Filing summary
Entity mismatch: The request names Lineage Cell Therapeutics, Inc., but the supplied filing is BioTime, Inc.’s Form 10-K. This summary describes BioTime and should not be treated as a summary of Lineage’s filing.
Business context and reporting period
The filing covers BioTime’s fiscal year ended December 31, 2017; it is an annual report, not a standalone fourth-quarter filing. BioTime is a clinical-stage biotechnology company developing cell-replacement and cell/drug-delivery technologies. Its lead programs were OpRegen, in a Phase I/IIa trial for dry age-related macular degeneration, and Renevia, a cell-delivery product for facial lipoatrophy. BioTime also held substantial stakes in public affiliates Asterias and OncoCyte and formed AgeX for earlier-stage programs.
Financial results and liquidity
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | $3.46 million | $5.92 million |
| Gross profit | $3.29 million | $5.57 million |
| Operating expenses | $43.95 million | $64.53 million |
| Operating loss | $38.90 million | $58.97 million |
| Net income (loss) attributable to BioTime | $(19.98) million | $33.57 million |
| Net cash used in operating activities | $30.52 million | $42.33 million |
Revenue fell 41.6% year over year, primarily because Asterias was deconsolidated in May 2016; the 2017 figure includes OncoCyte only through February 16. Gross margin was approximately 95%, but revenue was small relative to research and administrative spending. Research and development expense was $24.0 million and general and administrative expense was $19.9 million.
FY 2017 net loss attributable to BioTime contrasts with FY 2016 income, which benefited from a $49.0 million Asterias deconsolidation gain and a $34.4 million increase in the fair value of Asterias shares. In 2017, the $71.7 million OncoCyte deconsolidation gain was more than offset in part by a $51.1 million fair-value loss on Asterias shares, a $2.9 million OncoCyte fair-value loss, and other items. These noncash investment-related items materially affected reported earnings.
At year-end, BioTime reported $36.8 million in cash and cash equivalents, $1.3 million in available-for-sale securities, $35.7 million in working capital, $164.3 million in shareholders’ equity, and $9.0 million in total liabilities. Cash, cash equivalents, and available-for-sale securities totaled $38.2 million. It also held Asterias and OncoCyte shares valued at $48.9 million and $68.2 million, respectively; those market values may not be fully realizable in a sale. The filing reports $5.7 million in contractual obligations, mainly leases, capital leases, and promissory notes; no off-balance-sheet arrangements were reported.
BioTime generated $55.4 million from financing activities in 2017, including approximately $45.1 million net proceeds from public offerings and $10.0 million raised by AgeX. Management said available liquidity was expected to fund current operations for at least 12 months from the financial statements’ issuance date.
Material changes versus the prior period
- OncoCyte was deconsolidated on February 17, 2017, after BioTime’s ownership fell below 50%; BioTime retained an approximately 46.7% stake. Asterias had been deconsolidated in May 2016; BioTime held approximately 40.2% at year-end 2017.
- AgeX was formed and raised $10.0 million from investors; BioTime retained approximately 85.4% ownership. Management was considering options to take AgeX public, potentially through a pro rata distribution.
- Revenue declined with the loss of consolidated affiliate revenue, while expenses also fell largely because Asterias and OncoCyte were no longer consolidated for most or all of the year. Spending on BioTime and AgeX development programs increased.
- BioTime raised approximately $49 million gross through two underwritten offerings and issued shares to acquire additional Cell Cure ownership and notes. Its share count increased materially during the year.
- Fourth-quarter 2017 revenue was $0.95 million, operating loss was $9.56 million, and net loss attributable to BioTime was $71.93 million. The quarterly result included substantial fair-value and other non-operating effects.
Outlook, commentary, and risks
Management’s stated priorities were clinical progress, simplifying the corporate structure, and unlocking value through partnerships, asset sales, company formations, or potential spin-offs. No quantified revenue or earnings guidance was provided. Renevia met its primary endpoint in a European pivotal trial, with approximately 100% of implanted volume retained at six months; BioTime filed for EU marketing authorization on March 13, 2018 and anticipated a decision later in 2018. OpRegen interim results in nine subjects were described as generally supportive of tolerability, but the study remained early-stage and was not designed to establish efficacy.
Key risks include recurring operating losses and dependence on additional financing; uncertain clinical outcomes and regulatory approvals; reliance on grants for parts of OpRegen development; dilution from equity issuance; volatility in the value of Asterias and OncoCyte holdings; manufacturing and reimbursement challenges; and patent, competition, and regulatory risks. The filing also highlights OncoCyte’s delayed DetermaVu lung-test validation after inconsistent analytic results, with completion dependent on resolving the issue and potentially changing analytic platforms. Hextend sales face competition and a boxed warning concerning risks associated with hydroxyethyl starch products.
The auditor issued an unqualified opinion on the financial statements and internal controls; management reported effective disclosure controls and internal control over financial reporting. The filing states that no material litigation was pending. BioTime’s assessment that liquidity covers at least 12 months is subject to execution, spending, and financing assumptions.
Important facts for investors to verify
- Confirm the intended company: the source filing is BioTime’s, not Lineage Cell Therapeutics’.
- Review the 10-K’s audited statements and notes for the deconsolidation accounting and fair-value changes in Asterias and OncoCyte, which drove large swings in reported earnings.
- Assess cash burn, the 12-month liquidity assumption, grant availability, and the possibility and terms of future financing or share dilution.
- Check subsequent clinical, regulatory, and commercial developments for OpRegen, Renevia, and OncoCyte’s DetermaVu validation; stated expectations are not assurances of success.
- Verify the status and terms of any AgeX public listing or distribution, including potential effects on BioTime’s share price and outstanding warrants.