Quotient Limited
Feb 6, 2017

Quotient Limited Reports Continued Progress on the Commercial Scale-up of MosaiQ™ and Third Quarter Fiscal 2017 Financial Results

JERSEY, Channel Islands, Feb. 06, 2017 (GLOBE NEWSWIRE) -- Quotient Limited (NASDAQ:QTNT), a commercial-stage diagnostics company, today reported further positive progress on the commercial scale-up of MosaiQ™ and its financial results for its fiscal third quarter and nine months ended December 31, 2016.

"Our team continues to work diligently to advance MosaiQ™ through to the final internal validation process prior to commencing European field trials," said Paul Cowan, Chairman and Chief Executive Officer of Quotient. "Final internal performance evaluation studies for the initial disease screening panel have now been completed successfully.  We remain on schedule to complete European field trials for MosaiQ™ for blood grouping and the initial disease screening panel in the first half of calendar 2017."

MosaiQ™, Quotient's next-generation automation platform for blood grouping and disease screening, represents a transformative and highly disruptive testing platform for transfusion diagnostics, with an established capability to detect antibodies, antigens and nucleic acids (DNA or RNA). Through MosaiQ™, Quotient aims to deliver substantial value to donor testing laboratories worldwide with a unified instrument platform to be utilized for blood grouping and both serological and molecular disease screening of donated red blood cells and plasma.

Results of Performance Evaluation Study - Initial Disease Screening Panel

In January 2017 Quotient successfully completed its initial internal performance evaluation study for antigen typing. This has now been followed up with the successful completion of the final internal performance evaluation studies for the intial disease screening panel for CMV and syphilis, the results of which are summarized below:

Target Total
Samples
 True
Positive
 False
Positive
 True
Negative
 False
Negative
SensitivitySpecificity
Syphilis 240 39 0 201 0 100.0% 100.0%
CMV 183 87 0 93 3 96.7% 100.0%

Internal performance evaluation studies for antibody detection are underway. Following completion of this, and systems qualification for the MosaiQ™ manufacturing process and instrument, Quotient will undertake the final internal validation studies (designed to mimic the subsequent field trials) for the MosaiQ IH Microarray and initial MosaiQ SDS Microarray (serological disease screen to detect CMV and syphilis) prior to commencing European field trials.

Completion of European field trials and the commercial launch of MosaiQ™ in Europe are currently planned for the first half of calendar 2017. Field trials in the United States will commence thereafter.

Once licensed for sale, MosaiQ™ will be the first fully-automated solution for blood grouping, providing for the comprehensive characterization of both donor and patient blood. Quotient intends to simultaneously launch its MosaiQ™ IH Microarray into the donor and patient testing markets with its commercial partner, Ortho-Clinical Diagnostics. Launch of the initial MosaiQ™ SDS Microarray into the donor testing market will coincide with the launch of the MosaiQ™ IH Microarray. Launch of the full MosaiQ™ serological disease screening panel is currently scheduled to commence three to six months after the initial MosaiQ™ launch.

Fiscal Third Quarter 2017 Financial Results

"During the third quarter, strong revenue growth was generated by all key categories of our conventional reagent business. Both our OEM and U.S. direct businesses had another exceptional quarter, with product sales growing 22% and 21%, respectively, year-over-year," said Paul Cowan.

Key revenue and profit results are summarized below (expressed in thousands):

 
  Quarter Ended  Nine Months Ended 
  December 31,  December 31, 
  2016  2015  2016  2015 
Revenue:                
Product sales —OEM Customers $3,502  $2,879  $10,860  $9,093 
Product sales — direct customers and distributors  1,339   1,475   4,541   4,384 
Other revenues        1,300    
Total revenue $4,841  $4,354  $16,701  $13,477 
                 
Product sales from standing orders (%)  75%  71%  75%  72%
                 
Gross profit $2,239  $2,129  $8,247  $6,377 
Gross profit as a % of total revenue  46.3%  48.9%  49.4%  47.3%
Gross margin on product sales (%)  46.3%  48.9%  45.1%  47.3%
Operating (loss) $(22,430) $(12,779) $(56,321) $(36,243)
 

Net cash used in operating activities totaled $13.8 million in the third quarter of fiscal 2017 ("3QFY17"), compared with $16.2 million in the third quarter of fiscal 2016 ("3QFY16"). Capital expenditures totaled $5.8 million in 3QFY17, compared with $5.8 million in 3QFY16, largely reflecting expenditures in connection with the construction of the Company's new conventional reagent manufacturing facility near Edinburgh, Scotland.

Quotient ended 3QFY17 with $44.3 million in cash and cash equivalents and short-term investments.

Outlook for the Fiscal Year Ending March 31, 2017

Product sales in the fourth quarter of fiscal 2017 are expected to be within the range of $4.3 to $4.6 million, compared with $4.5 million for the fourth quarter of fiscal 2016.

Quarterly product sales can fluctuate depending upon the shipment cycles for red blood cell based products, which account for approximately two-thirds of our current product sales. These products typically experience 13 shipment cycles per year, equating to three shipments of each product per quarter, except for one quarter per year when four shipments occur. The timing of shipment of bulk antisera products to OEM customers may also move revenues from quarter to quarter. Some seasonality in demand is also experienced around holiday periods in both Europe and the United States. As a result of these factors, Quotient expects to continue to see seasonality and quarter-to-quarter variations in product sales. The timing of product development fees included in other revenues is mostly dependent upon the achievement of pre-negotiated project milestones.

Conference Call

Quotient will host a conference call on Tuesday, February 7 th at 8:30 a.m. Eastern Time to discuss its third quarter fiscal 2017 financial results. Participants may access the call by dialing 1-877-407-0784 in the U.S. or 1-201-689-8560 outside the U.S. The conference call will also be webcast live on the Company's website at www.quotientbd.com.

A replay of this conference call will be available through February 14 th by dialing 1-844-512-2921 in the U.S. or 1-412-317-6671 outside the U.S. The replay access code is 13653585.

About MosaiQ™

MosaiQ™ has been designed to offer a breadth of diagnostic tests unmatched by existing commercially available transfusion diagnostic instrument platforms, spanning blood grouping, serological disease screening for donor testing and nucleic acid testing (or molecular disease screening) for donor testing.

Once approved, MosaiQ™ will be the first fully automated solution for blood grouping, providing for the comprehensive characterization of donor and patient blood, with turnaround times significantly quicker than existing methods. Widespread adoption of MosaiQ™ is expected to improve patient outcomes through better and easier matching of donor and patient blood, given cost-effective extended antigen typing offered by MosaiQ™. Improved patient outcomes from the use of MosaiQ™ include the potential for reduced incidence of adverse events associated with transfusion, including alloimmunization, where patients develop antibodies to foreign antigens introduced through transfused blood.

MosaiQ™ will also offer the opportunity for substantial cost savings and a range of operational efficiencies for donor and patient testing laboratories, including:

Quotient expects to develop additional applications for MosaiQ™, starting with nucleic acid testing for donor molecular disease screening, upon completion of assay development for the blood grouping and serological disease screening applications.

About Quotient Limited

Quotient is a commercial-stage diagnostics company committed to reducing healthcare costs and improving patient care through the provision of innovative tests within established markets. With an initial focus on blood grouping and serological disease screening, Quotient is developing its proprietary MosaiQTM technology platform to address the $3.4 billion global transfusion diagnostics market. The Company's operations are based in Switzerland, Scotland and the U.S.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include statements regarding our expectations of continued growth, the development, regulatory approval, commercialization and impact of MosaiQTM and other new products, and current estimates of fourth quarter and full year fiscal 2017 operating results. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties, many of which are beyond our control, include delays or denials of regulatory approvals or clearances for products or applications; market acceptance of our products; the impact of competition; the impact of facility expansions and expanded product development, clinical, sales and marketing activities on operating expenses; delays or other unforeseen problems with respect to manufacturing, product development or field trial studies; adverse results in connection with any ongoing or future legal proceeding; continued or worsening adverse conditions in the general domestic and global economic markets; as well as the other risks set forth in the Company's filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Quotient disclaims any obligation to update these forward-looking statements.

The Quotient logo and MosaiQ™ are registered trademarks or trademarks of Quotient Limited and its subsidiaries in various jurisdictions.

 
Quotient Limited
Condensed Consolidated Statements Of Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)
 
  Quarter Ended  Nine Months Ended 
  December 31,  December 31, 
  2016  2015  2016  2015 
Revenue:                
Product sales $4,841  $4,354  $15,401  $13,477 
Other revenues        1,300    
Total revenue  4,841   4,354   16,701   13,477 
Cost of revenue  2,602   2,225   8,454   7,100 
Gross profit  2,239   2,129   8,247   6,377 
Operating expenses:                
Sales and marketing  1,836   918   4,367   2,350 
Research and development, net  17,183   6,931   43,479   22,122 
General and administrative expense  5,650   7,059   16,722   18,148 
Total operating expense  24,669   14,908   64,568   42,620 
Operating loss  (22,430)  (12,779)  (56,321)  (36,243)
Other income (expense)                
Interest expense, net  (4,168)  (1,134)  (6,552)  (2,992)
Change in financial liability for share warrants     3,830      15,857 
Other, net  (4,568)  305   (1,888)  (987)
Other income (expense), net  (8,736)  3,001   (8,440)  11,878 
Loss before income taxes  (31,166)  (9,778)  (64,761)  (24,365)
Provision for income taxes            
Net loss $(31,166) $(9,778) $(64,761) $(24,365)
Other comprehensive income (loss):                
Change in fair value of effective portion of                
foreign currency cash flow hedges $29  $(89) $(310) $120 
Foreign currency gain (loss)  (594)  (1,491)  (6,326)  (297)
Provision for pension benefit obligation  46      129   (1,747)
Other comprehensive loss, net  (519)  (1,580)  (6,507)  (1,924)
Comprehensive loss $(31,685) $(11,358) $(71,268) $(26,289)
Net loss available to ordinary shareholders                
- basic and diluted $(31,166) $(9,778) $(64,761) $(24,365)
Loss per share - basic and diluted $(1.06) $(0.48) $(2.34) $(1.33)
Weighted-average shares outstanding - basic and                
diluted  29,508,330   20,398,132   27,689,009   18,284,708 
 


 
Quotient Limited
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
 
  December 31,
2016
  March 31,
2016
 
ASSETS
        
Current assets:        
Cash and cash equivalents $14,328  $44,100 
Short-term investments  30,009    
Trade accounts receivable, net  1,639   2,269 
Inventories  13,168   12,584 
Prepaid expenses and other current assets  3,056   2,780 
Total current assets  62,200   61,733 
Property and equipment, net  60,905   57,115 
Intangible assets, net  776   902 
Total assets $123,881  $119,750 
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
        
Current liabilities:        
Accounts payable $9,463  $7,286 
Accrued compensation and benefits  2,799   3,294 
Accrued expenses and other current liabilities  12,129   9,180 
Current portion of long-term debt     1,000 
Current portion of lease incentive  415   439 
Capital lease obligation  1,363   152 
Total current liabilities  26,169   21,351 
Long-term debt  80,063   27,910 
Lease incentive, less current portion  933   1,316 
Capital lease obligation, less current portion  188   1,723 
Defined benefit pension plan obligation  4,597   4,502 
7% Cumulative redeemable preference shares  17,013   16,225 
Total liabilities  128,963   73,027 
Commitments and contingencies      
Total shareholders' equity (deficit)  (5,082)  46,723 
Total liabilities and shareholders' equity (deficit) $123,881  $119,750 
         


 
Quotient Limited
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
 
  Nine months ended
December 31,
 
  2016  2015 
OPERATING ACTIVITIES:        
Net loss $(64,761) $(24,365)
Adjustments to reconcile net loss to net cash provided by operating activities:        
Depreciation and amortization  7,029   1,573 
Share-based compensation  3,089   1,380 
Amortization of lease incentive  (323)  (327)
Swiss pension obligation  489    
Amortization of deferred debt issue costs  6,096   1,250 
Accrued preference share dividends  788   788 
Change in financial liability for share warrants     (15,857)
Net change in assets and liabilities:        
Trade accounts receivable, net  246   307 
Inventories  (1,310)  (3,249)
Accounts payable and accrued liabilities  6,660   (2,675)
Accrued compensation and benefits  (85)  (803)
Other assets  (700)  (725)
Net cash used in operating activities  (42,782)  (42,703)
INVESTING ACTIVITIES:        
Increase in short-term investments  (30,009)   
Purchase of property and equipment  (15,206)  (19,832)
Purchase of intangible assets  (65)  (64)
Net cash used in investing activities  (45,280)  (19,896)
FINANCING ACTIVITIES:        
Proceeds from (repayment of) finance leases  (108)  55 
Proceeds from drawdown of new debt  84,000   15,500 
Issue costs of new debt  (5,493)  (703)
Repayment of debt  (33,450)  (500)
Proceeds from issuance of ordinary shares  16,374   34,553 
Net cash generated from financing activities  61,323   48,905 
Effect of exchange rate fluctuations on cash and cash equivalents  (3,033)  230 
Change in cash and cash equivalents  (29,772)  (13,464)
Beginning cash and cash equivalents  44,100   37,525 
Ending cash and cash equivalents $14,328  $24,061 
Supplemental cash flow disclosures:        
Income taxes paid $  $ 
Interest paid $1,687  $1,463 
         
CONTACT: Paul Cowan, Chairman & Chief Executive Officer — CEO@quotientbd.com; +1 267 756 0842