Filing identity and reporting period
Important identity note: The supplied filing is BioTime, Inc.’s Form 10-K for the fiscal year ended December 31, 2013, filed March 17, 2014. It is not filed under the name Lineage Cell Therapeutics, Inc. The summary below reflects the BioTime filing. The filing includes unaudited fourth-quarter data.
Business context
BioTime was a biotechnology company focused on regenerative medicine, stem-cell research products, diagnostics, and cell-based therapies, operating through a portfolio of subsidiaries. Its marketed product was Hextend, a plasma-volume expander licensed to Hospira in the U.S. and CJ in South Korea. Most therapeutic and diagnostic programs remained in research or clinical development. In October 2013, subsidiary Asterias completed its acquisition of Geron’s stem-cell assets.
Financial performance and liquidity
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Total revenue | $4.43 million | $3.92 million |
| Revenue after cost of sales | $3.64 million | $3.48 million |
| Research and development expense | $26.61 million | $18.12 million |
| Acquired in-process R&D expense | $17.46 million | — |
| General and administrative expense | $15.56 million | $10.37 million |
| Operating loss | $55.99 million | $25.00 million |
| Net loss attributable to BioTime | $43.88 million | $21.43 million |
| Basic and diluted loss per share | $0.81 | $0.44 |
| Net cash used in operating activities | $29.51 million | $19.68 million |
Consolidated net loss was $52.91 million, including a $3.28 million deferred tax benefit; $9.03 million of the loss was attributable to noncontrolling interests. The $17.46 million acquired in-process R&D charge arose from Asterias’s Geron asset acquisition and was expensed under the applicable accounting treatment.
Revenue increased 13.3%, but the mix shifted: license fees rose to $2.22 million, while product royalties fell 32.3% to $0.37 million and grant income declined 29.2% to $1.57 million. Revenue after cost of sales was $3.64 million, approximately 82% of total revenue; this is not a measure of operating profitability.
At year-end, cash and cash equivalents were $5.50 million, current assets $7.95 million, and current liabilities $6.96 million. Total liabilities were $15.47 million; the filing does not report material interest-bearing debt. Working capital was approximately $0.99 million. Financing activities provided $34.26 million during 2013, principally from equity and subsidiary-share sales; investing activities used $3.67 million. Contractual operating-lease obligations totaled $12.27 million.
After year-end, BioTime reported raising a further $11.97 million in equity, including $3.50 million from preferred stock and $8.47 million from at-the-market share sales. Management stated that cash and cash equivalents, together with this financing, were expected to fund operations for at least twelve months, while also warning that further financing might be needed.
Material changes and unusual items
- Revenue after cost of sales rose 4.6%, but operating loss more than doubled as R&D and G&A spending increased and the Geron acquisition generated the one-time $17.46 million acquired IPR&D charge.
- License fees included $899,551 of Summit-related revenue recognized in 2013 after termination of the Summit agreements, when previously deferred fees were accelerated. LifeMap database subscription and advertising revenue also increased.
- Hextend royalties continued to weaken amid declining hetastarch pricing and a contracting market. The FDA required a boxed warning and other label changes in November 2013 concerning mortality and renal-injury risks in critically ill adults, including patients with sepsis.
- Asterias issued shares to Geron and BioTime and sold shares and warrants to an investor as part of the asset transaction. BioTime’s ownership in Asterias declined from approximately 96.7% to 71.6%.
- The filing reports effective disclosure controls and internal control over financial reporting; the independent auditor gave an unqualified opinion on the financial statements and internal controls.
Outlook, commentary, and principal risks
No specific consolidated revenue, earnings, or cash-flow guidance was provided. Management described 2014 development priorities including advancing Renevia, completing planned cancer-marker studies, and evaluating Asterias programs. The Renevia safety study in ten healthy volunteers reported no serious adverse events or withdrawals; a further study was planned subject to regulatory and institutional approvals. OncoCyte expected to complete breast, bladder, and lung diagnostic studies during 2014. These were stated plans, not assured outcomes.
Key risks include sustained operating losses and cash burn; reliance on additional financing, grants, and collaborators; uncertain clinical and regulatory outcomes; manufacturing scale-up and product-market acceptance; intellectual-property disputes, including the ViaCyte appeal affecting potential endoderm-derived programs; and the possibility that Geron-acquired biological materials require further testing or regeneration. The FDA’s Hextend label changes may further impair sales. Management noted that subsidiary development pace and clinical trials depend on available capital. The filing does not provide a clear value for future development costs.
Important facts for investors to verify
- Confirm the issuer: this is BioTime, Inc.’s 2013 Form 10-K, despite the request identifying Lineage Cell Therapeutics.
- Review cash burn, post-year-end equity proceeds, dilution, and the assumptions behind management’s stated twelve-month funding runway.
- Separate recurring revenue from the one-time accelerated Summit fee recognition and assess the decline in Hextend royalties and grant income.
- Track the effect of the FDA’s hydroxyethyl-starch warnings on Hextend demand and license royalties.
- Verify clinical-study progress, required approvals, funding, and the status of Asterias’s Geron-derived assets and ViaCyte appeal.
- Assess the $12.27 million lease commitment and the planned Asterias manufacturing-facility build-out against available financing.