Business Overview and History
Catheter Precision, Inc. (VTAK) is a U.S.-based innovative medical device company that is at the forefront of developing technologically advanced products for the cardiac electrophysiology (EP) market. With a strong focus on improving patient outcomes and streamlining clinical procedures, the company has established itself as a key player in the cardiac EP space.
Catheter Precision was initially founded in California on September 4, 2002, and later reincorporated in Delaware in July 2018. The company's original focus was on developing and marketing an advanced excimer laser-based platform for the treatment of vascular and dermatological immune-mediated inflammatory diseases. This platform, known as the DABRA Excimer Laser System, was specifically designed to treat Peripheral Artery Disease, which commonly affects the legs.
In addition to the DABRA platform, Catheter Precision previously marketed the Pharos laser, used for treating proliferative skin conditions. However, in August 2021, the company divested its Dermatology Business by selling the Pharos laser business to STRATA Skin Sciences, Inc.
A significant shift in the company's direction occurred in June 2022 when the board of directors reviewed strategic alternatives. As a result, Catheter Precision paused all engineering activities related to DABRA and ceased marketing the DABRA Excimer Laser System. The company decided not to pursue the commercialization of the DABRA 2.0 catheter.
The transformative moment came on January 9, 2023, when Catheter Precision merged with the former Catheter Precision, Inc., a privately-held Delaware corporation. This merger marked a pivotal change in the company's strategic focus, leading to the discontinuation of its legacy lines of business. Instead, Catheter Precision redirected its efforts towards the historical business of the former Catheter Precision, Inc., which centered on the design, manufacture, and sale of innovative medical technologies in the cardiac electrophysiology field.
One of Catheter Precision's primary products is the VIVO System, a non-invasive imaging solution that offers 3D cardiac mapping to help localize the sites of origin of idiopathic ventricular arrhythmias in patients with structurally normal hearts prior to EP procedures. The VIVO System is commercially available in the European Union and has received FDA 510(k) clearance in the United States, where the company began a limited commercial launch in 2021. Customers are provided with VIVO Positioning Patch Sets, which are custom patches used in conjunction with the VIVO System. The delivery of the VIVO System, including the VIVO Positioning Patch Sets, represents Catheter Precision's primary performance obligation.
The company's newest product, LockeT, is a suture retention device indicated for wound healing by distributing suture tension over a larger area in the patient, aiding clinicians in locating and removing sutures efficiently. LockeT was launched in February 2023 as a sterile, Class I product registered with the FDA. Clinical studies for LockeT began during the year ended December 31, 2023.
Catheter Precision's product portfolio also includes the Amigo Remote Catheter System, a robotic arm that serves as a catheter control device. While the company is not currently marketing and selling the Amigo System, it owns the intellectual property related to this product and is considering future research and development efforts for a generation 2.0 version.
Financial Performance and Ratios
Catheter Precision's financial performance has been impacted by the strategic shift in its business focus following the 2023 merger. For the fiscal year ended December 31, 2023, the company reported total revenue of $442,000, a significant decline from the $14,000 in revenue recorded in the prior year. This decrease was primarily due to the discontinuation of the company's legacy DABRA-related product lines.
The company's net loss for the fiscal year 2023 was $70.6 million, which included a $60.9 million impairment charge related to goodwill. This resulted in a net profit margin of -29.3% and a return on equity of -69.9%. Catheter Precision's current ratio of 0.66 and quick ratio of 0.65 indicate a relatively weak liquidity position, which is further reflected in its negative free cash flow of $20.7 million for the year.
The company's operating cash flow (OCF) for fiscal year 2023 was -$20,619,000, while its free cash flow (FCF) was -$20,695,000. These figures highlight the significant cash burn the company experienced during its transition period.
Quarterly Performance and Outlook
For the third quarter of 2024, Catheter Precision reported revenues of $96,000, a decrease of 27.8% compared to the $133,000 generated in the same period of the prior year. This decline was primarily attributed to lower sales of the VIVO System, as one major customer that accounted for a significant portion of sales in 2023 did not place additional orders in Q3 2024 despite continued use of the product. The decrease was partially offset by the company's first sales of the LockeT product.
The company's gross profit margin for the quarter was 90.5%, indicating a strong ability to control costs. However, Catheter Precision continued to incur significant operating expenses, including $2.9 million in selling, general, and administrative costs, and $63,000 in research and development expenses. This resulted in a net loss of $4.1 million for the quarter.
For the nine months ended September 30, 2024, Catheter Precision reported revenues of $271,000, with a cost of revenues of $31,000. The company incurred selling, general and administrative expenses of $8.25 million and research and development expenses of $181,000 during this period. The net loss for the nine months stood at $11.02 million.
The company's operating cash flow for Q3 2024 was -$2,452,000, with a free cash flow of -$2,452,001. The decrease in net income, OCF, and FCF was mainly driven by ongoing operating expenses and the change in fair value of the royalties payable.
In terms of geographic performance, during the three and nine months ended September 30, 2024, approximately 35% and 52% of Catheter Precision's sales were derived from customers outside the United States, respectively. This demonstrates the company's ability to generate revenue from international markets, particularly in the European Union where the VIVO System is commercially available.
Looking ahead, Catheter Precision is focused on the continued development and commercialization of its novel electrophysiology technologies, including the VIVO System and LockeT. The company has been expanding its sales force and marketing efforts to drive adoption of these products, particularly in the U.S. and European markets.
In September 2024, Catheter Precision successfully completed a $3.6 million public offering, which provided additional capital to support the company's growth initiatives. However, management has noted that the company's current cash position may not be sufficient to fund operations through the end of November 2025, and it is actively exploring potential means of raising additional cash, including through future capital transactions and bridge loans.
Liquidity
Catheter Precision's liquidity position remains a concern, as evidenced by its current ratio of 0.66 and quick ratio of 0.65. These ratios suggest that the company may face challenges in meeting its short-term obligations. The negative free cash flow of $20.7 million for the fiscal year 2023 further underscores the company's liquidity constraints.
As of September 30, 2024, Catheter Precision had $1.27 million in cash and cash equivalents. The company has access to a $10 million credit facility with ABC Bank, of which $5 million remains available as of the reporting date. This additional liquidity source could provide some flexibility in managing short-term cash needs.
The company's debt-to-equity ratio stands at 0.07, indicating a relatively low level of leverage. However, this should be considered in the context of the company's ongoing losses and cash burn.
Management's acknowledgment that the current cash position may not be sufficient to fund operations through November 2025 highlights the urgency of securing additional financing to support ongoing operations and growth initiatives. The company's ability to raise capital and manage its cash burn will be critical factors in its near-term financial stability.
Risks and Challenges
Catheter Precision faces several risks and challenges that could impact its future performance. The company operates in a highly competitive medical device industry, which may limit its ability to gain market share and maintain pricing power. Additionally, the company's reliance on a limited number of large customers for a significant portion of its revenue presents concentration risk, as evidenced by the impact of a single major customer not placing additional orders in Q3 2024.
The company's financial position also remains a concern, as it has incurred recurring net losses and negative cash flows from operations since the merger. Catheter Precision's ability to achieve profitability and generate positive cash flow will be critical to its long-term success.
Furthermore, the company is subject to extensive regulatory oversight, both in the U.S. and internationally, which could result in delays or denials of product approvals, as well as potential product recalls or suspensions. Failure to comply with these regulations could also lead to fines, penalties, or other legal actions.
Conclusion
Catheter Precision, Inc. is a company in transition, having shifted its focus to the cardiac electrophysiology market following the 2023 merger. While the company's products, such as the VIVO System and LockeT, offer innovative solutions to address unmet needs in the EP space, Catheter Precision faces significant financial and operational challenges that will need to be addressed to ensure its long-term success.
The company's ability to expand its customer base, particularly for the VIVO System, and drive adoption of its newer LockeT product will be crucial for revenue growth. Additionally, managing operating expenses and improving cash flow will be essential for achieving financial stability.
Catheter Precision's international presence, with over half of its sales coming from outside the United States in the first nine months of 2024, demonstrates the global potential for its products. However, this also exposes the company to currency fluctuations and varying regulatory environments.
Investors should closely monitor the company's ability to execute on its growth strategy, manage its liquidity position, and navigate the regulatory landscape, as these factors will be critical in determining the company's future performance. The success of ongoing clinical studies for LockeT and potential development of a next-generation Amigo Remote Catheter System could provide new avenues for growth, but will require careful allocation of resources and strategic planning.
As Catheter Precision continues to evolve its product portfolio and market presence in the cardiac electrophysiology space, its ability to secure additional funding, control costs, and drive revenue growth will be key determinants of its long-term viability and success in the competitive medical device industry.