BioLife Solutions, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2014. BioLife develops and sells biopreservation media and precision thermal shipping products, and provides related services. Financial statements are unaudited.
Financial performance and position
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Total revenue | $1.243 million | $2.170 million | $4.520 million | $6.661 million |
| Gross profit | $588,394 | $888,857 | $2.037 million | $2.843 million |
| Gross margin | 47.3% | 41.0% | 45.1% | 42.7% |
| Operating loss | $874,513 | $110,093 | $2.131 million | $606 |
| Net loss | $862,455 | $309,910 | $2.305 million | $599,592 |
| Loss per share, basic and diluted | $0.07 | $0.06 | $0.23 | $0.12 |
- Core product sales increased 24% in Q3 and 27% for the nine months. Nine-month core product sales were $3.452 million; contract manufacturing revenue was $1.068 million, versus $3.338 million in the prior-year period. The contract with the significant manufacturing customer was terminated in May 2014.
- Q3 revenue fell 43% year over year, largely because there was no contract manufacturing revenue in Q3 2014. Nine-month revenue fell 32%, also reflecting lower contract manufacturing revenue and no comparable 2014 licensing revenue. The 2013 nine-month period included $609,167 of licensing revenue with no associated costs.
- Operating expenses rose 46% in Q3 to $1.463 million and 47% for the nine months to $4.169 million. Nine-month increases included higher R&D, sales and marketing, and general and administrative costs. Q3 G&A included about $83,000 in the first biologistex payment and $80,000 in joint-venture legal costs.
- At September 30, cash and cash equivalents were $3.275 million and short-term investments were $7.744 million, totaling $11.019 million. Current assets were $12.833 million and current liabilities $833,014. Management said available liquidity was expected to meet needs for the foreseeable future.
- Nine-month operating cash flow was negative $2.466 million; investing cash flow was negative $8.092 million, primarily due to purchases of available-for-sale investments; financing cash flow was positive $13.677 million, principally from the public offering.
- Debt was eliminated when approximately $14.3 million of notes and accrued interest was converted to equity in March. Total liabilities were $1.587 million at quarter-end, including deferred rent. Shareholders’ equity was $12.667 million, versus a $13.272 million deficiency at December 31, 2013.
Material changes and transactions
- In March, BioLife raised $15.432 million gross ($13.596 million net) through a registered offering of units, each including a share and a seven-year warrant. It also issued 3.321 million units to noteholders in the debt conversion. The offering and conversion materially increased shares outstanding; 7.428 million warrants were outstanding at September 30.
- BioLife listed its common stock on Nasdaq in March and completed a 1-for-14 reverse stock split in January.
- In September, BioLife formed biologistex with SAVSU Technologies, holding 52% of the venture. BioLife committed a $2.4 million initial capital contribution and $1 million in payments to SAVSU over 12 months. The venture has an approximately $2.6 million minimum purchase commitment for smart containers over 24 months. BioLife consolidates the venture and may need to fund expense reimbursements through intercompany loans.
- The lease was amended to expand space from approximately 26,000 to 30,000 square feet. The term runs through July 2021, with two five-year extension options; scheduled future minimum lease payments were $4.791 million.
Outlook, commentary, and risks
- Management’s 2014 goal was to grow core product sales 25%–35% over 2013; achievement was not assured. Management cited adoption, customer clinical and commercial progress, competition, and other risks as relevant factors.
- BioLife expected to launch biologistex in the first quarter of 2015 and did not expect significant related revenue in Q4 2014. Management described the opportunity to realize the regenerative medicine market more fully over the next three to five years.
- Sales may fluctuate significantly with the timing and progress of customers’ clinical trials. Revenue is concentrated among a small number of customers and market sectors. One contract manufacturing customer represented about 24% of nine-month 2014 product revenue; two other customers represented 34% and 22% of Q3 revenue, respectively.
- Joint-venture risks include shared decision-making with SAVSU, possible disputes or deadlock, dependence on SAVSU’s technology and manufacturing, and BioLife’s sales-target and funding obligations. The filing also reports ongoing New York legal matters involving the Company and its former CEO and family members; no significant developments occurred in the period and no litigation accrual was recorded.
- Disclosure controls and procedures were assessed as effective at September 30, 2014. The filing provides no specific earnings guidance beyond the core-sales goal and biologistex launch expectations.
Important facts for investors to verify
- Whether core product growth can offset the loss of contract manufacturing revenue and the absence of prior-year licensing revenue.
- Progress toward the 25%–35% 2014 core-sales goal, and the underlying adoption and clinical-trial order trends.
- Biologistex’s launch timing, sales targets, minimum purchase commitments, capital needs, and any intercompany funding required.
- Customer concentration, cash burn, and the adequacy of liquidity as operating losses continue.
- Potential dilution from the substantial warrant balance, and developments in the disclosed litigation and other commitments.