Comment on Fluicell’s Q1-23 Report

On May 12th, Fluicell published the company’s quarterly report for Q1-23.

The Highest Revenue to Date on a Quarterly Basis

During Q1-23, the revenue amounted to SEK 1.8m, compared to SEK 0.8m in Q1-22, which corresponds to a YoY increase of 113%. Compared to the previous quarter of Q4-22 where the revenue amounted to SEK 1.3m, the increase corresponded to 36%. The top-line results were relatively in line with our expectations, and it is assuring to see that Fluicell is keeping up the momentum in sales. According to CEO Victoire Viannay, the revenue has not reached the company’s internal goals quite yet, but with further efforts, there is potential to reach higher levels. For example, in March, Fluicell launched the upgraded version of their ion channel screening platform Dynaflow Resolve, and additionally, Fluicell released Dynascout, a lighter version of the platform. Focusing on development of new products and services is of paramount importance since it will assist the company to attract new customers and drive the revenue further.

Operating Results

The operating result during Q1-23 amounted to SEK -5.4m, compared to SEK -4.9m in Q1-22, corresponding to an increased loss of SEK 0.5m, QoQ, the operating result improved with SEK 1.3m compared to Q4-22. We have previously mentioned that the cost base is higher than what we would like to see in relation to the revenue, as Fluicell continues with R&D in new areas to build assets and create growth for long-term deliverables. However, it a positive sign that Fluicell has managed to slim down the cost base while increasing the revenue during this quarter. The company mentioned in the report that the EBITDA was SEK 0.9m better than estimated, and that the development is successfully continuing with more controlled cost levels. Overall, we see that Fluicell are continuing to do well operationally while maintaining a greater financial discipline.

Extended Collaboration with Roche regarding Heart Tissue Models for Drug Safety

In February 2023, Fluicell announced that the company has extended the collaboration with Roche involving Biopixlar. The project spans over ten months where the aim is to investigate optimization of bioprinted heart tissues for drug safety. The project is a continuation of the pilot project that was completed at the end of year 2022, where an important part of the continued project is to integrate the bioprinted tissues directly into already establish laboratory workflows. The project will be divided into several milestones where the estimated completion date is December 2023. The material expenses during the project are going to be financed by Roche (approximately SEK 0.5m) while Fluicell will perform testing and studies, which means that the project is of low economic risk for Fluicell, but the potential reward is high if the company can demonstrate clinically significant results. The fact that the project, with the leading pharmaceutical company Roche, is continued validates the great interest in Fluicells unique Biopixlar-technology. Analyst Group views this project as one of Fluicells main value driving activities, where in a successful scenario, the company will be able to out-license the IP portfolio which has potential to create substantial revenue streams.

Important Milestones Reached in the In-Vitro Development Program for Type I-Diabetes

In March, Fluicell announced that the company reached important milestones regarding the in-vitro development of tissue therapeutics against type I-diabetes. Fluicell are now able to print up to 200 insulin producing islet tissues in the same trial, this corresponds to the number of transplanted islets of Langerhans that has been shown to have a beneficial effect in mice based on scientific literature. The milestones are a step towards generating candidates for in-vivo testing which is estimated to be initiated in 2024. Tissue therapeutics is one of Fluicell’s highest potential areas and something that should be observed closely by investors. For example, Aspect Biosystems, a Canadian bioprinting and tissue therapeutic company, recently entered a partnership with Novo Nordisk where the total deal value is worth up to USD 650m, additionally, Aspect Biosystems received USD 75m upon signing. This is one of the largest deals of the year and illustrates what Fluicell could achieve in a successful scenario.

Cash Position and Burn Rate

At the end of Q1-23, Fluicell’s cash balance amounted to SEK 15m, compared to SEK 24.5m at the end of Q4-22, corresponding to a net change in cash of SEK -9.5m. Fluicell burn rate during Q1-23 amounted to SEK -3.2m per month. The burn rate was exceptionally high due to a one-time expense related to deferred tax, which affected the change in working capital with SEK -3m. Adjusted for the one-time item, the burn rate would amount to SEK -2.1m and SEK -1.9m on an LTM basis. Moreover, Fluicell has warrants outstanding of series TO 4 that are due to strike in June 2023 and have the potential to extend the cash runaway. The outstanding warrants are estimated to generate up to SEK 16.4m before expenses, which is estimated to 10%, given full subscription, which equals approximately SEK 14.8 in net proceeds. Given the current cash position of SEK 15m, assumed net proceeds of SEK 14.8 from TO4 warrants in June 2023, and an assumed burn rate of SEK -2.0m per month which Analyst Group believe is fair to assume going forward, Fluicell is estimated to be financed until the end of H1-24, all else equal.

In conclusion, we believe that Fluicell delivers a strong quarter operationally as well as financially. Given that that the company continued to increase sales and/or have access to capital, interesting times and triggers are ahead regarding Fluicells various research projects within tissue-based disease models and tissue therapeutics.

Analyst Group will publish an updated analysis in conjunction to the report.