Form 8-K Quotient Ltd For: Jan 31

January 31, 2019 8:26 AM

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

—————————

FORM 8‑K

—————————

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 31, 2019 (January 31, 2019)

—————————

QUOTIENT LIMITED
(Exact name of registrant as specified in its charter)

 

Jersey, Channel Islands

001‑36415

Not Applicable

(State or other jurisdiction
of incorporation)

(Commission File Number)

(IRS Employer
Identification No.)

B1, Business Park Terre Bonne,
Route de Crassier 13,

1262 Eysins, Switzerland

Not Applicable

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: 011-41-22-716-9800

n/a
(Former name or former address, if changed since last report.)

—————————

Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12)

 

Pre‑commencement communications pursuant to Rule 14d‑2(b) under the Exchange Act (17 CFR 240.14d‑2(b))

 

Pre‑commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act (17 CFR 240.13e‑4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

 


 

Item 2.02. Results of Operations and Financial Condition.

On January 31, 2019, Quotient Limited issued an earnings release announcing its financial results for the quarter ended December 31, 2018.  A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.

The information in this Current Report, including the exhibit hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.  The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, unless it is specifically incorporated by reference therein.

 

Item 9.01. Financial Statements and Exhibits.

The following is a list of exhibits filed as part of this Current Report on form 8-K:

 

Exhibit 99.1Earnings Release, dated January 31, 2019.

 

 

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

QUOTIENT LIMITED

 

By:

 

/s/ Franz Walt

 

Name: Franz Walt

 

Title: Chief Executive Officer

Date: January 31, 2019

 

 

 

Exhibit 99.1

 

 

 

 

 

Quotient Limited Provides an Update on Extended Immunohematology Microarray Performance and on the Commencement of the Initial Serological Disease Screening Field Trial together with Third Quarter Fiscal 2019 Results

 

 

Development data provides positive results for extended IH microarray panel

 

Field trial for initial Serological Disease microarray panel has commenced

 

Reagent revenue growth of 15% in the quarter and 12% year to date

 

 

JERSEY, Channel Islands, January 31, 2019 (GLOBENEWSWIRE) -- Quotient Limited (NASDAQ: QTNT) (Quotient or the Company), a commercial-stage diagnostics company, today provided internal performance evaluation data for its extended immunohematology (IH) microarray, and announced the commencement of the European field trial for its initial Serological Disease Screening (SDS) microarray. The Company also disclosed continued strong top line growth in its core liquid reagent business for the quarter and for the nine months ended December 31, 2018.

“I am very pleased to report the progress which we have been able to make. We are well positioned with an ISO certified MosaiQ manufacturing system, a CE marked MosaiQ instrument and the resources required to bring a commercializable MosaiQ testing menu to the transfusion diagnostics market. The Quotient team continues to operate well to achieve the targets which we set earlier this fiscal year.” said Franz Walt, Quotient’s Chief Executive Officer. Mr. Walt added “Our ongoing menu expansion plans are progressing well as evidenced by our first SDS microarray entering its field trial and the development data for our extended antigen panel. When available, the extended antigen panel is designed to be a game changing innovation which will replace the initial IH menu that is planned for use in our European hypercare launch.”

Extended Antigen Assay Performance

In development studies performed for the extended antigen microarray the following concordance data were achieved in sample sizes of between 120 to 280:

 

 


 

MosaiQ IH Microarray Extended Antigen Typing

Blood Group Antigen

A

B

D

C

c

E

e

K

k

Cw

Concordance

100%

100%

100%

100%

100%

99.6

100%

100%

100%

100%

Blood Group Antigen

Kpa

Fya

Fyb

Jka

Jkb

M

N

S

Leb

P1

Concordance

100%

99.5%

100%

100%

100%

100%

99.1%

99.4%

100%

*

* An additional assay for the P1 antigen is in the final stages of the print concentration phase of development.

These studies also demonstrate equivalent or improved performance for the antigen assays included on the initial IH microarray. Ongoing development plans include commencement of Verification and Validation for the extended antigen panel in the near future.

MosaiQ Platform

MosaiQ, Quotient's next-generation platform is designed to deliver fast, comprehensive antigen typing, antibody detection and serological and molecular disease screening, using a single low volume sample in a high throughput automated format. MosaiQ represents a transformative and highly disruptive unified diagnostic testing platform for transfusion diagnostics and beyond. Through MosaiQ, Quotient expects to deliver substantial value to its initial target market of donor testing laboratories by providing affordable, routine, comprehensive characterization and screening of blood products, on a single automated instrument platform designed to radically reduce labor costs and complexity associated with existing practice.

Quotient Reconfirms the Following Regulatory and Commercial Milestones

European Regulatory Approval – Quotient filed for European regulatory approval for its initial MosaiQ IH microarray in September 2018 and continues to expect to file for the initial Serological Disease Screening (SDS) microarray in the first half of calendar 2019

European Commercialization – Quotient has received invitations to participate in tenders once MosaiQ has obtained European approval for the initial IH microarray

IH Microarray Ongoing Development – Quotient continues to plan for a Verification and Validation study for the expanded IH antigen testing menu during the first half of calendar 2019

U.S. Field Trials – Quotient expects to commence U.S. field trials with the expanded antigen testing menu in the first half of calendar 2019

U.S. Regulatory Approval – Quotient expects to file for U.S. and European regulatory approval for the expanded IH microarray in the second half of calendar 2019

 


 

Fiscal Third Quarter 2019 Financial Results

“The conventional reagent business recognized strong product sales of $6.7 million in the third quarter, up 15% year over year. Top line growth for the first nine months of this fiscal year was driven by 17% growth in sales to OEM customers, while direct product sales grew 18%. ” said Franz Walt. Mr. Walt added, “ In the quarter gross margin was adversely impacted by incremental manufacturing costs related to bringing our new Allan Robb Campus on line while continuing to operate our existing manufacturing facility. Milestone payments earned from the approval for sale in the U.S. of certain rare antisera reagents developed for a key OEM customer contributed $806,000 of other revenues in the first nine months of the last fiscal year.”

Key revenue and profit results are summarized below (expressed in thousands)

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

Dec 31,

 

 

Dec 31

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales OEM Customers

 

$

4,719

 

 

$

3,829

 

 

$

14,744

 

 

$

12,625

 

Product sales — direct customers and distributors

 

 

2,004

 

 

 

1,824

 

 

 

6,090

 

 

 

5,164

 

Other revenues

 

 

 

 

 

206

 

 

 

19

 

 

 

806

 

Total revenue

 

$

6,723

 

 

$

5,859

 

 

$

20,853

 

 

$

18,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales from standing orders (%)

 

 

67

%

 

 

76

%

 

 

67

%

 

 

75

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

$

2,537

 

 

$

3,534

 

 

$

8,050

 

 

$

10,652

 

Gross profit as a % of total revenue

 

 

37.7

%

 

 

60.3

%

 

 

38.6

%

 

 

57.3

%

Gross margin on product sales (%)

 

 

37.7

%

 

 

58.9

%

 

 

38.5

%

 

 

55.3

%

Operating (loss)

 

$

(19,028

)

 

$

(17,095

)

 

$

(58,629

)

 

$

(52,062

)

 

Capital expenditures totaled $1.4 million in the quarter ended December 31, 2018, compared with $5.1 million in the quarter ended December 31, 2017, reflecting the finalization of the construction of our new conventional reagent manufacturing facility earlier this year.

During the third quarter Quotient announced the closing of an underwritten public offering of 10,615,385 ordinary shares at a price to the public of $6.50 per share, which includes the exercise in full by the underwriters of their option to purchase up to 1,384,615 additional ordinary shares. The net proceeds to the Company from this offering was approximately $64.5 million, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company.

 


 

In October 2016, the Company issued $84.0 million in aggregate principal amount of Senior Notes and later issued an additional $36.0 million in aggregate principal amount of the Senior Notes in June 2018. In connection with the issuance of the Notes, the Company sold to the purchasers the right to receive, in the aggregate, a royalty right equal to 2% of the aggregate net sales of MosaiQ™ instruments and consumables in the donor testing market in the European Union and the United States.

During the third quarter the Company entered into a first supplemental indenture to modify the terms of its previously issued Senior Notes as follows:  

 

extending the maturity date of the Senior Notes to April 15, 2024

 

revising the principal amortization schedule to delay by two years the initial redemption of the Senior Notes now set to commence on April 15,2021

 

revising the periods and redemption prices related to the optional redemption by the Company of the Senior Notes

 

permitting the Company to issue up to an additional $25.0 million aggregate principal amount of Senior Notes following the European CE marking of the Company's initial MosaiQTM IH Microarray

In consideration for these modifications, the Company agreed to pay to the noteholders a one-time consent payment of $3.9 million and agreed to increase the aggregate amount of the Royalty Right from 2% to 3%.  The supplemental indenture became effective in December 2018.

Quotient ended the quarter with $107.7 million in available cash and other short-term investments and $112.8 million of debt, net of $7.2 million in an offsetting long-term cash reserve account.

Outlook for the Fiscal Year Ending March 31, 2019

Product revenue is expected to be in the range of $27.6 to $27.8 million for the full fiscal year. Other revenues (product development fees) of approximately $0.45 million are also expected in the fiscal year. Forecasted other revenue assumes the receipt of milestone payments contingent upon achievement of regulatory milestones 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 $75 to $78 million including approximately $18 million of non-cash expenses such as depreciation, amortization and stock compensation.

Capital expenditures are expected to be in the range of $4 to $5 million.

 


 

Product sales in the fourth quarter of fiscal 2019 are expected to be in the range of $6.8 to $7.0 million, compared with $6.1 million for the fourth quarter of fiscal 2018.

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.

Conference Call

Quotient will host a conference call on Thursday, January 31st at 8:30 a.m. Eastern Time to discuss its third quarter fiscal 2019 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 February 7, 2019 by dialing 1-844-512-2921 in the U.S. or 1-412-317-6671 outside the U.S. The replay access code is 13686635.

About Quotient Limited

Quotient is a commercial-stage diagnostics company committed to ensuring clinical excellence and increasing the efficiency in the lab through the provision of innovative testing methods for existing tests within established markets. With an initial focus on blood grouping and serological disease screening, Quotient is developing its proprietary MosaiQTM technology platform to offer a breadth of tests that is unmatched by existing commercially available transfusion diagnostic instrument platforms. The Company’s operations are based in Edinburgh, Scotland; Eysins, Switzerland and Newtown, Pennsylvania.

 


 

Forward-Looking Statements

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 fourth quarter and full year fiscal 2019 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.

CONTACT: Chris Lindop, Chief Financial Officer - chris.lindop@quotientbd.com; +41 799 61 69 38

 


 

Quotient Limited

Condensed Consolidated Statements of Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales

 

$

6,723

 

 

$

5,653

 

 

$

20,834

 

 

$

17,789

 

Other revenues

 

 

 

 

 

206

 

 

 

19

 

 

 

806

 

Total revenue

 

 

6,723

 

 

 

5,859

 

 

 

20,853

 

 

 

18,595

 

Cost of revenue

 

 

4,186

 

 

 

2,325

 

 

 

12,803

 

 

 

7,943

 

Gross profit

 

 

2,537

 

 

 

3,534

 

 

 

8,050

 

 

 

10,652

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

2,233

 

 

 

1,910

 

 

 

6,359

 

 

 

5,461

 

Research and development, net

 

 

11,788

 

 

 

11,929

 

 

 

37,356

 

 

 

37,944

 

General and administrative expense

 

 

7,544

 

 

 

6,790

 

 

 

22,964

 

 

 

19,309

 

Total operating expense

 

 

21,565

 

 

 

20,629

 

 

 

66,679

 

 

 

62,714

 

Operating loss

 

 

(19,028

)

 

 

(17,095

)

 

 

(58,629

)

 

 

(52,062

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(5,679

)

 

 

(3,249

)

 

 

(14,614

)

 

 

(11,656

)

Other, net

 

 

(1,536

)

 

 

33

 

 

 

(5,516

)

 

 

1,478

 

Other expense, net

 

 

(7,215

)

 

 

(3,216

)

 

 

(20,130

)

 

 

(10,178

)

Loss before income taxes

 

 

(26,243

)

 

 

(20,311

)

 

 

(78,759

)

 

 

(62,240

)

Provision for income taxes

 

 

(11

)

 

 

 

 

 

(33

)

 

 

 

Net loss

 

$

(26,254

)

 

$

(20,311

)

 

$

(78,792

)

 

$

(62,240

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of effective portion of

     foreign currency cash flow hedges

 

$

41

 

 

$

(64

)

 

$

(320

)

 

$

409

 

Unrealized gain on short-term investments

 

 

169

 

 

 

(7

)

 

 

416

 

 

 

25

 

Foreign currency gain (loss)

 

 

(176

)

 

 

(168

)

 

 

554

 

 

 

1,144

 

Provision for pension benefit obligation

 

 

35

 

 

 

45

 

 

 

107

 

 

 

132

 

Other comprehensive income (loss)

 

 

69

 

 

 

(194

)

 

 

757

 

 

 

1,710

 

Comprehensive loss

 

$

(26,185

)

 

$

(20,505

)

 

$

(78,035

)

 

$

(60,530

)

Net loss available to ordinary shareholders

     - basic and diluted

 

$

(26,254

)

 

$

(20,311

)

 

$

(78,792

)

 

$

(62,240

)

Loss per share - basic and diluted

 

$

(0.46

)

 

$

(0.47

)

 

$

(1.53

)

 

$

(1.58

)

Weighted-average shares outstanding - basic and

     diluted

 

 

56,619,356

 

 

 

43,353,506

 

 

 

51,512,352

 

 

 

39,274,570

 

 


 


 

Quotient Limited

Condensed Consolidated Balance Sheets

(In Thousands)

(Unaudited)

 

 

 

 

 

December 31,

2018

 

 

March 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,468

 

 

$

20,165

 

Short-term investments

 

 

103,202

 

 

 

5,669

 

Trade accounts receivable, net

 

 

2,356

 

 

 

2,862

 

Inventories

 

 

15,306

 

 

 

16,278

 

Prepaid expenses and other current assets

 

 

2,678

 

 

 

7,065

 

Total current assets

 

 

128,010

 

 

 

52,039

 

Restricted cash

 

 

7,510

 

 

 

5,040

 

Property and equipment, net

 

 

49,286

 

 

 

60,156

 

Intangible assets, net

 

 

759

 

 

 

914

 

Deferred income taxes

 

 

616

 

 

 

649

 

Other non-current assets

 

 

4,584

 

 

 

5,043

 

Total assets

 

$

190,765

 

 

$

123,841

 

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,996

 

 

$

5,441

 

Accrued compensation and benefits

 

 

4,337

 

 

 

5,312

 

Accrued expenses and other current liabilities

 

 

10,390

 

 

 

15,340

 

Current portion of long-term debt

 

 

 

 

 

 

Current portion of deferred lease rental benefit

 

 

440

 

 

 

443

 

Capital lease obligation

 

 

469

 

 

 

515

 

Total current liabilities

 

 

18,632

 

 

 

27,051

 

Long-term debt

 

 

120,044

 

 

 

85,063

 

Deferred lease rental benefit, less current portion

 

 

1,056

 

 

 

443

 

Capital lease obligation, less current portion

 

 

943

 

 

 

1,422

 

Defined benefit pension plan obligation

 

 

6,322

 

 

 

6,168

 

7% Cumulative redeemable preference shares

 

 

19,113

 

 

 

18,325

 

Total liabilities

 

 

166,110

 

 

 

138,472

 

Total shareholders' equity (deficit)

 

 

24,655

 

 

 

(14,631

)

Total liabilities and shareholders' equity (deficit)

 

$

190,765

 

 

$

123,841

 

 

 

 

 

 

 

 

 

 


 


 

Quotient Limited

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

 

 

Nine months ended

December 31,

 

 

 

2018

 

 

2017

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(78,792

)

 

$

(62,240

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,503

 

 

 

7,678

 

Share-based compensation

 

 

3,576

 

 

 

3,458

 

Increase in (amortization of) deferred lease rental benefit

 

 

266

 

 

 

(324

)

Swiss pension obligation

 

 

453

 

 

 

494

 

Amortization of deferred debt issue costs

 

 

4,097

 

 

 

3,383

 

Accrued preference share dividends

 

 

788

 

 

 

788

 

Deferred income taxes

 

 

33

 

 

 

 

Net change in assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable, net

 

 

315

 

 

 

681

 

Inventories

 

 

147

 

 

 

(2,347

)

Accounts payable and accrued liabilities

 

 

(5,076

)

 

 

(4,066

)

Accrued compensation and benefits

 

 

(664

)

 

 

(886

)

Other assets

 

 

3,833

 

 

 

456

 

Net cash used in operating activities

 

 

(61,521

)

 

 

(52,925

)

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Increase in short-term investments

 

 

(119,000

)

 

 

(78,000

)

Realization of short-term investments

 

 

21,883

 

 

 

66,403

 

Purchase of property and equipment

 

 

(3,047

)

 

 

(17,343

)

Purchase of intangible assets

 

 

(3

)

 

 

(68

)

Net cash used in investing activities

 

 

(100,167

)

 

 

(29,008

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Repayment of finance leases

 

 

(358

)

 

 

(135

)

Proceeds from drawdown of new debt

 

 

36,000

 

 

 

 

Issue costs of new debt

 

 

(5,113

)

 

 

 

Proceeds from issuance of ordinary shares and warrants

 

 

113,745

 

 

 

84,985

 

Net cash generated from financing activities

 

 

144,274

 

 

 

84,850

 

Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash

 

 

4,187

 

 

 

(1,521

)

Change in cash, cash equivalents and restricted cash

 

 

(13,227

)

 

 

1,396

 

Beginning cash, cash equivalents and restricted cash

 

 

25,205

 

 

 

9,794

 

Ending cash, cash equivalents and restricted cash

 

$

11,978

 

 

$

11,190

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

Income taxes paid

 

$

 

 

$

 

Interest paid

 

$

11,435

 

 

$

5,068

 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

  Cash and cash equivalents

 

$

4,468

 

 

$

6,150

 

  Restricted cash

 

 

7,510

 

 

 

5,040

 

Total cash, cash equivalents and restricted cash

 

$

11,978

 

 

$

11,190

 

 

 

Categories

SEC Filings