“There is a lot to be both pleased about and also to be proud of in this quarter’s achievements. The first hypercare site which was up and running in July marks a real milestone for our Company and the MosaiQ technology, commented Franz Walt, Quotient’s Chief Executive Officer. Mr Walt added, “As I have shared previously our commercial strategy is driven by menu expansion. The CE mark submission in June of the initial SDS microarray and the commencement of our U.S. field trial for this important assay are important steps towards delivering a significant reduction in complexity and meaningful cost savings to Quotient’s customers. In addition, future growth in our liquid reagent business will be underpinned by the products recently approved by the FDA.”
MosaiQ, Quotient's next-generation platform is designed to deliver fast, comprehensive antigen typing, antibody detection and disease screening results, using a single low volume sample in a high throughput automated format. MosaiQ represents a transformative and highly disruptive unified testing platform for transfusion diagnostics. Feasibility has also been demonstrated with respect to the detection of nucleic acids (DNA or RNA) using the MosaiQ platform. Through MosaiQ, Quotient expects to deliver substantial value to donor testing laboratories worldwide by providing affordable, routine comprehensive characterization and screening of blood products, on a single automated instrument platform. MosaiQ is designed to radically reduce labor costs and complexity associated with existing practice.
Regulatory and Commercial Milestones
- Initial European Regulatory Approval Quotient filed for European regulatory approval for its initial MosaiQ immunohematology (IH) microarray in late September 2018 and was notified of its approval on April 30, 2019.
- European Commercialization Following the CE mark for the initial IH microarray, Quotient commenced a hypercare launch with the first of nine selected customers during July 2019.
- Ongoing Microarray Menu Development Quotient continues to plan for the expansion of the IH and SDS testing menus during the second half of calendar 2019.
- Field Trials Quotient expects to commence European and U.S. field trials with the expanded IH microarray menu in the second half of calendar 2019. Quotient has commenced U.S. field trial activity for the initial SDS microarray and expects to commence European and U.S. field trials for the expanded SDS microarray early in calendar 2020.
- Ongoing Regulatory Approval Process Quotient completed a CE mark submission for the initial SDS microarray in June 2019. Quotient expects to file for U.S. and European regulatory approval for the expanded IH microarray early in calendar year 2020 and for the expanded SDS microarray later in the first half of 2020.
Franz Walt commented, “We continue to deliver on the plans that we made over a year ago. This reflects our continued focus and improved executional capabilities.” Mr. Walt added, “Everything we have to do now is linked to developing our value proposition through menu expansion and then delivering an outstanding customer experience. Also, later this year we plan to present data derived from an independent research study to demonstrate the effectiveness of MosaiQ for molecular disease screening (MDS).”
Fiscal First Quarter 2020 Financial Results
“The conventional reagent business continues to deliver top line growth, with record product sales of $8.2 million in the first quarter, up 3.9% from the quarter ended June 30, 2018,” said Franz Walt. Mr Walt added, “This performance was driven by 1.6% growth in sales to OEM customers, while direct product sales grew 9.7%. In the quarter ended June 30, 2019, gross margin on product sales improved sequentially by 60 basis points from the 43.5% product sales gross margin reported in the prior quarter ended March 31, 2019. Year over year, gross margin was adversely impacted by $0.4 million of incremental depreciation and other non-cash costs, related to bringing our new Allen Robb Campus (ARC) online, compared to the equivalent costs in the prior year’s quarter ended June 30, 2018.
Key revenue and profit results are summarized below (expressed in thousands):
|Product sales — OEM Customers||$||5,737||$||5,647|
|Product sales — direct customers and distributors||2,432||2,217|
|Product sales from standing orders (%)||68 %||65 %|
|Gross profit as a % of total revenue||44.1 %||48.4 %|
|Gross margin on product sales (%)||44.1 %||48.3 %|
Capital expenditures totaled $1.1 million in the quarter ended June 30, 2019, compared with $1.4 million in the quarter ended June 30, 2018.
Quotient ended the quarter with $90.7 million in cash and other short-term investments, $148.1 million of debt, and $8.7 million in an offsetting long-term cash reserve account.
On May 15, 2019, the Company issued an additional $25 million principal amount of its 12% Senior Secured Notes due 2024. The available net proceeds of the offering were approximately $22.6 million after deducting the estimated expenses payable by the Company and amounts held as restricted cash under the terms of the indenture.
Outlook for the Fiscal Year Ending March 31, 2020
- Total product sales are still expected to be in the range of $30 to $31 million for the full fiscal year. Other revenue (product development fees) of approximately $1.0 million are also expected. Forecasted other revenue assumes the receipt of milestone payments contingent upon achievement of regulatory approval for certain products under development. The receipt of these milestone payments involves risks and uncertainties.
- Operating loss, reflecting incremental investments in our development priorities, is expected to be in the range of $77 to $82 million including approximately $18.5 million of non-cash expenses such as depreciation, amortization and stock compensation.
- Capital expenditures are expected to be in the range of $5 to $10 million.
Product sales in the second quarter of fiscal 2020 are expected to be in the range of $6.3 to $6.7 million, compared with $6.2 million for the second quarter of fiscal 2019.
Quarterly product sales can fluctuate depending upon the shipment cycles for red blood cell-based products, which account for approximately two-thirds of current product sales. These products typically experience 13 shipment cycles per year, equating to three shipments of each product per quarter, except for one quarter per year when four shipments occur. The timing of shipment of bulk antisera products to OEM customers may also move revenues from quarter to quarter. Some seasonality in demand is also experienced around holiday periods in both Europe and the United States. As a result of these factors, Quotient expects to continue to see seasonality and quarter-to-quarter variations in product sales. The timing of product development fees included in other revenues is mostly dependent upon the achievement of pre-negotiated project milestones.
Quotient will host a conference call on Monday, August 5th at 8:00 a.m. Eastern Time to discuss its first quarter fiscal 2020 financial results. Participants may access the call by dialing 1-877-407-0784 in the U.S. or 1-201-689-8560 outside the U.S. The conference call will be webcast live on the Company’s website at www.quotientbd.com.
A replay of this conference call will be available through August 12th by dialing 1-844-512-2921 in the U.S. or 1-412-317-6671 outside the U.S. The replay access code is 13692663.
About Quotient Limited
Building on 30 years of experience in transfusion diagnostics, Quotient is a commercial-stage diagnostics company committed to delivering solutions that reshape the way diagnostics is practiced. MosaiQ, Quotient’s proprietary multiplex microarray technology, offers the world’s first fully automated, consolidated testing platform, allowing for multiple tests across different modalities. MosaiQ is designed to be a game-changing solution, which Quotient believes will increase efficiencies, improve clinical practice, deliver significant workflow improvements, and operational cost savings to laboratories around the world. Quotient's operations are based in Eysins, Switzerland, Edinburgh, Scotland and Newtown, Pennsylvania.
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include statements regarding our expectations of continued growth, the development, regulatory approval, commercialization and impact of MosaiQ and other new products (including the application of MosaiQ to infectious disease diagnostics), current estimates of second quarter and full year fiscal 2020 operating results and expectations regarding our future funding sources. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties, many of which are beyond our control, include delays or denials of regulatory approvals or clearances for products or applications; market acceptance of our products; the impact of competition; the impact of facility expansions and expanded product development, clinical, sales and marketing activities on operating expenses; delays or other unforeseen problems with respect to manufacturing, product development or field trial studies; adverse results in connection with any ongoing or future legal proceeding; continued or worsening adverse conditions in the general domestic and global economic markets; as well as the other risks set forth in the Company's filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Quotient disclaims any obligation to update these forward-looking statements.
The Quotient logo and MosaiQ™ are registered trademarks or trademarks of Quotient Limited and its subsidiaries in various jurisdictions.
Condensed Consolidated Statements Of Comprehensive Loss
(in thousands, except share and per share amounts)
|Cost of revenue||4,563||4,065|
|Sales and marketing||2,580||2,281|
|Research and development, net||11,653||12,570|
|General and administrative expense||7,797||7,505|
|Total operating expense||22,030||22,356|
|Other income (expense)|
|Interest expense, net||(6,086)||(3,116)|
|Other expense, net||(5,134)||(6,628)|
|Loss before income taxes||(23,558)||(25,166)|
|Provision for income taxes||(13)||(11)|
|Other comprehensive income (loss):|
|Change in fair value of effective portion of foreign currency cash flow hedges||$||(120)||$||(332)|
|Unrealized gain on short-term investments||147||26|
|Foreign currency gain (loss)||(1,014)||357|
|Provision for pension benefit obligation||48||36|
|Other comprehensive income (loss)||(939)||87|
|Net loss available to ordinary shareholders - basic and diluted||$||(23,571)||$||(25,177)|
|Loss per share - basic and diluted||$||(0.36)||$||(0.55)|
|Weighted-average shares outstanding - basic and diluted||66,078,290||45,796,533|
Condensed Consolidated Balance Sheets
|Cash and cash equivalents||$||6,528||$||4,096|
|Trade accounts receivable, net||4,724||3,348|
|Prepaid expenses and other current assets||3,326||3,202|
|Total current assets||115,441||116,926|
|Property and equipment, net||45,506||47,293|
|Operating lease right-of-use assets||17,615||—|
|Intangible assets, net||707||751|
|Deferred income taxes||592||605|
|Other non-current assets||4,568||4,688|
|LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)|
|Accrued compensation and benefits||4,372||6,149|
|Accrued expenses and other current liabilities||9,441||12,458|
|Current portion of operating lease liability||2,723||—|
|Current portion of deferred lease rental benefit||—||435|
|Capital lease obligation||457||471|
|Total current liabilities||22,335||25,449|
|Operating lease liability, less current portion||16,176||—|
|Deferred lease rental benefit, less current portion||—||1,144|
|Capital lease obligation, less current portion||753||865|
|Defined benefit pension plan obligation||7,647||7,368|
|7% Cumulative redeemable preference shares||19,638||19,375|
|Total shareholders' equity (deficit)||(21,192)||1,714|
|Total liabilities and shareholders' equity (deficit)||$||193,445||$||177,770|
Condensed Consolidated Statements of Cash Flows
|Adjustments to reconcile net loss to net cash provided by operating activities:|
|Depreciation and amortization||3,038||3,333|
|Amortization of lease incentive||(109)||(108)|
|Swiss pension obligation||183||155|
|Amortization of deferred debt issue costs||2,107||291|
|Accrued preference share dividends||263||263|
|Deferred income taxes||13||11|
|Net change in assets and liabilities:|
|Trade accounts receivable, net||(1,439)||(141)|
|Accounts payable and accrued liabilities||(3,713)||(5,401)|
|Accrued compensation and benefits||(1,699)||1,057|
|Net cash used in operating activities||(25,054)||(21,118)|
|Increase in short-term investments||(15,000)||—|
|Realization of short-term investments||21,724||—|
|Purchase of property and equipment||(1,138)||(1,428)|
|Net cash generated from (used in) investing activities||5,586||(1,428)|
|Repayment of finance leases||(94)||(116)|
|Proceeds from drawdown of new debt||25,000||36,000|
|Debt issuance costs and fees paid to noteholders||(874)||(1,213)|
|Proceeds from issuance of ordinary shares and warrants||63||2,195|
|Net cash generated from financing activities||24,095||36,866|
|Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash||(686)||3,304|
|Change in cash, cash equivalents and restricted cash||3,941||17,624|
|Beginning cash, cash equivalents and restricted cash||11,603||25,205|
|Ending cash, cash equivalents and restricted cash||$||15,544||$||42,829|
|Supplemental cash flow disclosures:|
|Income taxes paid||$||—||$||—|
|Reconciliation of cash, cash equivalents and restricted cash:|
|Cash and cash equivalents||$||6,528||$||35,629|
|Total cash, cash equivalents and restricted cash||$||15,544||$||42,829|