By Brian Marckx, CFA

PLC beefed up their capital base with a $1.75 million (~$1.6 million, net) private placement, announced yesterday (9/18) in an 8-K filing. The company sold 29.2MM shares of common stock at $0.06 with 100% warrant coverage. The five-year warrants are exercisable at $0.08/share.

PLC exited Q2 (6/30/2013) with $1.1MM in cash and equivalents (plus $500k in restricted cash). Cash used in operating activities (ex-changes in working capital) has averaged roughly $1MM per quarter. So this recent capital raise should given the company some more breathing room and provide additional resources to fund their ongoing U.S.-based pivotal study of RenalGuard.

We cover PLCSF with an Outperform rating. See below for free access to our full 18-page report on the company.

Background

PLC Systems Inc. (PLCSF) is a medical device company focused on commercialization of its RenalGuard product which is designed to reduce the risk of adverse exposure to toxic contrast media which can accumulate in the kidneys of patients undergoing angiographic medical imaging procedures. PLC went public through an IPO in 1992 and until recently was also involved in the manufacture and sale of a carbon dioxide laser used in transmyocardial revascularization procedures, called CO₂ Heart Laser System. In February 2011 PLC sold its heart laser to Novadaq Technologies for $1 million in cash in order to focus all of their resources and efforts on RenalGuard. PLC's scientific advisory board and trial investigators are counted among the world-renowned experts in the field of contrast induced nephropathy and have helped guide the science and clinical development of RenalGuard.

Angiographic imaging is used to view blood vessels and organs of the body and incorporates the use of a contrast agent injected into the blood stream to enhance the visibility of these structures in an X-ray. Data from completed and ongoing clinical trials indicate a strong safety profile and effectiveness of RenalGuard in reducing the risk of dangerous acute kidney injury, specifically contrast induced nephropathy (CIN), in at-risk patients undergoing image-guided cardiology and radiology procedures. Current standard of care to address the risk of CIN, a worldwide market PLC estimates at approximately 1 million patients and worth $500 million/year, are relatively unsophisticated, antiquated and (based on clinical data to-date) less effective than RenalGuard.

PLC obtained CE Mark in late 2007 allowing them to sell RenalGuard in Europe and also allowed them to initiate clinical studies of RenalGuard in Europe, which commenced shortly after CE Mark was granted. The company initiated commercialization in Italy in 2008 but only recently began ramping up their international sales efforts after their compelling clinical trial data from European studies was published in prestigious peer-reviewed journals and presented at the American College of Cardiology conference. PLC expects this, along with ongoing presentations and awareness-building efforts, to support their recently commenced roll-out into larger territories including France, Germany, Brazil, Israel and other regions where they just signed distribution agreements. This includes a deal signed in October 2011 with a subsidiary of the Bracco Group, a worldwide leader in diagnostic imaging equipment and agents, to be the exclusive distributor of RenalGuard in France and Germany. International expansion plans also include selling into China, other parts of Europe and, eventually into Japan.

RenalGuard is currently in a large (300 - 600 patient), multi-site (~30) pivotal U.S. clinical trial comparing it to standard of care in reducing the rates of CIN. Patient enrollment and clinical site recruitment is ongoing. Results of the study, which we think could wrap up in 2014, will be used (assuming positive) to support a PMA filing for FDA approval. If all goes to plan, we think RenalGuard could launch in the U.S. market sometime in mid-to-late 2015.

PLC's near-to-mid term strategy includes completing the U.S. study, additional investigator-led studies in international markets, presentation of clinical data to bolster commercialization efforts, additional OUS distribution agreements, initiation of a full clinical trial in Japan to support an eventual regulatory filing in that country, and raising additional capital to help fund these programs and general operations.

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