medical Inc.
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of Canadian dollars)
| Nine-months ended September 30 | |||||
| 2020 | 2019 | ||||
| $ | $ | ||||
| Cash flow provided by (used in) | |||||
| Operating activities | |||||
| Loss and comprehensive loss for the period | (6,951 | ) | (3,446 | ) | |
| Adjustments for: | |||||
| Depreciation on right-of-use asset | 70 | 70 | |||
| Depreciation on property and equipment | 140 | 122 | |||
| Amortization of intangible asset | 13 | 19 | |||
| Interest expense on lease liability | 25 | 27 | |||
| Unrealized foreign exchange loss (gain) on cash | 32 | 36 | |||
| Share-based compensation | 803 | 560 | |||
| (Gain) loss on disposal of property and equipment | (8 | ) | 7 | ||
| Changes in items of working capital: | |||||
| Trade and other receivables | (59 | ) | 1,126 | ||
| Inventories | (67 | ) | (67 | ) | |
| Prepayments and other assets | (257 | ) | (83 | ) | |
| Contract asset | 519 | 126 | |||
| Trade and other payables | 776 | 188 | |||
| Contract liabilities | 6,183 | 32 | |||
| Net cash provided by (used in) operating activities | 1,219 | (1,283 | ) | ||
| Investing activities | |||||
| Proceeds on disposal of property and equipment | 10 | - | |||
| Property and equipment expenditures | (215 | ) | (93 | ) | |
| Net cash used in investing activities | (205 | ) | (93 | ) | |
| Financing activities | |||||
| Proceeds from public offering | 5,100 | - | |||
| Transaction costs paid | (784 | ) | - | ||
| Lease liability payments | (81 | ) | (78 | ) | |
| Share options exercised | 429 | - | |||
| Warrants exercised | 495 | 101 | |||
| Net cash provided by financing activities | 5,159 | 23 | |||
| Increase (decrease) in cash | 6,173 | (1,353 | ) | ||
| Effects of exchange rate changes on cash | (32 | ) | (36 | ) | |
| Cash, beginning of period | 1,435 | 4,368 | |||
| Cash, end of period | 7,576 | 2,979 | |||
