Filing summary
Entity and period: The supplied filing is BioTime, Inc.’s Form 10-Q for the quarter ended March 31, 2018, signed May 10, 2018. It does not identify Lineage Cell Therapeutics, Inc. as the registrant; verify that this is the intended filing.
Business context
BioTime describes itself as a clinical-stage biotechnology company focused on degenerative diseases. Its lead cell-replacement candidate, OpRegen, was in a Phase I/IIa trial for dry age-related macular degeneration; its lead cell-delivery product, Renevia, was a potential treatment for facial lipoatrophy. BioTime also consolidated AgeX and other subsidiaries, while accounting for its Asterias and OncoCyte holdings at fair value.
Financial highlights
Amounts below are in millions of dollars unless otherwise indicated.
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Revenue | $0.701 | $0.390 |
| Gross profit | $0.592 | $0.333 |
| Gross margin | 84.5% | 85.4% |
| Research and development expense | $5.935 | $6.494 |
| General and administrative expense | $6.044 | $5.101 |
| Operating loss | $(12.187) | $(11.262) |
| Net income (loss) attributable to BioTime | $(63.548) | $49.288 |
| Basic and diluted loss per share | $(0.50) | $0.46 |
| Net cash used in operating activities | $(10.338) | $(8.098) |
At March 31, 2018, cash and cash equivalents were $29.8 million; cash, cash equivalents, and marketable equity securities totaled $31.4 million. Working capital was $30.3 million, total assets were $110.4 million, and shareholders’ equity was $102.5 million. Total liabilities were $7.9 million. Current and long-term lease liabilities, capital leases, and promissory notes were reported; the filing does not present a single aggregate debt figure.
Changes and unusual items
- Revenue rose 79.7% year over year, principally because grant revenue increased by $315,000, including a new NIH grant and Israeli Innovation Authority funding. Subscription and advertising revenue declined by $25,000.
- Operating expenses increased overall, including $800,000 of acquired in-process R&D expensed after AgeX acquired cardiomyocyte-related assets. G&A increased $943,000, primarily from legal and compliance costs, patent fees, and compensation.
- The $63.5 million attributable net loss was driven largely by noncash fair-value losses of $37.4 million on OncoCyte shares and $17.4 million on Asterias shares. Those holdings were valued at $30.8 million and $31.5 million, respectively, at quarter-end.
- AgeX recognized a $3.2 million gain on the sale of its Ascendance investment. It also paid $800,000 for in-process R&D assets. AgeX received $736,800 from warrant sales.
- Operating cash use exceeded the prior-year quarter by $2.2 million. Investing activities provided $2.2 million and financing activities provided $0.6 million; cash, cash equivalents, and restricted cash declined by $7.4 million during the quarter.
Outlook, risks, and contingencies
Management said cash, cash equivalents, and marketable equity securities of $31.4 million, together with the $62.3 million market value of its Asterias and OncoCyte shares, were expected to support current operations for at least 12 months from issuance of the financial statements. Management cautioned that the affiliate-share values may not be realizable at stated prices because of trading volume, market conditions, and securities-sale restrictions. It had no present plan to sell those holdings.
The company reported significant accumulated losses and said additional financing might be required. Loss or insufficiency of grant funding for OpRegen could require clinical-trial delays, reduced sites, or cancellation; additional equity financing could dilute shareholders. Development and regulatory approval of experimental products remain uncertain. BioTime reported no pending litigation and no off-balance-sheet arrangements, and said disclosure controls were effective. No specific earnings or revenue guidance was provided.
Other notable events: BioTime adopted the new revenue-recognition standard in January 2018, with an immaterial cumulative adjustment. Shareholders approved increasing authorized common shares to 250 million on May 1, 2018. The filing also reports a subsequent NIH grant award of up to approximately $386,000 to ReCyte.
Investor verification points
- Confirm the registrant and filing match the intended company: the supplied text is BioTime’s filing, not a filing naming Lineage Cell Therapeutics.
- Assess the cash runway using operating cash burn and distinguish liquid cash and marketable securities from the much more volatile Asterias and OncoCyte holdings.
- Review the drivers and sensitivity of the large fair-value losses, including affiliate share prices and any tax effects.
- Check the status, grant funding, and clinical progress of OpRegen and other development programs, as well as the impact of AgeX spending.
- Review potential dilution, including the at-the-market offering capacity and outstanding options and warrants.