PolarityTE Reports Results and Corporate Update for Two-Month Transition Period Ended December 31, 2018

March 18, 2019 |

9 min read

PolarityTE, Inc. today reported financial results for the two-month transition period that ended December 31, 2018.

SALT LAKE CITY, March 18, 2019 /PRNewswire/ -- PolarityTE, Inc. (Nasdaq: PTE), a commercial-stage biotechnology and regenerative biomaterials company focused on transforming the lives of patients by discovering, designing and developing a range of regenerative tissue products for the fields of medicine, biomedical engineering and material sciences, today reported financial results for the two-month transition period that ended December 31, 2018. As previously announced, PolarityTE is transitioning from an October 31 fiscal year end to a December 31 fiscal year end. For additional details, please refer to the PolarityTE transition report on Form 10-K filed with the Securities and Exchange Commission (SEC).

PolarityTE (PRNewsfoto/PolarityTE, Inc.)

Highlights

During calendar Q3 and Q4 of 2018, PolarityTE began to transition from a "limited market release" to a "regional market release." The regional market release was initiated with the hiring and initial training of a preliminary sales force and sales of the product in some facilities which had become activated through value analysis committee (VAC) approvals and entered into purchase agreements with PolarityTE.
Launch and near enrollment completion of two pilot trials evaluating the use of SkinTE for diabetic foot ulcers and venous leg ulcers with interim results to be presented at Symposium on Advance Wound Care Conference (San Antonio, May 7-9) and the Diabetic Limb Salvage Conference (Washington D.C., April 4-6), where it will be awarded Special Recognition for being one of the top abstracts accepted.
Received Institutional Review Board approval for multicentered randomized control trials (RCTs) in diabetic foot ulcers (DFUs) and venous leg ulcers (VLUs), with enrollment expected to begin shortly.
Continued enrollment in the head-to-head trial (SkinTE vs. skin graft).
Continued development of peer reviewed clinical outcomes abstracts, presentations, posters and publications on SkinTE.

Financial results for the transition period

Total net revenue for the two months ended December 31, 2018 was $0.7 million, of which $0.2 million was from sales of SkinTE and $0.5 million was associated with PolarityTE's contract research operations. At the end of 2018 we had 22 sales people, who will be working on our transition to a regional market release of SkinTE.

Research and development expenses for the two months ended December 31, 2018 were $3.5 million, which included $0.9 million of stock-based compensation. During the calendar fourth quarter we initiated two pilot evaluation trials of SkinTE in chronic wounds (diabetic foot ulcers and venous leg ulcers).

General and administrative expenses for the two months ended December 31, 2018 were $12.6 million, which included $7.5 million of stock-based compensation and is a non-cash charge.

Net loss for the two months ended December 31, 2018 was $18.4 million. This loss included $8.9 million of stock-based compensation. Cash used in operations was $8.0 million, or approximately $4.0 million per month.

Cash and Liquidity as of December 31, 2018

As of December 31, 2018, cash, cash equivalents and short-term investments were $61.8 million.

In the two months ended December 31, 2018, cash used in operations was $8.0 million, or approximately $4.0 million per month. This compares to $11.5 million, or approximately $3.8 million per month in the three months ended October 31, 2018.

2018 Calendar Quarter SkinTE Revenue (unaudited)

For the unaudited calendar quarters ended March 31, June 30, September 30, and December 31, 2018, revenue from the sale of SkinTE was $0.003 million, $0.189 million, $0.197 million, and $0.498 million, respectively.

POLARITYTE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	As of December 31,		As of October 31,
	2018		2018		2017
ASSETS

Current assets:
Cash and cash equivalents	$	55,673	$	70,961	$	17,667
Short-term investments		6,162		–		–
Accounts receivable		712		940		–
Inventory		336		238		–
Prepaid expenses and other current assets		1,432		1,163		297
Total current assets		64,315		73,302		17,964
Non-current assets:
Property and equipment, net		13,736		12,927		2,173
Intangible assets, net		924		957		–
Goodwill		278		278		–
Other assets		913		378		15
Total non-current assets		15,851		14,540		2,188
TOTAL ASSETS	$	80,166	$	87,842	$	20,152

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	6,508	$	4,363	$	1,939
Other current liabilities		316		286		–
Current portion of long-term note payable		529		519		–
Deferred revenue		170		150		–
Warrant liability and embedded derivative		–		–		13,502
Total current liabilities		7,523		5,318		15,441
Long-term note payable, net		479		736		–
Other long-term liabilities		131		126		–
Total liabilities		8,133		6,180		15,441

Commitments and Contingencies

Redeemable convertible preferred stock - 0, 0, and 6,455 shares authorized, issued and outstanding at December 31, 2018, October 31, 2018 and 2017, respectively; liquidation preference - $0, $0, and $17,750, respectively		–		–		4,541

STOCKHOLDERS' EQUITY:
Convertible preferred stock - 25,000,000 shares authorized, 0, 0, and 3,230,655 shares issued and outstanding at December 31, 2018, October 31, 2018 and 2017; aggregate liquidation preference $0, $0, and $2,140, respectively		–		–		109,995
Common stock - $.001 par value; 250,000,000 shares authorized; 21,447,088, 21,423,999, and 6,515,524 shares issued and outstanding at December 31, 2018, October 31, 2018 and 2017, respectively		21		21		7
Additional paid-in capital		414,840		406,087		149,173
Accumulated other comprehensive income		36		–		–
Accumulated deficit		(342,864)		(324,446)		(259,005)
Total stockholders' equity		72,033		81,662		170
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	80,166	$	87,842	$	20,152

POLARITYTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

	For the Two Months Ended December 31,		For the Years Ended October 31,
	2018		2018		2017
Net revenues
Products	$	210	$	689	$	–
Services		463		874		–
Total net revenues		673		1,563		–
Cost of sales:						–
Products		194		500		–
Services		187		502		–
Total costs of sales		381		1,002		–
Gross profit		292		561		–

Operating costs and expenses
Research and development		3,458		19,376		7,107
Research and development - intellectual property acquired		–		–		104,693
General and administrative		12,639		48,252		18,812
Sales and marketing		2,725		2,365		–
Total operating costs and expenses		18,822		69,993		130,612
Operating loss		(18,530)		(69,432)		(130,612)

Other income (expense)
Interest income, net		80		395		23
Other income, net		32		–		–
Change in fair value of derivatives		–		3,814		109
Loss on extinguishment of warrant liability		–		(520)		–
Net loss from continuing operations before income taxes		(18,418)		(65,743)		(130,480)
Benefit for income taxes		–		302		–
Net loss from continuing operations		(18,418)		(65,441)		(130,480)
Loss from discontinued operations		–		–		(449)
Gain on sale of discontinued operations		–		–		100
Loss from discontinued operations, net		–		–		(349)
Net loss after income taxes		(18,418)		(65,441)		(130,829)
Deemed dividend – accretion of discount on Series F preferred stock		–		(1,290)		(369)
Deemed dividend – exchange of Series F preferred stock		–		(7,057)		–
Cumulative dividends on Series F preferred stock		–		(373)		(124)
Net loss attributable to common stockholders	$	(18,418)	$	(74,161)	$	(131,322)

Net loss per share, basic and diluted:
Loss from continuing operations	$	(0.86)	$	(4.29)	$	(26.50)
Loss from discontinued operations		–		–		(0.07)
Net loss		(0.86)		(4.29)		(26.57)
Deemed dividend – accretion of discount on Series F preferred stock		–		(0.09)		(0.07)
Deemed dividend – exchange of Series F preferred stock		–		(0.46)		-
Cumulative dividends on Series F preferred stock		–		(0.02)		(0.03)
Net loss attributable to common stockholders	$	(0.86)	$	(4.86)	$	(26.67)
Weighted average shares outstanding, basic and diluted:		21,343,446		15,259,731		4,923,327

About PolarityTE®
PolarityTE is a commercial-stage biotechnology and regenerative biomaterials company 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. The PolarityTE platform technology begins with a small piece of the patient's own, or autologous, healthy tissue, rather than artificially manipulated individual cells. From this small piece of healthy autologous tissue, the company creates an easily deployable, dynamic and self-propagating product designed to enhance and stimulate the patient's own cells to regenerate the target tissues. Rather than manufacturing with synthetic and foreign materials within artificially engineered environments, PolarityTE manufactures with the patient's own tissue and uses the patient's own body to support the regenerative process to create the same tissue from which it was derived. PolarityTE's innovative method is intended to promote and accelerate growth of the patient's tissues to undergo a form of effective regenerative healing.

About SkinTE™
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 regulated by the FDA as an HCT/P solely under Section 361 of the Public Health Service Act and 21 CFR 1271. The FDA has specific regulations governing HCT/Ps. HCT/Ps that meet the criteria for regulation solely under Section 361 of the Public Health Service Act and 21 CFR 1271 (361 HCT/Ps) are not subject to pre-market clearance or approval requirements, but are subject to post-market regulatory requirements.

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, SKINTE and WHERE SELF REGENERATES SELF 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
(610) 751-3985

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