CollPlant(CLGN) - 2023 Q3 - Quarterly Report

Executive Summary & Q3 2023 Highlights CollPlant's Q3 2023 highlights include a major AbbVie milestone, regenerative breast implant progress, and a strong two-year cash runway Key Financial and Operational Highlights CollPlant's Q3 2023 results highlight a significant AbbVie milestone, regenerative breast implant progress, and a strong two-year cash runway - Received a $10 million milestone payment in the third quarter from partner, AbbVie Inc., for achieving a major milestone in the second quarter related to the clinical-phase dermal filler product candidate[1][4] - Company is preparing to launch a large-animal study with a commercial size breast implant by year-end[2][3] Key Financials (Nine Months Ended September 30, 2023) | Metric | Amount ($ million) | | :----------------- | :---------- | | Revenues | 10.7 | | Operating Loss | 2.4 | | Cash & Equivalents | 29.0 | - Cash and cash equivalents totaled $29 million as of September 30, 2023, representing an estimated cash runway of at least two years[2][28] Corporate and Program Updates CollPlant provided updates on its dermal filler, breast implants, gut-on-a-chip, bioink portfolio, and ESG initiatives Dermal and Soft Tissue Filler Program CollPlant achieved a significant milestone with AbbVie for its dermal filler, triggering a $10 million Q3 payment and potential future royalties - Achieved a milestone with respect to the dermal and soft tissue filler product candidate, in accordance with its collaboration agreement with AbbVie, triggering a $10 million payment received in Q3[1][4] - CollPlant has the potential to receive additional milestone payments as well as future royalties in accordance with its long-term collaboration with AbbVie[4] Photocurable Dermal Filler Patent CollPlant secured a U.S. patent for its photocurable dermal filler, providing IP protection until 2039 and strengthening its market position - U.S. Patent No. 11,801,329 was granted, covering CollPlant's photocurable dermal filler product candidate for the aesthetics market, providing intellectual property protection until 2039[5] - The patent is directed to a method of filling tissue space under the epidermis by introducing a polymerizable filler solution and applying external light to induce in-situ polymerization[5] Regenerative Breast Implants Program CollPlant is advancing its regenerative breast implants program, planning a large-animal study by year-end after positive tissue regeneration results - CollPlant is planning to initiate the next large-animal study to evaluate commercial size, 3D bioprinted, regenerative breast implants by year-end[2][6] - Positive results from the first large-animal study demonstrated progressive stages of tissue regeneration and neovascular networks within the implants, with no adverse events reported[6] - CollPlant's breast implants, comprised of proprietary plant-derived rhCollagen, are expected to regenerate breast tissue without eliciting immune response, offering a revolutionary alternative for aesthetic and reconstructive procedures[18] Gut-on-a-Chip Development CollPlant is independently developing a 3D bioprinted gut tissue model for personalized IBD treatment, successfully growing epithelial cells on scaffolds - CollPlant is developing a gut tissue model to enable predictive and personalized treatment for inflammatory bowel diseases (IBD) by mimicking gut structure using high-resolution 3D printing and rhCollagen-based bioink[19] - The CollPlant team successfully grew epithelial cells on 3D printed scaffolds that mimic the gut tissue geometry[19] - CollPlant elected to terminate its collaboration agreement with Tel Aviv University and Sheba Medical Center and continues to develop this program on its own[19] Commercial Bioink Solutions Portfolio CollPlant expanded its BioInks portfolio with a third formulation, enabling diverse 3D bioprinting applications and streamlining product development - CollPlant has released a third BioInk formulation to the market and continues to expand its BioInks portfolio, enabling a wide range of 3D bioprinting applications[8] - Applications include drug discovery, drug screening, tissue testing, and the development of transplantable tissues and organs[8] - CollPlant's bioink platform is intended to enable customers to streamline new product development, accelerate timelines, and reduce overall costs[21] Environmental, Social, and Governance (ESG) Initiatives CollPlant strengthens its ESG commitment by hiring a dedicated manager and joining the UN Global Compact, aligning with SEC standards - CollPlant recruited a dedicated manager to analyze, formulate, and execute upon the set of standards for its Environmental, Social and Governance (ESG) program[9] - This initiative is designed to help CollPlant meet SEC standards for publicly listed companies and align with sustainable values[9] - In September, CollPlant announced its participation in the United Nations Global Compact, the world's largest initiative for sustainable and responsible corporate governance[22] Financial Results for Q3 and Nine Months Ended September 30, 2023 CollPlant's Q3 and nine-month financial results show significant revenue growth, improved gross profit, and reduced net loss, driven by an AbbVie milestone Revenues CollPlant's GAAP revenues for the nine months ended September 30, 2023, significantly increased to $10.7 million, driven by the AbbVie milestone, despite a Q3 decrease GAAP Revenues Comparison | Period | 2023 ($ million) | 2022 ($ million) | Change ($ million) | Change (%) | | :---------------------- | :-------- | :-------- | :---------- | :--------- | | Nine Months Ended Sep 30 | 10.7 | 0.241 | +10.5 | +4357% | | Three Months Ended Sep 30 | 0.043 | 0.109 | -0.066 | -60.6% | - The increase in nine-month revenues is mainly related to the achievement of a milestone under the AbbVie Agreement and an increase in sales of rhCollagen products[10] Cost of Revenues GAAP cost of revenues increased for both nine-month and Q3 periods, driven by AbbVie milestone royalties, BioInk/rhCollagen sales, and inventory impairments GAAP Cost of Revenues Comparison | Period | 2023 ($ million) | 2022 ($ million) | Change ($ million) | Change (%) | | :---------------------- | :-------- | :-------- | :---------- | :--------- | | Nine Months Ended Sep 30 | 1.2 | 0.338 | +0.880 | +260.4% | | Three Months Ended Sep 30 | 0.278 | 0.264 | +0.014 | +5.3% | - The nine-month increase is mainly comprised of $312,000 in royalty expenses to the IIA related to the AbbVie milestone payment, and $430,000 relating to the sales of BioInk, VergenixFG, and rhCollagen[11] - The third-quarter increase in cost of revenues is mainly related to inventory impairments[49] Gross Profit (Loss) CollPlant reported a $9.4 million GAAP gross profit for the nine months ended September 30, 2023, a significant improvement from prior year's loss, despite a Q3 gross loss GAAP Gross Profit (Loss) Comparison | Period | 2023 ($ million) | 2022 ($ million) | | :---------------------- | :-------- | :-------- | | Nine Months Ended Sep 30 | 9.4 | (0.097) | | Three Months Ended Sep 30 | (0.235) | (0.155) | Operating Expenses GAAP operating expenses for the nine months ended September 30, 2023, decreased by $0.438 million, due to reduced R&D and G&A, while Q3 operating expenses slightly increased GAAP Operating Expenses Comparison | Period | 2023 ($ million) | 2022 ($ million) | Change ($ million) | Change (%) | | :---------------------- | :-------- | :-------- | :---------- | :--------- | | Nine Months Ended Sep 30 | 11.9 | 12.3 | -0.438 | -3.6% | | Three Months Ended Sep 30 | 4.4 | 4.3 | +0.1 | +2.3% | - The nine-month decrease is mainly attributed to $247,000 in research and product development activities and approximately $191,000 in general and administrative expenses, primarily due to a decrease in share-based compensation expenses[51] Financial Income (Expenses), Net CollPlant saw a positive shift in net financial income for both nine-month and Q3 periods, driven by higher interest rates and earnings from short-term cash deposits GAAP Financial Income (Expenses), Net Comparison | Period | 2023 ($ million) | 2022 ($ million) | | :---------------------- | :-------- | :-------- | | Nine Months Ended Sep 30 | 0.114 | (0.103) | | Three Months Ended Sep 30 | 0.225 | 0.089 | - The increase in financial income, net, is due to the increase in interest rates and interest received from the Company's short-term cash deposits[13][26] Net Loss and Basic Loss Per Share CollPlant significantly reduced its GAAP net loss for the nine months ended September 30, 2023, to $2.3 million, a substantial improvement from prior year, while Q3 net loss remained stable GAAP Net Loss and Basic Loss Per Share Comparison | Period | 2023 Net Loss ($ million) | 2022 Net Loss ($ million) | 2023 Basic EPS ($) | 2022 Basic EPS ($) | | :---------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Nine Months Ended Sep 30 | (2.3) | (12.5) | (0.20) | (1.14) | | Three Months Ended Sep 30 | (4.4) | (4.4) | (0.38) | (0.40) | Non-GAAP Net Loss and Basic Loss Per Share Comparison | Period | 2023 Non-GAAP Net Loss ($ million) | 2022 Non-GAAP Net Loss ($ million) | 2023 Non-GAAP Basic EPS ($) | 2022 Non-GAAP Basic EPS ($) | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Nine Months Ended Sep 30 | (1.2) | (11.2) | (0.11) | (1.02) | | Three Months Ended Sep 30 | (4.0) | (3.7) | (0.35) | (0.34) | Condensed Consolidated Financial Statements CollPlant's condensed consolidated financial statements provide a detailed overview of its balance sheets, statements of operations, and cash flows for the reported periods Condensed Consolidated Balance Sheets As of September 30, 2023, CollPlant's balance sheet shows slight decreases in total assets and liabilities, with cash and cash equivalents remaining a significant current asset Condensed Consolidated Balance Sheets (U.S. dollars in thousands) | Metric | Sep 30, 2023 (Unaudited) ($ thousand) | Dec 31, 2022 (Audited) ($ thousand) | | :--------------------------- | :------------------------------------ | :---------------------------------- | | Cash and cash equivalents | 28,981 | 29,653 | | Total current assets | 31,207 | 31,658 | | Total non-current assets | 6,351 | 6,110 | | Total assets | 37,558 | 37,768 | | Total current liabilities | 2,634 | 3,105 | | Total non-current liabilities | 2,526 | 2,382 | | Total liabilities | 5,160 | 5,487 | | Total shareholders' equity | 32,398 | 32,281 | Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations reflect significant improvement in nine-month net loss, driven by increased revenues and gross profit, despite an operating loss Condensed Consolidated Statements of Operations (U.S. dollars in thousands) | Metric | Nine Months Ended Sep 30, 2023 ($ thousand) | Nine Months Ended Sep 30, 2022 ($ thousand) | Three Months Ended Sep 30, 2023 ($ thousand) | Three Months Ended Sep 30, 2022 ($ thousand) | | :------------------------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Revenues | 10,660 | 241 | 43 | 109 | | Cost of Revenue | 1,218 | 338 | 278 | 264 | | Gross Profit (loss) | 9,442 | (97) | (235) | (155) | | Operating expenses: | | | | | | Research and development | 7,371 | 7,618 | 2,695 | 2,777 | | General, administrative and marketing | 4,515 | 4,706 | 1,672 | 1,536 | | Total Operating loss | (2,444) | (12,421) | (4,602) | (4,468) | | Financial income (expenses), net | 114 | (103) | 225 | 89 | | Net loss for the period | (2,330) | (12,524) | (4,377) | (4,379) | | Basic and diluted loss per ordinary share | (0.20) | (1.14) | (0.38) | (0.40) | | Weighted average ordinary shares outstanding used in computation of basic and diluted loss per share | 11,367,767 | 10,986,454 | 11,443,023 | 11,086,481 | Condensed Consolidated Statements of Cash Flows CollPlant's operating cash flow significantly improved, shifting from substantial use to minor use, driven by the AbbVie milestone, while investing activities shifted to cash usage Net Cash Flows (U.S. dollars in thousands) | Activity | Nine Months Ended Sep 30, 2023 ($ thousand) | Nine Months Ended Sep 30, 2022 ($ thousand) | | :------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash used in operating activities | (418) | (10,352) | | Net cash provided by (used in) investing activities | (784) | 29,226 | | Net cash provided by financing activities | 1,108 | 1,474 | | Net increase (decrease) in cash and cash equivalents and restricted deposits | (94) | 20,348 | Cash Flows from Operating Activities Q3 2023 operating cash flow was $6.8 million provided, a significant improvement, and nine-month cash used decreased, both benefiting from the $10 million AbbVie milestone Cash Flows from Operating Activities Comparison | Period | 2023 ($ million) | 2022 ($ million) | | :---------------------- | :------------- | :------------- | | Three Months Ended Sep 30 | 6.8 (provided) | 3.2 (used) | | Nine Months Ended Sep 30 | 0.418 (used) | 10.4 (used) | - Cash provided in the three and nine-month periods ended September 30, 2023, includes the $10 million milestone payment from AbbVie[15] Cash Flows from Investing Activities Q3 2023 cash used in investing activities decreased, and nine-month investing shifted from cash provision to usage, primarily due to changes in short-term cash deposits Cash Flows from Investing Activities Comparison | Period | 2023 ($ million) | 2022 ($ million) | | :---------------------- | :------------- | :------------- | | Three Months Ended Sep 30 | 0.243 (used) | 0.322 (used) | | Nine Months Ended Sep 30 | 0.784 (used) | 29.2 (provided)| - The decrease in cash provided by investing activities for the nine months is mainly attributed to repayment and investment in short-term cash deposits during the nine months ended September 30, 2022[54] Cash Flows from Financing Activities Q3 2023 financing cash provided was $0.216 million, an increase from prior year, and nine-month cash was $1.1 million, mainly from option and warrant exercises Cash Flows from Financing Activities Comparison | Period | 2023 ($ million) | 2022 ($ million) | | :---------------------- | :------------- | :------------- | | Three Months Ended Sep 30 | 0.216 (provided) | 0 (provided) | | Nine Months Ended Sep 30 | 1.1 (provided) | 1.5 (provided) | - Cash provided by financing activities is mainly attributed to proceeds from the exercise of options and warrants into shares[29] Cash and Cash Equivalents CollPlant maintained a strong cash position with $29 million in cash and cash equivalents as of September 30, 2023, providing an estimated cash runway of at least two years - Cash and cash equivalents as of September 30, 2023, were $29 million[2][28] - Based on current estimates, the cash balance represents a company cash runway of at least two years of operation as of November 2023[2][28] Reconciliation of GAAP to Non-GAAP Financial Measures This section reconciles GAAP to non-GAAP financial measures, providing adjusted operating expenses, loss, net loss, and EPS by excluding non-cash items Non-GAAP Operating Expenses and Loss CollPlant's non-GAAP operating expenses and loss for both Q3 and nine-month periods showed improvements or slight increases, reflecting adjustments for non-cash expenses Non-GAAP Operating Expenses Comparison (U.S. dollars in thousands) | Period | 2023 Non-GAAP Operating Expenses ($ thousand) | 2022 Non-GAAP Operating Expenses ($ thousand) | | :---------------------- | :------------------------------------------ | :------------------------------------------ | | Nine Months Ended Sep 30 | 10,560 | 11,047 | | Three Months Ended Sep 30 | 3,860 | 3,668 | Non-GAAP Operating Loss Comparison (U.S. dollars in thousands) | Period | 2023 Non-GAAP Operating Loss ($ thousand) | 2022 Non-GAAP Operating Loss ($ thousand) | | :---------------------- | :---------------------------------------- | :---------------------------------------- | | Nine Months Ended Sep 30 | (1,118) | (11,144) | | Three Months Ended Sep 30 | (4,095) | (3,823) | Non-GAAP Net Loss and EPS Non-GAAP net loss for the nine months ended September 30, 2023, significantly decreased to $1.2 million, reflecting a substantial improvement, while the Q3 non-GAAP net loss slightly increased Non-GAAP Net Loss and Basic Loss Per Share Comparison (U.S. dollars in thousands) | Period | 2023 Non-GAAP Net Loss ($ thousand) | 2022 Non-GAAP Net Loss ($ thousand) | 2023 Non-GAAP Basic EPS ($) | 2022 Non-GAAP Basic EPS ($) | | :---------------------- | :---------------------------------- | :---------------------------------- | :-------------------------- | :-------------------------- | | Nine Months Ended Sep 30 | (1,239) | (11,247) | (0.11) | (1.02) | | Three Months Ended Sep 30 | (3,957) | (3,734) | (0.35) | (0.34) | Explanation of Non-GAAP Measures CollPlant uses non-GAAP measures, excluding non-cash expenses like share-based compensation, to provide supplemental performance information and compare historical results - Non-GAAP financial measures exclude the effects of non-cash expense for share-based compensation to employees, directors and consultants, and change in operating lease accounts[44] - Management believes these non-GAAP measures provide meaningful supplemental information regarding the Company's performance, enhancing the ability to evaluate operating costs, net income (loss), and EPS, and to compare them to historical results[44] - The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with GAAP[66] Additional Information This section provides background on CollPlant, webcast details, forward-looking statement disclaimers, and contact information About CollPlant CollPlant Biotechnologies is a regenerative and aesthetic medicine company specializing in 3D bioprinting and medical aesthetics, using proprietary rhCollagen technology - CollPlant is a regenerative and aesthetic medicine company focused on 3D bioprinting of tissues and organs, and medical aesthetics[42] - The Company's products are based on its rhCollagen (recombinant human collagen) produced with CollPlant's proprietary plant-based genetic engineering technology[42] - In 2021, CollPlant entered into a development and global commercialization agreement for dermal and soft tissue fillers with Allergan, an AbbVie company[64] Webcast and Conference Call Information CollPlant provided details for its Q3 2023 earnings conference call and webcast, including dial-in numbers and a link for live and replay access - A conference call was scheduled for November 29, 2023, at 10:00 am U.S. ET to discuss the financial results[2] - Dial-in information for U.S., international, and Israel investors, along with a live webcast link and replay availability, were provided[30][55] Forward-Looking Statements This section contains forward-looking statements regarding CollPlant's future performance and plans, subject to risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied[48][69] - Many factors could cause actual results to differ, including significant losses, need for additional capital, timing and cost of clinical trials, regulatory actions, commercial success, strategic partnerships, manufacturing reliance, intellectual property, economic conditions, and geopolitical events like the Israel-Hamas war[48] - CollPlant does not undertake and specifically disclaims any obligation to update or revise any forward-looking statements[48] Contacts Contact information for CollPlant's Deputy CEO & CFO, Eran Rotem, and investor relations through LifeSci Advisors - Eran Rotem, Deputy CEO & CFO, can be contacted at +972-73-2325600 or Eran@collplant.com[70] - For investor inquiries, John Mullaly of LifeSci Advisors can be reached at jmullaly@lifesciadvisors.com[70]