Filing identity and reporting period
The supplied filing is BioTime, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2014, filed August 11, 2014. This does not match the request metadata naming Lineage Cell Therapeutics, Inc.; the figures and developments below are for BioTime and its consolidated subsidiaries.
Business context
BioTime describes itself as a regenerative-medicine company developing stem-cell-based therapies, research products, diagnostics and related technologies. Its subsidiaries include Asterias, Cell Cure Neurosciences, OncoCyte and LifeMap Sciences. Current revenue sources include grants, licenses and database subscriptions, product royalties, and research-product sales. Most therapeutic programs remain in development.
Financial performance
| Metric | Three months ended June 30, 2014 | Six months ended June 30, 2014 |
|---|---|---|
| Revenue | $1.107 million, down 9.0% year over year | $2.173 million, up 19.1% |
| Gross profit and margin | $0.855 million; 77.3% (prior-year margin 85.1%) | $1.790 million; 82.4% (prior-year margin 80.1%) |
| Research and development expense | $9.081 million, up 64.2% | $17.470 million, up 59.2% |
| General and administrative expense | $4.836 million, up 33.5% | $8.503 million, up 21.4% |
| Net loss attributable to BioTime | $9.520 million | $17.609 million |
| Net loss attributable to common shareholders; loss per share | $9.554 million; $0.16 | $17.643 million; $0.29 |
For the six months, grant income increased 56.4% and research-product sales increased 52.5%, while license fees and product royalties declined 16.5% and 17.5%, respectively. Q2 revenue was lower mainly as royalties and license fees declined. R&D and G&A growth reflected the expansion of Asterias following its Geron asset acquisition and the start-up of LifeMap Solutions, including higher staffing and intangible-asset amortization. The six-month consolidated net loss was $21.105 million; $3.496 million was attributable to noncontrolling interests.
Cash, liquidity and obligations
- Cash and cash equivalents were $15.722 million at June 30, 2014, compared with $5.495 million at December 31, 2013. Of the June balance, $12.861 million was held by Asterias.
- Six-month operating cash use was $21.135 million; investing cash use was $0.707 million; financing provided $32.192 million. Financing included common-stock sales, subsidiary share/warrant transactions and $3.5 million from preferred-stock issuance.
- Current assets were $18.646 million and current liabilities were $5.069 million. The balance sheet reported $115,000 of capital-lease liabilities; contractual capital-lease payments totaled $127,009. Operating-lease commitments totaled $12.297 million.
- BioTime stated that revenue was insufficient to cover operating expenses and that additional equity, debt or other funding would be needed. Asterias reimbursed BioTime $5.0 million after quarter-end for expenses BioTime had paid on its behalf.
Material changes, outlook and risks
- Management reported no formal financial guidance. It expected consolidated operating expenses and losses to remain elevated as Asterias develops its programs, and stated that programs could be modified, delayed or suspended if funding is inadequate.
- Asterias received a $14.3 million CIRM grant award for AST-OPC1, but funding depended on FDA trial clearance, a definitive agreement, milestones and timely disbursements. Management anticipated starting a Phase 1/2a trial in cervical spinal-cord-injury patients in six to nine months, subject to those conditions.
- Asterias had reached agreement in principle on a proposed UK charitable grant for AST-VAC2, but negotiations and execution remained pending; the filing cautioned that the grant was not assured.
- After quarter-end, on August 7, the FDA approved BioTime’s 510(k) application for Premvia, a wound-management product. OncoCyte also initiated a multi-site clinical study of its PanC-Dx bladder-cancer markers in July.
- Hextend royalties were under pressure from market contraction, price declines, FDA-mandated safety-label changes and a temporary Hospira sales suspension in January and February 2014. The filing described a boxed warning concerning mortality and renal injury in critically ill patients, including patients with sepsis. BioTime expected Hextend royalties to decline as a share of revenue.
- Key risks include continued operating losses, reliance on external financing and grants, clinical and regulatory uncertainty, possible dilution, product-development costs, and potential liabilities assumed by Asterias relating to prior Geron clinical trials. The filing reported no current litigation and no material changes to internal control over financial reporting.
Most important facts to verify
- Confirm the issuer: the source filing is BioTime, Inc., not Lineage Cell Therapeutics, Inc.
- Check the availability and permitted use of cash held by subsidiaries, particularly Asterias, and the company’s financing needs against its operating cash burn.
- Verify the CIRM funding agreement, FDA clearance and trial start for AST-OPC1, and whether the proposed AST-VAC2 grant was finalized.
- Assess whether Premvia’s FDA clearance leads to commercialization and whether Hextend royalties continue to fall under the revised safety labeling and market conditions.
- Review potential dilution and control implications of equity and warrant issuances, including the Series A preferred stock’s 3% cumulative dividend and conversion terms.