10-Q: Telesis Bio Inc. Reports Third Quarter 2024 Results Amidst Strategic Shift

Telesis Bio Inc. reports a net loss of $6.6 million for the third quarter of 2024, alongside the sale of its Eton subsidiary and a shift to the OTC Pink market.

Summary

• Telesis Bio Inc. reported a net loss of $6.6 million for the third quarter of 2024, compared to a net loss of $10.6 million for the same period in 2023.
• The company's total revenue decreased to $1.6 million in Q3 2024 from $4.1 million in Q3 2023, primarily due to a decline in product and collaboration revenue.
• Operating expenses decreased to $6.5 million in Q3 2024 from $11.9 million in Q3 2023, driven by reductions in research and development, sales and marketing, and general and administrative costs.
• The company completed the sale of its Eton subsidiary on August 26, 2024, and the Eton business is now reflected as a discontinued operation.
• Telesis Bio's common stock was suspended from trading on Nasdaq on September 30, 2024, and began trading on the OTC Pink market.
• As of September 30, 2024, the company had cash, cash equivalents, restricted cash, and short-term investments of $4.6 million.
• The company has incurred cumulative operating losses and negative cash flows from operations since its inception.
• The company has raised capital through equity offerings, collaborations, strategic alliances, licensing arrangements and other sources of funding.
• The company intends to seek additional financing, however, the company may not be able to raise cash on terms acceptable to the company or at all.
• The company has a going concern warning due to insufficient financial resources to fund operations for at least twelve months from the filing date of this report.

Sentiment

Score: 3

Explanation: The document indicates significant financial challenges, including a net loss, revenue decline, and a going concern warning. While cost-cutting measures are evident, the overall outlook is negative due to the company's delisting from Nasdaq and reliance on additional financing.

Positives

• Operating expenses decreased significantly in Q3 2024 compared to Q3 2023, indicating cost-cutting measures.
• The company repaid all outstanding indebtedness and terminated all commitments and obligations under the 2022 Term Loan and the 2022 Revolving Loan with MidCap Financial Trust.
• The company secured approximately $5.9 million in financing through the July 2024 Shareholder Notes.
• The company has a new Chief Financial Officer and a Corporate Controller to oversee its controls environment.

Negatives

• The company reported a net loss of $6.6 million for the third quarter of 2024.
• Total revenue decreased significantly in Q3 2024 compared to Q3 2023.
• The company's common stock was suspended from trading on Nasdaq and began trading on the OTC Pink market.
• The company has a going concern warning due to insufficient financial resources to fund operations for at least twelve months from the filing date of this report.
• The company recorded a $0.5 million loss on debt extinguishment in connection with the termination of the 2022 Term Loan Agreement in July 2024.
• The company recorded an impairment charge of $0.3 million to write down to fair value certain property and equipment used in its corporate headquarters.

Risks

• The company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of products.
• The company's success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, commercialize its products, generate revenue, meet its obligations, and, ultimately, become profitable.
• The delisting of the company's shares from Nasdaq makes shares of the company's common stock less liquid and makes it more difficult for the company to raise funds when and as needed to fund its operations.
• The company may not be able to raise cash on terms acceptable to the company or at all.
• The company could be forced to delay, limit, reduce or terminate product development or future commercialization efforts or grant rights to develop and market products that the company would otherwise prefer to develop and market itself.
• The company has identified a material weakness in its internal controls.

Future Outlook

The company expects to continue to incur operating losses for the foreseeable future and will need to raise additional capital to fund its operations. The company's ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of its products.

Management Comments

• Management believes there currently are insufficient financial resources to fund the company's operations for at least twelve months from the filing date of this Quarterly Report.
• Management intends to seek additional financing, however, the company may not be able to raise cash on terms acceptable to the company or at all.

Industry Context

The company operates in the rapidly evolving synthetic biology market, which is characterized by intense competition and rapid technological advancements. The company's performance is influenced by the research and development budgets of pharmaceutical, biotechnology, and academic institutions.

Comparison to Industry Standards

• The company's revenue decline and net losses are concerning when compared to industry leaders in the synthetic biology space, such as Thermo Fisher Scientific and Danaher Corporation, which have demonstrated consistent revenue growth and profitability.
• The company's shift to the OTC Pink market is a significant deviation from industry norms for publicly traded biotech companies, which typically seek to maintain a listing on major exchanges like Nasdaq or NYSE.
• The company's reliance on a limited number of customers for a significant portion of its revenue is a risk factor that is not uncommon in the biotech industry, but the concentration of revenue with a single customer like Pfizer is a concern.
• The company's going concern warning is a significant deviation from industry standards for publicly traded companies, which typically have sufficient financial resources to fund operations for at least twelve months.

Management Changes

Corporate Governance

Related Party Transactions

• The company issued promissory notes (the July 2024 Shareholder Notes) to and borrowed an aggregate principal amount of approximately $5.9 million from two shareholders, Novalis Lifesciences II, LP and Northpond Ventures III, LP.
• The principal amount borrowed under the July 2024 Shareholder Notes bears interest at the rate of 12.00% per annum, with all principal and interest due on January 15, 2026.
• Each of the Lenders, along with their affiliates, are beneficial owners of more than 10% of the company's common stock.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial challenges and delisting from Nasdaq.
• Employees may be affected by potential cost-cutting measures and organizational changes.
• Customers may experience disruptions in service or product availability due to the company's financial instability.
• Suppliers and creditors may face increased risk of non-payment due to the company's financial difficulties.

Next Steps

• The company intends to seek additional financing.
• The company will continue to implement its remediation plan to address the material weakness in internal control over financial reporting.
• The company will continue to focus on the sales and marketing of its developed products.

Key Dates

Keywords

synthetic biology, multi-omic, BioXp systems, DNA synthesis, mRNA, OTC Pink market, financial results, revenue, operating expenses, net loss, going concern, capital raise, EtonBio, shareholder notes