Company Update (NASDAQ:STEM): StemCells Inc Reports 2Q:15 Financial Results, Business Update and Clinical Program Highlights


StemCells Inc (NASDAQ:STEM), a world leader in the research and development of cell-based therapeutics for the treatment of disorders of the central nervous system, today reported its financial results for the three months ended June 30, 2015. The Company also provided a business update and clinical program highlights for the quarter.

“Our clinical programs achieved several key milestones since our last earnings release,” reported StemCells CEO Martin McGlynn. “Based on the strength of the safety and preliminary efficacy data from our Phase I/II clinical studies, our Phase II proof-of-concept trials are now underway in two serious CNS disorders, each of which represents a large unmet medical need. Health Canada joined the FDA in authorizing our Phase II clinical trial in spinal cord injury and, having completed transplantation of the first cohort, we began enrolling the second cohort in this study. Enrollment in our Phase II clinical trial in geographic atrophy of age-related macular degeneration also commenced.”

Spinal Cord Injury Clinical Program: Highlights Q2 2015

With the commencement of our Phase II Pathway™ Study in cervical spinal cord injury (SCI), StemCells, Inc. has once again made medical history: We have safely transplanted more neural stem cells into the human spinal cord than has ever been done previously. In April 2015, we completed transplantation of the first cohort, which was designed to confirm the cell dose to be used in the blinded Cohort II testing. OnJune 4, we advanced to enrollment and transplantation of the second cohort — the main body of the trial. On June 18, Health Canada authorized StemCells, Inc. to expand the Pathway Study (already underway at eight sites in the United States) intoCanada, which should allow us to continue enrolling this study in a very efficient manner.

The Pathway Study will evaluate the safety and efficacy of transplanting the Company’s proprietary HuCNS-SC® human neural stem cells into patients with traumatic injury in the cervical region, which is where the majority of spinal cord injuries occur, resulting in loss of arm and leg function. Conducted as a randomized, controlled, single-blind study, the primary efficacy outcome will focus on change in motor function in the upper extremities.

May 2015 marked the one-year post-transplant anniversary for the twelve patients who participated in our Phase I/II clinical trial in thoracic SCI, two of whom progressed during the study from the most severe classification, AIS A, to the lesser degree of injury grade, AIS B. We presented top-line results at the 4th Joint International Spinal Cord Society (ISCoS) and American Spinal Injury Association (ASIA) meeting on May 14. In addition to the safety and tolerability reported for our HuCNS-SC cells and the transplantation procedure, analysis of the 12-month data showed sustained improvements involving multiple sensory pathways in seven patients, which persisted through the end of the study.

Age-related Macular Degeneration Clinical Program: Highlights Q2 2015

In June, we began enrolling patients for our Phase II Radiant™ Study in geographic atrophy of dry age-related macular degeneration (GA-AMD), and the first patient was transplanted in July. Approximately twenty U.S. sites are expected to participate in this randomized, controlled study, which will evaluate the safety and efficacy of our proprietary HuCNS-SC cells for the treatment of GA-AMD, the most advanced stage of dry AMD. Designed as a “fellow eye” controlled study, all patients must exhibit bi-lateral GA-AMD (geographic atrophy associated with age related macular degeneration in both eyes). Patients will receive sub-retinal transplantation of HuCNS-SC cells via a single injection into the eye with inferior best corrected visual acuity; the untreated eye will serve as a control. The objective of the trial is to demonstrate a reduction in the rate of disease progression in the treated eye versus the control eye.

A year has passed since we completed the first-ever transplants of neural stem cells into the human eye with the dosing of the fifteen patients who participated in our Phase I/II clinical trial in GA-AMD. On June 26, top-line outcomes of this study were reported at the 2015 Annual Meeting of the International Society for Stem Cell Research (ISSCR). The data overall showed a positive safety profile indicating tolerability of both the cells and the sub-retinal transplantation procedure, as well as favorable preliminary data related to visual acuity, contrast sensitivity and anatomic assessment of the retina.

Business Update

In April 2015, the Company strengthened its balance sheet by raising net proceeds of approximately $23.2 million through a public offering of 35,715,000 units. Each unit consisted of one share of our common stock and a warrant to purchase three-quarters of a share of our common stock. The warrants have an exercise price of$0.85 per share, are exercisable immediately, and will expire five years from the date of issuance. We also granted the underwriters a thirty-day option (the over-allotment option) to purchase up to an additional 5,357,250 shares of common stock and/or warrants to purchase up to an additional 4,017,938 shares of common stock to cover over-allotments, if any. The underwriters exercised the over-allotment option for the warrants and so, in April 2015, we issued warrants to purchase up to an additional 4,017,938 shares of common stock at $0.85 per share. In May 2015 the underwriters exercised, in part, the over-allotment option for additional shares and purchased 2,757,250 shares of our common stock at a price of $0.699 per share, before the underwriting discount. We received net proceeds of approximately $1.8 million from the exercise of the over-allotment option, increasing our aggregate net proceeds from the offering to approximately $25 million, after deducting offering expenses, underwriting discounts and commissions.

Financial Results for the Quarter Ended June 30, 2015

Cash and cash equivalents totaled approximately $29.9 million at June 30, 2015, compared to approximately $14.1 million at March 31, 2015. The increase was primarily due to our raising approximately $25 million of net proceeds from an equity financing, offset by cash used in our operations.

Total revenue from continuing operations during the second quarter of 2015 was$30,000, compared to $23,000 in the same period of 2014. Revenue from continuing operations is primarily from royalties received under various licensing agreements.

For the second quarter of 2015, cash used in operations totaled $7,577,000, compared to $7,770,000 in the second quarter of 2014.

Total operating expenses in the second quarter of 2015 were $9,303,000, compared to $7,983,000 in the second quarter of 2014. The increased operating expenses were primarily attributable to an increase in expenses to support our clinical activities.

Other income, net in the second quarter of 2015 was $811,000, compared to other expense, net of $4,011,000 in the second quarter of 2014. The change in the second quarter of 2015 when compared to the similar quarter in 2014 is primarily attributable to changes in the estimated fair value of our warrant liability.

For the second quarter of 2015, the Company reported a net loss of $8,462,000 or$(0.09) per share. In comparison, for the second quarter of 2014, the Company reported a net loss of $12,115,000 or $(0.22) per share.

Excluding certain non-cash charges associated with stock based compensation, depreciation and amortization and changes in the fair value of our warrant liability, for the second quarter of 2015, the Company reported a non-GAAP net loss of$7,823,000 or $(0.08) per share. In comparison, for the second quarter of 2014, the Company reported a non-GAAP net loss of $7,611,000 or $(0.14) per share. The approximately $200,000 increase is primarily associated with increased levels of clinical activity and process development. Management believes that these non-GAAP financial measures provide important insight into our operational results. (Original Source)

Following the quarterly update, shares of StemCells are trading at $0.39, 0$.032 or 7.69%. STEM has a 1-year high of $1.70 and a 1-year low of $0.39. The stock’s 50-day moving average is $0.53 and its 200-day moving average is $0.82.

On the ratings front, StemCells has been the subject of a number of recent research reports. In a report issued on July 20, Maxim Group analyst Jason Kolbert reiterated a Buy rating on STEM, with a price target of $5, which implies an upside of 1076.5% from current levels. Separately, on June 22, Cantor Fitzgerald’s Caroline Corner reiterated a Buy rating on the stock and has a price target of $2.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Jason Kolbert and Caroline Corner have a total average return of -7.0% and -15.8% respectively. Kolbert has a success rate of 33.7% and is ranked #3693 out of 3727 analysts, while Corner has a success rate of 42.9% and is ranked #3597.

StemCells Inc is engaged in the research, development, and commercialization of cell-based stem cell therapeutics and related enabling technologies.