BioLife Solutions, Inc. — 2019 Form 10-K Summary
Business context and reporting period
BioLife develops and sells bioproduction tools used in cell and gene therapy manufacturing, storage, thawing and transport. Its product portfolio includes biopreservation media, automated thawing devices, cloud-connected shipping containers, and freezers and storage equipment. This filing reports the year ended December 31, 2019; it is an annual report, not a standalone fourth-quarter report. The 2018 comparative financial statements and specified 2018–2019 quarterly results are restated.
In 2019, BioLife acquired Astero (ThawSTAR), acquired the remaining interest in SAVSU (evo shipping systems), and acquired Custom Biogenic Systems (freezers and cryogenic equipment), broadening its product mix.
Financial results and liquidity
| Metric | 2019 | 2018, restated |
|---|---|---|
| Total revenue | $27.371 million | $19.742 million |
| Operating income (loss) | $(0.220) million | $3.662 million |
| Net income (loss) | $(1.657) million | $(25.005) million |
| Net loss per share | $(0.09) | $(1.56) |
| Cash from operating activities | $1.213 million | $2.348 million |
- Revenue increased 39%. Biopreservation media generated $23.358 million; acquired product lines contributed $4.013 million, with results included only from their respective acquisition dates. Media revenue grew 18% year over year.
- Gross margin was approximately 68% in 2019 versus 69% in 2018, based on reported revenue less cost of product and rental revenue. Management attributed the decline partly to acquired product lines’ higher costs and acquisition inventory step-up.
- Operating expenses rose 72% to $27.591 million, including higher R&D, selling and administrative costs, $1.079 million of acquired-intangible amortization and $0.940 million of acquisition costs.
- Net loss improved substantially from 2018, but results included a noncash $12.835 million warrant-liability fair-value expense and a noncash $10.108 million gain on the SAVSU acquisition. These items materially affect period comparisons.
- Cash and cash equivalents were $6.448 million at year-end, down from $30.657 million. Current assets were $24.113 million and current liabilities $7.669 million. Operating cash flow was positive, while investing activities used $27.018 million, principally for acquisitions and investments.
- Year-end liabilities included a $39.602 million warrant liability and $1.354 million of operating lease liabilities. The warrant liability is a fair-value accounting liability, not conventional funded debt. The filing does not indicate material outstanding borrowings; it reports only a small equipment-financing obligation.
Material changes, outlook and risks
- Restatement: Warrants issued in 2014 were reclassified from equity to liabilities because of a potential cash-settlement feature; fair-value changes are recorded in earnings. The restatement also corrected 2019 accounting for market-based stock awards and certain Astero acquisition valuations. The company stated that the warrant reclassification did not affect cash, liquidity, revenue or operating costs, but it materially changed reported earnings and equity. Previously issued financial statements for periods from 2014 through September 2019 should not be relied upon; use the restated information in this filing and subsequent filings.
- Controls and audit: Management concluded that disclosure controls and internal control over financial reporting were ineffective at December 31, 2019 due to a material weakness involving insufficient technical resources and review of complex financial instruments and market-based awards. The auditor issued an adverse opinion on internal control, while issuing an unqualified opinion on the 2019 financial statements. Management planned to use external specialists as needed to remediate the weakness.
- Management outlook: The company expected operating expenses to increase in 2020 as it developed acquired products and expanded commercial capabilities. It anticipated continued revenue fluctuations from customer ordering patterns and product mix. No specific revenue or earnings guidance was provided.
- Liquidity outlook: Management believed year-end cash would fund needs for at least 12 months, subject to revenue performance, expense management, COVID-19 effects and potential acquisitions. It said additional financing might be needed or pursued and might not be available on reasonable terms.
- COVID-19: The filing described facility closures and operating disruptions, uncertainty around customer demand and suppliers, and estimated inventory sufficient for previously forecast demand for six to nine months. BioLife reported a late-March 2020 increase in biopreservation-media orders attributed to customers securing inventory, but said the pandemic’s ultimate impact was uncertain.
- Subsequent financing and warrants: On May 14, 2020, Casdin agreed to invest $20 million at $10.50 per share, subject to closing conditions. Also that day, warrant holders exercised 3,871,405 warrants cashlessly, and the company issued 2,747,970 shares. The company received a $2.175 million PPP loan in April 2020 and repaid it on April 29, 2020.
- Other risks: Revenue remains concentrated in CryoStor (about 74% of 2019 revenue) and a limited number of customers; one customer represented approximately 15% of revenue. Other cited risks include acquisition integration and impairment, supplier dependence, competition, and expiration of a HypoThermosol-related U.S. patent in April 2019.
Important facts for investors to verify
- Use the restated comparative statements and quarterly data, and assess the continuing effects of the warrant liability’s fair-value volatility.
- Check progress in remediating the material weakness and whether future filings or audits identify further errors.
- Evaluate post-acquisition revenue, margins, operating costs, and integration performance against management’s expectations.
- Confirm the status and terms of the Casdin financing, the effects of cashless warrant exercises on share count, and remaining potential acquisition earnouts.
- Monitor cash use, inventory levels, customer and product concentration, and actual COVID-19 impacts on demand and supply.