Business context and reporting period
The supplied filing is BioTime, Inc.’s Form 10-Q for the quarter ended June 30, 2018, not a filing under the name Lineage Cell Therapeutics, Inc. BioTime was a clinical-stage biotechnology company focused on cell replacement and cell/drug delivery; its lead programs included OpRegen, in a Phase I/IIa trial for dry age-related macular degeneration, and Renevia.
Unless stated otherwise, amounts below are in U.S. dollars. Financial statements are unaudited. BioTime deconsolidated OncoCyte in February 2017, so comparisons with 2017 are affected by changes in consolidation scope.
Key financial metrics
| Metric | Q2 2018 | Six months ended June 30, 2018 |
|---|---|---|
| Revenue | $2.55 million | $3.25 million |
| Gross profit | $2.44 million | $3.03 million |
| Operating loss | $9.14 million | $21.22 million |
| Net loss | $4.65 million | $68.34 million |
| Net loss attributable to BioTime | $4.22 million | $67.76 million |
| Net loss per share, basic and diluted | $0.03 | $0.53 |
| Cash used in operating activities | Not separately provided for the quarter | $17.74 million |
Q2 gross margin was approximately 96%; six-month gross margin was approximately 93%. These ratios reflect the reported revenue mix, including grant revenue, and should not be read as product economics.
At June 30, 2018, cash and cash equivalents were $27.21 million, marketable equity securities were $1.95 million, and working capital was $28.7 million. The company reported total liabilities of $7.50 million, including $120,000 of current promissory notes and lease liabilities. Total shareholders’ equity was $104.75 million and accumulated deficit was $283.63 million. Cash, cash equivalents, and marketable equity securities totaled approximately $29.2 million; BioTime separately held Asterias and OncoCyte shares valued at approximately $66.8 million.
Material changes versus the prior comparable period
- Q2 revenue increased $2.17 million year over year, mainly from $1.94 million of grant revenue, versus none in Q2 2017. Six-month revenue rose $2.48 million to $3.25 million, principally reflecting grant revenue of $2.27 million.
- Q2 operating loss widened to $9.14 million from $8.56 million. Six-month operating loss widened to $21.22 million from $19.83 million; 2017 included a $1.75 million gain on sale of assets.
- Q2 net loss narrowed to $4.65 million from $12.23 million, chiefly because fair-value changes in OncoCyte shares shifted from an $11.01 million loss in Q2 2017 to a $6.60 million gain in Q2 2018.
- Six-month results swung from net income of $34.80 million in 2017 to a $68.34 million net loss in 2018. The prior-year period included a $71.70 million gain on OncoCyte deconsolidation; 2018 included combined fair-value losses of $50.39 million on OncoCyte and Asterias holdings.
- Operating cash use was $17.74 million, compared with $17.16 million in the first half of 2017. Cash, cash equivalents, and restricted cash decreased $10.05 million during the first half of 2018.
- General and administrative expense rose 18% in Q2 and 17% for the six-month period, partly due to AgeX distribution-related legal, audit, and compliance costs, stock-based compensation, personnel, consulting, and patent fees. Six-month R&D expense declined 4% before the separate $0.80 million acquired in-process R&D charge.
Outlook, risks, contingencies, and unusual items
- Management stated that available cash, cash equivalents, marketable equity securities, and the potential liquidity of its Asterias and OncoCyte holdings were expected to support current operations for at least 12 months from issuance of the financial statements. The company cautioned that share-sale proceeds could be affected by trading volume, market conditions, and securities-law restrictions.
- OpRegen development is partly grant-funded. Management warned that loss of grant funding or inadequate financing could force delays, reductions in clinical sites, or suspension of trials. Additional equity financing could dilute shareholders.
- The company’s results may fluctuate materially with the market prices of its Asterias and OncoCyte shares. These fair-value changes affect reported earnings but are noncash until shares are sold.
- After quarter-end, BioTime disclosed a planned pro rata AgeX share distribution, subject to SEC effectiveness and other conditions. The distribution could create an unquantified tax obligation.
- On August 1, 2018, BioTime entered a binding letter agreement to negotiate a sale of 14.4 million AgeX shares to Juvenescence for $43.2 million: $10.8 million at closing, $10.8 million on November 5, 2018, and the remaining $21.6 million under a two-year unsecured convertible note bearing 7% interest. Closing depended on definitive agreements and customary conditions; the filing gave no assurance the transaction would close.
- AgeX raised $5.0 million through a share sale and approximately $0.74 million from warrant sales during the first half. BioTime reported no pending litigation it considered material and no off-balance-sheet arrangements.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is BioTime, Inc.’s 2018 Form 10-Q, although the request metadata names Lineage Cell Therapeutics, Inc.
- Check the status and final terms of the proposed AgeX distribution and Juvenescence share sale, including closing, payment collection, note conversion terms, and potential tax effects.
- Assess operating cash burn and whether management’s stated 12-month liquidity outlook remains supported, particularly if grant funding or planned financing is unavailable.
- Review the concentration and liquidity of BioTime’s Asterias and OncoCyte holdings and the impact of further market-price changes on reported earnings and potential cash resources.
- Track OpRegen and Renevia clinical progress, grant support, and the possibility that financing constraints could alter development plans.