Perspective Therapeutics(CATX) - 2023 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements Isoray reported a net loss of $4.07 million for Q1 FY2023, a significant increase from $2.24 million in Q1 FY2022, driven by a 33% decline in net sales to $1.72 million due to supply disruptions Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2022 (in thousands) | Jun 30, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $18,989 | $55,890 | | Short-term investments | $35,123 | $0 | | Total current assets | $57,540 | $59,329 | | Total assets | $62,538 | $64,439 | | Total current liabilities | $4,001 | $2,266 | | Total liabilities | $4,836 | $3,162 | | Total stockholders' equity | $57,702 | $61,277 | Consolidated Statements of Operations Highlights (Unaudited) | Account | Three months ended Sep 30, 2022 (in thousands) | Three months ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | | Sales, net | $1,717 | $2,564 | | Gross profit | $414 | $1,029 | | Total operating expenses | $4,622 | $3,303 | | Operating loss | $(4,208) | $(2,274) | | Net loss | $(4,068) | $(2,243) | | Basic and diluted loss per share | $(0.03) | $(0.02) | Consolidated Statements of Cash Flows Highlights (Unaudited) | Activity | Three months ended Sep 30, 2022 (in thousands) | Three months ended Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | | Net cash used by operating activities | $(1,763) | $(2,084) | | Net cash used by investing activities | $(35,166) | $(54) | | Net cash provided by financing activities | $28 | $0 | | Net (decrease) in cash | $(36,901) | $(2,138) | Notes to the Consolidated Financial Statements (Unaudited) Key notes detail the pending merger with Viewpoint Molecular Targeting, significant non-current inventory of enriched barium, and high customer concentration with 68% of revenue from prostate brachytherapy - On September 27, 2022, Isoray entered into a merger agreement with Viewpoint Molecular Targeting, Inc. Post-merger, Viewpoint will become a wholly-owned subsidiary, and its former stockholders will own approximately 49% of the combined company's fully-diluted capital stock. The transaction involves an all-stock consideration with an exchange ratio of 3.3212 Isoray shares per Viewpoint share[20] - The company has multiple consignment and service agreements with MedikorPharma-Ural LLC to process its enriched barium carbonate inventory, which is essential for the manufacture of Cesium-131. A significant portion of this inventory is classified as non-current as it will be consumed over more than one operating cycle[29][30][31] - For the three months ended September 30, 2022, prostate brachytherapy comprised 68% of revenue, down from 77% in the prior-year period. Other applications, including brain, lung, and GYN treatments, made up the remaining 32%. All revenue during this period was domestic[47] Top Customer Revenue Concentration | Customer/Facility | Q1 FY2023 (% of total revenue) | Q1 FY2022 (% of total revenue) | | :--- | :--- | :--- | | GT Medical Technologies | 22.6% | 15.0% | | El Camino, Los Gatos, & other facilities (former medical director) | 16.3% | 28.5% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 33% revenue decline to isotope supply disruptions and a major customer's halt in orders, with operating expenses rising 40% due to merger-related costs, likely necessitating future capital raises - A key Russian reactor had an unplanned service disruption at the end of July 2022, and a second reactor was down for planned maintenance. This left the company unable to supply customers from mid-August to early September 2022, causing a significant drop in sales[60][73] - The company entered into a merger agreement with Viewpoint Molecular Targeting, an alpha-particle radiopharmaceutical company. Post-merger, Isoray's current CEO, Lori Woods, will become chairperson, and Viewpoint's CEO, Thijs Spoor, will be appointed CEO of the combined company[66][67] - General and administrative expenses increased by 69% YoY, primarily due to legal, due diligence consulting, and investment banking expenses related to the pending merger with Viewpoint[71][91] - The company plans to loan Viewpoint $6 million in the second quarter of fiscal 2023. Post-merger, Isoray's cash reserves will need to fund both its own operations and Viewpoint's R&D and clinical trials, making future capital raises likely[109][110] Results of Operations Net sales fell 33% to $1.72 million due to supply disruptions and customer order halts, leading to a 60% gross profit decline and an 85% wider operating loss of $4.21 million due to increased merger-related expenses Sales Breakdown (in thousands) | Sales Category | Q1 FY2023 Amount | Q1 FY2022 Amount | % Change | | :--- | :--- | :--- | :--- | | Prostate brachytherapy | $1,167 | $1,973 | (41)% | | Other sales | $550 | $591 | (7)% | | Total Sales, net | $1,717 | $2,564 | (33)% | - The primary reason for the 41% decrease in prostate sales was the unplanned reactor service disruption. Additionally, the company's former medical director and historically largest customer has not placed any orders since the isotope supply resumed in September[77] - Gross profit declined 60% due to lower sales volume against fixed overhead costs, exacerbated by the unplanned service disruption[85] - Sales to GT Med Tech for its GammaTile™ product constituted approximately 23% of total sales for the quarter, a significant increase in percentage terms due to the overall decrease in prostate sales and a contractual supply obligation[82] Liquidity and Capital Resources Working capital decreased to $53.5 million as cash and equivalents fell to $19.0 million due to short-term investments, with future capital raises likely needed post-merger with Viewpoint Key Liquidity Metrics (in thousands) | Metric | Sep 30, 2022 | Jun 30, 2022 | | :--- | :--- | :--- | | Working capital | $53,539 | $57,063 | | Current ratio | 14.38 | 26.18 | - The armed conflict in Ukraine has required adjustments to the transportation of medical isotopes from Russia, but to date, the company has not experienced any missed shipments due to the conflict. Banking relationships were adjusted to ensure wire transfers to Russian suppliers could continue[95] - Management projects that if the merger with Viewpoint closes, Isoray's cash reserves of approximately $50 million will need to fund both entities' operations and R&D, making it likely that additional capital will need to be raised in the near future[110] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable for the reporting period - Not Applicable[116] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting - Management, including the CEO and co-CFOs, evaluated disclosure controls and procedures as of September 30, 2022, and concluded they were effective[117] - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[118] PART II OTHER INFORMATION Legal Proceedings No legal proceedings were reported for the period - Nothing to disclose[120] Risk Factors The company faces significant customer concentration risk, with 48% of revenue from three customers, and its historically largest customer has ceased placing orders - The company has a heavy reliance on a few customers, with three customers accounting for approximately 48% of revenues in the quarter ended September 30, 2022[121] - A key risk has materialized: the company's former medical director and historically largest customer has not placed any orders since the isotope supply resumed and had not placed any orders in October or November, which is continuing to impact sales[121] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None[123] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, the Viewpoint Merger Agreement, and officer certifications