Filing summary
Entity and period: The supplied filing is BioTime, Inc.’s Form 10-Q for the quarter ended September 30, 2015, not a filing identified as Lineage Cell Therapeutics, Inc. The figures below summarize BioTime and its consolidated subsidiaries; verify the company identity before relying on this summary. Financial amounts are in U.S. dollars.
Business context and financial performance
BioTime describes itself as a regenerative-medicine company, with research and development across stem-cell therapies, cancer diagnostics, and research products, alongside database subscriptions, royalties, and grant-funded work. The statements cover the three and nine months ended September 30, 2015, compared with the same 2014 periods.
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $2.306 million | $1.191 million | $5.575 million | $3.365 million |
| Gross profit | $1.874 million | $0.960 million | $4.618 million | $2.751 million |
| Operating expenses | $18.978 million | $13.098 million | $48.727 million | $39.032 million |
| Operating loss | $17.104 million | $12.138 million | $44.109 million | $36.281 million |
| Net loss | $16.741 million | $9.951 million | $41.329 million | $30.979 million |
| Net loss attributable to BioTime | $13.626 million | $8.268 million | $33.567 million | $25.828 million |
| Net loss per common share, basic and diluted | $0.18 | $0.12 | $0.43 | $0.41 |
Q3 gross margin was approximately 81% of revenue, compared with approximately 81% in Q3 2014. The filing reports no operating profit; ongoing research and development and administrative spending substantially exceeded revenue.
Liquidity, cash flow, and debt
- At September 30, 2015, cash and cash equivalents were $29.378 million; working capital was $24.0 million. Total assets were $76.859 million and total shareholders’ equity was $60.934 million.
- For the first nine months, operating cash use was $30.597 million, investing cash use was $4.853 million, and financing provided $35.231 million. Cash decreased by $0.109 million from year-end 2014.
- Financing included $8.578 million from BioTime common-share issuance, $11.7 million from exercise of Asterias warrants, $11.586 million from subsidiary share sales, and other proceeds. Investing included $3.830 million for construction in progress and a $0.500 million advance to Hepregen.
- Current liabilities were $10.336 million and long-term liabilities $5.589 million. Balance-sheet debt included promissory notes of $0.363 million in total and related-party convertible debt with a net carrying value of $0.255 million. The filing also reports $4.089 million of lease liability and $10.068 million of operating-lease commitments.
Changes, outlook, and material items
- Revenue rose 94% in Q3 and 66% for the nine-month period. Grant income was the largest revenue category and increased 126% in Q3 and 93% year to date; royalties also increased. Grant and royalty revenue do not have corresponding cost of sales, while reported product sales and license-related costs increased.
- R&D expense rose 29% in Q3 and 14% year to date; general and administrative expense rose 77% and 48%, respectively. Management attributed increases to staffing and compensation, consulting and outside research, clinical and regulatory work, and public-company-related costs. Stock-based compensation was $7.189 million for the nine months.
- Management said quarter-end cash plus $25.5 million raised in October 2015 was expected to fund operations at least through December 31, 2016. This is management’s estimate, not a guarantee; the company continued to anticipate needing additional financing because revenue did not cover operating costs.
- October financing included BioTime’s sale of 8,130,612 shares for $25.5 million. Asterias and Cell Cure clinical work depended partly on grant funding; the CIRM award to Asterias was subject to progress and safety milestones, and the company warned that loss of grant funding could delay or curtail trials.
- Other subsequent events included BioTime’s dual listing on the Tel Aviv Stock Exchange, a planned pro rata distribution of OncoCyte shares (with key terms not yet determined), and a planned Ascendance Biotechnology business combination involving Hepregen assets. Asterias also entered an agreement for AST-VAC2 process development and licensing with potential payments of up to approximately $6.6 million over five years.
- Key risks include clinical and regulatory uncertainty, the need for further capital and possible shareholder dilution, grant-milestone dependence, foreign-currency exposure, and OncoCyte’s laboratory certification, diagnostic-test regulation, and reimbursement risks. The filing also flags a competitor patent that could affect Cell Cure’s ability to manufacture or commercialize OpRegen if infringement and validity were established.
Most important facts to verify
- Confirm that BioTime, rather than Lineage Cell Therapeutics, is the intended issuer; the filing text identifies BioTime throughout.
- Check the October share-sale proceeds and subsequent cash position against later filings, and assess whether management’s runway estimate remains valid.
- Review grant conditions and continued funding for Asterias and Cell Cure, including the CIRM milestone requirements.
- Track operating cash burn and spending growth, particularly R&D, general and administrative costs, and stock-based compensation.
- Verify the status and terms of the planned OncoCyte distribution and Ascendance transaction, and assess related financing, dilution, and consolidation effects.
- Assess the OpRegen patent issue and OncoCyte’s laboratory, regulatory, and reimbursement hurdles.