Lineage Cell Therapeutics(LCTX) - 2018 Q4 - Annual Report

Part I Business BioTime, Inc. is a clinical-stage biotechnology company developing cellular therapies for degenerative diseases and cancer, advancing its clinical pipeline and leveraging equity stakes for funding Clinical Development Programs | Product Candidate | Indication | Clinical Phase | Funder/Collaborator | |---|---|---|---| | OpRegen® | Advanced dry Age-Related Macular Degeneration (dry-AMD) | Phase I/IIa | BioTime | | OPC1 | Acute Spinal Cord Injuries | Phase I/IIa | Partially funded by CIRM | | VAC2 | Non-Small Cell Lung Cancer | Phase I | Funded by Cancer Research UK | - In March 2019, BioTime completed its acquisition of Asterias Biotherapeutics, Inc., thereby incorporating the OPC1 and VAC2 clinical programs into its portfolio[23][39] Key Equity Holdings (as of March 13, 2019) | Company | Ownership | Value | Note | |---|---|---|---| | OncoCyte Corporation (OCX) | ~28% | Based on closing stock price | Focused on cancer diagnostics | | AgeX Therapeutics, Inc. (AGE) | 4.8% | Based on closing stock price | Focused on regenerative biology and aging | | Juvenescence Limited | N/A | $21.6M + interest | Value from a convertible promissory note | - The combined value of BioTime's holdings in OncoCyte, AgeX, and the Juvenescence note was approximately $85.5 million as of March 13, 2019, representing a significant potential source of capital[21] - BioTime's business strategy includes completing the integration of Asterias, advancing its three clinical programs, and monetizing its equity assets in OncoCyte, AgeX, and Juvenescence to fund operations[40] Risk Factors The company faces significant risks including historical operating losses, dependence on external funding, clinical trial uncertainties, and challenges integrating acquired operations Operating Losses and Accumulated Deficit | Metric | 2018 | 2017 | |---|---|---| | Operating Loss | $41.8 million | $38.9 million | | Accumulated Deficit (as of Dec 31, 2018) | $262 million | N/A | - The company has a history of operating losses and will need to issue additional equity or debt to fund operations, which could result in shareholder dilution or restrictive covenants[170][173] - The successful integration of Asterias is critical and presents challenges in consolidating functions, technologies, and cultures, which could divert management attention and resources[175][176] - The value of investments in publicly-listed companies like OncoCyte and AgeX is subject to stock price fluctuations and could be negatively impacted by their business performance[191] - Clinical studies are costly, time-consuming, and subject to risks of delay or failure. The company relies on third parties like Contract Research Organizations (CROs) to conduct these trials[214][262] - The company's Israeli subsidiary, Cell Cure, has received government grants that impose conditions on manufacturing and technology transfer outside of Israel, which could restrict future business agreements[235][236] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[280] Properties BioTime's principal offices and labs are located in Alameda, California, occupying 30,795 square feet, which it shares with affiliates AgeX and OncoCyte, while its subsidiary Cell Cure leases approximately 17,896 square feet in Jerusalem, Israel - The main facility in Alameda, CA comprises 30,795 sq. ft. and is shared with affiliates OncoCyte and AgeX[281] - Subsidiary Cell Cure leases a total of 1,662.5 square meters (17,896 sq. ft.) of office and laboratory space in Jerusalem, Israel, including a new facility to support cGMP manufacturing[282][283] Legal Proceedings The company is involved in a putative class action lawsuit filed in February 2019 on behalf of Asterias shareholders, challenging the fairness of the merger consideration and alleging material omissions - A putative class action lawsuit was filed on February 19, 2019, by Asterias shareholders challenging the recent merger with BioTime[285] - The lawsuit alleges breach of fiduciary duty, claiming the merger consideration was unfair and the joint proxy statement omitted material information, with plaintiffs seeking injunctive relief or rescissory damages[285] Mine Safety Disclosures This item is not applicable to the company - Not applicable[286] Part II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities BioTime's common stock is traded on the NYSE American and the Tel Aviv Stock Exchange, with 16,538 shareholders as of February 2019, and the company does not anticipate paying cash dividends - The company's common stock trades on the NYSE American and Tel Aviv Stock Exchange under the ticker BTX[288] - As of February 15, 2019, there were 16,538 common shareholders[289] - The company has not paid dividends and does not plan to in the foreseeable future, retaining earnings for operations[290] Selected Financial Data As a smaller reporting company, BioTime is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide selected financial data[292] Management's Discussion and Analysis of Financial Condition and Results of Operations Total revenues increased in 2018 driven by grant revenue, while operating expenses rose due to G&A increases, and net loss was significantly impacted by non-cash gains and losses on equity investments Revenues Comparison (in thousands) | Revenue Source | 2018 | 2017 | Change ($) | Change (%) | |---|---|---|---|---| | Grant revenue | $3,572 | $1,666 | $1,906 | 114.4% | | Subscription and advertising | $691 | $1,395 | ($704) | (50.5%) | | Other | $725 | $397 | $328 | 82.6% | | Total revenues | $4,988 | $3,458 | $1,530 | 44.2% | Operating Expenses Comparison (in thousands) | Expense Category | 2018 | 2017 | Change ($) | Change (%) | |---|---|---|---|---| | Research and development | $21,755 | $24,024 | ($2,269) | (9.4%) | | General and administrative | $24,726 | $19,922 | $4,804 | 24.1% | Key Other Income/(Expenses), Net (in thousands) | Item | 2018 | 2017 | |---|---|---| | Gain on sale/deconsolidation of AgeX | $78,511 | - | | Gain on deconsolidation of OncoCyte | - | $71,697 | | Loss on equity method investment in OncoCyte | ($47,985) | ($2,935) | | Loss on equity method investment in Asterias | ($35,449) | ($51,107) | - As of December 31, 2018, the company had $23.6 million in cash and cash equivalents and held OncoCyte shares valued at $20.3 million. Management believes these resources are sufficient to fund operations for at least the next 12 months[373][374] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, BioTime is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide disclosures about market risk[381] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2018 and 2017, including balance sheets, statements of operations, and cash flows - This section includes the index to and the full consolidated financial statements and supplementary data for BioTime, Inc. and its subsidiaries[383] Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2018 | Dec 31, 2017 | |---|---|---| | Total Assets | $101,660 | $173,241 | | Cash and cash equivalents | $23,587 | $36,838 | | Equity method investments (OncoCyte & Asterias) | $33,733 | $117,167 | | Total Liabilities | $9,414 | $8,978 | | Total Shareholders' Equity | $92,246 | $164,263 | Consolidated Statement of Operations Highlights (in thousands) | Account | Year Ended Dec 31, 2018 | Year Ended Dec 31, 2017 | |---|---|---| | Total revenues | $4,988 | $3,458 | | Loss from operations | ($41,795) | ($38,902) | | Total other income (expenses), net | ($5,335) | $15,613 | | Net Loss | ($46,784) | ($23,289) | | Net Loss Attributable to BioTime, Inc. | ($45,990) | ($19,976) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable to the company - Not applicable[650] Controls and Procedures Management concluded that the company's disclosure controls and internal controls over financial reporting were effective as of December 31, 2018, with no material changes during the fourth quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[651] - Management's report on internal control over financial reporting concluded that these controls were effective as of December 31, 2018[655] - No material changes were made to the company's internal control over financial reporting during the fourth quarter[652] Other Information This item is not applicable to the company - Not applicable[657] Part III Directors, Executive Officers, and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2019 Proxy Statement - Information for this section is incorporated by reference from the registrant's Proxy Statement for the 2019 Annual Meeting of Shareholders[658] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2019 Proxy Statement - Information for this section is incorporated by reference from the registrant's Proxy Statement for the 2019 Annual Meeting of Shareholders[661] Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters Information regarding security ownership of beneficial owners and management is incorporated by reference from the company's 2019 Proxy Statement - Information for this section is incorporated by reference from the registrant's Proxy Statement for the 2019 Annual Meeting of Shareholders[662] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2019 Proxy Statement - Information for this section is incorporated by reference from the registrant's Proxy Statement for the 2019 Annual Meeting of Shareholders[663] Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the company's 2019 Proxy Statement - Information for this section is incorporated by reference from the registrant's Proxy Statement for the 2019 Annual Meeting of Shareholders[664] Part IV Exhibits, Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report, including consolidated financial statements and notes on Asterias and OncoCyte - This section lists all financial statements and exhibits filed with the report[665] - Audited financial statements of Asterias are filed as Exhibit 99.1. The company will amend the report to include audited financial statements of OncoCyte[665] Form 10-K Summary The company provides no summary for this item - None[674]