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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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 of (I.R.S. Employer
incorporation or organization) Identification No.)
935 Pardee Street, Berkeley, California 94710
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 845-9535
Securities registered pursuant to Section 12(b)
of the Act:
Common Shares, no par value
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The approximate aggregate market value of voting stock held by nonaffiliates of
the registrant was $110,720,000 as of March 27, 2000. Shares held by each
executive officer and director and by each person who beneficially owns more
than 5% of the outstanding Common Shares have been excluded in that such persons
may under certain circumstances be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
10,891,823
(Number of Common Shares outstanding as of March 27, 2000)
Documents Incorporated by Reference
None
PART I
Statements made in this Form 10-K 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. Words such as "expects," "may," "will," "anticipates,""intends,"
"plans," "believes," "seeks," "estimates," and similar expressions identify
forward-looking statements. See "Risk Factors" and Note 1 to Financial
Statements.
Item 1. Description of Business
Overview
BioTime, Inc. (the "Company" or "BioTime") is a development stage
company engaged in the research and development of synthetic solutions that can
be used as blood plasma volume expanders, blood replacement solutions during
hypothermic (low temperature) surgery, and organ preservation solutions. Plasma
volume expanders are used to treat blood loss in surgical or trauma patients
until blood loss becomes so severe that a transfusion of packed red blood cells
or other blood products is required. The Company is also developing a specially
formulated hypothermic blood substitute solution that would have a similar
function and would be used for the replacement of very large volumes of a
patient's blood during cardiac surgery, neurosurgery and other surgeries that
involve lowering the patient's body temperature to hypothermic levels.
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 "Licensing" 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's marketing program
for Hextend includes, in addition to advertisements in medical journals,
educational presentations for its sales force and physicians
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explaining the various benefits of using Hextend. Abbott is also working with
hospitals to have Hextend approved for use and added to hospital formularies.
As part of the marketing program, Abbott and the Company will finance a
number of limited medical studies comparing outcomes of patients receiving
Hextend and patients receiving other products during surgery. It will take time
to complete these studies and publish the results. 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 Company is also developing two other blood volume replacement
products, PentaLyte,(R) and HetaCool,TM that, like Hextend,(R) have been
formulated to maintain the patient's tissue and organ function by sustaining the
patient's fluid volume and physiological balance. Various colloid and
crystalloid products are being marketed by other companies for use in
maintaining patient fluid volume in surgery and trauma care, but the use of
those solutions can contribute to patient morbidity, including conditions such
as hypovolemia, edema, impaired blood clotting, acidosis, and other biochemical
imbalances. Hextend, PentaLyte, and HetaCool contain constituents that may
prevent or reduce the physiological imbalances that can cause those problems.
The Company's products do not contain albumin. Albumin produced from human
plasma is also currently used as a plasma expander, but it is expensive and
subject to supply shortages. Additionally, a recent FDA ("Food and Drug
Administration") warning has cautioned physicians about the risk of
administering albumin to seriously ill patients. A recently published study of
hemodilution in laboratory animals supports claims that hetastarch products like
Hextend and PentaLyte permit blood to clot at least as well as albumin. This new
study found that when used in vitro and in large volumes Hextend and PentaLyte
out performed albumin and other plasma volume expanders in blood clotting tests.
Based upon the results of its clinical studies and laboratory research,
the Company has determined that in many emergency care and surgical applications
it is not necessary for a plasma volume expander to include special oxygen
carrying molecules to replace red blood cells. Therefore, the Company is
developing formulations that do not use costly and potentially toxic oxygen
carrying molecules such as synthetic hemoglobin and perfluorocarbons.
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
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.
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
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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,
based upon its United States clinical trials, has 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 the 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. The Company has
determined that several member nations would accept an application based upon
the United States clinical trials. If approvals based upon those trials can be
obtained in the requisite number of member nations, then the Company would be
permitted to market Hextend in all 16 member nations.
In order to commence clinical trials for regulatory approval of new
products, such as PentaLyte and 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.
BioTime recently completed a clinical study at the University College
of London Hospitals involving elderly patients undergoing major elective surgery
in which large quantities of blood were often lost. In this study, patients were
treated with BioTime's Hextend plasma volume expander and other fluids designed
to replace lost blood volume. Preliminary analysis indicated that the Hextend
treated group showed significantly better preservation of blood pH, chloride and
calcium levels, compared to those treated with 6% hetastarch in saline.
Hyperchloremic acidemia was found in those surgical patients treated with
saline-based surgical fluids, but not in those treated with Hextend. The study
investigators have prepared abstracts of the results and have submitted a peer
review journal article detailing their findings.
BioTime is also planning clinical studies of other products. BioTime
has filed an IND for PentaLyte and is waiting for the FDA to complete its review
before a clinical study can begin. BioTime's present plan is to seek approval of
PentaLyte as a cardio-pulmonary by-pass pump priming solution and for the
treatment of hypovolemia. BioTime is preparing a protocol for the use of
HetaCool (a modified formulation of Hextend) to replace a portion of a patient's
blood volume at temperatures ranging from 12o to 20o C. When the protocol is
completed and approved by physicians who may participate in clinical trials,
BioTime plans to submit the protocol to the FDA as part of an amendment to
BioTime's Hextend IND. The amendment will seek permission to conduct clinical
trials of HetaCool as a blood volume replacement solution in low temperature
surgeries for the correction of aneurysms, and for the use of Hextend as a
priming solution for cardio-pulmonary bypass pumps. Aneurysms are vascular
disorders that are often found in patients suffering from aging-related
cardiovascular disease.
After surgical procedures have been performed in the 12o to 20o C
temperature range, BioTime plans to conduct additional clinical studies in which
HetaCool will be used to replace all
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of the patient's circulating blood volume at near-freezing temperatures in
aneurysm surgery. BioTime has developed techniques to permit cardiovascular
surgery while the patient is maintained in a state of circulatory arrest at near
freezing temperatures. These techniques have been successfully used to maintain
dogs and pigs in a state of circulatory arrest for periods ranging from one hour
to more than two hours, and hamsters for more than six hours.
The cost of preparing regulatory filings and conducting clinical trials
is not presently determinable, but could be substantial. It will be necessary
for the Company to obtain additional funds in order to complete any clinical
trials that may begin for its new products or for new uses of Hextend. The
Company plans to negotiate product licensing and marketing agreements that
require overseas licensees and distributors of Company products to bear
regulatory approval and clinical trial costs for their territories.
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.
The Company was incorporated under the laws of the State of California
on November 30, 1990. The Company's principal office is located at 935 Pardee
Street, Berkeley, California 94710. Its telephone number at such office is (510)
845-9535.
Hextend(R) and PentaLyte(R) are registered trademarks, and HetaCoolTM
is a trademark, of BioTime, Inc.
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Products for Surgery, Plasma Replacement and Emergency Care
The Market for Plasma Volume Expanders
The Company is developing Hextend, PentaLyte, HetaCool and other
synthetic plasma expander solutions to treat acute blood loss that occurs during
many kinds of surgery. The solutions could also be used by emergency room
physicians or by paramedics to treat acute blood loss in trauma victims being
transported to the hospital.
Approximately 10,000,000 surgeries take place in the United States each
year, and blood transfusions are required in approximately 2,500,000 of those
cases. Transfusions are also required to treat patients suffering severe blood
loss due to traumatic injury. Many more surgical and trauma cases do not require
blood transfusions but do involve significant bleeding that can place the
patient at risk of suffering from shock caused by the loss of fluid volume
(hypovolemia) and physiological balance. Whole blood, packed red cells, or blood
plasma generally cannot be administered to a patient until the patient's blood
serum has been typed and sufficient units of compatible blood or red cells can
be located. Periodic shortages of supply of donated human blood are not
uncommon, and rare blood types are often difficult to locate. The use of human
blood products also poses the risk of exposing the patient to blood borne
diseases such as AIDS and hepatitis.
Due to the risks and cost of using human blood products, even when a
sufficient supply of compatible blood is available, physicians treating patients
suffering blood loss are generally not permitted to transfuse red blood cells
until the patient's level of red blood cells has fallen to a level known as the
"transfusion trigger." During the course of surgery, while blood volume is being
lost, the patient is infused with plasma volume expanders to maintain adequate
blood circulation. During the surgical procedure, red blood cells are not
replaced until the patient has lost approximately 45% to 50% of their red blood
cells, thus reaching the transfusion trigger at which point the transfusion of
red blood cells may be required. After the transfusion of red blood cells, the
patient may continue to experience blood volume loss, which will be replaced
with plasma volume expanders. Even in those patients who do not require a
transfusion, physicians routinely administer plasma volume expanders to maintain
sufficient fluid volume to permit the available red blood cells to circulate
throughout the body and to maintain the patient's physiological balance.
Several units of fluid replacement products are often administered
during surgery. The number of units will vary depending upon the amount of blood
loss and the kind of plasma volume expander administered. Crystalloid products
must be used in larger volumes than colloid products such as Hextend.
Other plasma volume expanders have certain draw backs. The use of those
products can contribute to patient morbidity, including conditions such as
hypovolemia, edema, impaired blood clotting, acidosis, and other biochemical
imbalances. In contrast, Hextend, PentaLyte, and HetaCool contain constituents
that may prevent or reduce the physiological imbalances that cause the problems
associated with the use of other plasma volume expanders, and because the
Company's products are
6
synthetic they can be manufactured in large volumes. Albumin produced from human
plasma is expensive and subject to supply shortages. Additionally, a recent FDA
warning has cautioned physicians about the risk of administering albumin to
seriously ill patients. A recently published study of hemodilution in laboratory
animals contradicts claims that hetastarch products like Hextend and PentaLyte
may impair the ability of blood to clot to a greater degree than albumin. This
new study found that when used in vitro and in large volumes Hextend and
PentaLyte out performed albumin and other plasma volume expanders in blood
clotting tests.
The Market for Products for Hypothermic Surgery
Approximately 400,000 coronary bypass and other open heart surgeries
are performed in the United States annually, and approximately 18,000 aneurysm
surgeries and 4,000 arterio-venous malformation surgeries were performed in the
United States during 1989. Those procedures often require the use of
cardio-pulmonary bypass equipment to do the work of the heart and lungs during
the surgery. During open heart surgery and surgical procedures for the treatment
of certain cardiovascular conditions such as large aneurysms, cardiovascular
abnormalities and damaged blood vessels in the brain, surgeons must temporarily
interrupt the flow of blood through the body. Interruption of blood flow can be
maintained only for short periods of time at normal body temperatures because
many critical organs, particularly the brain, are quickly damaged by the
resultant loss of oxygen. As a result, certain surgical procedures are performed
at low temperatures because lower body temperature helps to minimize the chance
of damage to the patient's organs by reducing the patient's metabolic rate,
thereby decreasing the patient's needs during surgery for oxygen and nutrients
which normally flow through the blood.
Current technology limits the degree to which surgeons can lower a
patient's temperature and the amount of time the patient can be maintained at a
low body temperature because blood, even when diluted, cannot be circulated
through the body at near-freezing temperatures. As a result, surgeons face
severe time constraints in performing surgical procedures requiring blood flow
interruption, and those time limitations prevent surgeons from correcting
certain cardiovascular abnormalities.
Hextend, PentaLyte and HetaCool
The Company's first three blood volume replacement products, Hextend,
PentaLyte, and HetaCool, have been formulated to maintain the patient's tissue
and organ function by sustaining the patient's fluid volume and physiological
balance. Hextend, PentaLyte, and HetaCool, are composed of a hydroxyethyl
starch, electrolytes, sugar and a buffer in an aqueous base. Hextend and
HetaCool use a high molecular weight hydroxyethyl starch (hetastarch) whereas
PentaLyte uses a lower molecular weight hydroxyethyl starch (pentastarch). The
hetastarch is retained in the blood longer than the pentastarch, which may make
Hextend and HetaCool the products of choice when a larger volume of plasma
expander or blood replacement solution for low temperature surgery is needed or
where the patient's ability to restore his own blood proteins after surgery is
compromised. PentaLyte, with pentastarch, would be eliminated from the blood
faster than Hextend and HetaCool
7
and might be used when less plasma expander is needed or where the patient is
more capable of quickly restoring lost blood proteins. The Company recently
began testing HexaLyte, a new plasma volume expander that contains a low
molecular weight hydroxyethyl starch and that would be eliminated from the body
more rapidly than Hextend and HetaCool, but not as rapidly as PentaLyte. BioTime
believes that by testing and bringing these products to the market, it can
increase its market share by providing the medical community with solutions to
match patients' needs.
Certain test results indicate that Hextend and PentaLyte may prove more
effective at maintaining blood calcium levels than the leading domestically
available plasma extender when used to replace large volumes of blood. Calcium
can be a significant factor in regulating blood clotting and cardiac function.
BioTime has not attempted to synthesize potentially toxic and costly
oxygen carrying molecules such as hemoglobin because the loss of fluid volume
and physiological balance may contribute as much to shock as the loss of the
oxygen carrying component of the blood. Surgical and trauma patients are
routinely given supplemental oxygen and retain a substantial portion of their
own red blood cells. Whole blood or packed red blood cells are generally not
transfused during surgery or in trauma care until several units of plasma or
plasma volume expanders have been administered and the patient's hematocrit has
fallen to the transfusion trigger. Therefore, the lack of oxygen carrying
molecules in the Company's solutions should not pose a significant
contraindication to use.
Hextend is BioTime's proprietary hetastarch-based synthetic blood
plasma volume expander, designed especially to treat hypovolemia in surgery and
trauma care where patients experience a large amount of blood loss. An important
goal of the Hextend development program was to produce a product that can be
used in multi-liter volumes to treat patients who have lost a large volume of
blood during surgery or as a result of injury. The safety related secondary
endpoints targeted in the U.S. clinical study included those involving
coagulation. The Company believes that the low incidence of adverse events
related to blood clotting in the Hextend patients demonstrates that Hextend may
be safely used in large amounts. An average of 1.6 liters of Hextend was used in
the clinical trials, with an average of two liters for patients who received
transfused blood products. The use of Hextend in volumes exceeding five liters
has been reported in a number of high blood loss cases since Hextend became
available for use in the United States.
BioTime plans to test the use of Hextend as a cardio-pulmonary bypass
circuit priming solution. In order to perform heart surgery, the patient's heart
must be stopped and a mechanical apparatus is used to oxygenate and circulate
the blood. The cardio-pulmonary bypass apparatus requires a blood compatible
fluid such as Hextend to commence and maintain the process of diverting the
patient's blood from the heart and lungs to the mechanical oxygenator and pump.
BioTime believes that Hextend will maintain blood pressure and
physiological balance better than the solutions presently used as bypass priming
solutions. Approximately 2 liters of Hextend would be used for each bypass
operation. Based upon the number of coronary bypass operations
8
performed, the potential market for Hextend as a bypass circuit priming solution
in the United States would be about 800,000 liters annually.
PentaLyte is BioTime's proprietary pentastarch-based synthetic plasma
expander, designed especially for use when a faster elimination of the starch
component is desired and acceptable. Although Hextend can be used in these
cases, some physicians appear to prefer a solution which could be metabolized
faster and excreted earlier when the longer term protection provided by Hextend
is not required. PentaLyte combines the physiologically balanced Hextend
formulation with pentastarch that has a lower molecular weight and degree of
substitution than the hetastarch used in Hextend. BioTime has filed an IND for
PentaLyte and is waiting for the FDA to complete its review before a clinical
study can begin. BioTime's present plan is to seek approval of PentaLyte as a
cardio-pulmonary by-pass pump priming solution and for the treatment of
hypovolemia.
HetaCool is a modified formulation of Hextend. HetaCool is specifically
designed for use at low temperatures. Surgeons are already using a variety of
other solutions to carry out certain limited procedures involving shorter term
(up to nearly one hour) arrest of brain and heart function at temperatures
between 15o and 25o C. However, BioTime is not aware of any fluid currently used
in medical practice or any medically-approved protocol allowing operations which
can completely replace all of a patient's blood at temperatures close to the ice
point. The Company believes that very low temperature bloodless surgical
techniques could be developed for open heart and minimally invasive closed chest
cardiovascular surgeries, and removal of tumors from the brain, head, neck,
heart, and other areas.
The Company is in the process of preparing an amendment to its Hextend
IND application to conduct preliminary clinical trials to use HetaCool as a
cardio-pulmonary bypass circuit priming solution in low temperature
cardio-vascular surgery. Those preliminary clinical trials will be a step to
preparing an amended IND application to conduct clinical trials using HetaCool
as a solution to replace all of a patient's circulating blood volume during
profound hypothermic (carried out at near- freezing temperatures) surgical
procedures. The experimental protocol for the planned blood replacement clinical
trial is being tested on animal subjects. HetaCool would be introduced into the
patient's body during the cooling process. Once the patient's body temperature
is nearly ice cold, and heart and brain function are temporarily arrested, the
surgeon would perform the operation. During the surgery, HetaCool may be
circulated throughout the body in place of blood, or the circulation may be
arrested for a period of time if an interruption of fluid circulation is
required. Upon completion of the surgery, the patient would be slowly warmed and
blood would be transfused.
Cardiac surgeons are working to develop innovative procedures to repair
damaged coronary arteries and heart valves. If optically guided surgical
instruments can be inserted into the heart through blood vessels or small
incisions, there may be no need to open the patient's chest cavity. BioTime
believes that HetaCool may be useful in these minimally invasive closed chest
cardiac procedures because the solution is transparent and if it were used to
completely replace blood at low temperatures it would permit surgeons to use
their optically guided instruments inside the heart or
9
blood vessels without having their view obstructed by blood. The use of
BioTime's solutions may also allow better control over stopping and starting the
heart, as well as extending the time period of such surgeries. BioTime intends
to conduct a series of laboratory studies using animal subjects to test the
utility of HetaCool as a low temperature blood substitute in such procedures.
HetaCool has been used to completely replace the blood volume of
hamsters, dogs, pigs, and baboons at temperatures approaching freezing. Many of
these animal subjects survived long term after hypothermic blood substitution
with HetaCool. In these laboratory tests, the animals' blood was replaced by
HetaCool and they were chilled for one to more than four hours with deep body
temperatures between 1oC and 10oC.
BioTime is developing a new formulation that has allowed the revival of
hamsters after as long as 6.5 hours of hypothermic blood substitution during
which time the animals' heartbeat and circulation were stopped.
Organ Transplant Products
The Market for Organ Preservation Solutions
Organ transplant surgery is a growing field. Each year in the United
States, approximately 5,000 donors donate organs, and approximately 5,000 people
donate skin, bone and other tissues.
As more surgeons have gained the necessary expertise and surgical methods have
been refined, the number of transplant procedures has increased, as has the
percentage of successful transplants. Organ transplant surgeons and their
patients face two major obstacles, namely the shortage of available organs from
donors, and the limited amount of time that a transplantable organ can be kept
viable between the time it is harvested from the donor and the time it is
transplanted into the recipient.
The scarcity of transplantable organs makes them too precious to lose
and increases the importance of effective preservation technology and products.
Current organ removal and preservation technology generally requires multiple
preservation solutions to remove and preserve effectively different groups of
organs. The removal of one organ can impair the viability of other organs.
Available technology does not permit surgeons to keep the remaining organs
viable within the donor's body for a significant time after the first organ is
removed. Currently, an organ available for transplant is flushed with an ice
cold solution during the removal process to deactivate the organ and preserve
its tissues, and then the organ is transported on ice to the donee. The ice cold
solutions currently used, together with transportation on ice, keep the organ
healthy for only a short period of time. For example, the storage time for
hearts is limited to approximately six hours. Because of the short time span
available for removal and transplant of an organ, potential organ donees may not
receive the needed organs.
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BioTime is seeking to address this problem by developing a more
effective organ preservation solution that will permit surgeons to harvest all
transplantable organs from a single donor. The Company believes that preserving
the viability of all transplantable organs and tissues simultaneously, at low
temperatures, would extend by several hours the time span in which the organs
can be preserved prior to transplant.
Using HetaCool for Multi-Organ Preservation. The Company is seeking to
develop HetaCool for use as a single solution that can simultaneously preserve
all of a single donor's organs. When used as an organ preservation solution,
HetaCool would be perfused into the donor's body while the body is chilled,
thereby eliminating an undesirable condition called "warm ischemia," caused when
an organ is warm while its blood supply is interrupted. The use of HetaCool in
conjunction with the chilling of the body should help to slow down the process
of organ deterioration by a number of hours so that a surgeon can remove all
organs for donation and transplant. The Company's current estimates are that
each such preservation procedure could require as much as 50 liters of HetaCool.
The Company believes that the ability to replace an animal's blood with
the Company's HetaCool solution, to maintain the animal at near freezing
temperatures for several hours, and then revive the animal, would demonstrate
that the solution could be used for multi-organ preservation. Company scientists
have revived animals after more than six hours of cold blood-substitution, and
have observed heart function in animals maintained cold and blood-substituted
for more than eight hours. An objective of the Company's research and
development program is to extend the time span in which animal subjects can be
maintained in a cold, blood-substituted state before revival or removal of
organs for transplant purposes. Organ transplant procedures using animal
subjects could then be conducted to test the effectiveness of Hextend as an
organ preservative.
Long-term Tissue and Organ Banking
The development of marketable products and technologies for the
preservation of tissues and vital organs for weeks and months is a long-range
goal of the Company's research and development plan. To permit such long-term
organ banking the Company is attempting to develop products and technologies
that can protect tissues and organs from the damage that occurs when human
tissues are subjected to subfreezing temperatures.
HetaFreeze is one of a family of BioTime's freeze-protective solutions
which may ultimately allow the extension of time during which organs and tissues
can be stored for future transplant or surgical grafting. In laboratory
experiments, BioTime's proprietary freeze-protective compounds have already been
used to preserve skin when used as a whole animal perfusate. Silver dollar size
full thickness shaved skin samples have been removed after saturation with
HetaFreeze solution, frozen at liquid nitrogen temperatures and stored for
periods ranging from days to weeks. The grafts were then warmed and sewn onto
the backs of host animals. Many of these grafts survived.
11
In other laboratory experiments, BioTime scientists have shown that
animals can be revived to consciousness after partial freezing with their blood
replaced by HetaFreeze. While this technology has not developed to an extent
that allows long term survival of the laboratory subjects, and their organs, a
better understanding of the effects of partial freezing could allow for extended
preservation times for vital organs, skin and blood vessels.
Other Potential Uses of BioTime Solutions
Isolated regional perfusion of anti-cancer drugs has been used to treat
melanoma of the limbs, and inoperable tumors of the liver. The Company believes
that employing such a procedure while the patient is kept in ice-cold
blood-substitution may allow high doses of toxic anti-cancer drugs to be
directed at inoperable tumors within vital organs. Keeping the rest of the
patient in a cold, blood substituted state may reduce or eliminate the
circulation of the toxic drugs to healthy tissues.
BioTime considers such surgical techniques to be a longer range goal of
its research and development program for hypothermic surgery products. Use of
this complex technology in the practice of oncology can occur only after
ice-cold blood-substitution has advanced to an appropriate level of safety and
effectiveness.
Research and Development Strategy
From inception through December 31, 1999, the Company has spent
$16,582,509 on research and development. The greatest portion of BioTime's
research and development efforts have been devoted to the development of
Hextend, PentaLyte and HetaCool for conventional surgery, emergency care, low
temperature surgery, and multi-organ preservation. A lesser portion of the
Company's research and development efforts have been devoted to developing
solutions and protocols for storing organs and tissues at subfreezing
temperatures. In the future the Company may explore other applications of its
products and technologies, including cancer chemotherapy. As the first products
achieve market entry, more effort will be expended to bring the next tier of
products to maturity.
One major focus of the Company's research and development effort has
been on products and technology to extend the time animals can be kept cold and
blood-substituted, and then revived without physical impairment. An integral
part of that effort has been the development of techniques and procedures or
"protocols" for use of the Company's products. A substantial amount of data has
been accumulated through animal tests, including the proper surgical techniques,
drugs and anesthetics, the temperatures and pressures at which blood and blood
replacement solutions should be removed, restored and circulated, solution
volume, the temperature range, and times, for maintaining circulatory arrest,
and the rate at which the subject should be rewarmed.
12
Experiments intended to test the efficacy of the Company's low
temperature blood replacement solutions and protocols for surgical applications
involve replacing the animal's blood with the Company's solution, maintaining
the animal in a cold blood-substituted state for a period of time, and then
attempting to revive the animal. Experiments for multi-organ preservation
involve the maintenance of the animal subjects at cold temperatures for longer
periods of time than would be required for many surgical applications, followed
by transplant procedures to test the viability of one or more of the subject's
vital organs.
The Company is conducting experiments at hospital, and medical school,
and university research facilities. These collaborative research programs are
testing solutions and protocols developed in the Company's laboratories and, in
some cases, comparing the efficacy of the Company's products with commercially
available FDA approved products manufactured by other companies. Collaborative
gerontological research is being conducting at the University of California at
Berkeley. The Company intends to continue to foster relations with research
hospitals and medical schools for the purpose of conducting collaborative
research projects because it believes that such projects will introduce the
Company's potential products to members of the medical profession and provide
the Company with objective product evaluations from independent research
physicians and surgeons.
Licensing
On April 23, 1997, the Company and Abbott entered into a License
Agreement under which the Company granted to Abbott an exclusive license to
manufacture and sell Hextend in the United States and Canada for all therapeutic
uses other than those involving hypothermic surgery where the patient's body
temperature is lower than 12(degree)C ("Hypothermic Use"), or replacement of
substantially all of a patient's circulating blood volume ("Total Body
Washout"). The Company has retained all rights to manufacture, sell or license
Hextend and other products in all other countries.
Under the License Agreement, Abbott has agreed to pay the Company up to
$40,000,000 in license fees, of which $2,500,000 has been paid to date for the
grant of the license and the achievement of certain 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 $15,000,0000 and
$30,000,000. Abbott's obligation to pay licensing fees on sales of 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 total annual net sales of Hextend. The royalty rate will be 5% plus an
additional .22% for each $1,000,000 of annual net sales, up to a maximum royalty
rate of 36%. The royalty rate for each year will be applied on a total net sales
basis so that once the highest royalty rate for a year is determined, that rate
will be
13
paid with respect to all sales for that year. 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.
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, the Company 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. Abbott's
exclusive license also may terminate, without the payment of termination fees by
the Company, if Abbott fails to market Hextend. Abbott has agreed to manufacture
Hextend for sale by the Company in the event that Abbott's exclusive license is
terminated in either case.
Abbott has a right to acquire additional licenses to manufacture and
sell the Company's other plasma expander products in the United States and
Canada. If Abbott exercises its right to acquire a license to sell such products
for uses other than Hypothermic Surgery or Total Body Washout, in addition to
paying royalties, Abbott will be obligated to pay a license fee based upon the
Company's direct and indirect research, development and other costs allocable to
the new product. If Abbott desires to acquire a license to sell any of the
Company's products for use in Hypothermic Surgery or Total Body Washout, the
license fees and other terms of the license will be subject to negotiation
between the parties. For the purpose of determining the applicable royalty
rates, net sales of any such new products licensed by Abbott will be aggregated
with sales of Hextend. If Abbott does not exercise its right to acquire a new
product license, the Company may manufacture and sell the product itself or may
license others to do so.
In order to preserve its rights to obtain an exclusive license for
PentaLyte under the License Agreement, Abbott notified the Company that Abbott
will supply BioTime with batches of PentaLyte, characterization and stability
studies, and other regulatory support needed for BioTime to file an IND and
conduct clinical studies.
The foregoing description of the License Agreement is a summary only
and is qualified in all respects by reference to the full text of the License
Agreement.
The Company is also discussing and negotiating prospective licensing
arrangements with other pharmaceutical companies, some of which have the
capacity to produce and market the Company's products in various countries.
Representatives of the Company and Nihon Pharmaceutical Company, Ltd. ("Nihon")
have been discussing the development of BioTime products for the Japanese
market, and the development of a clinical trial program to obtain Japanese
regulatory approval. Nihon and the Company previously signed a letter of intent
to negotiate a licensing agreement to manufacture and market BioTime products in
Japan. Nihon is a subsidiary of Takeda Chemical Industries, Japan's largest
pharmaceutical manufacturer. In licensing arrangements that include marketing
rights, the participating pharmaceutical company would be
14
entitled to retain a large portion of the revenues from sales to end users and
would pay the Company a royalty on net sales. There is no assurance that any
such additional arrangements can be made.
Manufacturing
Facilities Required
The Company has sufficient equipment, space and personnel needed to
synthesize the quantities of its products used in its research activity, but the
Company does not have facilities to manufacture the solution in commercial
quantities, or under "good manufacturing practices" required by the FDA. Any
products that are used in clinical trials for FDA approval, or that are approved
by the FDA for marketing, will have to be manufactured according to "good
manufacturing practices" at a facility that has passed FDA inspection. In
addition, any products that are approved by the FDA will have to be manufactured
in commercial quantities, and with sufficient stability to withstand the
distribution process, and in compliance with such federal and state regulatory
requirements as may be applicable. The active ingredients and component parts of
the products must be either USP or themselves manufactured according to "good
manufacturing practices."
Abbott, which manufactures Hextend for the North American market, and
NPBI International, BV, a Netherlands company ("NPBI"), that has manufactured
lots of Hextend for the Company's use in seeking regulatory approval in Europe,
both have the facilities to manufacture Hextend and other Company products in
commercial quantities. If Abbott chooses not to obtain a license to manufacture
and market another BioTime product, and if NPBI declines to manufacture BioTime
products on a commercial basis, the Company will need to enter into licensing or
product manufacturing arrangements with another established pharmaceutical
company.
Acquiring a manufacturing facility would involve significant
expenditure of time and money for design and construction of the facility,
purchasing equipment, hiring and training a production staff, purchasing raw
material and attaining an efficient level of production. Although the Company
has not determined the cost of constructing production facilities that meet FDA
requirements, it expects that the cost would be substantial, and that the
Company would need to raise additional capital in the future for that purpose.
There can be no assurance that the Company will be able to obtain the capital
required for the acquisition of production facilities. To avoid the incurrence
of those expenses and delays, the Company is seeking contract and licensing
arrangements with established pharmaceutical companies for the production of the
Company's products, but there can be no assurance that satisfactory arrangements
will be made.
Raw Materials
Although most ingredients in the products being developed by the Company are
readily obtainable from multiple sources, the Company knows of only a few
manufacturers of the hydroxyethyl starches that serve as the drug substance in
Hextend, PentaLyte and HetaCool. Abbott
15
presently has a source of supply of the hydroxyethyl starch used in Hextend,
PentaLyte and HetaCool, and has agreed to maintain a supply sufficient to meet
market demand for Hextend in the United States and Canada. In order to
manufacture its products for overseas markets, or products not presently
licensed to Abbott for the United States and Canadian markets, the Company or a
licensee would have to secure a supply or production agreement with one or more
of the known hydroxyethyl starch manufacturers. The Company believes that it
will be able to obtain a sufficient supply of starch for its needs in the
foreseeable future, although it does not have a supply agreement in place. If
for any reason a sufficient supply of hydroxyethyl starch could not be obtained,
the Company or a licensee would have to acquire a manufacturing facility and the
technology to produce the hydroxyethyl starch according to good manufacturing
practices. The Company would have to raise additional capital to participate in
the development and acquisition of the necessary production technology and
facilities.
If arrangements cannot be made for a source of supply of hydroxyethyl
starch, the Company would have to reformulate its solutions to use one or more
other starches that are more readily available. In order to reformulate its
products, the Company would have to perform new laboratory testing to determine
whether the alternative starches could be used in a safe and effective synthetic
plasma volume expander, low temperature blood substitute or organ preservation
solution. If needed, such testing would be costly to conduct and would delay the
Company's product development program, and there is no certainty that any such
testing would demonstrate that an alternative ingredient, even if chemically
similar to the one currently used, would be as safe or effective.
Marketing
Because Hextend is a surgical product, sales efforts must be directed
to anesthesiologists, surgeons, intensive care and trauma care physicians, and
hospital pharmacists. In order to reach that customer base, sales calls are made
to hospital pharmacies, advertisements are placed in medical journals, and
presentations of marketing information are made to physicians individually and
at medical conferences and in the hospital setting. Abbott is also working with
hospitals to have Hextend approved for use and added to hospital formularies. As
is common in the pharmaceutical industry, many customers received free samples
of Hextend, which is often an effective way to introduce a new product to
physicians, but also may result in a delay in the first purchase until a re-
order is needed.
Hextend competes with other products used to treat or prevent
hypovolemia, including albumin, generic 6% hetastarch solutions, and crystalloid
solutions. The competing products have been commonly used in surgery and trauma
care for many years, and in order to sell Hextend, physicians must be convinced
to change their product loyalties. Although albumin is expensive, crystalloid
solutions and generic 6% hetastarch solutions sell at low prices. In order to
compete with other products, particularly those that sell at lower prices,
Hextend will have to be recognized as providing medically significant
advantages. As part of the marketing program, Abbott and the Company will
finance a number of limited medical studies comparing outcomes of patients
receiving
16
Hextend and patients receiving other products during surgery, and comparing the
relative patient care cost of using Hextend compared to other products. The
results of these studies will be published in a series of abstracts, reports and
peer reviewed journal articles intended for the target Hextend customer base. It
will take time to complete these studies and publish the results. 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 Company is discussing product licensing arrangements with a number
of companies for over-seas markets and is approaching agreement to license its
products in certain parts of the world. Although such arrangements could permit
the Company to receive revenues from the sale of its products expeditiously,
without the time and expense of developing its own manufacturing facilities and
marketing resources, the Company would have to share sales revenues with the
participating pharmaceutical companies. There can be no assurance that any
additional pharmaceutical companies will be willing to enter into marketing
arrangements on terms acceptable to the Company. If the Company does not enter
into licensing or other arrangements for the sale of a product in a particular
market, the Company would have to establish its own marketing organization.
Government Regulation
The FDA and foreign regulatory authorities will regulate the Company's
proposed products as drugs, biologicals, or medical devices, depending upon such
factors as the use to which the product will be put, the chemical composition
and the interaction of the product on the human body. In the United States,
products that are intended to be introduced into the body, such as blood
substitute solutions for low temperature surgery and plasma expanders, will be
regulated as drugs and will be reviewed by the FDA staff responsible for
evaluating biologicals.
The Company's domestic human drug products will be subject to rigorous
FDA review and approval procedures. After testing in animals, an Investigational
New Drug (IND) application must be filed with the FDA to obtain authorization
for human testing. Extensive clinical testing, which is generally done in three
phases, must then be undertaken at a hospital or medical center to demonstrate
optimal use, safety and efficacy of each product in humans. Each clinical study
is conducted under the auspices of an independent Institutional Review Board
("IRB"). The IRB will consider, among other things, ethical factors, the safety
of human subjects and the possible liability of the institution. The time and
expense required to perform this clinical testing can far exceed the time and
expense of the research and development initially required to create the
product. No action can be taken to market any therapeutic product in the United
States until an appropriate New Drug Application ("NDA") has been approved by
the FDA. Even after initial FDA approval has been obtained, further studies may
be required to provide additional data on safety or to gain approval for the use
of a product as a treatment for clinical indications other than those initially
targeted. In addition, use of these products during testing and after marketing
could reveal side effects that could delay, impede or prevent FDA marketing
approval, resulting in a FDA-ordered product recall, or in FDA-imposed
limitations on permissible uses.
17
The FDA also regulates the manufacturing process of pharmaceutical
products and requires that a portion of the clinical trials for new products be
conducted using products produced in compliance with "good manufacturing
practices." See "Manufacturing."
Sales of pharmaceutical products outside the United States are subject
to foreign regulatory requirements that vary widely from country to country.
Even if FDA approval has been obtained, approval of a product by comparable
regulatory authorities of foreign countries must be obtained prior to the
commencement of marketing the product in those countries. The time required to
obtain such approval may be longer or shorter than that required for FDA
approval.
Patents and Trade Secrets
The Company holds a number of United States patents having composition
and methods of use claims covering BioTime's proprietary solutions, including
Hextend and PentaLyte. The most recent U.S. patents were issued during 1998.
Patents covering certain of the Company's solutions have also been issued in
Australia, Israel, and South Africa. Additional patent applications have been
filed in the United States and numerous other countries for Hextend, PentaLyte
and other solutions.
There is no assurance that any additional patents will be issued, or
that any patents now held or later obtained by the Company will not be
successfully challenged by third parties and declared invalid or infringing of
third party claims. Further, the enforcement of patent rights often requires
litigation against third party infringers, and such litigation can be costly to
pursue.
While the Company believes that the protection of patents and licenses
is important to its business, the Company also will rely on trade secrets,
know-how and continuing technological advancement to maintain its competitive
position. The Company has entered into intellectual property, invention and
non-disclosure agreements with its employees and it is the Company's practice to
enter into confidentiality agreements with its consultants. There can be no
assurance, however, that these measures will prevent the unauthorized disclosure
or use of the Company's trade secrets and know-how or that others may not
independently develop similar trade secrets and know-how or obtain access to the
Company's trade secrets, know-how or proprietary technology. If, in the future,
the techniques for use of the Company's products become widely known through
academic instruction or publication, patent protection would become more
important as a means of protecting the Company's market share for its products.
Competition
The Company's solutions will compete with products currently used to
treat or prevent hypovolemia, including albumin, other colloid solutions, and
crystalloid solutions presently manufactured by established pharmaceutical
companies, and with human blood products. Some of
18
these products, in particular crystalloid solutions, are commonly used in
surgery and trauma care and sell at low prices. In order to compete with other
products, particularly those that sell at lower prices, the Company's products
will have to be recognized as providing medically significant advantages. The
competing products are being manufactured and marketed by established
pharmaceutical companies that have large research facilities, technical staffs
and financial and marketing resources. DuPont Pharmaceuticals presently markets
Hespan, an artificial plasma volume expander. Abbott and Baxter International
manufacture and sell a generic equivalent of Hespan. As a result of the
introduction of generic plasma expanders intended to compete with Hespan,
competition in the plasma expander market has intensified and wholesale prices
have declined.
To compete with new and existing plasma expanders, the Company is
developing products that contain constituents that may prevent or reduce the
physiological imbalances, bleeding, fluid overload, edema, poor oxygenation, and
organ failure that can occur when competing products are used. To compete with
existing organ preservation solutions, the Company is seeking to develop a
solution that can be used to preserve all organs simultaneously and for long
periods of time.
A number of other companies are known to be developing hemoglobin and
synthetic red blood cell substitutes and technologies. BioTime's products have
been developed for use either before red blood cells are needed or in
conjunction with the use of red blood cells. In contrast, hemoglobin and other
red blood cell substitute products are designed to remedy ischemia and similar
conditions that may result from the loss of oxygen carrying red blood cells.
Those products would not necessarily compete with the Company's products unless
the oxygenating molecules were included in solutions that could replace fluid
volume and prevent or reduce the physiological imbalances as effectively as the
Company's products. Generally, red blood cell substitutes are more expensive to
produce and potentially more toxic than Hextend and PentaLyte.
Competition in the areas of business targeted by the Company is likely
to intensify further as new products and technologies reach the market. Superior
new products are likely to sell for higher prices and generate higher profit
margins once acceptance by the medical community is achieved. Those companies
that are successful in introducing new products and technologies to the market
first may gain significant economic advantages over their competitors in the
establishment of a customer base and track record for the performance of their
products and technologies. Such companies will also benefit from revenues from
sales which could be used to strengthen their research and development,
production, and marketing resources. All companies engaged in the medical
products industry face the risk of obsolescence of their products and
technologies as more advanced or cost effective products and technologies are
developed by their competitors. As the industry matures, companies will compete
based upon the performance and cost effectiveness of their products.
Employees
As of December 31, 1999, the Company employed 14 persons on a full-time
basis and 4 persons on a part-time basis. Three full-time employees and two
part-time employee hold Ph.D. or Masters Degrees in one or more fields of
science.
19
Risk Factors
Some of the factors that could materially affect the Company's operations
and prospects are discussed below. There may be other factors that are not
mentioned here or of which BioTime is not presently aware that could also affect
BioTime's operations.
Uncertainty of Future Sales; Competition
The Company's ability to generate substantial operating revenue depends
upon its success in developing and marketing its products. There can be no
assurance that Hextend or any other products that receive FDA or foreign
regulatory approval will be successfully marketed or that the Company will
receive sufficient revenues from product sales to meet its operating expenses.
The acceptance of the Company's products and technologies by the medical
profession may take time to develop because physicians and hospitals may be
reluctant to try a new product due to the high degree of risk associated with
the application of new technologies and products in the field of human medicine.
The Company's plasma expander products will compete with products currently
used to treat or prevent hypovolemia, including albumin and other colloid
solutions, and crystalloid solutions. Some of these products, in particular
crystalloid solutions, are commonly used in surgery and trauma care and sell at
low prices. In order to compete with other products, particularly those that
sell at lower prices, the Company's products will have to be recognized as
providing medically significant advantages. The competing products are being
manufactured and marketed by established pharmaceutical companies with
substantial resources. DuPont Pharmaceuticals presently markets Hespan, an
artificial plasma volume expander. Abbott and Baxter International manufacture
and sell a generic equivalent of Hespan. As a result of the introduction of
generic plasma expanders intended to compete with Hespan, competition in the
plasma expander market has intensified and wholesale prices have declined. There
also is a risk that the Company's competitors may succeed in developing safer or
more effective products that could render the Company's products and
technologies obsolete or noncompetitive.
BioTime Needs to Raise Additional Capital
The Company needs to raise capital to meet its operating expenses until
such time as it is able to generate sufficient revenues from product sales or
royalties. There can be no assurance that the Company will be able to raise
additional funds on favorable terms or at all, or that such funds, if raised,
will be sufficient to permit the Company to continue its operations,
notwithstanding the progress of its research and development projects. The
Company's operating expenses will increase if it succeeds in bringing additional
products out of the laboratory testing phase of development and into clinical
trials. Additional financing may be required for the continuation or expansion
of the Company's research and product development, additional clinical trials of
new products, and production and marketing of Company products that receive FDA
or foreign regulatory approval. Although the Company will continue to seek
licensing fees from pharmaceutical companies for
20
licenses to manufacture and market the Company's products abroad, additional
sales of equity or debt securities may 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.
BioTime Products Cannot Be Marketed Without FDA and Other Regulatory Approvals
The products that BioTime develops cannot be sold until the FDA and
corresponding foreign regulatory authorities approve the products for medical
use. The regulatory process, which includes preclinical, clinical and
post-clinical testing of each product to establish its safety and efficacy, can
take several years to complete and require the expenditure of substantial time
and funds. Data obtained from preclinical and clinical activities are
susceptible to varying interpretations which could delay, limit or prevent
regulatory approval. In addition, delays or rejections may be encountered as a
result of changes in FDA policy during the period of product development and FDA
regulatory review. Similar delays may also be encountered in foreign countries.
There can be no assurance that, even after substantial expenditures of time and
money, regulatory approval will be obtained for any products developed by the
Company. Moreover, even if regulatory approval of a product is granted, such
approval may entail limitations on the indicated uses for which the product may
be marketed. After regulatory approval is obtained, the approved product, the
manufacturer and the manufacturing facilities are subject to continual review
and periodic inspections, and a later discovery of previously unknown problems
with a product, manufacturer or facility may result in restrictions on such
product or manufacturer, including withdrawal of the product from the market.
Failure to comply with the applicable regulatory requirements can, among other
things, result in fines, suspensions of regulatory approvals, product recalls,
operating restrictions and criminal prosecution. Additional government
regulation may be established which could prevent or delay regulatory approval
of the Company's products.
Development Stage Company
BioTime is in the development stage, and, to date, has been principally
engaged in research and development activities. Only one of the Company's
products is presently on the market, and the Company has not generated a
significant amount of operating revenue from royalties on sales. As a result of
the developmental nature of its business, the Company can be expected to sustain
additional operating losses. There can be no assurance that the Company will
generate sufficient revenues from the sale or licensing of its products and
technologies to be profitable.
Uncertainty as to the Successful Development of Medical Products
The Company's business involves the attempt to develop new medical products
and technologies. Such experimentation is inherently costly, time consuming and
uncertain as to its results. If the Company is successful in developing a new
technology or product, refinement of the new technology or product and
definition of the practical applications and limitations of the technology or
product may take years and require the expenditure of large sums of money. From
the date of the Company's
21
inception through December 31, 1999, the Company spent $16,582,509 on research
and development, and the Company expects to continue to incur substantial
research and development expenses.
Absence of Manufacturing and Marketing Capabilities; Reliance Upon Licensing
The Company presently does not have adequate facilities or resources to
manufacture its products or the hydroxyethyl starches used in its products.
BioTime has granted Abbott an exclusive license to manufacture and market
Hextend in the United States and Canada, and BioTime plans to enter into
additional arrangements with pharmaceutical companies for the production and
marketing of the Company's products in other countries. In addition, NPBI
International, BV, a Netherlands Company, has the facilities to manufacture
Hextend for BioTime. However, there can be no assurance that the Company will be
successful in entering into additional manufacturing and marketing arrangements.
If additional manufacturing and marketing arrangements cannot be made on
acceptable terms, the Company may have to construct or acquire its own
manufacturing facilities and to establish its own marketing organization, which
would entail significant expenditures of time and money.
Patents May Not Protect BioTime Products from Competition
The Company has obtained patents in the United States, Israel, Australia
and South Africa, and has filed patent applications in certain foreign
countries, for certain products, including Hextend and PentaLyte. No assurance
can be given that any additional patents will be issued to the Company, or that
the Company's patents will provide meaningful protection against the development
of competing products. There also is no assurance that competitors will not
successfully challenge the validity or enforceability of any patent issued to
the Company. The costs required to uphold the validity and prevent infringement
of any patent issued to the Company could be substantial, and the Company might
not have the resources available to defend its patent rights.
Prices and Sales of Products May be Limited by Health Insurance Coverage and
Government Regulation
Success in selling BioTime's products may depend in part on the extent to
which health insurance companies, HMOs, and government health administration
authorities such as Medicare and Medicaid will pay for the cost of the products
and related treatment. Health insurance reimbursements and HMO coverage now
include the cost of Hextend used in surgical procedures. However, there can be
no assurance that such reimbursements will continue. In some foreign countries,
pricing or profitability of health care products is subject to government
control. In the United States, there have been a number of federal and state
proposals to implement similar government controls, and new proposals are likely
to be made in the future.
22
Dependence Upon Key Personnel
The Company depends to a considerable degree on the continued services of
its executive officers. Although the Company maintains key man life insurance in
the amount of $1,000,000 on the life of Dr. Paul Segall, the loss of the
services of any of the executive officers could have a material adverse effect
on the Company. In addition, the success of the Company will depend, among other
factors, upon successful recruitment and retention of additional highly skilled
and experienced management and technical personnel.
BioTime Does Not Pay Cash Dividends
BioTime does not pay cash dividends on its Common Shares. For the
foreseeable future it is anticipated that any earnings generated from the
Company's business will be used to finance the growth of the Company and will
not be paid out as dividends to BioTime shareholders.
The Price of BioTime Stock May Rise and Fall Rapidly
BioTime Common Shares are traded on the American Stock Exchange. The
market price of the Common Shares, like that of the common stock of many
biotechnology companies, has been highly volatile. The price of BioTime shares
may rise rapidly in response to certain events, such as the commencement of
clinical trials of an experimental new drug, even though the outcome of those
trials and the likelihood of ultimate FDA approval remains uncertain. Similarly,
prices of BioTime shares may fall rapidly in response to certain events such as
unfavorable results of clinical trials or a delay or failure to obtain FDA
approval. The failure of the Company's earnings to meet analysts' expectations
could result in a significant rapid decline in the market price of the Company's
shares. In addition, the stock market has experienced and continues to
experience extreme price and volume fluctuations which have affected the market
price of the equity securities of many biotechnology companies and which have
often been unrelated to the operating performance of these companies. Such broad
market fluctuations, as well as general economic and political conditions, may
adversely affect the market price of BioTime Common Shares.
Item 2. Facilities.
The Company occupies its office and laboratory facility in Berkeley,
California under a lease that will expire on March 31, 2004. The Company
presently occupies approximately 8,200 square feet of space and pays rent in the
amount of $10,000 per month. The rent will increase annually by the greater of
3% and the increase in the local consumer price index, subject to a maximum
annual increase of 7%. The Company also pays all charges for utilities and
garbage collection.
The Company has an option to extend the term of the lease for a period of
three years, and to terminate the lease early upon six months notice after
September 30, 2000.
23
The Company uses, on a fee per use basis, facilities for surgical research
on animals at an unaffiliated privately run research center located in Winters,
California. Contracting for the use of research facilities has enabled the
Company to initiate its research projects without the substantial capital cost,
overhead costs and delay associated with the acquisition and maintenance of a
modern animal surgical research facility.
Item 3. Legal Proceedings.
The Company is not presently involved in any material litigation or
proceedings, and to the Company's knowledge no such litigation or proceedings
are contemplated.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
24
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's Common Shares have been trading on the American Stock
Exchange since August 31, 1999, and traded on the Nasdaq National Market from
April 28, 1998 to August 30,1999, and on the Nasdaq SmallCap Market from March
5, 1992 through April 27, 1998. The closing price of the Company's Common Shares
on AMEX on March 20, 2000 was $14.19.
The following table sets forth the range of high and low bid prices for the
Common Shares for the fiscal years ended June 30, 1997 and 1998 and the fiscal
years ended December 31, 1998 (six months) and December 31, 1999, based on
transaction data as reported by Nasdaq and AMEX. All prices have been adjusted
to give effect to the Company's payment of a stock dividend during October 1997
to effect a three-for-one stock split.
Quarter Ended High Low
- ------------- ---- ---
March 31, 1997 13.20 8.08
June 30, 1997 12.33 7.58
September 30, 1997 17.08 8.67
December 31, 1997 27.00 18.50
March 31, 1998 19.75 11.00
June 30, 1998 14.37 5.81
September 30, 1998 9.88 5.50
December 31, 1998 18.13 7.00
March 31, 1999 19.38 12.88
June 30, 1999 21.50 8.63
September 30, 1999 16.69 8.13
December 31, 1999 13.25 8.19
As of March 17, 2000, there were 298 shareholders of record of the Common
Shares based upon information from the Registrar and Transfer Agent.
The Company has paid no dividends on its Common Shares since its inception
and does not plan to pay dividends on its Common Shares in the foreseeable
future.
25
Item 6. Selected Financial Data.
The selected financial data as of December 31, 1999 and 1998, June 30, 1998,
1997, 1996, and 1995 and the period from inception (November 30, 1990) to
December 31, 1999 presented below have been derived from the audited financial
statements of the Company. The selected financial data should be read in
conjunction with the Company's financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere.
Statement of Operations Data:
Six Months
Year Ended Ended
December 31, December 31, June 30, Period from Inception
------------- ------------- ------------------------------------------------------ (November 30, 1990)
1999 1998 1998 1997 1996 1995 December 31, 1999
------------- ------------- ------------ ------------- ------------ ------------- --------------------
REVENUE:
Licensing Fee $ 1,037,500 $ 250,000 $ 1,150,000 $ 62,500 $ -- $ -- $ 2,500,000
------------- ------------- ------------ ------------- ------------ ------------- ---------------
EXPENSES:
Research and development $ (4,900,521) $ (1,723,860) $(3,048,775) $ (2,136,325) $(1,142,168) $( 1,791,698) $ (16,582,509)
General and administrative (1,896,690) (710,131) (1,849,312) (1,209,546) (954,049) (808,432) (9,686,454)
------------- ------------- ------------ ------------- ------------ ------------- ---------------
Total expenses (6,797,211) (2,433,991) (4,898,087) (3,345,871) (2,096,217) (2,600,130) (26,268,963)
------------- ------------- ------------ ------------- ------------ ------------- ---------------
INTEREST AND OTHER
INCOME: 279,827 89,513 294,741 189,161 130,882 222,383 1,582,574
------------- ------------- ------------ ------------- ------------ ------------- ---------------
NET LOSS $ (5,479,884) $ (2,094,478) $(3,453,346) $ (3,094,210) $(1,965,335) $ (2,337,747) $ (22,186,389)
============= ============= ============ ============= ============ ============= ===============
BASIC AND DILUTED NET
LOSS PER SHARE $ (0.51) $ (0.21) $ (0.35) $ (0.35) $ (0.25) $ (0.30)
============= ============= ============ ============= ============ =============
COMMON AND EQUIVALENT
SHARES USED IN COMPUTING
PER SHARE AMOUNTS 10,688,100 10,008,468 9,833,156 8,877,024 7,827,732 7,900,392
============= ============= ============ ============= ============ =============
Balance Sheet Data:
December 31, 1999 December 31,1998 June 30, 1998
------------------------ -------------------- ------------------
Cash, cash equivalents and
short term investments $5,292,806 $2,429,014 $4,105,781
Working Capital 4,804,579 2,157,578 3,724,663
Total assets 5,678,644 2,809,455 4,641,780
Shareholders' equity 5,083,132 2,384,752 4,014,750
26
Item 7. 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 December 31, 1999 the
Company had incurred a cumulative net loss of $22,186,389. 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 "Licensing" 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'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. Abbott is also working with hospitals to have
Hextend approved for use and added to hospital formularies.
As part of the marketing program, Abbott and the Company will finance a
number of limited medical studies comparing outcomes of patients receiving
Hextend and patients receiving other
27
products during surgery and comparing the relative cost of using Hextend
compared to other products. It will take time to complete these studies and
publish the results. 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.
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.
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 year ended December 31, 1999 include royalties on sales made by Abbott
during the three months ended September 30, 1999. Royalties on sales made during
the fourth quarter of 1999 will not be recognized by the Company until the first
quarter of fiscal year 2000. Royalties for both periods were not material to
BioTime's financial results.
Abbott initiated a more active phase of the marketing program for
Hextend in the fourth quarter of 1999, and has continued such activity in the
first quarter 2000. In this regard, 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 new Hextend advertising
campaign features high 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 has recently been expanded by directing advertising in medical
journals, medical conferences and sales calls to a broad array of medical
specialists. The potential favorable impact of these expanded marketing
activities may not be felt for several months, and are not reflected in
royalties payable to BioTime with respect to the 1999 periods.
The Company estimates that Hextend has now been successfully used in
several thousand patients undergoing surgery at over 300 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 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
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.
28
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. The Company has determined that
several member nations would accept an application based upon the United States
clinical trials. If approvals based upon those trials can be obtained in the
requisite number of member nations, then the Company would be permitted to
market Hextend in all 16 member nations.
In order to commence clinical trials for regulatory approval of new
products, such as PentaLyte and 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.
Change of Fiscal Year
In November 1998, the Board of Directors approved a change to the
Company's operating fiscal year from a fiscal year ending June 30 to a fiscal
year ending December 31, beginning January 1, 1999. See Note 1 of Notes to
Financial Statements. Accordingly, the accompanying financial statements are for
the twelve months ended December 31, 1999, the six months ended December 31,
1998, the twelve months ended June 30, 1998 ("Fiscal 1998"), and the twelve
months ended June 30, 1997 ("Fiscal 1997").
29
Results of Operations
Year Ended December 31, 1999 and Six Months Ended December 31, 1998
The Company recognized $1,037,500 of license fees for the year ended
December 31, 1999, and $250,000 during the six month period ended December 31,
1998. The $1,037,500 includes $850,000 for achieving the final milestones under
its license agreement with Abbott. The remaining $187,500 of license fee
represents the deferred portion of the license fee payment received for
signing of the License Agreement signed in 1997. For the year ended December 31,
1999, interest and other income was $279,827, and for the six month period ended
December 31, 1998, interest and other income was $89,513.
Research and development expenses were $4,900,521 for the year ended
December 31, 1999, and $1,723,860 for the six month period ended December 31,
1998. 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.
General and administrative expenses were $1,896,690 for the year ended
December 31, 1999, and were $710,131 for the six month period ended December 31,
1998. General and administrative expenses include salaries, consultants' fees,
and general operating expenses.
Years Ended June 30, 1998 and June 30, 1997
During Fiscal 1997, the Company received $1,400,000 for signing the
Abbott License Agreement and achieving a license fee milestone pertaining to the
allowance of certain patent claims pending. During Fiscal 1998, the Company
received an additional milestone fee of $250,000 for filing its NDA for Hextend.
The Company deferred recognition of a portion of the license fee payment
received for signing of the License Agreement ($1,000,000). The Company
recognized $62,500 of license fee revenue during Fiscal 1997, and $1,150,000
during Fiscal 1998. Interest and other income increased to $294,741 for Fiscal
1998 from $189,161 for Fiscal 1997. The increase in interest and other income is
attributable to the increase in cash and cash equivalents from the Company's
sale of Common Shares through a subscription rights offering that was completed
during February 1997.
Research and development expenses increased to $3,048,775 for Fiscal
1998, from $2,136,325 for Fiscal 1997. The increase in research and development
expenses is attributable to the cost of preparing and filing an NDA for Hextend,
and preparing for future regulatory filings in Europe and Canada. Research and
development expenses increased to $2,136,325 for Fiscal 1997, from $1,142,168
for Fiscal 1996. The increase in research and development expenses was
attributable to the Company's Phase III human clinical trials of Hextend,
initiation of a clinical trial
30
at Middlesex Hospital in London, England, and an accrual for bonuses granted
after June 30, 1997. It is expected that research and development expenses will
increase as the Company continues clinical testing of Hextend and commences
clinical studies of other products.
General and administrative expenses increased to $1,849,312 for Fiscal
1998, from $1,209,546 for Fiscal 1997. This increase is attributable to an
increase in the general operations of the Company, an increase in personnel, and
bonus awards. General and administrative expenses increased to $1,209,546 for
Fiscal 1997. This increase was attributable to an amortization expense
associated with agreements the Company entered into with certain financial
advisors and consultants in exchange for warrants to purchase the Company's
stock, an increase in the general operations of the Company, an increase in
personnel, and bonus awards.
Taxes
At December 31, 1999, the Company had a cumulative net operating loss
carryforward of approximately $23,000,000 for federal income tax purposes.
Liquidity and Capital Resources
Since inception, the Company has primarily financed its operations
through the sale of equity securities and licensing fees, and at December 31,
1999 the Company had cash and cash equivalents of $5,292,800. The Company
expects that its cash on hand will be sufficient to finance its operations for
the next 12 months, but will 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,
additional sales of equity or debt securities may 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.
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, are 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 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company did not hold any market risk sensitive instruments as of
December 31, 1999, December 31, 1998, June 30, 1998 or June 30, 1997.
31
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Pages
-----
Independent Auditors' Report 33
Balance Sheets As of December 31, 1999 and
December 31, 1998 34
Statements of Operations For the Year Ended
December 31, 1999, For the Six Months Ended
December 31, 1998, the Two Years in the Period
Ended June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 1999 35
Statements of Shareholders' Equity For the Year Ended
December 31, 1999, the Six Months Ended December 31, 1998,
the Two Years in the Period Ended June 30, 1998 and the Period
From Inception (November 30, 1990) to December 31, 1999 36-37
Statements of Cash Flows For the Year Ended
December 31, 1999, the Six Months Ended
December 31, 1998, the Two Years in the Period
Ended June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 1999 38-39
Notes to Financial Statements 40-50
32
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
BioTime, Inc.:
We have audited the accompanying balance sheets of BioTime, Inc. (a development
stage company) as of December 31, 1999 and December 31, 1998, and the related
statements of operations, shareholders' equity and cash flows for the year ended
December 31, 1999, the six months ended December 31, 1998, each of the two years
in the period ended June 30, 1998, and the period from November 30, 1990
(inception) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of BioTime, Inc. as of December 31, 1999 and
December 31, 1998, and the results of its operations and its cash flows for the
year ended December 31, 1999, the six months ended December 31, 1998, each of
the two years in the period ended June 30, 1998 and the period from November 30,
1990 (inception) to December 31, 1999, in conformity with generally accepted
accounting principles.
The Company is in the development stage as of December 31, 1999. As discussed in
Note 1 to the financial statements, successful completion of the Company's
product development program and ultimately the attainment of profitable
operations is dependent upon future events, including maintaining adequate
financing to fulfill its development activities, obtaining regulatory approval
for products ultimately developed, and achieving a level of revenues adequate to
support the Company's cost structure.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
February 10, 2000
33
BIOTIME, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS December 31, December 31,
1999 1998
----------------- ----------------
CURRENT ASSETS
Cash and cash equivalents $ 5,292,806 $ 2,429,014
Prepaid expenses and other current assets 107,285 153,267
----------------- ----------------
Total current assets 5,400,091 2,582,281
----------------- ----------------
EQUIPMENT, Net of accumulated depreciation of $276,647 and $217,107 268,653 166,474
DEPOSITS AND OTHER ASSETS 9,900 60,700
----------------- ----------------
TOTAL ASSETS $ 5,678,644 2,809,455
================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 595,512 $ 237,203
Deferred revenue - current portion -- 187,500
----------------- ----------------
Total current liabilities 595,512 424,703
----------------- ----------------
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 (Note 4)
Common Shares, no par value, authorized 40,000,000 shares; issued and
outstanding shares; 10,891,031in 1999 and 10,033,079 in 1998 (Note 4) 27,200,380 19,022,116
Contributed Capital 93,972 93,972
Deficit accumulated during development stage (22,211,220) (16,731,336)
----------------- ----------------
Total shareholders' equity 5,083,132 2,384,752
----------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,678,644 $ 2,809,455
================= ================
<FN>
See notes to financial statements.
</FN>
34
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Six Months
Year Ended Ended Year Ended June 30, Period from Inception
December 31, December 31, ---------------------------- (November 30, 1990) to
1999 1998 1998 1997 December 31, 1999
------------ ------------ ------------ ------------ ----------------------
REVENUE:
License fee $ 1,037,500 $ 250,000 $ 1,150,000 $ 62,500 $ 2,500,000
------------ ------------ ------------ ------------ --------------
EXPENSES:
Research and development (4,900,521) (1,723,860) (3,048,775) (2,136,325) (16,582,509)
General and administrative (1,896,690) (710,131) (1,849,312) (1,209,546) (9,686,454)
------------ ------------ ------------ ------------ --------------
Total expenses (6,797,211) (2,433,991) (4,898,087) (3,345,871) (26,268,963)
------------ ------------ ------------ ------------ --------------
INTEREST AND OTHER INCOME: 279,827 89,513 294,741 189,161 1,582,574
------------ ------------ ------------ ------------ --------------
NET LOSS $(5,479,884) $(2,094,478 $(3,453,346) $(3,094,210) $ (22,186,389)
============ ============ ============ ============ ==============
BASIC AND DILUTED LOSS PER SHARE $ (0.51) $ (0.21) $ (0.35) $ (0.35)
============ ============ ============ ============
COMMON AND EQUIVALENT SHARES
USED IN COMPUTING PER SHARE
AMOUNTS:
BASIC AND DILUTED 10,688,100 10,008,468 9,833,156 8,877,024
============ ============ ============ ============
<FN>
See notes to financial statements.
</FN>
35
BIOTIME, INC.
(A Development Stage Company)
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
--------- --------- ----------- ---------- ----------- --------------------
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>
36
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
Series A Convertible
(Continued) Preferred Shares Common Shares Deficit
-------------------- ------------------------ Accumulated
Number of Number of Contributed During
Shares Amount Shares Amount Capital Development Stage
--------- --------- ----------- ---------- ---------- -----------------
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)
========= ========= ========== =========== ========= ================
<FN>
See notes to financial statements. (Concluded)
</FN>
37
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Period
Year Ended Six Months Year Ended June 30 from Inception
December 31, December 31, --------------------------- (November 30, 1990)
1999 1998 1998 1997 to December 31, 1999
------------- -------------- ------------ -------------- -------------------
OPERATING ACTIVITIES:
Net loss $ (5,479,884) $ (2,094,478) $(3,453,346) $ (3,094,210) $ (22,186,389)
Adjustments to reconcile net loss to net cash
operating activities:
Deferred revenue (187,500) (250,000) (500,000) (62,500) (1,000,000)
Depreciation 59,540 28,582 49,284 41,023 276,647
Cost of Donation - warrants 552,000 552,000
Cost of services - shares, options and warrants 220,574 78,750 44,300 240,821 797,902
Supply reserves 100,000 100,000 200,000
Changes in operating assets and liabilities:
Research and development supplies on hand (200,000)
Prepaid expenses and other current
assets 31,260 87,367 13,197 (180,837) (107,285)
Deposits and other assets 50,800 34,000 (65,000) (24,722) (9,900)
Accounts payable 358,309 47,673 (59,638) 119,939 595,512
Accrued compensation (175,000) 175,000 --
Deferred revenue (400,000) 1,400,000 1,000,000
------------- -------------- ------------ -------------- -------------
Net cash used in operating activities (4,394,901) (2,068,106) (4,446,203) (1,285,486) (20,081,513)
------------- -------------- ------------ -------------- -------------
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 (161,719) (4,391) (147,340) (32,072) (528,875)
------------- -------------- ------------ ------------- -------------
Net cash used in investing activities (161,719) (4,391) (147,340) (32,072) (331,475)
------------- -------------- ------------ ------------- -------------
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 5,662,180 23,701,732
Common shares placement costs (128,024) (170,597) (2,180,320)
Net proceeds from exercise of common share
options and warrants 219,810 395,730 887,690 1,194,488 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 7,420,412 395,730 887,690 6,686,071 25,705,794
------------- -------------- ------------ ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,863,792 (1,676,767) (3,705,853) 5,368,513 5,292,806
CASH AND CASH EQUIVALENTS:
At beginning of period 2,429,014 4,105,781 7,811,634 2,443,121 --
------------- -------------- ------------ ------------- -------------
At end of period 5,292,806 $ 2,429,014 $ 4,105,7$1 $ 7,811,634 5,292,806
============= ============== ============ ============= =============
<FN>
See notes to financial statements. (Continued)
</FN>
38
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Period
Year Ended Six Months Year Ended June 30 from Inception
December 31, December 31, --------------------------- (November 30, 1990)
1999 1998 1998 1997 to December 31, 1999
------------- -------------- ------------ -------------- -------------------
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 $ 195,952 $ 50,000 $ 38,050 $ 105,000 $ 762,002
Issuance of common shares in exchange for
services $ 9,900 $ 18,750 $ 6,250 $ 34,900
<FN>
See notes to financial statements. (Concluded)
</FN>
39
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.
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
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 any Company products that are
ultimately sold; 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 $22,186,389 from
inception to December 31, 1999. 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.
40
2. SIGNIFICANT ACCOUNTING POLICIES
Change in fiscal year - On November 12, 1998, the Board of Directors of
BioTime determined that it would be in the best interests of the Company
and its shareholders to change the Company's fiscal year from one ending on
June 30 to one ending on December 31 and, accordingly, the Company adopted
a December 31 or calendar year-end beginning on January 1, 1999.
Accordingly, the accompanying statements of operations, shareholders'
equity and cash flows include the transition fiscal period for the six
months from July 1, 1998 to December 31, 1998.
Equipment is stated at cost or, in the case of donated equipment, at fair
market value. Equipment is being depreciated using the straight-line method
over a period of thirty-six to eighty-four months.
Patent costs associated with obtaining patents on products being developed
are expensed as research and development expenses when incurred. These
costs totaled $160,221 for the year ended December 31, 1999, $47,781 for
the six month period ended December 31, 1998, $81,303 and $95,362 for the
years ended June 30, 1998 and 1997, respectively, and cumulatively,
$661,284 for the period from inception (November 30, 1990) to December 31,
1999.
Revenue recognition - License revenue is recognized ratably over the
development period of the Hextend product which was originally determined
to be two years. Milestone payments are recognized as revenue when
milestones have been achieved. Royalty and license fees related to sales of
a certain blood plasma volume expander product are generally recognized in
the quarter subsequent to the quarter in which the related sales occur and
upon receipt of a sales report from the third-party
manufacturer/distributor of the product (see note 3).
Research and development costs are expensed when incurred and consist
principally of salaries, payroll taxes, research and laboratory fees,
hospital and consultant fees related to the clinical trials, and the
Company's PentaLyte solution for use in human clinical trials.
Stock-based compensation - The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.
Stock split - In October 1997, the Company effected a three-for-one split
of its common shares. All share and per share amounts have been restated to
reflect the stock split for all periods presented.
Net loss 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
41
share for the year ended December 31, 1999, the six months ended December
31, 1998 and the years ended June 30, 1998 and 1997 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.
Comprehensive Income (Loss) - Comprehensive income (loss) includes the
changes in net assets during the period from nonowner sources reported by
major components and as a single total. Comprehensive income (loss) was the
same as net loss for all periods presented. The Company's comprehensive
income (loss) was the same as net loss.
Segment information - The Company operates in the single segment of
producing aqueous based synthetic solutions used in medical applications
and is currently in the development stage of this segment.
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 agreed to pay the Company license
fees based upon achievement of specified milestones and product sales. As
of December 31, 1999, $2,500,000 of the license fees for the achievement of
milestones has been earned and paid. 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 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
42
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.
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
During June 1994, the Board of Directors authorized management to
repurchase up to 200,000 of the Company's common shares at market price at
the time of purchase. A total of 90,800 shares have been repurchased and
retired. No shares have been repurchased since August 28, 1995.
During September 1995, the Company entered into an agreement for financial
advisory services with Greenbelt Corp., a corporation controlled by Alfred
D. Kingsley and Gary K. Duberstein, who are also shareholders of the
Company. Under the agreement, the Company issued to the financial advisor
warrants to purchase 311,276 common shares at a price of $1.93 per share,
and the Company agreed to issue additional warrants to purchase up to an
additional 622,549 common shares at a price equal to the greater of (a)
150% of the average market price of the common shares during the three
months prior to issuance and (b) $2 per share. The additional warrants were
issued in equal quarterly installments over a two year period, beginning
October 15, 1995. The exercise price and number of common shares for which
the warrants may be exercised are subject to adjustment to prevent dilution
in the event of a stock split, combination, stock dividend,
reclassification of shares, sale of assets, merger or similar transaction.
The warrants are exercisable at the following prices: 466,912 at $1.93 per
share; 77,818 at $2.35 per share;77,818 at $9.65 per share; 77,818 at $9.42
per share; 77,818 at $10.49 per share; 77,818 at $15.74 per share; and
77,818 at $13.75 per share. The total value of these warrants at the
agreement date, estimated to be $300,000, was capitalized in fiscal 1996
and was amortized over the two year term of the agreement.
During September 1996, the Company entered into an agreement with an
individual to act as an advisor to the Company. In exchange for services,
as defined, to be rendered by the advisor through September 1999, the
Company issued warrants, with five year terms, to purchase 124,510 common
shares at a price of $6.02 per share. The exercise price and number of
common shares for which the warrants may be exercised are subject to
adjustment to prevent dilution in the event of a stock split, combination,
stock dividend, reclassification of shares, sale of assets, merger or
similar transaction. Warrants for 77,775 common shares vested and became
43
exercisable and transferable when issued; warrants for the remaining 46,735
common shares vested ratably through September 1997 and became exercisable
and transferable as vesting occurred. The estimated value of the services
to be performed is $60,000 and that amount has been capitalized and is
being amortized over the three year term of the agreement.
On February 5, 1997, the Company completed a subscription rights offering
raising $5,662,180, through the sale of 849,327 common shares.
During April 1998, the Company entered into a new financial advisory
services agreement with Greenbelt Corp. The agreement provides for an
initial payment of $90,000 followed by an advisory fee of $15,000 per month
that will be paid quarterly. The agreement will expire on March 31, 2000,
but either party may terminate the agreement earlier upon 30 days prior
written notice.
On March 9, 1999, the Company completed a subscription rights offering
raising $7,328,626, through the sale of 751,654 common shares.
On July 15, 1999, the Company established the "BioTime Endowment for the
Study of Aging and Low-Temperature Medicine" (the "Endowment") at the
University of California at Berkeley. The endowment will support the
research activities of faculty and researchers in the areas of aging and
low temperature medicine. The initial term of the Endowment shall be for
ten years, and upon review, renewed every five years thereafter. The
Company funded the Endowment with $65,000 in cash and a warrant to the
University to purchase 40,000 of the Company's common shares for $0.50 per
share. On September 23, 1999, the University of California at Berkeley
exercised its warrant for 40,000 shares. The fair value of the warrant,
estimated to be approximately $552,000, was recognized in research and
development expenses during the quarter.
5. STOCK OPTION PLAN
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
44
Option Committee. During the two years ended June 30, 1998 and 1997,
employees, including directors, were granted options to purchase 17,500 and
123,000 common shares, respectively, and non-employees were granted options
to purchase 14,500 and 165,000 common shares respectively. During the six
months ended December 31, 1998, no options were granted to employees or
directors, and an option to purchase 20,000 shares was granted to a
consultant. During the year ended December 31, 1999, employees, and
directors were granted options to purchase 33,000 common shares, and
non-employees were granted options to purchase 63,000 shares. 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 ($450,845 at December
31, 1999), 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 year ended
December 31, 1999 was approximately $171,027. At December 31, 1999, 503,000
shares were available for future grants under the Option Plan.
Option activity under the Plan is as follows:
Weighted
Number of Average Exercise
Shares Price
---------------------- -----------------------
Outstanding, June 30, 1996 (537,000 exercisable at a
weighted average price of $2.26) 690,000 2.01
Granted (weighted average fair value of $6.83 per share) 288,000 7.37
Exercised 138,000 2.37
Canceled -- --
---------------------- -----------------------
Outstanding, June 30, 1997 (678,000 exercisable at a
weighted average price of $4.22) 840,000 3.78
Granted (weighted average fair value of $18.25 per share) 32,000 16.56
Exercised 337,500 2.63
Canceled -- --
---------------------- -----------------------
Outstanding, June 30, 1998 (411,500 exercisable at a
weighted average price of $6.52) 534,500 5.28
Granted (weighted average fair value of $2.50 per share) 20,000 7.25
Exercised 84,000 4.71
Canceled -- --
---------------------- -----------------------
45
Weighted
Number of Average Exercise
Shares Price
---------------------- -----------------------
Outstanding, December 31, 1998 (440,500
exercisable at a weighted average price of $5.76) 470,500 $ 5.46
Granted (weighted average fair value of $9.52 per
share) 96,000 11.81
Exercised 68,000 12.65
Canceled -- --
---------------------- -----------------------
Outstanding, December 31, 1999 498,500 6.98
---------------------- -----------------------
Additional information regarding options outstanding as of December 31, 1999 is
as follows:
Options Outstanding Options Exercisable
------------------------------ ------------------------------------
Weighted Avg.
Remaining
Range of Number Contractual Life Weighted Avg. Number Weighted Avg.
Exercise Prices Outstanding (yrs) Exercise Price Exercisable Exercise Price
- -------------------- ----------------- -------------------- -------------------- --------------- ----------------
$1.00-1.13 180,000 2.44 $1.09 180,000 $1.09
6.00-8.81 86,500 3.15 6.23 86,500 6.23
10.33-13.00 210,000 4.65 11.17 150,000 10.94
18.25 22,000 2.90 18.25 22,000 18.25
----------------- ---------------
$1.0-$18.25 498,500 3.51 $6.98 438,500 $6.33
As discussed in Note 1, the Company continues to account for its employee
stock-based awards using the intrinsic value method in accordance with
Accounting Principles Board No. 25, Accounting for Stock Issued to
Employees and its related interpretations. Accordingly, no compensation
expense has been recognized in the financial statements for employee stock
arrangements. Options to purchase 204,500 shares were outstanding to
employees at December 31, 1999. Options granted to non-employees have been
recognized in the financial statements at the estimated fair value of the
services or benefit provided. Options to purchase 294,000 shares were
outstanding to non-employees at December 31, 1999.
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, (SFAS 123) requires the disclosure of pro forma
net income and earnings per share had the Company adopted the fair value
method as of the beginning of fiscal 1995. Under SFAS 123, the fair value
of stock-based awards to employees is calculated through the use of
46
option pricing models, even though such models were developed to estimate
the fair value of freely tradable, fully transferable options without
vesting restrictions, which significantly differ from the Company's stock
option awards. These models also require subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly
affect the calculated values. The Company's calculations were made using
the Black-Scholes option pricing model with the following weighted average
assumptions: expected life, 24 - 60 months following vesting; stock
volatility, 84.7%, 83.87%, and 95.00% for the year ended December 31, 1999,
and the years ended June 30, 1998 and 1997, respectively; risk free
interest rates, 5.99%, 5.64%, and 5.96%, for the year ended December 31,
1999, and the years ended June 30, 1998 and 1997, respectively; and no
dividends during the expected term. The Company's calculations are based on
a multiple option valuation approach and forfeitures are recognized as they
occur. If the computed fair values for the year ended December 31, 1999 and
the years ended June 30, 1998, 1997 awards had been amortized to expense
over the vesting period of the awards, pro forma net loss would have been
$5,760,878 ($0.54 per share) in 1999, $3,665,915 ($0.37 per share) in 1998,
and $3,983,890 ($0.44 per share) in 1997. No employee options vested or
were granted in the six months ended December 31, 1998. Therefore, pro
forma net loss is the same as recorded net loss for the six months ended
December 31, 1998. The impact of outstanding non-vested stock options
granted prior to 1996 has been excluded from the pro forma calculation;
accordingly, the year ended December 31, 1999, the six months ending
December 31, 1998, and the years ended June 30, 1998, 1997 pro forma
adjustments are not indicative of future period pro forma adjustments, when
the calculation will apply to all applicable stock options.
6. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with six officers who are also
shareholders, for five- year terms, five of which expire in June 2001 and
one which expires in April 2002. All provide for base salaries with annual
increases. The agreements also provide that in the event any of the
officer's employment terminates, voluntarily or involuntarily, after a
change in control of the Company through an acquisition of voting stock or
assets, or a merger or consolidation with another corporation or entity,
the executive officers will be entitled to severance payments equal to the
greater of (a) 2.99 times the average annual compensation for the preceding
five years or (b) the balance of the base salary for the unexpired portion
of the term of the employment agreement. These officers/shareholders have
signed intellectual property agreements with the Company as a condition of
their employment.
The Company occupies its office and laboratory facility in Berkeley,
California under a lease that will expire on March 31, 2004. The Company
presently occupies approximately 8,200 square feet of space with a monthly
rent of $10,000. The rent will increase annually by the greater of 3% and
the increase in the local consumer price index, subject to a maximum annual
increase of 7%. Rent expense totaled $91,796 for the year ended December
31, 1999, $32,694 for the six month period ending December 31, 1998,
$62,990, and $59,376, for each of the two years ended June 30, 1998 and
1997, respectively; and cumulatively, $414,182 for the period from
inception to December 31, 1999.
47
7. INCOME TAXES
The primary components of the net deferred tax asset are:
Year Ended Six MonthsEnded Year Ended
December 31, December 31, June 30,
1999 1998 1998
--------------------- -------------------- -----------------
Deferred Tax Asset:
NOL Carryforwards $ 9,246,868 $ 7,256,851 $ 5,125,447
Research & Development Credits 788,920 622,516 444,398
Other, net 514,618 320,790 327,492
--------------------- -------------------- -----------------
Total 10,550,406 8,200,157 5,897,337
Valuation allowance (10,550,406) (8,200,157) (5,897,337)
--------------------- -------------------- -----------------
Net deferred tax asset $ -0- $ -0- $ -0-
===================== ==================== =================
No tax benefit has been recorded through December 31, 1999 because of the
net operating losses incurred and a full valuation allowance provided. A
valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Company
established a 100% valuation allowance at December 31, 1999, December 31,
1998 and June 30, 1998 due to the uncertainty of realizing future tax
benefits from its net operating loss carryforwards and other deferred tax
assets.
As of December 31, 1999, the Company has net operating loss carryforwards
of approximately $23,000,000 for federal and $11,000,000 for state tax
purposes, which begin to expire during fiscal years 2007 and 2000,
respectively.
Internal Revenue Code Section 382 places a limitation (the "Section 382
Limitation") on the amount of taxable income which can be offset by net
operating loss ("NOL") carryforwards after a change in control (generally
greater than 50% change in ownership) of a loss corporation. California has
similar rules. Generally, after a control change, a loss corporation cannot
deduct NOL carryforwards in excess of the Section 382 Limitation. Due to
these "change in ownership" provisions, utilization of the NOL and tax
credit carryforwards may be subject to an annual limitation regarding their
utilization against taxable income in future periods.
48
8. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1999, the six months ended December 31,
1998 and the years ended June 30, 1998 and1997, fees for consulting
services of $19,125, $15,649, $33,500, and $36,000, respectively, were paid
to a member of the Board of Directors.
9. QUARTERLY RESULTS (UNAUDITED)
Summarized unaudited results of operations for each quarter of the year
ended December 31, 1999, the six months ended December 31, 1998 and the
fiscal year ended June 30, 1998, are as follows:
Fourth Total
First Quarter Second Quarter Third Quarter Quarter Year
------------------ ------------------- ------------------- ---------------- -----------------
Fiscal Year Ended
December 31, 1999
- ---------------------------
Revenue $437,500 $600,000 -- -- $1,037,500
Net Loss $786,939 $990,594 $2,254,588 $1,447,763 $5,479,884
Net Loss per share $.08 $.09 $.21 $.14 $.51
Fourth Total
First Quarter Second Quarter Third Quarter Quarter Year
------------------ ------------------- ------------------- ---------------- -----------------
Six Months Ended
December 31, 1998
- ---------------------------
Revenue $125,000 $125,000 $250,000
Net Loss $1,137,742 $956,736 $2,094,478
Net Loss per share $.11 $.10 $.21
Fourth Total
First Quarter Second Quarter Third Quarter Quarter Year
------------------ ------------------- ------------------- ---------------- -----------------
Fiscal Year Ended June
30, 1998
- ---------------------------
Revenue $125,000 $525,000 $125,000 $375,000 $1,150,000
Net Loss $982,621 $637,177 $1,071,538 $762,010 $3,453,346
Net Loss per share $.10 $.06 $.11 $.08 $.35
49
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
50
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors and Executive Officers
The names and ages of the directors and executive officers of the
Company are as follows:
Paul Segall, Ph.D., 57, is the Chairman and Chief Executive Officer and
has served as a director of the Company since 1990. Dr. Segall received a Ph.D.
in Physiology from the University of California at Berkeley in 1977.
Ronald S. Barkin, 54, became President of BioTime during October 1997,
after serving as Executive Vice President since April 1997. Mr. Barkin has been
a director of the Company since 1990. Before becoming an executive officer of
the Company, Mr. Barkin practiced civil and corporate law for more than 25 years
after getting a J.D. from Boalt Hall, University of California at Berkeley.
Victoria Bellport, 34, is the Chief Financial Officer and Vice
President and has been a director of the Company since 1990. Ms. Bellport
received a B.A. in Biochemistry from the University of California at Berkeley in
1988.
Hal Sternberg, Ph.D., 46, is the Vice President of Research and has
been a director of the Company since 1990. Dr. Sternberg was a visiting
scientist and research Associate at the University of California at Berkeley
from 1985-1988, where he supervised a team of researchers studying Alzheimer's
Disease. Dr. Sternberg received his Ph.D. from the University of Maryland in
Biochemistry in 1982.
Harold Waitz, Ph.D., 57, is the Vice President of Engineering and
Regulatory Affairs and has been a director of the Company since 1990. He
received his Ph.D. in Biophysics and Medical Physics from the University of
California at Berkeley in 1983.
Judith Segall, 46, is the Vice President of Technology and Secretary,
and has been a director of the Company from 1990 through 1994, and from 1995
through the present date. Ms. Segall received a B.S. in Nutrition and Clinical
Dietetics from the University of California at Berkeley in 1989.
Jeffrey B. Nickel, Ph.D., 55, joined the Board of Directors of the
Company during March 1997. Dr. Nickel is the President of Nickel Consulting
through which he has served as a consultant to companies in the pharmaceutical
and biotechnology industries since 1990. Prior to starting his consulting
business, Dr. Nickel served in a number of management positions for Syntex
Corporation and Merck & Company. Dr. Nickel received his Ph.D. in Organic
Chemistry from Rutgers University in 1970.
Milton H. Dresner, 73, joined the Board of Directors of the Company
during February 1998. Mr. Dresner is Co-Chairman of the Highland Companies, a
diversified organization engaged in the
51
development and ownership of residential and industrial real estate. Mr. Dresner
serves as a director of Avatar Holdings, Inc., a real estate development
company, and Childtime Learning Centers, Inc. a child care and pre-school
education services company.
Executive Officers
Paul Segall, Ronald S. Barkin, Victoria Bellport, Hal Sternberg, Harold
Waitz and Judith Segall are the only executive officers of BioTime.
There are no family relationships among the directors or officers of
the Company, except that Paul Segall and Judith Segall are husband and wife.
Directors' Meetings, Compensation and Committees of the Board
The Board of Directors has an Audit Committee, the members of which are
Jeffrey Nickel and Milton Dresner. The purpose of the Audit Committee is to
recommend the engagement of the corporation's independent auditors and to review
their performance, the plan, scope and results of the audit, and the fees paid
to the corporation's independent auditors. The Audit Committee also will review
the Company's accounting and financial reporting procedures and controls and all
transactions between the Company and its officers, directors, and shareholders
who beneficially own 5% or more of the Common Shares.
The Company does not have a standing Nominating Committee. Nominees to
the Board of Directors are selected by the entire Board.
The Board of Directors has a Stock Option Committee that administers
the Company's 1992 Stock Option Plan and makes grants of options to key
employees, consultants, scientific advisory board members and independent
contractors of the Company, but not to officers or directors of the Company. The
members of the Stock Option Committee are Paul Segall, Ronald S. Barkin, and
Victoria Bellport. The Stock Option Committee was formed during September 1992.
During the fiscal year ended December 31, 1999, the Board of Directors
met nine times. No director attended fewer than 75% of the meetings of the Board
or any committee on which they served.
Directors of the Company who are not employees receive an annual fee
of $20,000, which may be paid in cash or in Common Shares, at the election of
the director. During the year ended December 31, 1999, each director who was not
a Company employee also received options to purchase 10,000 Common Shares.
Directors of the Company and members of committees of the Board of Directors who
are employees of the Company are not compensated for serving as directors or
attending meetings of the Board or committees of the Board. Directors are
entitled to reimbursements for their out-of-pocket expenses incurred in
attending meetings of the Board or committees of the Board. Directors who are
employees of the Company are also entitled to receive compensation in such
capacity.
52
Executive Compensation
The Company has entered into five-year employment agreements (the
"Employment Agreements") with Paul Segall, the Chairman and Chief Executive
Officer; Victoria Bellport, the Chief Financial Officer; Judith Segall, Vice
President of Technology and Corporate Secretary; Hal Sternberg, Vice President
of Research; and Harold Waitz, Vice President of Engineering and Regulatory
Affairs. The Employment Agreements will expire on December 31, 2000 but may
terminate prior to the end of the term if the employee (1) dies, (2) leaves the
Company, (3) becomes disabled for a period of 90 days in any 150 day period, or
(4) is discharged by the Board of Directors for failure to carry out the
reasonable policies of the Board, persistent absenteeism, or a material breach
of a covenant. Under the Employment Agreements, the executive officers are
presently receiving annual salaries of $163,000, and will receive a one-time
cash bonus of $25,000 if the Company receives at least $1,000,000 of equity
financing from a pharmaceutical company.
In the event of the executive officer's death during the term of his
or her Employment Agreement, the Company will pay his or her estate his or her
salary for a period of six month or until December 31, 2000, whichever first
occurs. In the event that the executive officer's employment terminates,
voluntarily or involuntarily, after a change in control of the Company through
an acquisition of voting stock, an acquisition of the Company's assets, or a
merger or consolidation of the Company with another corporation or entity, the
executive officers will be entitled to severance compensation equal to the
greater of (a) 2.99 times his or her average annual compensation for the
preceding five years and (b) the balance of his or her base salary for the
unexpired portion of the term of his Employment Agreement.
The Company also entered into a similar employment agreement with
Ronald S. Barkin, which commenced on April 1, 1997 and expires on March 31, 2002
Each executive officer has also executed an Intellectual Property
Agreement which provides that the Company is the owner of all inventions
developed by the executive officer during the course of his or her employment.
The following table summarizes certain information concerning the
compensation paid to the five most highly compensated executive officers during
the last three full fiscal years and the six months ended December 31, 1998.
53
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------- ----------------------
Name and Principal Position Year Ended Salary($) Bonus Stock Options (Shares)
- --------------------------- ---------- --------- ----- ----------------------
Paul Segall December 31, 1999 $163,000
Chairman and Chief Executive Officer December 31, 1998* $ 49,500
June 30, 1998 $ 95,500 $50,000 __
June 30, 1997 $ 90,583 __ __
Hal Sternberg
Vice President of Research December 31, 1999 $163,000
December 31, 1998* $ 49,500
June 30, 1998 $ 95,500 $25,000 __
June 30, 1997 $ 90,583 $25,000 __
Harold Waitz December 31, 1999 $163,000
Vice President of Engineering December 31, 1998* $ 49,500
June 30, 1998 $ 95,500 __ __
June 30, 1997 $ 90,583 $50,000 __
Victoria Bellport December 31, 1999 $163,000
Vice President and December 31, 1998* $ 49,500
Chief Financial Officer June 30, 1998 $ 95,500 $25,000 __
June 30, 1997 $ 90,583 $25,000 __
Judith Segall December 31, 1999 $163,000
Vice President and Corporate Secretary December 31, 1998* $ 49,500
June 30, 1998 $ 95,500 $25,000 __
June 30, 1997 $ 90,583 $25,000 __
<FN>
*During 1998, the Company changed its fiscal year end from June 30 to December
31. The amounts of base salary shown in the table for the year ended December
31, 1998 reflect a short (six month) fiscal year.
</FN>
Insider Participation in Compensation Decisions
The Board of Directors does not have a standing Compensation Committee.
Instead, the Board of Directors as a whole approves all executive compensation.
All of the executive officers of the Company serve on the Board of Directors but
do not vote on matters pertaining to their own personal compensation. Paul
Segall and Judith Segall do not vote on matters pertaining to each other's
compensation.
Stock Options
None of the five most highly compensated executive officers of the
Company held any stock options during the fiscal year ended December 31, 1999.
54
Certain Relationships and Related Transactions
During the year ended December 31, 1999, $19,125 in fees for
consulting services was paid to Jeffrey B. Nickel, a member of the Board of
Directors.
During September 1995, the Company entered into an agreement for
financial advisory services with Greenbelt Corp., a corporation controlled by
Alfred D. Kingsley and Gary K. Duberstein, who are also shareholders of the
Company. Under this agreement the Company issued to the financial advisor
warrants to purchase 311,276 Common Shares at a price of $1.93 per share, and
the Company agreed to issue additional warrants to purchase up to an additional
622,549 Common Shares at a price equal to the greater of (a) 150% of the average
market price of the Common Shares during the three months prior to issuance and
(b) $2 per share. The additional warrants were issued in equal quarterly
installments over a two year period, beginning October 15, 1995. The exercise
price and number of Common Shares for which the warrants may be exercised are
subject to adjustment to prevent dilution in the event of a stock split,
combination, stock dividend, reclassification of shares, sale of assets, merger
or similar transaction. The warrants are exercisable at the following prices:
466,912 at $1.93 per share; 77,818 at $2.35 per share; 77,818 at $9.65 per
share; 77,818 at $9.42 per share; 77,818 at $10.49 per share; 77,818 at $15.74
per share; and 77,818 at $13.75 per share. The number of shares and exercise
prices shown have been adjusted for the Company's subscription rights
distributions during January 1997 and February 1999 and the payment of a stock
dividend during October 1997.
Under the agreement, upon the request of Greenbelt Corp., the Company
will file a registration statement to register the warrants and underlying
Common Shares for sale under the Securities Act of 1933, as amended (the "Act")
and applicable state securities or "Blue Sky" laws. The Company will bear the
expenses of registration, other than any underwriting discounts that may be
incurred by Greenbelt Corp. in connection with a sale of the warrants or common
shares. The Company shall not be obligated to file more than two such
registration statements, other than registration statements on Form S-3.
Greenbelt Corp. also is entitled to include warrants and common shares in any
registration statement filed by the Company to register other securities for
sale under the Act.
During April 1998, the Company entered into a new financial advisory
services agreement with Greenbelt Corp. The new agreement provides for an
initial payment of $90,000 followed by an advisory fee of $15,000 per month that
will be paid quarterly. The agreement will expire on March 31, 2000, but either
party may terminate the agreement earlier upon 30 days prior written notice.
The Company has agreed to reimburse Greenbelt Corp. for all reasonable
out-of-pocket expenses incurred in connection with its engagement as financial
advisor, and to indemnify Greenbelt Corp. and the officers, affiliates,
employees, agents, assignees, and controlling person of Greenbelt Corp. from any
liabilities arising out of or in connection with actions taken on behalf of the
Company under the agreement.
55
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information as of March 21, 2000
concerning beneficial ownership of Common Shares by each shareholder known by
the Company to be the beneficial owner of 5% or more of the Company's Common
Shares, and the Company's executive officers and directors. Information
concerning certain beneficial owners of more than 5% of the Common Shares is
based upon information disclosed by such owners in their reports on Schedule 13D
or Schedule 13G.
Number of Percent of
Shares Total
--------- ----------
Alfred D. Kingsley (1)
Gary K. Duberstein
Greenbelt Corp.
Greenway Partners, L.P.
Greenhouse Partners, L.P.
277 Park Avenue, 27th Floor
New York, New York 10017 1,365,642 11.6
Paul and Judith Segall (2) 745,408 6.8
Harold D. Waitz (3) 524,166 4.8
Hal Sternberg 502,043 4.6
Victoria Bellport 205,978 1.9
Ronald S. Barkin (4) 192,761 1.7
Jeffrey B. Nickel (5) 25,000 *
Milton H. Dresner (6) 29,063 *
All officers and directors
as a group (8 persons)(4)(5) 2,224,419 20.1%
- ---------------------------
<FN>
* Less than 1%
(1) Includes 933,825 Common Shares issuable upon the exercise of certain
warrants owned beneficially by Greenbelt Corp and 59,730 Common Shares
owned by Greenbelt Corp. Mr. Kingsley and Mr. Duberstein may be deemed
to beneficially own the warrant shares that Greenbelt Corp.
beneficially owns. Includes 90,750 Common Shares owned by Greenway
Partners, L.P. Greenhouse Partners, L.P. is the general partner of
Greenway Partners, L.P. and Mr. Kingsley and Mr. Duberstein are the
general partners of Greenhouse Partners, L.P. Greenhouse Partners,
L.P., Mr. Kingsley and Mr. Duberstein may be deemed to beneficially own
the Common Shares that Greenway Partners, L.P.
</FN>
56
[FN]
beneficially owns. Includes 270,442 Common Shares owned solely by Mr.
Kingsley, as to which Mr. Duberstein disclaims beneficial ownership.
Includes 10,895 Common Shares owned solely by Mr. Duberstein, as to
which Mr. Kingsley disclaims beneficial ownership.
(2) Includes 543,245 shares held of record by Paul Segall and 202,163
shares held of record by Judith Segall.
(3) Includes 2,100 shares held for the benefit of Dr. Waitz's minor
children.
(4) Includes 135,000 Common Shares issuable upon the exercise of certain
options.
(5) Includes 25,000 Common Shares issuable upon the exercise of certain
options.
(6) Includes 10,000 Common Shares issuable upon the exercise of certain
stock options. Does not include Common Shares that Mr. Dresner may
acquire in lieu of cash payment of his director's fees.
</FN>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
persons who own more than ten percent (10%) of a registered class of the
Company's equity securities to file with the Securities and Exchange Commission
(the "SEC") initial reports of ownership and reports of changes in ownership of
Common Shares and other equity securities of the Company. Officers, directors
and greater than ten percent beneficial owners are required by SEC regulation to
furnish the Company with copies of all reports they file under Section 16(a).
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with during the fiscal year ended December 31, 1999.
57
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a-1) Financial Statements.
The following financial statements of BioTime, Inc. are filed in the Form 10-K:
Page
----
Independent Auditors' Report 33
Balance Sheets As of December 31, 1999
and December 31, 1998 34
Statements of Operations For the Year Ended December 31, 1999,
the Six Months Ended December 31, 1998, the Two Years in the
Period Ended June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 1999 35
Statements of Shareholders' Equity For the
Year Ended December 31, 1999, the Six Months
Ended December 31, 1998, the Two Years in the Period
Ended June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 1999 36-37
Statements of Cash Flows For the
Year Ended December 31, 1999, the Six Months Ended
December 31, 1998, the Two Years in the Period
Ended June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 1999 38-39
Notes to Financial Statements 40-50
58
(a-3) 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.^
59
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.
^ ^ 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.
60
^^^ 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
December 31, 1999.
61
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized on the
28th day of March 2000.
BIOTIME, INC.
By: /s/Paul E. Segall
------------------
Paul E. Segall, Ph.D.
Chairman and Chief Executive
Officer (Principal executive
officer)
Signature Title Date
--------- ----- ----
/s/Paul E. Segall
- ----------------------
Paul E. Segall, Ph.D. Chairman, Chief Executive Officer and March 28, 2000
Director (Principal Executive Officer)
/s/Ronald S. Barkin
- ----------------------
Ronald S. Barkin President and Director March 28, 2000
/s/Harold D. Waitz
- ----------------------
Harold D. Waitz, Ph.D. Vice President and Director March 28, 2000
/s/Hal Sternberg
- ----------------------
Hal Sternberg, Ph.D. Vice President and Director March 28, 2000
/s/Victoria Bellport
- ----------------------
Victoria Bellport Chief Financial Officer and March 28, 2000
Director (Principal Financial and
Accounting Officer)
/s/Judith Segall
- ----------------------
Judith Segall Vice President, Corporate Secretary March 28, 2000
and Director
- ----------------------
Jeffrey B. Nickel Director March 28, 2000
- ----------------------
Milton H. Dresner Director March 28, 2000
62
Exhibit Index
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.^
63
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.
^ ^ 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
December 31, 1999.
64