FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-12830
BioTime, Inc.
(Exact name of registrant as specified in its charter)
California 94-3127919
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
935 Pardee Street
Berkeley, California 94710
(Address of principal executive offices)
(510) 845-9535
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No__
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 10,891,823 common
shares, no par value, as of May 11, 2000.
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PART 1--FINANCIAL INFORMATION
Statements made in this Report that are not historical facts may
constitute forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
discussed. Such risks and uncertainties include but are not limited to those
discussed in this report under Item 1 of the Notes to Financial Statements, and
in BioTime's Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Words such as "expects," "may," "will," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," and similar expressions identify
forward-looking statements.
<TABLE>
Item 1. Financial Statements BIOTIME, INC.
(A Development Stage Company)
<CAPTION>
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS March 31, December 31,
2000 1999
----------------- ----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,687,377 $ 5,292,806
Prepaid expenses and other current assets 95,888 107,285
----------------- ----------------
Total current assets 3,783,265 5,400,091
----------------- ----------------
EQUIPMENT, Net of accumulated depreciation of $294,901 and $276,647 257,902 268,653
DEPOSITS AND OTHER ASSETS 9,900 9,900
----------------- ----------------
TOTAL ASSETS $ 4,051,067 $ 5,678,644
================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 127,355 $ 595,512
----------------- ----------------
COMMITMENTS (Note 6)
SHAREHOLDERS' EQUITY:
Preferred Shares, no par value, undesignated as to Series, authorized 1,000,000
shares; none outstanding in 1999 and 1998
Common Shares, no par value, authorized 40,000,000 shares; issued and
outstanding shares; 10,891,823 and 10,891,031 27,360,907 27,200,380
Contributed Capital 93,972 93,972
Deficit accumulated during development stage (23,531,167) (22,211,220)
----------------- ----------------
Total shareholders' equity 3,923,712 5,083,132
----------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,051,067 $ 5,678,644
================= ================
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE>
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<TABLE>
BIOTIME, INC.
(A Development Stage Company)
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Period from Inception
March 31, (November 30, 1990)
2000 1999 to March 31, 2000
------------ ------------ ------------------
<S> <C> <C> <C>
REVENUE:
License fee $ - $ 437,500 $ 2,500,000
------------ ------------ -------------
EXPENSES:
Research and development (909,930) (739,484) (17,492,439)
General and administrative (475,468) (513,450) (10,161,922)
------------ ------------ -------------
Total expenses (1,385,398) (1,252,934) (27,654,361)
------------ ------------ -------------
INTEREST AND OTHER INCOME: 65,451 28,495 1,648,025
------------ ------------ -------------
NET LOSS $(1,319,947) $ (786,939) $(23,506,336)
============ ============ =============
BASIC AND DILUTED LOSS PER SHARE $ (0.12) $ (0.08)
============ ============
COMMON AND EQUIVALENT SHARES
USED IN COMPUTING PER SHARE
AMOUNTS:
BASIC AND DILUTED 10,891,797 10,232,279
============ ============
<FN>
See notes to financial statements.
</FN>
</TABLE>
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<TABLE>
BIOTIME, INC.
(A Development Stage Company)
<CAPTION>
STATEMENTS OF SHAREHOLDERS' EQUITY
Series A Convertible
Preferred Shares Common Shares Deficit
--------------------- ----------------------- Accumulated
Number of Number Contributed During
Shares Amount of Shares Amount Capital Development Stage
--------- --------- ----------- ---------- ----------- --------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, November 30, 1990
(date of inception) -- -- -- -- -- --
NOVEMBER 1990
Common shares issued for cash 1,312,758 $ 263
DECEMBER 1990:
Common shares issued for
stock of a separate entity at fair value 1,050,210 137,400
Contributed equipment at appraised
value $ 16,425
Contributed cash 77,547
MAY 1991:
Common shares issued for cash
less offering costs 101,175 54,463
Common shares issued for stock
of a separate entity at fair value 100,020 60,000
JULY 1991:
Common shares issued for
services performed 30,000 18,000
AUGUST-DECEMBER 1991
Preferred shares issued for
cash less offering costs of $125,700 360,000 $474,300
MARCH 1992:
Common shares issued for
cash less offering costs of $1,015,873 2,173,500 4,780,127
Preferred shares converted
into common shares (360,000) (474,300) 360,000 474,300
Dividends declared and paid
on preferred shares $(24,831)
MARCH 1994:
Common shares issued for cash less
offering costs of $865,826 2,805,600 3,927,074
JANUARY-JUNE 1995:
Common shares repurchased
with cash (253,800) (190,029)
JULY 1995-JUNE 1996:
Common shares issued for cash 608,697 1,229,670
Common shares repurchased with cash (18,600) (12,693)
Common shares warrants and options
granted for services 356,000
NET LOSS (8,064,471)
--------- --------- ---------- ---------- ---------- --------------
BALANCE AT JUNE 30, 1996 -- $ -- 8,269,560 10,834,575 93,972 (8,089,302)
<FN>
See notes to financial statements. (Continued)
</FN>
</TABLE>
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BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A Convertible
(Continued) Preferred Shares Common Shares Deficit
-------------------- ------------------------ Accumulated
Number of Number of Contributed During
Shares Amount Shares Amount Capital Development Stage
--------- --------- ----------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Common shares issued for cash less
offering costs of $170,597 849,327 5,491,583
Common shares issued for cash
(exercise of options and warrants) 490,689 1,194,488
Common shares warrants and options
granted for service 105,000
NET LOSS (3,094,210)
--------- --------- ---------- ---------- --------- ----------------
BALANCE AT JUNE 30, 1997 -- $ -- 9,609,576 $17,625,646 $ 93,972 $ (11,183,512)
Common shares issued for cash
(exercise of options) 337,500 887,690
Common shares warrants and options
granted for service 38,050
Common shares issued for services 500 6,250
NET LOSS (3,453,346)
--------- --------- ----------- ----------- --------- ----------------
BALANCE AT JUNE 30,1998 -- -- 9,947,576 $18,557,636 $ 93,972 $ (14,636,858)
Common shares issued for cash
(exercise of options and warrants) 84,000 395,730
Common shares options granted for services 50,000
Common shares issued for
services 1,500 18,750
NET LOSS (2,094,478)
--------- --------- ---------- ----------- --------- ----------------
BALANCE AT DECEMBER 31, 1998 -- $ -- 10,033,076 $19,022,116 $ 93,972 $ (16,731,336)
Common shares issued for cash (less
offering costs of $128,024) 751,654 7,200,602
Common shares issued for cash and
exchange for 2,491 common shares which
were canceled (exercise of options) 65,509 199,810
Common shares issued for services 792 9,900
Common shares warrant donated (Note 4) 552,000
Common shares issued for cash (exercise
of warrant) 40,000 20,000
Options granted for services 195,952
NET LOSS (5,479,884)
--------- --------- ---------- ------------ --------- ----------------
BALANCE AT DECEMBER 31, 1999 -- $ -- 10,891,031 $27,200,380 $ 93,972 $ (22,211,220)
Common Shares issued for services 792 10,100
Options granted for services 150,427
NET LOSS (1,319,167)
--------- --------- ---------- ------------ --------- ----------------
BALANCE AT MARCH 31, 2000 - unaudited -- $ -- 10,891,823 $27360,907 $ 93,972 $ (23,531,167)
========= ========= ========== ============ ========= ================
<FN>
See notes to financial statements. (Concluded)
</FN>
</TABLE>
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<TABLE>
BIOTIME, INC.
(A Development Stage Company)
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Period from Inception
March 31, (November 30, 1990) to
2000 1999 March 31, 2000
-------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,319,947) $ (786,939) $ (23,506,336)
Adjustments to reconcile net loss to net cash used
in operating activities:
Deferred revenue (187,500) (1,000,000)
Depreciation 18,254 11,890 294,901
Cost of Donation - warrants 552,000
Cost of services - shares, options and warrants 160,527 5,000 958,429
Supply reserves 200,000
Changes in operating assets and liabilities:
Research and development supplies on hand (200,000)
Prepaid expenses and other current
assets 11,397 (47,346) (95,888)
Deposits and other assets 16,800 (9,900)
Accounts payable (468,157) 84,193 127,355
License fee receivables (250,000) --
Deferred revenue 1,000,000
-------------- ------------- ---------------
Net cash used in operating activities (1,597,926) (1,153,902) (21,679,439)
-------------- ------------- ---------------
INVESTING ACTIVITIES:
Sale of investments 197,400
Purchase of short-term investments (9,946,203)
Redemption of short-term investments 9,946,203
Purchase of equipment and furniture (7,503) (12,643) (536,378)
-------------- ------------- ---------------
Net cash used in investing activities (7,503) (12,643) (338,978)
-------------- ------------- ---------------
FINANCING ACTIVITIES:
Issuance of preferred shares for cash 600,000
Preferred shares placement costs (125,700)
Issuance of common shares for cash 7,328,626 23,701,732
Common shares placement costs (126,632) (2,180,320)
Net proceeds from exercise of common share options
and warrants 145,000 3,860,088
Contributed capital - cash 77,547
Dividends paid on preferred shares (24,831)
Repurchase of common shares (202,722)
-------------- ------------- ---------------
Net cash provided by financing activities -- 7,346,974 25,705,794
-------------- ------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,605,429) 6,180,449 3,687,377
CASH AND CASH EQUIVALENTS:
At beginning of period 5,292,806 2,429,014 --
-------------- ------------- ---------------
At end of period $ 3,687,377 $ 8,859,463 $ 3,687,377
============== ============= ===============
<FN>
See notes to financial statements. (Continued)
</FN>
</TABLE>
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<TABLE>
BIOTIME, INC.
(A Development Stage Company)
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Period from Inception
March 31, (November 30, 1990) to
2000 1999 March 31, 2000
------------- ------------- ----------------------
<S> <C> <C> <C>
NONCASH FINANCING AND
INVESTING ACTIVITIES:
Receipt of contributed equipment $ 16,425
Issuance of common shares
in exchange for shares of
common stock of Cryomedical
Sciences, Inc. in a stock-for-stock
transaction $ 197,400
Granting of options and warrants for
services $ 150,427 $ 913,429
Issuance of common shares in exchange for $ 10,100 $ 45,000
services
<FN>
See notes to financial statements. (Concluded)
</FN>
</TABLE>
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BIOTIME, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. GENERAL AND DEVELOPMENT STAGE ENTERPRISE
General - BioTime, Inc. (the Company) was organized November 30, 1990 as a
California corporation. The Company is a biomedical organization, currently
in the development stage, which is engaged in the research and development
of synthetic plasma expanders, blood volume substitute solutions, and organ
preservation solutions, for use in surgery, trauma care, organ transplant
procedures, and other areas of medicine.
The balance sheet as of March 31, 2000, the statements of operations for
the three months ended March 31, 2000 and 1999 and the period from
inception (November 30, 1990) to March 31, 2000, the statement of
shareholders' equity for the three month period ended March 31, 2000, and
the statements of cash flows for the three months ended March 31, 2000 and
1999 and the period from inception (November 30, 1990) to March 31, 2000
have been prepared by the Company without audit. In the opinion of
management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, shareholders' equity and cash flows at March 31, 2000 and for
all periods presented have been made. The balance sheet as of December 31,
1999 is derived from the Company's audited financial statements as of that
date. The results of operations for the period ended March 31, 2000 are not
necessarily indicative of the operating results anticipated for the full
year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as permitted by regulations of
the Securities and Exchange Commission. Certain previously furnished
amounts have been reclassified to conform with presentations made during
the current periods. It is suggested that these interim condensed financial
statements be read in conjunction with the annual audited financial
statements and notes thereto included in the Company's Form 10-K for the
year ended December 31, 1999.
Certain Significant Risks and Uncertainties - The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Such
management estimates include certain accruals. Actual results could differ
from those estimates.
The Company's operations are subject to a number of factors that can affect
its operating results and financial condition. Such factors include but are
not limited to the following: the results of clinical trials of the
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Company's products; the Company's ability to obtain United States Food and
Drug Administration and foreign regulatory approval to market its products;
competition from products manufactured and sold or being developed by other
companies; the price of and demand for Company products; the Company's
ability to obtain additional financing and the terms of any such financing
that may be obtained; the Company's ability to negotiate favorable
licensing or other manufacturing and marketing agreements for its products;
the availability of ingredients used in the Company's products; and the
availability of reimbursement for the cost of the Company's products (and
related treatment) from government health administration authorities,
private health coverage insurers and other organizations.
Development Stage Enterprise - Since inception, the Company has been
engaged in research and development activities in connection with the
development of synthetic plasma expanders, blood volume substitute
solutions and organ preservation products. The Company has limited
operating revenues and has incurred operating losses of $23,506,336 from
inception to March 31, 2000. The successful completion of the Company's
product development program and, ultimately, achieving profitable
operations is dependent upon future events including maintaining adequate
capital to finance its future development activities, obtaining regulatory
approvals for the products it develops and achieving a level of revenues
adequate to support the Company's cost structure.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities," (SFAS 133) which establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS 133
requires that entities recognize all derivatives as either assets or
liabilities and measure those instruments at fair value. Adoption of this
statement will not impact the Company's financial position, results of
operations or cash flows. The Company is currently required to adopt SFAS
133 in the first quarter of the fiscal year ending December 31, 2001.
3. LICENSE AGREEMENT
In April 1997, BioTime and Abbott Laboratories ("Abbott") entered into an
Exclusive License Agreement (the "License Agreement") under which BioTime
granted to Abbott an exclusive license to manufacture and sell BioTime's
proprietary blood plasma volume expander solution Hextend in the United
States and Canada for certain therapeutic uses.
Under the License Agreement, Abbott has paid the Company $2,500,000 of
license fees based upon achievement of specified milestones. Up to
$37,500,000 of additional license fees will be payable based upon annual
net sales of Hextend at the rate of 10% of annual net sales if annual net
sales exceed $30,000,000 or 5% if annual net sales are between $15,000,000
and $30,000,000. Abbott's obligation to pay license fees on sales of
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Hextend will expire on the earlier of January 1, 2007 or, on a country by
country basis, when all patents protecting Hextend in the applicable
country expire or any third party obtains certain regulatory approvals to
market a generic equivalent product in that country.
In addition to the license fees, Abbott will pay the Company a royalty on
annual net sales of Hextend. The royalty rate will be 5% plus an additional
.22% for each increment of $1,000,000 of annual net sales, up to a maximum
royalty rate of 36%. Abbott's obligation to pay royalties on sales of
Hextend will expire in the United States or Canada when all patents
protecting Hextend in the applicable country expire and any third party
obtains certain regulatory approvals to market a generic equivalent product
in that country.
The Company will recognize such revenues in the quarter in which the sales
report is received, rather than the quarter in which the sales took place.
Revenues for the three months ended March 31, 2000 include royalties on
sales made by Abbott during the three months ended December 31, 1999.
Royalties on sales made during the first quarter of 2000 will not be
recognized by the Company until the second quarter of fiscal year 2000.
Royalties for the quarter ended December 31, 1999 and the first quarter of
fiscal 2000 were not material to BioTime's financial results.
Abbott has agreed that the Company may convert Abbott's exclusive license
to a non-exclusive license or may terminate the license outright if certain
minimum sales and royalty payments are not met. In order to terminate the
license outright, BioTime would pay a termination fee in an amount ranging
from the milestone payments made by Abbott to an amount equal to three
times prior year net sales, depending upon when termination occurs.
Management believes that the probability of payments of any termination fee
by the Company is remote.
4. SHAREHOLDERS' EQUITY
The Board of Directors of the Company adopted the 1992 Stock Option Plan
(the "Plan") during September 1992. The Plan was approved by the
shareholders at the 1992 Annual Meeting of Shareholders on December 1,
1992. Under the Plan, as amended, the Company has reserved 1,800,000 common
shares for issuance under options granted to eligible persons. No options
may be granted under the Plan more than ten years after the date the Plan
was adopted by the Board of Directors, and no options granted under the
Plan may be exercised after the expiration of ten years from the date of
grant.
Under the Plan, options to purchase common shares may be granted to
employees, directors and certain consultants at prices not less than the
fair market value at date of grant for incentive stock options and not less
than 85% of fair market value for other stock options. These options expire
five to ten years from the date of grant and may be fully exercisable
immediately, or may be exercisable according to a schedule or conditions
specified by the Board of Directors or the Option Committee. As of March
31, 2000, 470,500 shares were available for future grants under the Option
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Plan; and options to purchase 531,000 had been granted and were outstanding
at exercise prices ranging from $1.00 to $18.25. Of the options granted to
consultants, options to purchase 60,000 common shares vest upon achievement
of certain milestones. The Company is amortizing into compensation the
estimated fair value of such options ($601,457 at March 31, 2000), subject
to remeasurement at the end of each reporting period, over the period
estimated to achieve such milestones (one to two years). Compensation
expense recognized on these options during the quarter ended March 31, 2000
was approximately $122,192 and was recorded as research and development
expense.
5. NET INCOME PER SHARE
Basic earnings (loss) per share excludes dilution and is computed by
dividing net income (loss) by the weighted average number of common shares
outstanding during the period. Diluted earnings (loss) per share reflects
the potential dilution from securities and other contracts which are
exercisable or convertible into common shares. Diluted earnings (loss) per
share for the three months ended March 31, 2000 and the year ended December
31, 1999 exclude any effect from such securities as their inclusion would
be antidilutive. As a result, there is no difference between basic and
diluted calculations of loss per share for all periods presented.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Since its inception in November 1990, the Company has been engaged
primarily in research and development activities. The Company has not yet
generated significant operating revenues, and as of March 31, 2000 the Company
had incurred a cumulative net loss of $23,506,336. The Company's ability to
generate substantial operating revenue depends upon its success in developing
and marketing or licensing its plasma volume expanders and organ preservation
solutions and technology for medical use.
Most of the Company's research and development efforts have been
devoted to the development of the Company's first three blood volume replacement
products: Hextend, PentaLyte, and HetaCool. By testing and bringing all three
products to the market, BioTime can increase its market share by providing the
medical community with solutions to match patients' needs.
The Company's first product, Hextend(R), is a physiologically balanced
blood plasma volume expander, for the treatment of hypovolemia. Hypovolemia is a
condition often associated with blood loss during surgery or from injury.
Hextend maintains circulatory system fluid volume and oncotic pressure and keeps
vital organs perfused during surgery. Hextend, approved for large-volume use in
major surgery, is the only blood plasma volume expander that contains
hetastarch, buffer, multiple electrolytes and glucose. Hextend is designed to
compete with and to replace flawed older products such as albumin and other
colloid solutions, as well as crystalloid solutions, that have been used to
maintain fluid volume and blood pressure during surgery. Hextend is also
completely sterile to avoid risk of infection. Health insurance reimbursements
and HMO coverage now include the cost of Hextend used in surgical procedures.
Hextend is being sold in the United States by Abbott Laboratories under
an exclusive license from the Company. Abbott also has the right to sell Hextend
in Canada, where an application for marketing approval is pending. BioTime has
retained all rights to manufacture, sell or license Hextend and other products
in all other countries. Abbott also has a right to obtain licenses to
manufacture and sell other BioTime products. See Note 3 of Notes to Financial
Statements for more information about the license granted to Abbott
Laboratories.
Because Hextend is a surgical product, sales will be determined by
anesthesiologists, surgeons and hospital pharmacists. Abbott is implementing a
dynamic marketing strategy designed to produce a significant growth in sales.
Abbott's marketing program for Hextend includes, in addition to advertisements
in medical journals, educational presentations for its sales force and
physicians explaining the various benefits of using Hextend. The first major
marketing presentation of Hextend at a medical conference occurred during
October 1999. Abbott's current advertising campaign began during January 2000.
The current Hextend advertising campaign features high
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quality, multi-color, multi-page print spreads that focus on the physiological
basis of using a plasma- like substance to replace lost blood volume, and stress
the ability of Hextend to support vital physiological processes at high volume
use. The target customer base of the advertising campaign is being expanded by
advertising in medical journals, medical conferences and sales calls directed to
a broad array of medical specialists. The Company expects that the favorable
impact of these expanded marketing activities will be realized in the months to
come.
As part of the marketing program, Abbott and the Company are financing
a number of medical studies comparing patient outcomes and costs of treatment of
patients receiving Hextend compared to other products during surgery. As these
studies are completed, the results will be presented at medical conferences and
articles will be written for publication in medical journals. The outcome of the
planned medical studies and timing of the publication of the results could have
an effect on the growth of demand for Hextend and sales by Abbott. The next
major presentation of certain of these Hextend studies, including the results of
the Company's study involving elderly patients undergoing major elective
surgery, will take place at the World Congress of Anaesthesiologists in
Montreal, Canada during the first week of June 2000.
Abbott is also working with hospitals to have Hextend approved for use
and added to hospital formularies. To facilitate product acceptance, substantial
quantities of Hextend were introduced into hospitals at no charge. While this
may cause a delay in revenues from product sales, it is often effective in
obtaining market penetration.
The Company estimates that Hextend has now been successfully used in
many thousands of patients undergoing surgery at over 500 hospitals. The number
of hospitals in which Hextend is being used, the number of hospital formularies
that have approved Hextend, and the number of patients receiving Hextend, is
growing. The number of hospitals switching to Hextend from albumin and older
hetastarch solutions, is also increasing.
Under its License Agreement with the Company, Abbott will report sales
of Hextend and pay the Company the royalties and license fees due on account of
such sales within 90 days after the end of each calendar quarter. The Company
will recognize such revenues in the quarter in which the sales report is
received, rather than the quarter in which the sales took place. Revenues for
the three months ended March 31, 2000 include royalties on sales made by Abbott
during the three months ended December 31, 1999. Royalties on sales made during
the first quarter of 2000 will not be recognized by the Company until the second
quarter of fiscal year 2000. Royalties for the quarter ended December 31, 1999
and the first quarter of fiscal 2000 were not material to BioTime's financial
results.
As a result of Abbott's aggressive marketing efforts, sales of Hextend
have been rising steadily since January, when its current advertising campaign
began. The Company expects Hextend sales growth to continue as the number of
hospitals in which Hextend is used, the number of hospital formularies that have
approved Hextend, and the number of patients receiving Hextend increases. The
Company estimates that Hextend has now been successfully used in many thousands
of patients undergoing surgery at over 500 hospitals. Abbott's marketing program
is designed to produce accelerating sales which, if realized over the next
several quarters, may produce royalties adequate for the Company to meet or
exceed its expenses.
The Company intends to enter global markets through licensing
agreements with overseas pharmaceutical companies. By licensing its products
abroad, the Company will avoid the capital costs and delays inherent in
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acquiring or establishing its own pharmaceutical manufacturing facilities and
establishing an international marketing organization. A number of pharmaceutical
companies in Europe, Asia and other markets around the world have expressed
their interest in obtaining licenses to manufacture and market the Company's
products. The Company is continuing to meet with representatives of interested
companies and is approaching agreement to license its products in certain parts
of the world. In addition, the Company is discussing an arrangement with a
leading producer of the hydroxyethyl starch used in Hextend through which the
Company would obtain a source of supply of that ingredient and assistance in
regulatory matters for approval of Hextend for the European market.
The Company is also pursuing a global clinical trial strategy, the goal
of which is to permit the Company to obtain regulatory approval for its products
as quickly and economically as practicable. For example, the United States Phase
III clinical trials of Hextend involved 120 patients and were completed in less
than 12 months. Although regulatory requirements vary from country to country,
the Company may be able to file applications for foreign regulatory approval of
its products based upon the results of the United States clinical trials. The
Company's application to market Hextend in Canada had been found acceptable for
review as a New Drug Submission by the Canadian Health Protection Branch (HPB),
and the Company is now awaiting completion of HPB's review of that application.
Regulatory approvals for countries that are members of the European Union may be
obtained through a mutual recognition process. If approvals can be obtained in
the requisite number of member nations, then the Company would be permitted to
market Hextend in all 16 member nations. The Company plans to file a European
Union application in Sweden. That filing is expected to take place this summer
and will be based upon the results of the Company's completed clinical trials.
The Company has received permission from the FDA to begin a Phase I
clinical trial of PentaLyte involving nine subjects. Upon completion of this
small safety study, BioTime plans to test PentaLyte as a cardio-pulmonary
by-pass pump priming solution and for the treatment of hypovolemia in surgery.
PentaLyte contains a lower molecular weight hydroxyethyl starch than Hextend,
and is more quickly metabolized. PentaLyte is designed for use when short
lasting volume expansion is desirable.
In order to commence clinical trials for regulatory approval of new
products, such as HetaCool, or new therapeutic uses of Hextend, it will be
necessary for the Company to prepare and file with the FDA an Investigational
New Drug Application ("IND") or an amendment to expand the present IND for
additional Hextend studies. Filings with foreign regulatory agencies will be
required to commence clinical trials overseas.
In addition to developing clinical trial programs, the Company plans to
continue to provide funding for its laboratory testing programs at selected
universities, medical schools and hospitals for the purpose of developing
additional uses of Hextend, PentaLyte, HetaCool, and other new products, but the
amount of research that will be conducted at those institutions will depend upon
the Company's financial status. Because the Company's research and development
expenses, clinical trial expenses, and production and marketing expenses will be
charged against earnings for financial reporting purposes, management expects
that losses from operations will continue to be incurred for the foreseeable
future.
Hextend(R) and PentaLyte(R) are registered trademarks, and HetaCool(TM) is a
trademark, of BioTime.
14
<PAGE>
Results of Operations
From inception (November 30, 1990) through March 31, 2000, the Company
recognized $2,500,000 of license fee revenues. For the three months ended March
31, 2000, no license fee revenue based on product sales was earned or
recognized. All license fees based upon milestones under the Abbott License
Agreement were earned during prior periods. For the three months ended March 31,
1999, the Company recognized revenues of $437,500, comprised of amortization of
deferred license fees from the $1,000,000 signing payment received under the
License Agreement with Abbott, and $250,000 for the achievement of a certain
milestone.
From inception (November 30, 1990) through March 31, 2000, the Company
incurred $17,492,439 of research and development expenses. Research and
development expenses were $909,930 for the three months ended March 31, 2000,
compared to $739,484 for the three months ended March 31, 1999. The increase in
research and development expenses is due to recognition of a compensation
expense for options granted in a previous quarter to consultants. Research and
development expenses include laboratory study expenses, European clinical trial
expenses, salaries, preparation of additional regulatory applications in the
United States and Europe, manufacturing of solution for trials, and consultants'
fees. It is expected that research and development expenses will increase as the
Company commences new clinical studies of its products in the United States and
Europe.
From inception (November 30, 1990) through March 31, 2000, the Company
incurred $10,161,922 of general and administrative expenses. General and
administrative expenses were $475,468 for the three months ended March 31, 2000,
compared to $513,450 for the three months ended March 31, 1999. The decrease in
general and administrative expenses in 2000 is attributable to a decrease in
personnel costs and a focus of the Company's resources on product development
and regulatory filings. General and administrative expenses include salaries,
consultants' fees, and general operating expenses.
Liquidity and Capital Resources
Since inception, the Company has primarily financed its operations
through the sale of equity securities and licensing fees, and at March 31, 2000
the Company had cash and cash equivalents of approximately $3,700,000. The
Company expects that its cash on hand will be sufficient to finance its
operations for approximately the next twelve months, but it will have to curtail
the pace of its product development efforts unless its cash resources increase
through a growth in revenues or additional equity investment. Accordingly,
additional funds are required for the successful completion of the Company's
product development activities. The Company has not received significant
royalties and licensing fees from the sale of Hextend. Although the Company will
continue to seek licensing fees from pharmaceutical companies for licenses to
manufacture and market the Company's products abroad, it is likely that
additional sales of equity or debt securities will be required to meet the
Company's short-term capital needs. Sales of additional equity securities could
result in the dilution of the interests of present shareholders.
15
<PAGE>
The amount of license fees and royalties that may be earned through the
licensing and sale of the Company's products, as well as the future availability
and terms of equity and debt financings, is uncertain. The unavailability or
inadequacy of financing or revenues to meet future capital needs could force the
Company to modify, curtail, delay or suspend some or all aspects of its planned
operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company did not hold any market sensitive instruments as of March 31, 2000,
December 31, 1999 or March 31, 1999.
16
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits.
Exhibit
Numbers Description
- ------- -----------
3.1 Articles of Incorporation, as Amended.+
3.3 By-Laws, As Amended.#
4.1 Specimen of Common Share Certificate.+
10.1 Lease Agreement dated July 1, 1994 between the Registrant and Robert
and Norah Brower, relating to principal executive offices of the
Registrant.*
10.2 Employment Agreement dated June 1, 1996 between the Company and
Paul Segall.++
10.3 Employment Agreement dated June 1, 1996 between the Company and
Hal Sternberg.++
10.4 Employment Agreement dated June 1, 1996 between the Company and
Harold Waitz.++
10.5 Employment Agreement dated June 1, 1996 between the Company and
Judith Segall.++
10.6 Employment Agreement dated June 1, 1996 between the Company and
Victoria Bellport.++
10.7 Intellectual Property Agreement between the Company and Paul Segall.+
10.8 Intellectual Property Agreement between the Company and Hal Sternberg.+
10.9 Intellectual Property Agreement between the Company and Harold Waitz.+
10.10 Intellectual Property Agreement between the Company and Judith Segall.+
10.11 Intellectual Property Agreement between the Company and
Victoria Bellport.+
10.12 Agreement between CMSI and BioTime Officers Releasing Employment
Agreements, Selling Shares, and Transferring Non-Exclusive License.+
10.13 Agreement for Trans Time, Inc. to Exchange CMSI Common Stock for
BioTime, Inc. Common Shares.+
10.14 1992 Stock Option Plan, as amended.##
10.15 Employment Agreement dated April 1, 1997 between the Company and
Ronald S. Barkin.^
17
<PAGE>
10.16 Intellectual Property Agreement between the Company and
Ronald S. Barkin.^
10.17 Addenda to Lease Agreement between the Company and Donn Logan.**
10.18 Amendment to Employment Agreement between the Company and
Paul Segall.^^
10.19 Amendment to Employment Agreement between the Company and
Hal Sternberg.^^
10.20 Amendment to Employment Agreement between the Company and
Harold Waitz.^^
10.21 Amendment to Employment Agreement between the Company and
Judith Segall.^^
10.22 Amendment to Employment Agreement between the Company and
Victoria Bellport.^^
10.23 Amendment to Employment Agreement between the Company and
Ronald S. Barkin.^^
10.24 Exclusive License Agreement between Abbott Laboratories and
BioTime, Inc.(Portions of this exhibit have been omitted pursuant to a
request for confidential treatment).###
10.25 Modification of Exclusive License Agreement between Abbott Laboratories
and BioTime, Inc.(Portions of this exhibit have been omitted pursuant
to a request for confidential treatment).^^^
23.1 Consent of Deloitte & Touche LLP**
27 Financial Data Schedule**
+Incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1998.
+ Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992, respectively.
# Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992, respectively.
* Incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1994.
++ Incorporated by reference to the Company's Form 10-K for the fiscal year
ended June 30, 1996.
^ Incorporated by reference to the Company's Form 10-Q for the quarter ended
March 31, 1997.
## Incorporated by reference to Registration Statement on Form S-8, File Number
333-30603 filed with the Securities and Exchange Commission on July 2, 1997.
18
<PAGE>
^ ^ Incorporated by reference to the Company's Form 10-Q for the quarter ended
March 31, 1999.
### Incorporated by reference to the Company's Form 8-K, filed April 24, 1997.
^^^ Incorporated by reference to the Company's Form 10-Q for the quarter ended
June 30, 1999.
** Filed herewith.
(b) Reports on Form 8-K
The Company did not file any reports of Form 8-K for the three months ended
March 31, 2000.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIOTIME, INC.
/s/ Paul Segall
Date: May 11, 2000 -----------------------------------------
Paul Segall
Chief Executive Officer
/s/ Victoria Bellport
Date: May 11, 2000 -----------------------------------------
Victoria Bellport
Chief Financial Officer
20
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