Memorandum

Cellnovo 3Q16 – Sales of €301,218 decline 5% sequentially, 68 devices shipped; Flex manufacturing transfer ongoing; €15.6 million in cash remains – October 21, 2016

Yesterday, Cellnovo announced its 3Q16 financial results via press release. Sales of the patch pump system in current European markets (Italy, UK, France, Netherlands) totaled €301,218 in 3Q16, up 55% year-over-year (YOY) and bringing the nine-month total to over €1 million for the first time (up four-fold YOY). Sales fell a modest 5% sequentially from 2Q16 following a larger 27% sequential decline from 1Q16 to 2Q16. The company only fulfilled 68 new pump orders in 3Q16 (520 since launch), as it is limiting expansion until more automated manufacturing transfers over to Flex. Cellnovo received the first pilot batch of cartridges earlier this quarter, and once the transition is complete around the end of this year, manufacturing capacity will increase from 50,000 cartridges to 600,000 per year – assuming three days per cartridge, that takes current capacity from supporting just over 400 patients in a year to just under 5,000. Cash remained relatively constant from Q2 to Q3, falling from just over €16 million to €15.6 million. We assume current cash is sufficient for about three more quarters, meaning the manufacturing transition must go well and scale revenue quickly. On the plus side, Cellnovo did receive ~€5.4 million from EU and US institutional investors in 3Q16, which will finance its artificial pancreas project from development to initial commercial launch in Europe. Management told us it is “too early to comment” on timing, but work is ongoing with Diabeloop (n=36, pivotal trial completion slated for December, according to clinicaltrials.gov), in the partnership with TypeZero, and in the EU Horizon 2020 project. A US launch is expected by the end of 2017, though we assume another fundraise or partnership would be needed.

  • The press release did not mention other pipeline projects: the FDA submission of the second-gen handset (previously slated for 2Q16); expected 2016 launches in Germany, Austria, Switzerland, Belgium, and Scandinavia; or plans for a 2017 launch of a type 2 insulin delivery device. 

-- by Brian Levine, Adam Brown, and Kelly Close