Scimitar Equity Blog

                                         BioTime, Inc (Amex: BTX) develops blood plasma volume expanders and blood replacement solutions for hypothermic (low temperature) surgery, organ preservation solutions and technology for use in surgery, emergency trauma treatment, and other applications.

Focus: BioTime develops and markets research products in the field of stem cells and regenerative medicine through its wholly owned subsidiary Embryome Sciences.

• Embryome Sciences’  stem cell technologies comprise iPS technology that allows the transformation of human cells of the body back to a primordial stem cell state and ACTCellerate technology that permits the generation of purified cells of the human body,
• BTX’s lead product, Hextend is manufactured and distributed in the US by Hospira and in South Korea by CJ CheilJedang Corp under licensing agreements,
• BTX’s products under development include PentaLyte, a pentastarch-based synthetic plasma expander for the treatment of hypovolemia in cardiac surgery, HetaCool, a plasma volume expander to facilitate the cooling of a patient’s body and maintaining body temperatures,  HetaFreeze and other freeze-protective solutions,
• Its stem cell products comprise ESpan cell growth media for the growth of human embryonic progenitor cells; progenitor cell types made using the ACTCellerate technology; and human embryonic stem cell lines carrying inherited genetic diseases,
• BTX is also developing ESpy cell lines that are derivatives of hES cells,  new growth and differentiation factors to manufacture specific cell types from embryonic stem cells and purification tools to researchers in quality control of products for regenerative medicine.

Market Opportunity: BTX derives most of its revenue currently from license revenues of its FDA approved blood expander, Hextend.  It’s  stem cell research concentrated in it subsidiary, Embryome Sciences. While, OncoCyte’s therapeutic strategy and goal is to utilize human embryonic stem cell technology to create genetically modified stem cells capable of homing to specific malignant tumors while carrying genes that can cause the destruction of the cancer cells.

• Hextend is a proprietary physiologically balanced blood plasma volume expander for treating low blood volume, a condition often caused from blood loss during surgery or trauma,
• The therapeutic use of human embryonic stem cells differs from most proposed industrial uses of stem cell technology in that OncoCyte’s goal is NOT the stable engraftment of the cells to regenerate tissue function, but rather a use of the unique properties of stem cells as a tool to eliminate malignant cells,
• OncoCyte believes that its unique therapeutic strategy may be well-suited to the treatment of certain cancers for which no current therapies are effective, therefore fulfilling a current high unmet medical need.

Partner: BioTime’s research products will soon be available through Millipore (MIL) which is already a leading supplier of stem cell research reagents in Q1/10.

• BioTime has shipped inventory of 6 ACTCellerate™ progenitor cell lines to MIL and plans to begin shipments of additional cell lines and ESpan™ cell growth media. Derived from human embryonic stem cells but not fully differentiated into specific cell types (each ACTCellerate™ line provides a convenient, highly purified source of progenitor cells that may have applications in drug discovery, research and the development of therapeutic products).

Financing: Announced 1/7/10 that subsidiary, OncoCyte Corporation completed the funding of the 2nd tranche of a private equity offering through the sale of 3 M shares of OncoCyte common stock for $2 M to a private investor. BioTime plans to invest an additional $2.25 M of its own cash in OncoCyte during Q1/10.

• For Q3/09, BTX’s quarterly revenue (including royalty income, revenue recognition of deferred license fees, and grant income) increased 5% to $446,993 from $426,931 for the same period last year. BioTime reported a net loss of $3,574,755, or $0.11 per basic and diluted share, for the three months ended September 30, 2009, compared to a net loss of $1,077,194, or $0.05 per basic and diluted share, for the three months ended September 30, 2008. However, the net loss for Q3/09 includes $2,126,051 of non-cash charges primarily relating to stock appreciation rights (SARs) granted. BioTime recognized $225,518 in royalty revenue from the sale of Hextend. A decline in royalties (FY09 versus FY08) is attributable to the decrease in sales of Hextend to the United States Armed Forces.  The consolidated entities reported total revenue of $447 K for Q3/09; included in that revenue was $225 K in royalty revenue from the sale of Hextend. Non-royalty product revenue provided by BTIM’s Embryome Sciences  sale of cell cultures, was approximately $222 K for Q3/09.

Bottom Line: BTX’s CEO, Dr. Michael West has been characterized as one of the “early rock stars” of stem cell research   (a founder of Geron and a former CEO of Advanced Cell Technology).  As I am personally acquainted with Dr. West, I have kept to the facts:

• BTX’s potential therapeutic products are at a very early stage of preclinical development,
• The ACTCellerate™ product line allows scientists to save time and money, and to accomplish a wider range of research goals,
• Biotime’s securities trading recently moved from the NASDAQ to the AMEX,
• BTX trades at $5.24 (52 week range of $1.25 to $6.94) with a market cap of $174.52 M, an enterprise value of $157.39 M with 31.31 M shares outstanding, a 19.17 M share float, a short interest ratio of 2.54 M (14.20 % of float) … $7.94 M in cash, 135.45 K in debt with cash of $0.238 a share,
• 51.09% of shares are held by Insiders while 1.7% % are held by Institutions,
• BTX’s corporate governance  is better than  31.8%  Biotechnology & Life Sciences companies,
• BioTime has licensed extensive stem cell research and therapy patent rights from ACTC.PK,
• BTX formed a subsidiary, BioTime Asia, LTD for the purpose of developing and marketing therapeutic stem cell products in the People’s Republic of China (PRC) and marketing stem cell research products in China and other countries in Asia,
• In 10/09, BTX received royalties in the amount of $277,080 based on sales of Hextend post Q3/09,
• Cash and cash equivalents totaled $7,942,577 as of 9/30/09.  Total shareholders’ equity was $4,146,460 as of 9/30/09,
• BioTime had raised a $4 M through a private placement; BTX could receive more than $24 M of equity capital if all of its class(es) of publicly traded warrants and the warrants sold to Broadwood Partners and a private investor (Karfunkel) are exercised prior to the 10/31/10, 2010, expiration date,
• Some important disclaimers: Before starting clinical trials, BioTime Asia will have to compile laboratory test data substantiating the characteristics and purity of the stem cells, including animal studies. Then it must obtain all necessary regulatory and clinical trial site approvals and it must assemble a team of physicians and statisticians for the trials. BTX and its US subsidiary Embryome Sciences will license the rights to use certain stem cell technology to BioTime Asia which will sell the new venture stem cell products for therapeutic use and for resale as research products. To the extent permitted by law, BioTime Asia will license back to BioTime any new technology that BioTime Asia might develop or acquire for use outside of China. In the US, 2  product lines are marketed by Hospira (NYSE: HSP): a line of blood plasma volume extenders  in the US and a human embryonic stem (hES) cell including an induced pluripotent stem (iPS) cell technology,
• A  BUY; but, it has appreciated 254.29% in the past 52 weeks – so purchase on the dips,
• Without a model (in development), I still project a target of $6.50 t0 $7.25 in the near term.