Filing identity and reporting period
The supplied filing is BioTime, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2015. This differs from the requested company, Lineage Cell Therapeutics, Inc.; the filing’s financial information below is for BioTime and its consolidated subsidiaries, not Lineage.
BioTime describes itself as a regenerative-medicine company with therapeutic, diagnostic, research-products, and database businesses. Its consolidated operations include majority-owned Asterias and other subsidiaries.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Total revenue | $1.264 million | $1.067 million; up 19% |
| Gross profit | $1.000 million; approximately 79% gross margin | $0.935 million; approximately 88% margin |
| Research and development | $9.324 million | $8.405 million; up 11% |
| General and administrative | $5.179 million | $3.667 million; up 41% |
| Loss from operations | $13.502 million | $11.138 million |
| Net loss attributable to BioTime | $10.167 million; $0.13 per share | $8.099 million; $0.14 per share |
| Net cash used in operating activities | $9.069 million | $10.357 million |
Revenue increases came mainly from grants and royalties; research-products and services revenue declined. Cost of sales doubled to $264,000, reducing gross margin despite higher revenue. The larger net loss reflected increased operating expenses and a swing to other expense, including foreign-currency losses. The per-share loss narrowed as weighted-average shares rose to 78.3 million from 58.3 million.
At March 31, cash and cash equivalents were $25.830 million, down from $29.487 million at year-end. Current assets were $28.544 million and current liabilities $8.203 million; reported working capital was $20.341 million. Total shareholders’ equity was $57.512 million. The company reported an accumulated deficit of $192.358 million.
Financing activities provided $5.684 million, primarily from Asterias’ approximately $5.5 million stock offering; investing activities used $0.373 million. Cash declined by $3.657 million during the quarter. The balance sheet included $170,000 of current related-party convertible debt, net of discount, and capital- and operating-lease obligations. Operating lease commitments totaled $10.786 million; capital lease commitments totaled $85,000.
Changes, outlook, and risks
- R&D expense growth was attributed to continued development at Asterias and LifeMap Solutions, OncoCyte clinical work, and increased ESI BIO activity. G&A growth reflected higher staffing and compensation, consulting, audit and tax, legal, investor-relations, and director costs.
- Management said available cash was expected to fund operations at least through 2015. This is not a profitability outlook; BioTime stated that revenues were insufficient to cover operating expenses and that it would continue seeking equity, debt, grants, and other funding.
- Asterias’ $14.3 million CIRM grant is paid in installments subject to progress and safety milestones. Asterias received $2.270 million in January and $1.062 million in April 2015; future installments were not assured. The company warned that loss of grant funding could delay or curtail subsidiary clinical programs.
- Key risks include ongoing losses, uncertain clinical and regulatory outcomes, need for additional capital and potential dilution, grant conditions, competition, product demand and reimbursement, and foreign-exchange exposure. BioTime does not hedge foreign currency risk.
- Asterias’ Fremont cGMP facility was expected to be substantially complete and in service in Q3 2015. The landlord allowance was $4.4 million; $283,764 had been received by quarter-end, with $560,970 of recorded construction costs qualifying for reimbursement.
- Subsequent event: in May, BioTime exchanged $3.3 million of OncoCyte debt for shares and received a further $3.3 million convertible note, bearing 1% interest and due November 2016. OncoCyte also accepted $3.3 million of subscriptions from shareholders.
- No pending litigation was reported. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm issuer identity: the supplied document is BioTime’s 10-Q, although the request names Lineage Cell Therapeutics.
- Review cash runway assumptions and the timing, conditions, and availability of CIRM and other grant funding; management’s stated cash coverage was only through 2015.
- Assess the drivers and sustainability of rising R&D and G&A expenses, and the effect of higher cost of sales on gross margin.
- Check subsequent financing and related-party transactions, including the OncoCyte debt conversion and note, and potential shareholder dilution.
- Monitor clinical progress, regulatory milestones, facility completion, and the ability to raise capital; the filing provides no assurance of profitability or successful product development.