Cardiex Faces Funding Pressure Despite New Product Launch and Capital Raise
Cardiex Limited reported a $2.94 million cash outflow for Q2 FY2025 but bolstered its balance sheet with a $3.25 million placement. The company has begun delivering its CONNEQT Pulse units, signaling a new revenue stream and ongoing R&D investment.
- Quarterly cash outflow of $2.94 million driven by R&D and operational costs
- Raised $3.25 million through a placement, including director participation
- Commenced deliveries of CONNEQT Pulse units to U.S. customers
- Reduced debt following receipt of 2024 R&D Tax Incentive refund of $1.46 million
- Management optimizing cost base and reviewing ongoing R&D funding options
Cardiex’s Cash Flow Dynamics
Cardiex Limited’s latest Appendix 4C filing for the quarter ended 31 December 2024 reveals a significant net cash outflow of $2.94 million. This cash burn primarily reflects ongoing investments in research and development, product manufacturing, staff costs, and administration. Despite the outflow, the company ended the quarter with $3.4 million in cash and cash equivalents, a notable increase from $546,000 at the previous quarter’s end.
The cash position was bolstered by a $3.25 million placement completed in December 2024, with $2.785 million received during the quarter and a further $140,000 post-quarter. Director participation in this placement amounted to $325,000, pending shareholder approval at an upcoming extraordinary general meeting. This capital injection provides Cardiex with a vital runway to support its operational and development activities.
Progress on Product Commercialisation
Cardiex has commenced deliveries of its CONNEQT Pulse units to customers in the United States following receipt of the first 3,000 units from its manufacturing partner, Andon. This marks a critical milestone as the company transitions from development to commercialisation, introducing a new income stream focused on arterial health insights and wellness solutions. Early indications suggest promising market demand, with the first full-quarter sales results expected at the end of Q3 FY2025.
This product launch is strategically important, as it diversifies Cardiex’s revenue base beyond clinical trials and R&D tax incentives, which have historically underpinned its funding.
Debt Management and Funding Strategy
Post-quarter, Cardiex received its 2024 R&D Tax Incentive refund totaling $1.46 million. These funds were used to fully repay a short-term Working Capital Loan Facility and partially repay the R&D Term Loan Facility, reducing the outstanding balance to $730,000. The company is actively reviewing its ongoing R&D funding options, anticipating a similar refund amount for 2025.
Additionally, Cardiex has a promissory note agreement with its US legal counsel for $2.41 million related to outstanding legal fees from a withdrawn NASDAQ IPO. The repayment schedule extends through October 2025, with manageable installments and a modest 5.5% interest rate.
Operational Efficiency and Outlook
Management is focused on optimising the cost base by relocating R&D and engineering resources to Australia, aiming to reduce ongoing expenses. While the company expects to maintain its current level of net operating cash flows, it acknowledges the need for additional capital should sales of CONNEQT Pulse fall short or clinical trial cash flows be delayed.
The directors remain confident in Cardiex’s ability to raise further capital if required, citing a proven track record in timely fundraising. The company’s strategic initiatives and early commercial traction with CONNEQT Pulse position it well to navigate the near-term funding challenges.
Bottom Line?
Cardiex’s successful capital raise and product launch offer optimism, but sustaining cash flow beyond one quarter remains critical.
Questions in the middle?
- Will CONNEQT Pulse sales meet expectations to reduce reliance on external funding?
- How will Cardiex’s cost optimisation efforts impact future cash burn rates?
- What are the prospects and timing for additional capital raises if needed?
