Comment on Fluicell’s Q2-23 Report

On August 18th, Fluicell published the company’s quarterly report for Q2-23.

Development of Revenue during the Quarter

During Q2-23, the revenue amounted to SEK 1.1m, compared to SEK 0.5m in Q2-22, which corresponds to a YoY increase of 119%. Compared to the previous quarter of Q1-23 where the revenue amounted to SEK 1.8m, a decrease of 41% was observed. Total revenue amounted to SEK 1.4m (0.8), corresponding to a YoY increase of 70%. The top-line results were lower than our expectations, where we had estimated higher sales from research instruments. In the CEO letter, the explanation for the slowdown was attributed to decreasing activity levels within the research instrument market where sales and purchasing decisions are being postponed by many key players, which has affected the sales growth adversely. However, it was also mentioned that the lowered investment appetite in research instruments was observed as a broad trend that affects the entire sector and not only Fluicell. Based on information from the report, the following potential revenue generating events were observed: (1) Fluicell renewed a contract with Oregon Health and Science University regarding Biopixlar, (2) renewed a contract with Genentech regarding Dynaflow Resolve Silver, and (3) received an order from Washington University regarding Dynaflow components.

Operating results

The operating result during Q2-23 amounted to SEK -7.3m, compared to SEK -7.2m in Q2-22, corresponding to an increased loss of SEK 0.1m. As Fluicell continues with R&D in new areas to build assets and create growth for long-term deliverables, it will be necessary to keep investing in the current clinical programs to reach necessary milestones and in employees to retain talent. As a result, we expect that the cost base will increase going forward. Overall, we see that Fluicell is continuing to do well operationally while maintaining adequate financial discipline.

Income Opportunities in Tissue-Based Disease Models

In our previous comment, we mentioned that Fluicell extended the collaboration with Roche involving Biopixlar to create bioprinted cardiac models for use in safety pharmacological screening. This is an area where the state of the art is still cells grown on plastic in two dimensions and where Fluicell’s engineered tissues could make a tremendous impact, moving the entire field forward. The current research project was initiated in March this year and is expected to be finalized by the end of 2023 in December. The collaboration is proceeding according to plan, and Fluicell has so far successfully delivered on the first project milestone. A key part of the project is to enable integration of the company’s printed cardiac tissues within existing workflow, a critical aspect to facilitate actual implementation of the technology within pharmaceutical development. The fact that the project with Roche, a giant within pharma and diagnostics, is continued validates the great interest in Fluicell’s unique Biopixlar-technology. Analyst Group views this project as one of Fluicell’s 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.

Cash Position and Burn Rate

At the end of Q2-23, Fluicell’s cash balance amounted to SEK 14.4m, compared to SEK 15m at the end of Q1-23, corresponding to a net change in cash of SEK -0.6m. Fluicell burn rate during Q2-23 amounted to SEK -2m per month, compared to SEK -3.2m in the previous quarter where an unfavorable change in working capital contributed to a high burn rate. In June, it is worth noting that Fluicell also received SEK 3.5m net of fees in cash from the TO4 warrants. Given the current cash position of SEK 14.4m, 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 beginning of Q1-24, all else equal. The company is evaluating different financing options to enable a stronger development capacity and accelerate the clinical programs. Given that Fluicell increases sales, reduces costs, and/or secures additional funding, either from investors or through research grants, the company could strengthen its cash position and be financed longer than estimated.

In conclusion, we believe that Fluicell is going in the right direction despite an overall market slowdown which is not specifically attributed to the company itself. Given that that the company continued to increase sales and/or have access to capital, interesting times and triggers are ahead regarding Fluicell’s various research projects within tissue-based disease models and tissue therapeutics.

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