qtnt-ex991_15.htm

Quotient Limited Provides an Update on Recent MosaiQ Milestone Achievements together with Third Quarter Fiscal 2020 Results

JERSEY, Channel Islands, January 30, 2020 (GLOBE NEWSWIRE) -- Quotient Limited (NASDAQ:QTNT), a commercial-stage diagnostics company (Quotient or the Company), headquartered in Eysins, Switzerland, today re-capped recently disclosed milestone achievements which included the completion of a third party feasibility study of its innovative Molecular Disease Screening (MDS) microarray, the US Food and Drug Administration’s (FDA) acceptance of its 510(k) submission for both the initial Serological Disease Screening (SDS) microarray and the MosaiQ™ system and the commencement of European Union (EU) field trial activities for the expanded Immunohematology (IH) microarray. In addition, the Company announced strong top line growth for both its third quarter ended December 31, 2019 and for the year to date.

“We are very pleased to start the year off with EU field trial activities underway for our expanded IH microarray. This marks an important milestone towards having available the first powerful commercial menu combination of the initial SDS and expanded IH microarrays later this year,” said Franz Walt, Chief Executive Officer of Quotient.

Mr. Walt added “the acceptance of the 510(k) application is also a key step toward both regulatory clearance in the world’s largest market and the subsequent initiation of U.S. hyper-care sites once approved. The ongoing strong growth in product sales from our conventional liquid reagents business underscores the relevance of our reagent development to the transfusion diagnostics market.”

MosaiQ, Quotient's next-generation platform is designed to deliver fast, comprehensive antigen typing, antibody detection and disease screening results, using a single low volume sample in a high throughput automated format. MosaiQ represents a transformative and highly disruptive unified testing platform for transfusion diagnostics. Feasibility has also been demonstrated with respect to the detection of DNA using the MosaiQ platform. Through MosaiQ, Quotient expects to deliver substantial value to donor testing laboratories worldwide by providing affordable, routine

comprehensive characterization and screening of blood products, on a single automated instrument platform. MosaiQ is designed to radically reduce labor costs and complexity associated with existing practice.

Franz Walt commented “I am pleased with the continued progress we have made recently towards the goals which we set for ourselves back in 2018.” Mr. Walt added, “with each milestone achieved we demonstrate further the transformative capabilities of the MosaiQ technology platform and further reduce the technology risk associated with it.”

“The conventional reagent business recognized strong product sales of $7.6 million in the third quarter of fiscal 2020, up 14% year over year. Top line growth of 10% for the first nine months of this fiscal year was driven by 4% growth in sales to original equipment manufacturer (OEM) customers, while direct product sales grew 24%.” said Franz Walt. Mr. Walt added, “ In the third quarter, gross margin on product sales was 40.6% reflecting a less optimal product mix than in the first two quarters of fiscal 2020, but up from the fiscal 2019 third quarter gross margin of 37.7%, which was adversely impacted by incremental manufacturing costs related to bringing our Allan Robb Campus (ARC) on-line while continuing to operate our previous conventional reagent production facility. Milestone payments earned from the development and approval for sale in the U.S. of certain rare antisera reagents developed for a key OEM customer contributed $1.1 million of other revenues in the first nine months of this fiscal year.”

Key revenue and profit results are summarized below (expressed in thousands, except percentages)

	Quarter Ended						Nine Months Ended
	December 31,						December 31,
	2019			2018			2019			2018
Revenue:
Product sales —OEM Customers	$	5,071		$	4,719		$	15,354		$	14,744
Product sales — direct customers and distributors		2,565			2,004			7,547			6,090
Other revenues		305			—			1,055			19
Total revenue	$	7,941		$	6,723		$	23,956		$	20,853

Product sales from standing orders (%)		72	%		67	%		71	%		67	%

Gross profit	$	3,409		$	2,537		$	10,889		$	8,050
Gross profit as a % of total revenue		42.9	%		37.7	%		45.5	%		38.6	%
Gross margin on product sales (%)		40.6	%		37.7	%		42.9	%		38.5	%
Operating (loss)	$	(22,357	)	$	(19,028	)	$	(59,221	)	$	(58,629	)

The operating loss for the quarter ended December 31, 2019 included termination and transition benefit costs of approximately $1.3 million; legal and advisory fees related to the Company’s termination of its distribution and supply agreement with Ortho Clinical Diagnostics Inc. (OCD) and the related dispute; increased payments to a research and development collaboration partner totaling $0.8 million and $0.4 million of costs related to the recently completed initial SDS U.S. clinical trial.

Capital expenditures totaled $1.4 million in the quarter ended December 31, 2019, compared with $1.4 million in the quarter ended December 31, 2018.

During the quarter ended December 31, 2019, Quotient announced the closing of an underwritten public offering of 13,800,000 ordinary shares at a price to the public of $7.00 per share, which included the exercise in full by the underwriters of their option to purchase up to 1,800,000 additional ordinary shares. The net proceeds to the Company from this offering was approximately $90.4 million, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

As at December 31, 2019 Quotient had $138.0 million in available cash and other short-term investments and $153.7 million of debt and $8.7 million in an offsetting long-term cash reserve account.

Product sales in the fourth quarter of fiscal 2020 are expected to be in the range of $7.8 million to $8.2 million, compared with $7.8 million for the fourth quarter of fiscal 2019.

Quarterly product sales can fluctuate depending upon the shipment cycles for red blood cell based products, which account for approximately two-thirds of 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.

Quotient will host a conference call on Thursday, January 30 at 8:30 a.m. Eastern Time to discuss its third quarter fiscal 2020 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 access code is 13698277. The conference call will be webcast live on the Company’s website at www.quotientbd.com.

A replay of this conference call will be available through February 6, 2020 by dialing 1-844-512-2921 in the U.S. or 1-412-317-6671 outside the U.S. The replay access code is 13698277.

Building on 30 years of experience in transfusion diagnostics, Quotient is a commercial-stage diagnostics company committed to delivering solutions that reshape the way diagnostics is practiced. MosaiQ, Quotient’s proprietary multiplex microarray technology, offers the world’s first fully automated, consolidated testing platform, allowing for multiple tests across different modalities. MosaiQ is designed to be a game-changing solution, which Quotient believes will increase efficiencies, improve clinical practice, deliver significant workflow improvements, and create operational cost savings to laboratories around the world. Quotient's operations are based in Eysins, Switzerland, Edinburgh, Scotland and Newtown, Pennsylvania.

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 MosaiQ and other new products (including the application of MosaiQ to infectious disease diagnostics), current estimates of fourth quarter and full year fiscal 2020 operating results and expectations regarding our future funding sources. 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.

CONTACT: Chris Lindop, Chief Financial Officer - chris.lindop@quotientbd.com; +41 799 61 69 38

	Quarter Ended						Nine Months Ended
	December 31,						December 31,
	2019			2018			2019			2018
Revenue:
Product sales	$	7,636		$	6,723		$	22,901		$	20,834
Other revenues		305			—			1,055			19
Total revenue		7,941			6,723			23,956			20,853
Cost of revenue		4,532			4,186			13,067			12,803
Gross profit		3,409			2,537			10,889			8,050
Operating expenses:
Sales and marketing		2,290			2,233			7,123			6,359
Research and development, net		14,160			11,788			38,895			37,356
General and administrative expense		9,316			7,544			24,092			22,964
Total operating expense		25,766			21,565			70,110			66,679
Operating loss		(22,357	)		(19,028	)		(59,221	)		(58,629	)
Other income (expense)
Interest expense, net		(7,008	)		(5,679	)		(20,384	)		(14,614	)
Other, net		1,894			(1,536	)		1,600			(5,516	)
Other expense, net		(5,114	)		(7,215	)		(18,784	)		(20,130	)
Loss before income taxes		(27,471	)		(26,243	)		(78,005	)		(78,759	)
Provision for income taxes		(14	)		(11	)		(41	)		(33	)
Net loss	$	(27,485	)	$	(26,254	)	$	(78,046	)	$	(78,792	)
Other comprehensive income (loss):
Change in fair value of effective portion of foreign currency cash flow hedges	$	487		$	41		$	209		$	(320	)
Change in unrealized gain on short-term investments		148			169			342			416
Foreign currency gain (loss)		254			(176	)		(771	)		554
Provision for pension benefit obligation		48			35			144			107
Other comprehensive income (loss)		937			69			(76	)		757
Comprehensive loss	$	(26,548	)	$	(26,185	)	$	(78,122	)	$	(78,035	)
Net loss available to ordinary shareholders - basic and diluted	$	(27,485	)	$	(26,254	)	$	(78,046	)	$	(78,792	)
Loss per share - basic and diluted	$	(0.37	)	$	(0.46	)	$	(1.14	)	$	(1.53	)
Weighted-average shares outstanding - basic and diluted		73,768,845			56,619,356			68,722,475			51,512,352

	December 31, 2019		March 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	4,664	$	4,096
Short-term investments		133,371		90,729
Trade accounts receivable, net		5,037		3,348
Inventories		19,791		15,551
Prepaid expenses and other current assets		3,856		3,202
Total current assets		166,719		116,926
Restricted cash		9,015		7,507
Property and equipment, net		43,425		47,293
Operating lease right-of-use assets		22,798		—
Intangible assets, net		687		751
Deferred income taxes		564		605
Other non-current assets		4,747		4,688
Total assets	$	247,955	$	177,770
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	3,513	$	5,936
Accrued compensation and benefits		5,899		6,149
Accrued expenses and other current liabilities		12,839		12,458
Current portion of operating lease liability		3,157		—
Current portion of deferred lease rental benefit		—		435
Current portion of finance lease obligation		522		471
Total current liabilities		25,930		25,449
Long-term debt		153,717		121,855
Operating lease liability, less current portion		21,139		—
Deferred lease rental benefit, less current portion		—		1,144
Finance lease obligation, less current portion		950		865
Defined benefit pension plan obligation		7,998		7,368
7% Cumulative redeemable preference shares		20,163		19,375
Total liabilities		229,897		176,056
Total shareholders' equity		18,058		1,714
Total liabilities and shareholders' equity	$	247,955	$	177,770

	Nine months ended December 31,
	2019			2018
OPERATING ACTIVITIES:
Net loss	$	(78,046	)	$	(78,792	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		8,996			9,503
Share-based compensation		3,375			3,576
Increase in deferred lease rentals		215			266
Swiss pension obligation		551			453
Amortization of deferred debt issue costs		7,736			4,097
Accrued preference share dividends		788			788
Deferred income taxes		41			33
Net change in assets and liabilities:
Trade accounts receivable, net		(1,638	)		315
Inventories		(3,838	)		147
Accounts payable and accrued liabilities		(2,268	)		(5,076	)
Accrued compensation and benefits		(268	)		(664	)
Other assets		(406	)		3,833
Net cash used in operating activities		(64,762	)		(61,521	)
INVESTING ACTIVITIES:
Increase in short-term investments		(95,000	)		(119,000	)
Realization of short-term investments		52,700			21,883
Purchase of property and equipment		(3,941	)		(3,047	)
Purchase of intangible assets		—			(3	)
Net cash used in investing activities		(46,241	)		(100,167	)
FINANCING ACTIVITIES:
Repayment of finance leases		(337	)		(358	)
Proceeds from drawdown of new debt		25,000			36,000
Debt issuance costs and fees paid to noteholders		(874	)		(5,113	)
Proceeds from issuance of ordinary shares and warrants		90,728			113,745
Net cash generated from financing activities		114,517			144,274
Effect of exchange rate fluctuations on cash and cash equivalents		(1,438	)		4,187
Change in cash and cash equivalents		2,076			(13,227	)
Beginning cash and cash equivalents		11,603			25,205
Ending cash and cash equivalents	$	13,679		$	11,978
Supplemental cash flow disclosures:
Income taxes paid	$	—		$	—
Interest paid	$	15,959		$	11,435


Quotient Limited
Condensed Consolidated Statements Of Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)