BioLife Solutions, Inc. — 2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. This is an annual filing; it does not provide standalone fourth-quarter results.
Business context
BioLife develops, manufactures and sells biopreservation media and related services for cells, tissues and organs, serving regenerative medicine, biobanking and drug-discovery markets. Its principal products include HypoThermosol and CryoStor. The company reported that its products were used in more than 250 regenerative-medicine applications, including CAR-T and other cell therapies.
Financial results and liquidity
| Metric | 2016 | 2015 |
|---|---|---|
| Revenue | $8.23 million | $6.45 million |
| Gross profit / margin | $4.78 million / 58.1% | $3.81 million / 59.1% |
| Operating expenses | $9.63 million | $8.83 million |
| Operating loss | $4.85 million | $5.02 million |
| Consolidated net loss | $8.04 million | $5.00 million |
| Net loss attributable to BioLife | $6.88 million | $4.21 million |
| Net cash used in operating activities | $4.33 million | $4.97 million |
Revenue grew 28%, driven by a 56% increase in regenerative-medicine sales and a 30% increase in distributor revenue. Gross margin declined modestly, attributed to higher overhead and expired-inventory adjustments. Operating expenses rose 9%; research and development increased 47%, while general and administrative expense declined 6%.
At year-end, cash and cash equivalents were $1.41 million, with no short-term investments, versus $3.82 million in combined cash and short-term investments at December 31, 2015. Current assets were $4.63 million and current liabilities $1.13 million. Total assets were $7.93 million; total liabilities were $4.76 million. The balance sheet reported a related-party note payable net of discount of $2.84 million and accrued related-party interest of $98,000. The company had $3.0 million drawn under a $4.0 million WAVI facility at year-end; the final $1.0 million advance was received March 1, 2017.
Management said year-end liquidity, together with the subsequent $1.0 million advance, was expected to fund needs for the next 12 months. It cautioned that weaker-than-expected revenue or insufficient expense control could require additional debt or equity financing. No cash interest or income taxes were paid in 2016.
Material changes, outlook and notable items
- SAVSU joint-venture restructuring: On December 31, 2016, BioLife reduced its interest in the formerly majority-owned biologistex venture to 45%, contributed $6.56 million of outstanding loans to the venture, and lost control. It deconsolidated the venture and began equity-method accounting; its retained investment was recorded at $2.08 million. The transaction produced a $2.79 million loss, including approximately $0.1 million of restructuring charges, and materially increased the reported consolidated loss.
- BioLife agreed to transfer additional interests to STLLC, with ownership expected to fall to 40% after one year and 25% after two years, subject to specified provisions. Management expected annual operating-expense savings of $1.6–$2.0 million from the restructuring.
- Related-party debt: A January 2017 amendment extended the WAVI note’s maturity to June 1, 2022, retaining a 10% annual interest rate. It provides for interest-only payments from September 2017 through June 2018, followed by quarterly principal payments plus interest.
- Management cited customer adoption agreements and a pipeline of cell-therapy applications, but commercialization depends partly on customers obtaining regulatory approvals and scaling their therapies. The filing does not provide formal company revenue or earnings guidance.
- BioLife reported a $71.2 million accumulated deficit and a history of annual operating losses. It identified risks including customer and market concentration, competition, supplier dependence, manufacturing and quality requirements, future capital needs, dilution, and uncertainty over commercialization.
- U.S. patent 6,045,990, covering HypoThermosol FRS, was scheduled to expire in April 2019; foreign counterparts were scheduled to expire in July 2019. The company noted potential pricing and competitive effects.
- Several lawsuits stemming from 2007 employment and business disputes remained in discovery; BioLife said it would vigorously defend its position. It reported no other currently material ordinary-course litigation.
Important facts for investors to verify
- Reconcile the reported loss with the $2.79 million noncash deconsolidation loss, and assess the valuation assumptions used for the retained SAVSU investment.
- Track cash burn, sales growth, gross-margin trends and whether the stated 12-month liquidity expectation remains achievable, including required WAVI payments.
- Confirm the timing and realization of expected $1.6–$2.0 million annual cost savings and the planned reduction in SAVSU ownership.
- Assess customer and distributor concentration, customer therapy approvals and the effect of the 2019 HypoThermosol patent expirations.
- Review potential dilution and control implications: two shareholders collectively held approximately 61.9% of outstanding shares at year-end, and substantial options and warrants were outstanding.
The independent auditor issued an unqualified opinion on the consolidated financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal control.