BioLife Solutions, Inc. — 2017 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2017. This annual filing reports full-year results; it does not provide a separate fourth-quarter financial summary. BioLife develops, manufactures, and sells biopreservation media and related services for cells, tissues, and organs, serving regenerative medicine, biobanking, and drug-discovery markets.
Financial performance and position
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | $11.02 million | $8.23 million |
| Gross profit / gross margin | $6.75 million / 61.2% | $4.78 million / 58.1% |
| Operating expenses | $7.80 million | $9.63 million |
| Operating loss | $1.06 million | $4.85 million |
| Consolidated net loss | $2.52 million | $8.04 million |
| Net loss attributable to BioLife | $2.52 million | $6.88 million |
| Net cash from/(used in) operating activities | $0.61 million | ($4.33 million) |
| Cash and cash equivalents at year-end | $6.66 million | $1.41 million |
- Revenue increased 34%; management attributed growth principally to regenerative medicine sales, up 54%, higher distributor revenue, up 30%, increased liters sold, and a higher average selling price per liter.
- Gross margin rose to 61.2% from 58.1%, reflecting improved pricing and product mix, partly offset by higher direct overhead and raw-material costs.
- Operating expenses fell 19%, largely because the 2016 deconsolidation of the biologistex/SAVSU venture removed related costs from BioLife’s consolidated results.
- Year-end current assets were $9.93 million and current liabilities were $1.51 million. Total assets were $12.14 million; total liabilities were $2.05 million.
- BioLife reported no promissory-note balance at year-end: in June 2017, $4.25 million of related-party debt and accrued interest was exchanged for Series A preferred stock. The preferred stock has a 10% annual cash dividend and a $4.25 million liquidation preference; redemption at stated value is at the company’s discretion.
- Cash from financing activities was $4.80 million, including $1.0 million in credit-facility proceeds and $3.98 million from option and warrant exercises. Preferred dividends of $212,500 were recognized for 2017, of which $106,250 was accrued at year-end and paid in January 2018.
Material changes and notable developments
- Revenue grew from $8.23 million to $11.02 million, and operating cash flow improved from a $4.33 million use to $0.61 million provided.
- BioLife’s 2017 net loss narrowed materially from 2016, when results included a $2.79 million loss on deconsolidation of biologistex. In 2017, the company recorded a $1.00 million equity-method loss on its SAVSU investment.
- BioLife held a 45% interest in SAVSU at December 31, 2017 and recorded a $1.07 million investment balance. A January 22, 2018 amendment set its ownership and share of profits and losses at 35%, subject to ordinary dilution, in exchange for terminating a services agreement.
- WAVI, a principal stockholder, received the Series A preferred stock in the debt exchange. Two stockholders, Taurus and WAVI, together beneficially owned approximately 57.1% of common shares at December 31, 2017.
Outlook, risks, and other matters
- Liquidity outlook: Management stated that year-end cash was expected to fund liquidity needs for at least the next 12 months, based on current revenue, expense, and preferred-dividend expectations. It cautioned that weaker-than-expected revenue or insufficient expense management could require additional financing. No specific revenue or earnings guidance was provided.
- Management cited more than 275 applications incorporating its products and anticipated potential growth as customers obtain regulatory and marketing approvals and begin commercial manufacturing. Customer therapy approvals and commercialization remain outside BioLife’s control.
- Key risks include customer and market concentration, continuing losses and uncertain future financing needs, competition, dependence on external suppliers, manufacturing and quality-system interruption, and the uncertain commercial success of customers’ therapies. One distributor represented approximately 12% of revenue in both 2017 and 2016; two customers represented 41% of year-end 2017 gross accounts receivable.
- Patent 6,045,990, covering HypoThermosol FRS, was scheduled to expire in the United States in April 2019 and in foreign counterparts in July 2019. The filing notes potential competitive and pricing pressure after expiry; the company may seek extensions and also relies on trade secrets and know-how.
- Former-employee lawsuits dating to 2007 were disclosed; the company stated they were not material as of the filing date. Other ordinary-course legal proceedings were also described as not currently material.
- The independent auditor gave an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not provide an ICFR attestation.
Important facts for investors to verify
- Whether regenerative-medicine customers’ products receive approvals and reach commercial-scale production, and how that translates into recurring BioLife sales.
- Whether revenue growth, average selling prices, and gross margins can be sustained as volume and product mix change.
- Cash use, the adequacy of the stated 12-month liquidity outlook, and the cash cost and priority of the preferred stock’s 10% dividend and liquidation preference.
- The effect of the 2019 HypoThermosol-related patent expirations on competition, pricing, and market share.
- SAVSU’s operating performance, BioLife’s revised 35% interest and profit-and-loss participation, and any dilution or further funding requirements.
- Customer concentration, supplier continuity, and potential dilution from outstanding options, warrants, and other equity awards.