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PolarityTE Reports Fourth Quarter and Fiscal Year 2020 Results

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·14 min read
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Fourth Quarter Revenues of $3.59 million and Full Year 2020 Revenues of $10.13 million

PolarityTE to host conference call and webcast today, March 30, 2021 at 8:00 a.m. ET

PolarityTE, Inc. (Nasdaq: PTE), a biotechnology company developing regenerative tissue products and biomaterials, today reported financial results for the fourth quarter and fiscal year ended December 31, 2020.

David Seaburg, Chief Executive Officer, commented, "2020 was a transformational year for PolarityTE as we made the decision to pursue an IND and BLA for SkinTE. If we successfully obtain a BLA for SkinTE, we believe it will create a more valuable asset with a greater likelihood of achieving widespread commercial adoption bolstered by robust clinical data, which should have a positive effect on stockholder value. As a result of this change in direction, we reduced our commercial operations in May 2020 and have realized a substantial reduction in our operating expenses. This cost savings coupled with our recent capital raises means we have the resources to pursue the FDA regulatory process and fund our operations well into 2022. Our team weathered COVID-19’s headwinds to our SkinTE business and leveraged our internal resources to build out our testing business, allowing us to defray expenses and support the public health effort to combat the pandemic. We have also made great progress towards our planned IND submission, which we remain on track to file in the second half of 2021. I am proud of what we have accomplished over the past year, and look forward to what the future holds for PolarityTE and all of our stakeholders."

Recent Business Highlights

  • Raised $25.67 million of capital (before offering costs) from a single healthcare-dedicated institutional investor in December 2020 and January 2021

  • Submitted a Type B Pre-IND meeting request to FDA for SkinTE and received written responses in October 2020

  • In February 2021, U.S. Patent No. 10,926,001 issued, and U.S. Application No. 16/165,169 was allowed. The granted and allowed claims pertain to methods of making compositions for regenerating functional skin tissue, and related methods of treatment. The Company’s total number of allowed and granted utility patents is currently ten—eight internationally and two in the U.S.

  • Final patient enrolled in our multicenter, randomized controlled trial evaluating SkinTE plus standard of care versus standard of care alone in treatment of diabetic foot ulcers in January 2021, with top-line results expected to be announced at the Symposium on Advanced Wound Care (SAWC) Spring Conference in May 2021

Operating Highlights for the Year Ended December 31, 2020

  • Total revenues were $10.13 million for FY:20 compared to $5.65 million for FY:19, representing a 79% increase year over year

  • SkinTE revenues were $3.73 million for FY:20 compared to $2.35 million for FY:19, representing a 59% increase year over year

  • Contract services revenues were $6.40 million for FY:20 compared to $3.30 million for FY:19, representing a 94% increase year over year

    • Contract services revenues for FY:20 includes $4.32 million from COVID-19 test processing that began in late May of 2020

  • Operational cash burn for FY:20 was $37.75 million which is a reduction of $18.89 million from FY:19, representing a 33% decrease year over year

Operating Highlights for the Quarter Ended December 31, 2020

  • Total revenues were $3.59 million in Q4:20 compared to $3.34 million in Q3:20, representing an 8% increase quarter over quarter

  • SkinTE revenues were $1.20 million in Q4:20 compared to $1.16 million in Q3:20, representing a 4% increase quarter over quarter

  • Contract services revenues were $2.39 million in Q4:20 compared to $2.18 million in Q3:20, representing a 9% increase quarter over quarter

    • Contract services revenues for Q4:20 includes $1.86 million from COVID-19 testing processing

  • Operational cash burn for Q4:20 was $4.82 million, excluding $0.76 million of offering and warrant repricing expenses, which represents a 70% reduction from Q4:19 and 29% reduction from Q3:20

Financial Results for the Year Ended December 31, 2020

Net revenues increased by 79% to $10.13 million in 2020. The increase in net revenues for sale of products was the result of a sales strategy adopted in May 2020 to focus on regions and facilities where we had repeat users of SkinTE. For 2020 the average wound size treated with SkinTE was 219 cm2 compared to 120 cm2 in 2019, which corresponds with the difference in revenue between those years. The increase in net revenues for services was the result of $4.32 million in new COVID-19 testing services we began to offer through Arches Research at the end of May 2020. In 2019 services net revenues was derived primarily from pre-clinical testing services provided through IBEX Preclinical Research, which were adversely impacted by COVID-19 in 2020.

Total operating costs and expenses decreased to $51.64 million in 2020 from $96.57 million in 2019, or 47%. This is the most significant change in our results of operations period over period and is attributable to the 46% reduction in personnel from the end of 2019 to the end of 2020. The reduction in personnel substantially reduced salary and benefit costs across the Company. Salary and benefits totaled $19.72 million in 2020 compared to $28.81 million in 2019. In addition, stock-based compensation decreased by 77% from $31.40 million in 2019 to $7.26 million in 2020. The decrease in salary and benefits in 2020 accounts for 20% of the decrease in total operating costs and expenses in 2020 compared to 2019. The decrease in stock-based compensation in 2020 accounts for 54% of the decrease in total operating costs and expenses in 2020 compared to 2019. The reduction in personnel also allows us to make incremental reductions in the cost of infrastructure required to support the activities of employees.

Research and development expenses decreased by 30% in 2020 to $11.53 million, which is attributable to the reduction in salary and benefits and stock compensation costs from 2019.

General and administrative expenses decreased by 56% in 2020 to $27.56 million. In addition to reductions in salary and benefits and stock compensation costs from 2019, travel and related costs decreased to $0.24 million in 2020 from $1.32 million in 2019. Expenses for our leased facilities were $2.09 million in 2020.

Sales and marketing expenses decreased by 49% in 2020 to $8.72 million. In addition to reductions in salary and benefits and stock compensation costs from 2019, promotional consulting and expense was reduced to $0.83 million in 2020 from $5.27 in 2019, and travel and related costs decreased to $0.44 million in 2020 from $1.44 million in 2019.

Net loss for the year ended December 31, 2020 was $42.85 million compared with a net loss of $92.49 million for the year ended December 31, 2019.

Cash and Liquidity as of December 31, 2020

As of December 31, 2020, we had $25.52 million in cash and cash equivalents. In January 2021, we raised an additional $17.67 million in gross proceeds before offering expenses in a registered direct offering and through a warrant exercise agreement. Based on currently available information as of the date we file this press release, we believe that our existing cash and cash equivalents will be sufficient to fund our activities through the end of 2021 and into the third quarter of 2022. However, our projections of future cash needs may differ from actual results.

Cash used in operating activities for the three-month period ended December 31, 2020 was approximately $5.58 million, which included $0.76 million of offering and repricing costs, or $4.82 million excluding offering and repricing costs or approximately $1.61 million per month on average, 70% lower than the $5.33 million monthly average in the three months ended December 31, 2019 and 29% lower than the $2.25 million monthly average in the three months ended September 30, 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 363305 and referencing "PolarityTE Fiscal Year 2020 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. 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 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. 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, WHERE SELF REGENERATES SELF and WELCOME TO THE SHIFT are trademarks or registered trademarks of PolarityTE, Inc.

POLARITYTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

December 31,
2020

December 31,
2019

ASSETS

Current assets

Cash and cash equivalents

$

25,522

$

10,218

Short-term investments

19,022

Accounts receivable, net

3,819

1,731

Inventory

883

252

Prepaid expenses and other current assets

992

1,264

Total current assets

31,216

32,487

Property and equipment, net

10,550

14,911

Operating lease right-of-use assets

2,452

4,590

Intangible assets, net

542

731

Goodwill

278

278

Other assets

472

602

TOTAL ASSETS

$

45,510

$

53,599

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable and accrued expenses

$

4,148

$

7,095

Other current liabilities

2,106

2,338

Current portion of long-term note payable

2,059

528

Deferred revenue

168

98

Total current liabilities

8,481

10,059

Common stock warrant liability

5,975

Operating lease liabilities

1,476

2,994

Other long-term liabilities

723

1,630

Long-term notes payable

1,517

Total liabilities

18,172

14,683

Commitments and Contingencies (Note 17)

STOCKHOLDERS’ EQUITY

Preferred stock – 25,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2020 and 2019

Common stock - $.001 par value; 250,000,000 shares authorized; 54,857,099 and 27,374,653 shares issued and outstanding at December 31, 2020 and 2019, respectively

55

27

Additional paid-in capital

505,494

474,174

Accumulated other comprehensive income

72

Accumulated deficit

(478,211

)

(435,357

)

Total stockholders’ equity

27,338

38,916

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

45,510

$

53,599

POLARITYTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)

For the Year Ended
December 31,

For the Year Ended
December 31,

2020

2019

Net revenues

Products

$

3,730

$

2,353

Services

6,396

3,299

Total net revenues

10,126

5,652

Cost of sales

Products

1,068

1,365

Services

3,356

1,114

Total costs of sales

4,424

2,479

Gross profit

5,702

3,173

Operating costs and expenses

Research and development

11,532

16,397

General and administrative

27,557

63,189

Sales and marketing

8,719

16,980

Restructuring and other charges

3,834

Total operating costs and expenses

51,642

96,566

Operating loss

(45,940

)

(93,393

)

Other income (expense), net

Change in fair value of common stock warrant liability

2,914

Interest (expense) income, net

(182

)

151

Other income, net

354

749

Net loss

$

(42,854

)

$

(92,493

)

Net loss per share attributable to common stockholders

Basic

$

(1.11

)

$

(3.70

)

Diluted

$

(1.16

)

$

(3.70

)

Weighted average shares outstanding

Basic

38,779,316

24,966,355

Diluted

39,367,390

24,966,355

POLARITYTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

For the Year
Ended
December 31,

For the Year
Ended
December 31,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss

$

(42,854

)

$

(92,493

)

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

Stock-based compensation expense

7,258

31,402

Depreciation and amortization

3,074

2,992

Change in allowance for doubtful accounts

148

26

Change in fair value of common stock warrant liability

(2,914

)

Amortization of intangible assets

189

193

Amortization of debt discount

19

49

Change in fair value of contingent consideration

(36

)

Loss on abandonment of property and equipment and ROU assets

2,806

914

Other non-cash adjustments

(21

)

20

Changes in operating assets and liabilities:

Accounts receivable

(2,236

)

(1,045

)

Inventory

(631

)

84

Prepaid expenses and other current assets

272

193

Operating lease right-of-use assets

1,700

1,651

Other assets/liabilities, net

(200

)

(249

)

Accounts payable and accrued expenses

(2,761

)

1,269

Other current liabilities

35

32

Deferred revenue

70

(72

)

Operating lease liabilities

(1,708

)

(1,578

)

Net cash used in operating activities

(37,754

)

(56,648

)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

(1,339

)

(2,773

)

Purchase of available-for-sale securities

(14,144

)

(40,072

)

Proceeds from maturities of available-for-sale securities

16,945

23,327

Proceeds from sale of available-for-sale securities

16,171

3,901

Net cash provided by/(used in) investing activities

17,633

(15,617

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from term note payable and financing arrangements

4,629

Principal payments on term note payable and financing arrangements

(1,675

)

(534

)

Payment of contingent consideration liability

(225

)

Principal payments on financing leases

(508

)

(453

)

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

32,020

28,073

Proceeds from warrants exercised

1,008

Cash paid for tax withholdings related to net share settlement

(155

)

(679

)

Proceeds from stock options exercised

31

529

Proceeds from ESPP purchase

75

99

Net cash provided by financing activities

35,425

26,810

Net increase/(decrease) in cash and cash equivalents

15,304

(45,455

)

Cash and cash equivalents - beginning of period

10,218

55,673

Cash and cash equivalents - end of period

$

25,522

$

10,218

View source version on businesswire.com: https://www.businesswire.com/news/home/20210330005206/en/

Contacts

Investors:
Rich Haerle
VP, Investor Relations
PolarityTE, Inc.
ir@PolarityTE.com
(385) 315-0697