Filing summary
Registrant and period: The supplied filing is BioTime, Inc.’s Form 10-Q for the quarter ended September 30, 2013, not a filing under the name Lineage Cell Therapeutics, Inc. The filing describes BioTime as a regenerative-medicine biotechnology company with research, diagnostic, and therapeutic programs conducted through subsidiaries.
Financial results and liquidity
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Total revenue | $714,062 | $1,003,551 | $2,541,851 | $2,692,790 |
| Revenue after cost of sales | $507,384 | $833,817 | $1,971,614 | $2,418,874 |
| Operating expenses | $10,709,337 | $6,780,375 | $28,663,357 | $20,361,217 |
| Net loss attributable to BioTime | $9,003,168 | $4,958,014 | $24,270,521 | $15,390,749 |
| Basic and diluted loss per share | $0.16 | $0.10 | $0.45 | $0.31 |
Revenue after cost of sales was about 71% of revenue in Q3 and 78% for the nine-month period. Cash and cash equivalents were $6.72 million at September 30, 2013, up from $4.35 million at December 31, 2012. For the first nine months, operating cash use was $20.88 million, investing cash use was $2.01 million, and financing provided $25.14 million. The company reported total current assets of $8.68 million and current liabilities of $4.60 million. No borrowings or debt balance are presented in the supplied balance sheet; operating lease obligations totaled $2.17 million.
Material changes versus prior comparable periods
- Q3 revenue fell 28.8%; nine-month revenue fell 5.6%. License fees rose over the nine-month period, principally because of LifeMap database subscription and advertising revenue, while royalties and grant income declined.
- Hextend royalties declined 39.8% in Q3 and 28.5% year to date, reflecting lower U.S. and South Korean sales and pricing pressure. Management expected royalties to continue declining as a share of revenue.
- Q3 research and development expense rose 41.7% and general and administrative expense rose 91.0%. For the nine months, the respective increases were 30.5% and 60.2%; the filing attributes much of the growth to subsidiary activity, including Asterias, and higher compensation, facilities, legal, and transaction costs.
- Cash financing included common-share issuance and other equity transactions. Common shares issued and outstanding increased during the period, and the filing notes additional potential dilution from options and warrants.
Outlook, risks, and unusual items
- Management said existing cash and cash equivalents were expected to fund operations at least into the first quarter of 2014, but revenues were insufficient to cover operating expenses and further capital was needed. Additional financing was uncertain and could dilute shareholders or require changes to planned research and development.
- On October 1, 2013, after quarter-end, Asterias completed its acquisition of stem-cell assets from Geron. BioTime contributed cash, shares, warrants, and other assets; after the transaction and a related investor financing, BioTime owned approximately 71.6% of Asterias. The filing anticipated increased consolidated research, development, and public-company costs.
- Asterias planned a public offering expected to raise $10 million to $15 million, but there was no assurance it would be completed. The company also described potential grant and collaboration funding, which was not assured.
- The FDA had proposed safety-labeling changes for hydroxyethyl starch products, including Hextend. BioTime disputed some proposed warnings and submitted amended labeling; FDA approval was pending. More restrictive labeling could further affect Hextend sales.
- Asterias assumed obligations related to follow-up of former Geron clinical-trial participants and potential patient liabilities. Asterias also continued a patent appeal involving ViaCyte; an adverse outcome could limit development in certain fields and entail legal expense.
- Key business risks include clinical and regulatory uncertainty, early-stage product commercialization, manufacturing scale-up, competition, patent and licensing disputes, and dependence on additional financing. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Investor verification points
- Confirm the issuer identity and corporate-name history: this source identifies BioTime, Inc., not Lineage Cell Therapeutics, Inc.
- Review subsequent filings for actual cash runway, financing raised, and any changes to management’s stated funding outlook.
- Verify the financial and ownership effects of the October 1 Asterias transaction, including contributed assets, warrants, and resulting dilution.
- Check the final FDA labeling action for Hextend and subsequent royalty and sales trends.
- Track Asterias’ public-offering and grant plans, development spending, and the outcome and potential costs of the ViaCyte patent proceedings.