BioTime (NYSEMKT:BTX) is a biotechnology company that has yet to be fully understood by Wall Street.
- The 12 month range in BioTime stock is $5.95 - $2.21
- 5.7 million shares are currently short out of a total of 83 million shares
- Year end 2014 cash levels were $29.5 million
- Baxter International (NYSE:BAX) and Hospira (NYSE:HSP) are competitors in their industry.
BioTime is a conglomerate existing of several subsidiaries (several of which are majority owned) with minimal information available to dissect the true value of the company. Therefore, we are reduced to evaluate the company as it exists and try to determine the companies true value and if it is a buy at current prices.
The information below is from the BioTime 2014 10k Annual Report filed with the SEC.
When evaluating BioTime one must consider their subsidiaries and what they should be valued at.
Just one subsidiary, Asterias (NYSEMKT:AST) is worth $299 million based on BTX owning 23,563,085 shares at the 5/5/15 closing price of $12.71. Compare that to BTX itself having a total market capitalization of $431 million.
Companies frequently spin off assets and subsidiaries to unlock undervalued assets. This can be done via a stock spin off to shareholders, an IPO to raise cash for internal use or a sale to another entity. In all three cases, investors in the parent company are rewarded. Below are the BioTime subsidiaries:
|Subsidiary||Field of Business||BioTime
|Asterias Biotherapeutics, Inc.||Research, development and commercialization of human therapeutic products from stem cells, focused initially in the fields of neurology and oncology||70.6%(1)||USA|
|BioTime Asia, Limited||Stem cell products for research||81%||Hong Kong|
|Cell Cure Neurosciences Ltd.||Age-related macular degeneration
|ES Cell International Pte Ltd||Stem cell products for research, including clinical grade cell lines produced under cGMP||100%||Singapore|
|LifeMap Sciences, Inc.||Biomedical, gene, disease, and stem cell databases and tools||74.5%||USA|
|LifeMap Sciences, Ltd.||Biomedical, gene, disease, and stem cell databases and tools||(3)||Israel|
|LifeMap Solutions, Inc.||Mobile health software||(3)||USA|
|OncoCyte Corporation||Cancer diagnostics||75.3%||USA|
|OrthoCyte Corporation||Orthopedic diseases, including chronic back pain and osteoarthritis||100%(4)||USA|
|ReCyte Therapeutics, Inc.||Vascular disorders, including cardiovascular-related diseases, ischemic conditions, vascular injuries
Stem cell-derived endothelial and cardiovascular related progenitor cells that have applications in research, drug testing, and therapeutics
BioTime has several drugs in various stages of testing. BTX is not a one trick pony drug company. Also of note is the fact that their drugs are in various stages of development. While none has entered final phase testing yet, there are several drugs addressing a wide range of illnesses. This is something not frequently seen among smaller biotechnology companies. The chart below reviews BTX's current pipeline:
|Therapeutic Area||Program or Product||Status||Development
|Cervical Spinal Cord Injury||AST-OPC-1: Glial Cells||Phase I/IIa dose escalation trial underway in cervical spinal cord injury.
$14.3 million grant from California Institute for Regenerative Medicine to provide matching funds for AST-OPC1 clinical trial and process development.
|Non-Small Cell Lung Cancer||AST-VAC2 Allogeneic Dendritic Cells Loaded with Telomerase antigen||Proof of concept established in multiple in vitro systems.
Agreement by Cancer Research UK to conduct Phase I/IIa clinical trial of AST-VAC2 in subjects with non-small cell lung cancer. Manufacturing process being developed for transfer to Cancer Research UK for clinical trials.
|Age Related Macular Degeneration (NASDAQ:AMD)||OpRegen® and OpRegen®-Plus||Received approval from Israel ministry of health and US FDA to begin a Phase I/IIa clinical trial to determine safety and effective dose for OpRegen® in patients with geographic atrophy stage of dry AMD. The trial will enroll at least 15 patients beginning in the second quarter of 2015. We expect this phase to take several months and then will follow each patient for a minimum of 12 months.||Cell Cure Neurosciences|
|Bone Repair||Bone repair using embryonic-derived progenitor cells (Spinal fusion, trauma and cranial maxillo-facial)||Initiated in vitro optimization of bone differentiation and induction using progenitor cells.||OrthoCyte|
|Age Related Vascular Disease, including Cardiovascular Disorders||Therapeutic products for age related vascular disease, including cardiovascular disorders utilizing proprietary ReCyte™ technology and human pluripotent stem cell derived cells.||Evaluating progenitor stem cell-based and cell-derived therapeutics.
Conducting ongoing collaboration with researchers at Cornell Weill Medical College for derivation and preclinical testing of endothelial progenitor cells for the treatment of age-related vascular disease.
|Nearer-Term Commercial Opportunities||Program or Product||Status||Development
|HIV-related Lipoatrophy||Renevia™ (the trade name for HyStem® used in lipotransfer)||Commenced a pivotal trial for Renevia™ in Europe to show effectiveness of Renevia™ in lipotransfer for patients suffering from HIV related lipoatrophy of the face.
Completed first human clinical safety trial for Renevia™ Results confirmed that Renevia™ was safe in humans at the proposed dosage concentration for this particular use.
|Other Clinical Areas||Biocompatible hydrogels that mimic the human extracellular matrix||Received ISO13485:2003 Certification from BSI (British Standards Institution) for design, development, manufacture, and distribution of BioTime HyStem® hydrogels for cell delivery applications. ISO certification is a prerequisite for CE marking of medical devices within the European Union and will be needed in order to market Renevia™ in Europe.||BioTime|
|Diagnostic Tests for Lung Cancer, Bladder Cancer; and Breast Cancer||PanC-Dx™||Entrance into License Agreement with Cornell University through which Weill Cornell Medical College will provide blood samples derived from healthy people and lung cancer patients for comparative analysis using OncoCyte's proprietary PanC-Dx™ diagnostic tests.
Completion by collaborators at The Wistar Institute of a large, multi-site study involving 600 patients evaluating a blood-based lung cancer diagnostic test;
Completion of enrollment in the initial clinical study, which involved 100 patients, of a urine-based bladder cancer diagnostic test conducted in collaboration with investigators in the Department of Pathology, Division of Cytopathology, at a leading medical institution with an international reputation for excellence and discovery;
Expansion of the clinical development of a urine-based bladder cancer diagnostic test by initiating a multi-site clinical trial which will involve up to 1,200 patient samples obtained from at least four large urology clinics located throughout the United States; and
Expansion of the clinical development of a blood-based breast cancer diagnostic test through collaboration with Abcodia, a UK-based company focusing on the early detection of cancer that has exclusive commercial access to a unique longitudinal biobank of over 5,000,000 serum samples collected through the UK Collaborative Trial for Ovarian Cancer Screening.
|Marketing On-Line Searchable Data Bases||GeneCards®||A database of human genes that provides concise genomic, transcriptomic, genetic, proteomic, functional and disease related information, on all known and predicted human genes.||LifeMap Sciences|
|MalaCards™||A database of human diseases that is based on the GeneCards® platform and contains computerized "cards" classifying information relating to a wide array of human diseases.|
|LifeMap Discovery®||A database of embryonic development, stem cell research and regenerative medicine.|
|VarElect™||A powerful, yet easy-to-use application for prioritizing gene variants resulting from next generation sequencing experiments.|
|GeneAnalytics™||A novel gene set analysis tool.|
|Mobile Health||Mobile health software development||Developing mobile health software products in conjunction with the Icahn School of Medicine at Mount Sinai.||LifeMap Solutions|
Research & Development
R&D spending was a bright spot in our analysis. 2014 saw a 40% increase in R&D spending from 2013 levels. All too often when the cash flow of a company becomes problematic R&D spending is one of the first bottom line categories to be cut back. BTX seems to have a solid commitment to keep aggressively channeling funds into their R&D. This bodes well for the future.
|Asterias Biotherapeutics(2)||hESC-based cell therapy programs||$||13,310,421||$||4,319,494||35.5%||16.2%|
|BioTime Asia||Stem cell products for research||$||-||$||31,288||-%||0.1%|
|BioTime and ESI||PureStem® hEPCs, cGMP hES cell lines, and related research products||$||4,089,310||$||2,763,879||10.9%||10.4%|
|BioTime||Hydrogel products and HyStem® research||$||5,176,876||$||5,229,278||13.8%||19.6%|
|Cell Cure Neurosciences||OpRegen®, OpRegen®-Plus, and neurological disease therapies||$||5,311,472||$||6,401,884||14.1%||24.1%|
|LifeMap Sciences||Database development and sales||$||3,566,530||$||2,663,066||9.5%||10.0%|
|OncoCyte||Cancer therapy and diagnostics and therapy||$||3,872,500||$||2,760,810||10.3%||10.4%|
|ReCyte Therapeutics||Cardiovascular therapy||$||1,341,544||$||1,042,102||3.6%||3.9%|
One of the key standouts was the abundance of compensation bonus money; given the fact that BTX is still so far away from profitability, these bonuses are excessive (to say it kindly).
SUMMARY COMPENSATION TABLE
|Name and principal
|Michael D. West||2014||$||680,315||$||204,000||(2)||$||624,115||(3)||$||-||$||38,000||(4)||$||1,546,430|
|Chief Executive Officer||2013||$||680,315||$||65,000||(2)||$||851,574||(3)||$||-||$||37,750||(4)||$||1,634,639|
|Robert W. Peabody(5)||2014||$||430,135||$||107,500||(2)||$||237,681||(6)||$||-||$||13,000||(7)||$||788,316|
|Senior Vice-President, Chief Operating Officer, and Chief Financial Officer||2013||$||405,107||$||145,000||(2)||$||521,500||(6)||$||-||$||11,984||(7)||$||1,083,591|
|Pedro Lichtinger (8)||2014||$||224,359||$||-||$||1,409,456||(9)||$||468,000||(10)||$||8,333||(7)||$||2,110,149|
|President and Chief Executive Officer of Asterias Biotherapeutics, Inc.|
|Chief Operating Officer|
|Lesley A. Stolz(12)||2014||$||76,154||$||-||$||95,165||(12)||$||$||-||$||171,319|
|Executive Vice President, Corporate Development||2013||$||104,183||$||-||$||591,278||(12)||$||$||-||$||695,461|
|William P. Tew||2014||$||343,272||$||-||$||190,300||(13)||$||$||13,000||(7)||$||546,602|
|Chief Commercial Officer(13)||2013||$||285,000||$||30,000||(2)||$||343,285||(13)||$||$||12,750||(7)||$||671,035|
Cash bonuses paid in 2014 totaled over $310,000. This is excluding the $1,750,000 base salary, $4,045,000 in options and $72,000 in "other compensation".
Here is another area where the lining of the pockets seems to be the paramount concern of the executives running BioTime. $1,195,000 was paid out in fees earned and cash.
|Option Award (1)||Total|
|Franklin M. Berger(3)||$||5,000||$||-||$||5,000|
|Neal C. Bradsher||$||59,375||$||23,831||$||83,206|
|Stephen L. Cartt(4)||$||12,125||$||25,571||$||37,696|
|Stephen C. Farrell||$||67,125||$||23,831||$||90,956|
|Alfred D. Kingsley(5)||$||189,500||$||393,564||$||583,064|
|Michael H. Mulroy(7)||$||13,375||$||25,048||$||38,423|
|Henry L. Nordhoff(8)||$||17,250||$||24,142||$||41,392|
|Angus C. Russell(9)||$||8,500||$||23,558||$||32,058|
|Andrew C. von Eschenbach, M.D.(11)||$||20,500||$||24,142||$||44,642|
Total compensation for 2014 for the top five executives came in at over 1,750,000 (excluding options). Compare this to the TOTAL 2014 revenues of $1,946,000 (when excluding grant income of $3,296,832).
Comprehensive loss attributed to shareholders in 2014 was $36, 375,551.
Over the years biotechnology companies frequently come and go. The home runs are not nearly as common as the strike outs. With that being said, the healthy balance sheet (particularly strong cash balances), the broad range of drugs in the BTX pipeline and the strong emphasis on R&D are appealing. If it were not for the high level of cash going out the door to the top executives and Directors I would have very little to complain about when evaluating BioTime. Investing in BioTime or penny stocks carries substantial risk. You may lose most or all of your investment.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.