On December 1, 2020 CollPlant (NASDAQ: CLGN), a regenerative and aesthetics medicine company, reported financial results for the third quarter ended September 30, 2020 and provided an update on the Company’s business developments (Press release, CollPlant, DEC 1, 2020, View Source [SID1234572068]). Certain metrics, including those expressed on an adjusted basis, are non-GAAP measures. See "Use of Non-GAAP Measures" below.

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CollPlant reported revenues of $4.1 million for the third quarter of 2020, a 511% increase from the $679,000 recorded in the third quarter of 2019. The Company ended the third quarter of 2020 with $5.0 million in cash and cash equivalents. Comprehensive income for the third quarter of 2020 was $703,000 on a GAAP basis, or adjusted comprehensive income of $1.1 million, on a non-GAAP basis.

"We are very pleased with the progress of our collaboration with United Therapeutics which started with lungs and is now expanding to cover kidneys, a second lifesaving organ. The $3 million payment for the option exercise which contributed to our profitability in the third quarter of 2020 is part of a larger agreement signed in October 2018 that includes upfront and milestone payments plus royalties," stated Yehiel Tal, CollPlant’s Chief Executive Officer.

"We continue to advance our medical aesthetics line with next-generation, regenerative, photocurable dermal fillers which we believe will yield skin rejuvenation inclusive of the ability to inject into deep wrinkles, as well as other key attributes. During the third quarter of 2020 we shared updates on our photocurable dermal fillers and on our breast implant product pipeline, at the exclusive Science of Aging Virtual Symposium 2020."

"Furthermore, we are moving forward with a development program of an antiviral agent for the potential treatment of COVID-19. We got promising preclinical data showing our platform technology significantly inhibited avian coronavirus infectivity. The data indicated our formulation that is comprised of rhCollagen imbedded with silver nanoparticles (AgNP), targets viral load in COVID-19 patients, thereby potentially assisting the body’s immune system to combat viral infection, reduce transmission rates between people, and ultimately reduce the percentage of patients who need to be treated in critical care settings," Mr. Tal concluded.

Financial Results

Third Quarter 2020 Financial Results on U.S. GAAP basis ("GAAP")

Revenues for the three months ended September 30, 2020 increased by 511% to $4.1 million, compared to $679,000 in the third quarter of 2019. Revenues were derived mainly from sales of CollPlant’s BioInk for the development of 3D bioprinting of human organs, the exercise of an option by United Therapeutics for licensing CollPlant technology to print kidneys, and from sales of rhCollagen for medical aesthetics product development.

Cost of revenue was $1.4 million in the three months ended September 30, 2020, an increase of 123% compared to $645,000 in the same period in 2019. The increase is primarily related to royalties payments to the Israel Innovation Authority on revenue from licensing CollPlant’s technology to United Therapeutics for printing of kidneys.

The Company’s gross profit for the three months ended September 30, 2020 increased by $2.7 million to $2.7 million, or 65% of revenues, in the third quarter of 2020, compared to $34,000, or 5% of revenues in the third quarter of 2019.

Total operating expenses for the three months ended September 30, 2020 were $2.0 million, an increase of 11% compared to $1.8 million in the third quarter of 2019. The increase is primarily related to share-based compensation expenses for options grant.

Operating profit for the three months ended September 30, 2020 was $734,000, compared to an operating loss of $1.7 million in the third quarter of 2019.

Financial expense, net for the three months ended September 30, 2020 was $31,000 compared to $1.4 million in the third quarter of 2019. Financial expense in the three months ended September 30, 2020 and September 30, 2019 mainly derived from non-cash exchange differences of operating lease liabilities under ASC 842, and re-evaluation of financial instruments.

Comprehensive income for the third quarter of 2020 was $703,000, or $0.10 per share, compared to a comprehensive loss of $3.2 million, or $0.68 per share, for the third quarter of 2019.

Cash used in operating activities during the nine months ended September 30, 2020 was $2.9 million compared to $4.1 million in the nine months ended September 30, 2019. As of September 30, 2020, cash and cash equivalents totaled $5.0 million.

Cash used in investing activities during the nine months ended September 30, 2020 was $378,000 compared to $1.2 million in the nine months ended September 30, 2019. The decrease is mainly attributable to costs incurred in the establishment in 2019 of CollPlant’s new HQ and R&D center in Rehovot, Israel.

Cash provided by financing activities during the nine months ended September 30, 2020 was $4.5 million, of which $4.4 million are attributable to proceeds from issuance of shares in a private placement in February 2020. Cash provided in the nine months ended September 30, 2019 by financing activities amounted to $5.4 million, and are attributed to proceeds from funding in September 2019.

Third Quarter 2020 Financial Results on Non-U.S. GAAP Basis ("non-GAAP")

On a non-GAAP basis, the operating expenses for the third quarter of 2020 were $1.6 million, a decrease of $106,000 compared to $1.7 million for the third quarter of 2019.

Comprehensive income for the third quarter of 2020 was $1.1 million, or $0.16 per share, compared to comprehensive loss of $1.8 million, or $0.38 per share, for the third quarter of 2019.

Non-GAAP measures exclude certain non-cash expenses. The table on page 10 includes a reconciliation of the Company’s GAAP results to non-GAAP results. The reconciliation reflects non-cash expenses in the amount of $397,000 with respect to (i) change in fair value of financial instruments, (ii) share-based compensation to employees, directors and consultants and (iii) change of operating lease accounts, including related financial expenses.

Use of Non-GAAP Measures

This press release contains certain non-GAAP financial measures for operating costs and expenses, operating loss, comprehensive loss and basic and diluted comprehensive loss per share that exclude the effects of non-cash expense for fair market value attributed to change in fair value of financial instruments, share-based compensation to employees, directors and consultants, and change in operating lease accounts. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s performance that enhances management’s and investors’ ability to evaluate the Company’s operating costs, comprehensive loss and loss per share, and to compare them to historical Company results.

The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management uses both GAAP and non-GAAP measures when operating and evaluating the Company’s business internally and therefore decided to make these non-GAAP adjustments available to investors. The non-GAAP financial measures used by the Company in this press release may be different from the measures used by other companies.

For more information on the non-GAAP financial measures, please see the "Reconciliation of GAAP to Non-GAAP Financial Measures" table on page 10 in this press release. This accompanying table on page 10 has more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

The Company’s consolidated financial results as of, and for the nine months ended, September 30, 2020 are presented in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP").