Filing identity and reporting period
The supplied filing is BioTime, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2011, filed August 9, 2011. It does not identify Lineage Cell Therapeutics, Inc. as the registrant; verify that this is the intended filing.
Business context
BioTime described itself as a biotechnology company focused primarily on regenerative medicine, including stem-cell research products and preclinical therapeutic programs, alongside its plasma-volume-expander product Hextend. The consolidated results include multiple subsidiaries, several of which BioTime did not wholly own.
Financial performance and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue, 2011 | $755,553 | $1,581,407 |
| Revenue, 2010 | $680,278 | $1,447,406 |
| Net loss attributable to BioTime, 2011 | $(4,277,928) | $(7,642,222) |
| Net loss attributable to BioTime, 2010 | $(2,259,775) | $(3,546,538) |
| Basic and diluted loss per share, 2011 | $(0.09) | $(0.16) |
| Research and development expense, 2011 | $3,285,286 | $6,143,222 |
| General and administrative expense, 2011 | $2,451,261 | $4,444,644 |
Revenue increased about 11% year over year in both the quarter and six-month period, while the attributable net loss widened substantially. Hextend royalties fell 18% in the quarter and were $393,197 for the six months, versus $512,294 a year earlier. Management attributed the royalty decline mainly to lower prices for competing products, which led Hospira to reduce Hextend pricing. The filing does not present gross profit or a conventional gross margin.
For the six months, net cash used in operating activities was $6,402,906, investing activities used $530,153, and financing activities provided $827,381. Cash and cash equivalents were $27,381,941 at June 30, down from $33,324,924 at year-end 2010. Total assets were $53,457,744; current liabilities were $3,286,882 and total liabilities were $4,588,265. No borrowings are reported on the balance sheet. Current assets were $29,419,983, providing substantial coverage of current liabilities; the principal disclosed fixed obligations were operating leases.
Changes, outlook, risks, and unusual items
- Operating expenses rose with expanded research and development and corporate activity, including acquisitions and consolidation of subsidiaries. Six-month R&D expense increased from $2,588,978 to $6,143,222; G&A increased from $2,499,973 to $4,444,644.
- BioTime acquired Cell Targeting assets and merged Glycosan into OrthoCyte during 2011. These transactions added intangible assets and involved share and warrant consideration; intangible assets, net, increased to $21,645,188 from $15,386,905 at year-end.
- Foreign-currency translation loss was $1,598,542 for the six months, contributing to comprehensive net loss of $9,240,764.
- Management said subsidiary capital was expected to support current R&D plans during 2011, but revenues did not cover operating expenses and additional debt or equity financing might be needed. Financing availability and terms were uncertain; additional equity could dilute shareholders. The company had already curtailed aspects of its plasma-expander development work due to funding limits.
- Therapeutic programs were largely preclinical; development, clinical trials, and regulatory approval were uncertain, costly, and potentially lengthy. Other stated risks included reliance on grants and Hextend royalties, competitive pricing, stem-cell market and regulatory uncertainty, intellectual-property and licensing risks, and foreign-exchange exposure. BioTime did not hedge foreign currency.
- A subsequent event disclosed a $335,900 NIH small-business research grant received in July 2011. Management provided no formal revenue or earnings guidance.
Important facts for investors to verify
- Confirm the registrant: the source is BioTime, Inc., not Lineage Cell Therapeutics, Inc.
- Review the drivers and sustainability of the widening losses and operating cash use, including the effect of acquired subsidiaries and noncash amortization and compensation.
- Verify cash runway and financing needs against planned research spending, lease commitments, and the possibility of dilution.
- Assess the trend in Hextend royalties and the commercialization prospects and development status of research products and therapeutic programs.
- Review acquisition accounting and preliminary purchase-price allocations, as well as foreign-currency translation effects and subsidiary noncontrolling interests.