BioRestorative Therapies, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are with FY 2021. The company is a pre-commercial biotechnology business developing adult stem-cell therapies. Its lead candidate, BRTX-100, is in a Phase 2 trial for chronic lower-back pain associated with degenerative disc disease; ThermoStem remains preclinical.
Financial performance and liquidity
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $119,800 | $46,000 |
| Research and development expense | $3.51 million | $0.73 million |
| General and administrative expense | $15.58 million | $25.62 million |
| Operating loss | $18.97 million | $26.31 million |
| Net loss | $18.49 million | $44.30 million |
| Net cash used in operating activities | $5.87 million | $3.33 million |
- All revenue was royalty revenue from a sublicense agreement; the company reported no significant operating revenue to date. Profit margins are not meaningful given the minimal revenue and continuing losses.
- R&D expense increased 382% as development activity resumed. G&A fell 39%, primarily due to a $10.4 million decrease in stock-based compensation.
- FY 2021 net loss included a $16.18 million loss on extinguishment of notes payable and $1.82 million in interest expense. Their absence in 2022, along with $250,000 of PPP loan-forgiveness income and $110,518 of grant income, contributed to the lower reported net loss.
- Stock-based compensation was $12.61 million in 2022, a substantial noncash expense. The company reported accumulated deficit of $152.64 million.
- At year-end, cash and cash equivalents were $1.68 million and marketable securities were $13.07 million, totaling $14.75 million. Working capital was $14.69 million. Total liabilities were $0.60 million; notes payable were zero after PPP loan forgiveness. Lease liabilities totaled approximately $0.30 million.
- Investing cash outflow was $13.48 million, principally purchases of marketable securities; financing cash flow was zero. No material off-balance-sheet arrangements were reported.
Material changes and business developments
- The FDA-authorized BRTX-100 Phase 2 trial was underway: the first patient was enrolled in June 2022, and agreements were in place with 11 trial sites. The planned study is randomized, double-blind and placebo-controlled, with 99 patients and a primary efficacy endpoint at 12 months.
- The company completed testing and certification of its clinical-grade manufacturing facility and expanded its laboratory for clinical production. It cautioned that substantially greater manufacturing capacity would be needed for Phase 3 and commercial-scale production.
- In December 2022, the company restored exclusive rights to licensed disc/spine intellectual property after paying $175,000 and issuing 51,370 warrants valued at $117,030.
- ThermoStem remained preclinical. A $256,000 NIH STTR Phase 1 grant awarded in 2021 supported BRTX-100-related research; a separate NIH SBIR Phase 1 grant announced in December 2022 supports ThermoStem research for polycystic ovary syndrome.
- The company reincorporated from Delaware to Nevada in December 2022. It also reported a February 2023 grant of approximately 629,000 stock options to officers, an employee, directors and scientific advisers; this is a subsequent event, not a FY 2022 operating result.
Outlook, risks and controls
- Management said year-end funds were expected to support operations for 12 months from the financial-statement issuance date, but also stated that additional financing would be required to complete a contemplated Phase 3 trial, advance other programs and support general operations. The 2021 offering proceeds were considered sufficient for Phase 2, not Phase 3.
- The filing provides no revenue or earnings guidance. Management expects continued substantial costs and losses. The company stated that commercialization of BRTX-100 was not anticipated for at least five years.
- The financial statements were prepared on a going-concern basis. The filing warns that failure to obtain timely financing could require curtailing development or operations, or potentially liquidation.
- Key risks include clinical-trial enrollment, safety or efficacy failures, regulatory delays or denial, variability in autologous cell manufacturing, limited Phase 3 and commercial manufacturing capacity, dependence on third parties and specialized supplies, uncertain reimbursement, competition, intellectual-property challenges and future dilution.
- Management found disclosure controls and internal control over financial reporting ineffective at December 31, 2022 because of a material weakness involving formal procedures, risk assessment, and documented testing and review controls. Remediation was in progress; effectiveness had not yet been established. The auditor did not attest to internal-control effectiveness. The financial-statement audit opinion was unqualified.
Important facts for investors to verify
- Current Phase 2 enrollment, site activity, timeline, safety updates and eventual efficacy results for BRTX-100.
- Actual cash burn and available liquidity, and the timing, amount and terms of financing needed for Phase 3 and ongoing operations.
- Whether the company can expand compliant manufacturing capacity and secure reliable supplies for later-stage trials.
- Progress in remediating the reported material weakness and whether controls operate effectively over a sufficient period.
- Potential dilution: as of March 22, 2023, 3,767,615 common shares were outstanding; the filing also reported substantial outstanding warrants, options and Series B preferred stock subject to conversion and ownership limits.
- Whether the licensed intellectual-property exclusivity, reimbursement prospects and regulatory pathway support the company’s development and commercialization assumptions.