UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FORM 10-K/A
(Amendment No. 1)
(Mark One)
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| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE FISCAL YEAR ENDED December 31, 20202021
OR
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| ☐ | 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 001-33650
CALADRIUS BIOSCIENCES, INC.
(Exact name of registrantRegistrant as specified in its charter)
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| Delaware | 22-2343568 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
| | |
| 110 Allen Road, 2nd Floor, Basking Ridge, New Jersey | 07920 |
| (Address of principal executive offices) | (zip code) |
Registrant’s telephone number, including area code: 908-842-0100
Securities Registered Pursuant to Section 12(b) of the Act:
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| Title of Each Class | Trading Symbol (s) | Name of Each Exchange On Which Registered |
| Common Stock, par value $0.001 per share | CLBS | The Nasdaq Capital Market |
| | |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrantRegistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
Indicate by check mark if the registrantRegistrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No x
Indicate by check mark whether the registrantRegistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrantRegistrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrantRegistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
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| Large accelerated filer | ☐ | | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | | Smaller reporting company | ☒ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrantRegistrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrantRegistrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrantRegistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant'sRegistrant's voting and non-voting common stock held by non-affiliates of the registrantRegistrant (without admitting that any person whose shares are not included in such calculation is an affiliate) computed by reference to June 30, 20202021 (the last business day of the registrant'sRegistrant's most recently completed second fiscal quarter) was approximately $27$95 million, computed by reference to the last sale price of $1.78$1.61 for the common stock on the Nasdaq Capital Market reported for such date. Shares held by executive officers, directors and persons owning directly or indirectly more than 10% of the outstanding common stock have been excluded from the preceding number because such persons may be deemed to be affiliates of the registrant.Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
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| Class | Outstanding as of February 25, 2021April 21, 2022 |
| Common stock, $0.001 par value per share | 59,505,26160,521,635 | | shares |
DOCUMENTS INCORPORATED BY REFERENCE
The following documents (or parts thereof) are incorporated by reference into the following parts ofNone.
EXPLANATORY NOTE
This registrant is filing this Form 10-K: Certain information required in Part III of thisAmendment No. 1 ("Amendment No. 1") to its Annual Report on Form 10-K is incorporated from the Registrant's Proxy Statement for the year ended December 31, 2021 Annual Meetingas filed with the Securities and Exchange Commission (the "SEC") on March 22, 2022 (the “Original Filing”) solely to include the information required by Item 10 - “Directors, Executive Officers and Corporate Governance”, Item 11 - “Executive Compensation”, Item 12 - “Security Ownership of Stockholders.
All references in this Annual Report on Form 10-K to “we,” “us,” the “Company” and “CALADRIUS” mean CALADRIUS, Inc., including subsidiaries and predecessors, except where it is clear that the term refers only to CALADRIUS, Inc. This Annual Report on Form 10-K contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” and under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS | |
| | |
| ITEM 1. BUSINESS | |
| ITEM 1A. RISK FACTORS | |
| ITEM 1B. UNRESOLVED STAFF COMMENTS | |
| ITEM 2. PROPERTIES | |
| ITEM 3. LEGAL PROCEEDINGS | |
| ITEM 4. MINE SAFETY DISCLOSURES | |
| PART II | |
| ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | |
| ITEM 6. SELECTED FINANCIAL DATA | |
| ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
| ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |
| ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | |
| ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | |
| ITEM 9A. CONTROLS AND PROCEDURES | |
| ITEM 9B. OTHER INFORMATION | |
| PART III | |
| ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | |
| ITEM 11. EXECUTIVE COMPENSATION | |
| ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | |
| ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | |
| ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES | |
| PART IV | |
| ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES | |
| ITEM 16. FORM 10-K SUMMARY | |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS
The Caladrius Board of Directors (the "Caladrius Board") currently consists of eight members. Pursuant to our Amended and Restated Certificate of Incorporation, we have a classified Board which consists of three separate classes of directors. Each class serves a three-year term and until their successors are duly elected and qualified. The classes are elected on a rotating or staggered basis, with each class being elected at the annual report (this "Annual Report") contains “forward-looking” statements withinmeeting of stockholders coinciding with the meaningexpiration of that class’s term. Pursuant to the General Corporation Law of the Private Securities Litigation Reform ActState of 1995,Delaware (the “DGCL”), if a board of directors is classified, unless the certificate of incorporation otherwise provides, members of such board of directors may be removed by the stockholders before the expiration of their terms only for cause.
The following table sets forth certain information about the current directors of our Company. There are no family relationships among any of our directors and executive officers. For biographical information regarding our directors, see the discussion under “Biographical Information — Directors,” below.
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| Name | | Age | | Director Since | |
| Gregory B. Brown, M.D. | | 68 | | 2016 | |
| David J. Mazzo, PhD | | 65 | | 2015 | |
| Michael H. Davidson, M.D. | | 65 | | 2020 | |
| Cynthia L. Flowers | | 62 | | 2018 | |
| Steven M. Klosk | | 65 | | 2014 | |
| Steven S. Myers | | 75 | | 2006 | |
| Peter G. Traber, M.D. | | 66 | | 2015 | |
| Anne C. Whitaker | | 54 | | 2020 | |
Biographical Information - Directors
Class I Directors Continuing in Office until the 2023 Annual Meeting of Stockholders
Cynthia L. Flowers
Ms. Flowers was appointed to the Caladrius Board in November 2018. She is the owner of EIR Advisory LLC, a life sciences advisory and strategic investment firm. From February 2014 through November 2017, Ms. Flowers was President and Chief Executive Officer of Ipsen North America, where she led the transformation of the company as it became the highest-growth subsidiary worldwide. Prior to joining Ipsen, she served as President of Eisai Pharmaceuticals, where she oversaw commercial operations, medical affairs and services, manufacturing, alliance management and other functions. She has also held general management roles, both domestically and internationally, at Amgen Inc. and Johnson & Johnson. Ms. Flowers began her career as an oncology/critical care nurse.
Ms. Flowers currently serves on the board of Hikma Pharmaceuticals PLC, a multigenerational generics company and G1 Therapeutics Inc., a biotechnology clinical development company. She has held positions on numerous corporate and non-profit boards, including Nanoform Finland OYi, a nanoparticle manufacturing company, Kadmon Group, Inc., a clinical stage biopharmaceutical company, the Women’s Leadership Advisory Board for the John F. Kennedy School of Government at Harvard University and the board of directors for the Sarah Cannon Oncology Research Institute. She currently serves as a Wharton Business School Leadership Advisor. Ms. Flowers holds an M.B.A. from the Wharton School of the University of Pennsylvania and a B.S.N. from the University of Delaware. We believe that Ms. Flowers is qualified to serve on the Caladrius Board based on her pharmaceutical industry, management and scientific training and experience.
Peter G. Traber, M.D.
Dr. Traber joined the Caladrius Board in January 2015. He has extensive experience in medicine, science and the pharmaceutical industry. Since August 2020 he has served as Chief Medical Officer at Selectra Biosciences. Prior to that, from July 2018 to July 2020, he served as Partner to Alacrita Consulting. From March 2011 until June 2018, he was President and
Chief Executive Officer of Galectin Therapeutics, Inc. (Nasdaq: GALT), where he served since 2010 as Chief Medical Officer and starting in 2009 as a member of its Board of Directors. Galectin is a publicly traded biotechnology company that is developing carbohydrate-based therapies for the treatment of fibrotic liver disease and cancer. Since 2008, he has been President Emeritus of Baylor College of Medicine, where he was Chief Executive Officer from 2003 to 2008. Dr. Traber also has extensive big pharma leadership experience, serving from 2000 to 2003 as Senior Vice President of clinical development and medical affairs and Chief Medical Officer of GlaxoSmithKline. He has also served as CEO of the University of Pennsylvania Health System, and as Chair of the Department of Internal Medicine and Chief of Gastroenterology for the University of Pennsylvania School of Medicine.
Dr. Traber has managed a molecular biology research laboratory and published more than 100 research articles, reviews, and book chapters. He received his M.D. from Wayne State School of Medicine, a B.S. in chemical engineering from the University of Michigan, and a certificate in medical leadership from Wharton Business School. We believe that Dr. Traber is qualified to serve on the Caladrius Board based on his diverse experience in healthcare, including his expertise in clinical trial design and product development, and his management experience.
Anne C. Whitaker
Anne C. Whitaker became a board member in November 2020. Ms. Whitaker is a seasoned healthcare executive and director with more than 30 years of experience and a proven track record as an executive of building and leading high-performance teams. Ms. Whitaker currently serves as Managing Partner of Anne Whitaker Group, LLC, a board and private equity advisory firm, and is the current Chairperson of the Board of Aerami Therapeutics, a private life science company. Prior to taking the Chair role at Aerami, she served as the CEO from October 2018 to November 2020 and as a director from July 2018. She also serves as an independent director on the boards of three public companies including Faron Pharmaceuticals, a development stage pharma company; OraSure Technologies, a diagnostic company; and Mallinckrodt, a specialty pharmaceutical company. In addition to her board work, she is an active industry advisor to private equity and venture capital funds in the U.S. and Europe. Ms. Whitaker started her healthcare career with The Upjohn Company selling pharmaceuticals. She subsequently transitioned to GlaxoSmithKline PLC, where she spent 19 years and rose in the commercial ranks from a sales representative to become a Senior Vice President, Business Unit Head for the Cardiovascular, Metabolic, and Urology franchises in 2009. She joined Sanofi SA in 2011 as the President of the North America Pharmaceutical Region. Anne served as the CEO and President of Synta Pharmaceuticals, Inc. in 2014 and 2015. She joined Bausch Health as an Executive Vice President and Company Group Chairman for the Branded Pharmaceuticals segment in mid-2015. From February 2017 until April 2018, she served as the CEO and President of Novoclem Therapeutics, Inc.
Ms. Whitaker holds a Bachelor of Science degree in chemistry from the University of North Alabama. We believe that Ms. Whitaker is qualified to serve on the Caladrius Board based on her experience in the life science industry, including her senior leadership roles with large pharmaceutical, biotech and specialty pharma companies.
Class II Directors Continuing in Office until the 2024 Annual Meeting of Stockholders
Gregory B. Brown, M.D.
Gregory B. Brown, M.D. was appointed to the Caladrius Board in October 2016 and was elected Chairman by the Caladrius Board on February 16, 2017. Dr. Brown is currently Chief Executive Officer of Memgen, Inc., a development-stage biotechnology company. In 2007, Dr. Brown co-founded HealthCare Royalty Partners ("HCR Partners"), a healthcare-focused private asset management firm investing in biopharmaceutical and medical products, and developing and deploying innovative risk-mitigated investment strategies to deliver non-correlated cash flow. Dr. Brown remains Vice Chairman of HCR Partners and a member of the firm’s SAB. Dr. Brown was educated as a transplantation immunologist and trained as a thoracic and vascular surgeon. He practiced thoracic and vascular surgery in a community setting where he also founded and led a health maintenance organization. He brings particular expertise in the scientific, technical, clinical and medical evaluation of products as well as historical information. When used in this Annual Report, statementshealthcare systems and payor/reimbursement dynamics. He has been involved in sourcing, performing due diligence on and closing more than $1 billion of royalty financings.
Before co-founding HCR Partners, Dr. Brown was a partner at Paul Capital Partners where he co-managed that are not statements of current or historical fact may be deemed to be forward-looking statements, including, without limitation, all statements related to any expectations of revenues, expenses, cash flows, earnings or losses from operations, cash required to maintain current and planned operations, capital or other financial items; any statementsfirm's royalty investments as a member of the plans, strategiesroyalty management committee. Prior to beginning his principal investment career in 2003, Dr. Brown was co-head of investment banking and objectiveshead of healthcare at Adams, Harkness & Hill (now Canaccord Genuity) and a ranked biotechnology research analyst at Vector Securities International. Dr. Brown holds a B.A. from Yale, an M.D. from SUNY Upstate Medical Center and an M.B.A. from Harvard Business School. He currently serves on the boards of FAST Biomedical since January 2020, Memgen, Inc. since October 2018, Aquestive Therapeutics, Inc. since 2007, and Faron Pharmaceuticals, Oy since 2017. He previously served on the boards of Cambrex Corporation, Invuity, Inc. and Vanderbilt Clinical, S.a.r.l. We believe that Dr. Brown is qualified to serve on the Caladrius Board based on his medical, financial and management experience.
David J. Mazzo, Ph.D.
David J. Mazzo, Ph.D. was appointed as Caladrius' President and Chief Executive Officer on March 28, 2017. Dr. Mazzo was previously appointed as Caladrius’ Chief Executive Officer and as a member of the Caladrius Board on January 5, 2015. Dr. Mazzo brings to Caladrius over 38 years of experience in the pharmaceutical industry. Prior to joining Caladrius, Dr. Mazzo served from August 2008 to October 2014 as Chief Executive Officer and as a member of the Board of Directors of Regado Biosciences, Inc. (Nasdaq: RGDO), a biopharmaceutical company focused on the development of novel antithrombotic drug systems for future operations; any plans or expectations with respectacute and sub-acute cardiovascular indications. Prior to producthis leading Regado, from March 2007 to April 2008, Dr. Mazzo was President, Chief Executive Officer and a director of Æterna Zentaris, Inc. (Nasdaq: AEZS), a publicly held international biopharmaceutical company. From 2003 until 2007 Dr. Mazzo served as President, Chief Executive Officer and director of Chugai Pharma USA, LLC, a biopharmaceutical company and U.S. subsidiary of Chugai Pharmaceutical Co., Ltd. of Japan and a member of the Roche Group. Dr. Mazzo has also held senior management and executive positions in research and development and commercialization, including regulatory approvals; any other statements of expectations, plans, intentions or beliefs; and any statements of assumptions underlying anywas a director of the foregoing. Without limitingEssex Chimie European subsidiary at Schering-Plough Corporation, a publicly held pharmaceutical company that was subsequently acquired by Merck & Co., Inc.; Hoechst Marion Roussel, Inc., the foregoing,US subsidiary of Hoechst AG, that was subsequently acquired by Sanofi, a multinational pharmaceuticals company; and Rhone-Poulenc Rorer, Inc., a subsidiary of Rhone-Poulenc SA, a French pharmaceuticals company, that was subsequently acquired by Hoechst AG. He previously served on the words “plan,” “project,” “forecast,” “outlook,” “intend,” “may,” “will,” “expect,” “likely,” “believe,” “could,” “anticipate,” “estimate,” “continue” or similar expressions orboard of directors of publicly held EyePoint Pharmaceuticals, Inc. (formerly known as pSivida Corp.), a biopharmaceutical company, from October 2005 to June 2020, Seneca Biopharmaceuticals, Inc. (NASDAQ: SNCA), a therapeutics development company focused on CNS applications that merged with Palisade BIO, from April 2019 to April 2021 and Avanir Pharmaceuticals, Inc., from October 2005 through January 2015, a pharmaceutical company that was sold to Otsuka Holdings in 2015. He currently serves on the board of directors of VTI, Inc. (ASX: VTI), a developer and seller of therapeutic contact lenses, where he has served as Chairman of the board since February 2020 and Feldan Therapeutics, a private company developing technology for the intracellular delivery of therapeutic agents, where he has served on the board since January 2021.
Dr. Mazzo earned a B.A. in the Honors Program (Interdisciplinary Humanities) and a B.S. in Chemistry from Villanova University. In addition, Dr. Mazzo received his M.S. in chemistry and his Ph.D. degree in Analytical Chemistry from the University of Massachusetts, Amherst. He was also a research fellow at the Ecole Polytechnique Federale de Lausanne, Switzerland. Based on Dr. Mazzo’s experience within the pharmaceutical industry and his executive experience, specifically his experience as Chief Executive Officer at other variations or comparable terminology are intendedcompanies in the biopharmaceutical industry, as well as his service on other boards of directors in the healthcare industry in addition to identify such forward-looking statements, although some forward-looking statements are expressed differently.his scientific training and experience, we believe that Dr. Mazzo is qualified to serve on the Caladrius Board.
Class III Directors Continuing in Office until the 2022 Annual Meeting of Stockholders
Michael H. Davidson, M.D.
Dr. Davidson joined the Caladrius Board in July 2020. He is an industry leader and expert in preventative cardiology and lipidology and has served as the Chief Executive Officer and Member of the Board of New Amsterdam Pharma since August 2020. In addition, he has served on the Board of Directors for Tenax since March 2021 and the Board of Directors of Inositec since July 2021. Prior to that, he was the Founder and Chief Scientific Officer of Corvidia Therapeutics, which was sold in 2021 to Novo-Nordisk for $2.1 billion. Dr. Davidson also serves as Clinical Professor and Director of the Lipid Clinic at the University of Chicago Pritzker School of Medicine. He previously served on the Board of Directors of Cerenis Therapeutic/Abionyx Therapeutics from January 2015 through September 2019.
In addition to his current roles, Dr. Davidson is a nationally recognized expert in lipidology and has been named one of "The Best Doctors in America" by Best Doctors Inc. for the past 11 years. Dr. Davidson was the co-founding Chief Medical Officer of Omthera Pharmaceuticals in 2008, which was later acquired by Astra Zeneca Pharmaceutical in 2013 for $443 million. His research and clinical development background encompass both pharmaceutical and nutritional clinical trials, including extensive research on statins, novel lipid-lowering drugs, and omega-3 fatty acids. Dr. Davidson is board-certified in internal medicine, cardiology and clinical lipidology and served as President of the National Lipid Association from 2010 to 2011. He received his B.A. and M.S. from Northwestern University and an MD from The Ohio State University School of Medicine. We remind readersbelieve that forward-looking statements are merely predictionsDr. Davidson is qualified to serve on the Caladrius Board based on his experience in healthcare, including as an industry leader and therefore inherently subjectexpert in preventative cardiology and lipidology.
Steven M. Klosk
Steven M. Klosk joined the Caladrius Board in 2014. He is a senior executive with extensive management experience in the life sciences industry. He served as a Director at Cambrex Corporation (NYSE:CBM) from May 2008 through December 2019, until it was acquired by Permira and then as Director from December 2019 until June 2020. Cambrex is one of the leading providers of active pharmaceutical ingredients, advanced intermediates and finished dosage form products to uncertaintiesthe branded and
generic pharmaceutical markets, where he served as President and Chief Executive Officer from May 2008 through June 2020. In that role he was responsible for all aspects of Cambrex’s global business with manufacturing and R&D facilities in the United States, Sweden, Italy, Estonia and Germany. In addition, he has served on the Board of Directors of Recipharm, a leading pharmaceutical contract development & manufacturing organization since March 2021 and Golden Arrow Merger Corp. since March 2021. In addition, since 2021 he has served on the board of directors of Formulated Solutions, a topicals contract development and manufacturing company (CDMO) where he is the chairman of the board; BioIVT, a leading supplier of biologics specimens for biotech research; BIOVECTRA, a leading small molecule and biologics CDMO; and NJ Bio, a leading antibody drug conjugate contract research organization.
Mr. Klosk held other factorsexecutive positions at Cambrex Corporation, including President, Executive Vice President & COO as well as President, Pharma Business Unit (2007-2008) where he had full P&L and involve knownbalance sheet responsibility for four operating units in North America and unknown risksEurope. Prior to this he was Executive Vice President & COO Cambrex Pharma & Biopharmaceuticals Business Unit (2003-2007) where he was responsible for managing a highly profitable global business with six operating units in North America and Europe. Earlier in his career Mr. Klosk served as Vice President, Administration for The Genlyte Group, Inc., a publicly traded producer of lighting fixtures. Mr. Klosk earned a B.S. from Cornell University and a J.D. from New York Law School. We believe that could causeMr. Klosk is qualified to serve on the actual results, performance, levelsCaladrius Board based on his diversified management experience, particularly in the biopharmaceutical field.
Steven S. Myers
Steven S. Myers joined the Caladrius Board in November 2006. He graduated from Stanford University with a B.S. in Mathematics. He is a four-time serial entrepreneur, an Ernst & Young “Entrepreneur of activity or our achievements or industry results,the Year” for Software and Information Services, and a recipient of the California Governor’s Special Recognition Award.
Mr. Myers is the founder, President and Director of his private equity investment company, Dolphin Capital Holdings, Inc., which invests in companies with innovative business strategies. Portfolio investments have included regenerative medicine, biotechnology, medical devices, applied materials development, alternative energy, distressed debt, and for-income real estate. He presently serves as a Director on the board of CEO International Inc., since November 2021. He also served as the Chairman of the LSI Business Development, Inc. board from January 2019 through August 2019. He previously served on the boards of Spikes Security, Inc., QuantumSphere, Inc., the Pacific Council of International Policy and the Bel Air Association. He has conducted business in a dozen countries in Europe and Asia.
An Administration policy advisor on Cyber Security, he served in 2012 on the Department of Homeland Security Task Force on Cyber Security Resources and briefed then-DHS Secretary Napolitano on the Task Force recommendations. He was appointed to be materially different from any future results, performance, levelsthree terms on the U.S. State Department Advisory Committee on International Economic Policy, which advises the Secretary of activity or our achievements or industry results expressed or implied by such forward-looking statements. FactorsState on foreign policy issues. At the Pacific Council on International Policy he serves on the Board of Directors and is Chairman of its National Security Member Committee.
Mr. Myers founded SM&A, an Aerospace & Defense Industry management consulting firm that could cause our actual resultsgrew over a 25 year period to differ materially from anticipated results expressed or implied by forward-looking statements include, among others:approximately $100 million in annual revenue and over 800 employees, spearheading industry-changing innovations in competing for and managing U.S. Government contracts. During his tenure the company managed more than $360 billion in major program competitions. After conducting a successful Nasdaq listed IPO in 1998 he served as Chairman and CEO of SM&A for another ten years. The company was sold to private equity in 2008.
An accomplished public speaker and author, Mr. Myers is a nationally recognized thought leader on business competitiveness and is a frequent guest lecturer on entrepreneurship at the USC Marshall School of Business. He is a two-time U.S. Air Force Veteran and a highly accomplished aviator. The Caladrius Board has concluded that Mr. Myers should continue serving as a Director based upon his technical background and diverse entrepreneurial and business expertise, including his having established and managed innovative enterprises (in the areas of proposal development for competitive procurements, aircraft leasing and private equity investment), together with his technical experience in the aerospace and defense sector.
•
EXECUTIVE OFFICERS
The following table sets forth certain information about the executive officers of our abilityCompany. There are no family relationships among any of our directors and executive officers. For biographical information regarding our executive officers, see the discussion under “Biographical Information — Executive Officers,” below.
| | | | | | | | | | | | | | | | | |
| Name | | Age | | Position | |
| David J. Mazzo, PhD | | 65 | | President and Chief Executive Officer | |
| Todd C. Girolamo, Esq. | | 57 | | Former Chief Legal Officer and Corporate Secretary | |
| Kristen K. Buck, M.D. | | 48 | | Executive Vice President R&D and Chief Medical Officer | |
Biographical Information - Executive Officers
David J. Mazzo, Ph.D.
See the discussion under “Biographical Information - Directors” above.
Todd C. Girolamo, J.D., M.B.A.
Mr. Girolamo joined Caladrius as Associate General Counsel in February 2011 and was promoted to obtain sufficient capital or strategic business arrangementsSenior Vice President, General Counsel and Corporate Secretary in October 2015. He began his legal career at Cahill Gordon & Reindel in 1990 and later at Reid & Priest, practicing in the areas of securities law, intellectual property, employment law and general commercial litigation. After private practice, Mr. Girolamo spent 12 years on Wall Street in institutional equities as a Series 24, 7 and 63 licensed principal at Oppenheimer & Co., CIBC World Markets, Leerink Swann & Co. and Summer Street Research Partners where he specialized in equity research, sales and trading of biotechnology, pharmaceuticals and medical technology market sectors. Mr. Girolamo then served as an analyst and portfolio manager at Lion’s Path Capital managing a long-short portfolio of biopharma and med-tech equities. Mr. Girolamo is a director on the board of Longeveron, Inc., where he has served since February 2022. Mr. Girolamo received an A.B. with honors from Harvard College, a J.D. from the University of Pennsylvania Law School and an M.B.A. from Columbia Business School.
Kristen K. Buck, M.D.
Dr. Kristen K. Buck joined Caladrius in September 2021 as Executive Vice President of R&D and Chief Medical Officer (“CMO”) of the Company. Prior to fund ourjoining Caladrius Dr. Buck worked at ICON plc from March 2020 to July 2021, where she served as its CMO and represented the company’s position on key scientific, ethical, and medical governance matters, provided guidance and oversight to the medical and scientific groups, and led the Drug Development Services group. Prior to that, Dr. Buck was Senior Vice President & Chief of Clinical Development at Optum Insights (part of the United Healthcare Group) from August 2018 to March 2020, where she led the clinical operations and expansionregulatory groups within the Digital Research Network (DRN) clinical trial business. From January 2014 to July 2018, Dr. Buck held a position at Quintiles/IQVIA as Vice President of Global Strategic Drug Development designing clinical development plans and protocols across all therapeutic areas for emerging biotech and large pharma.
Earlier in her career, Dr. Buck worked as a primary care physician and then later served as a medical officer in the U.S. Food and Drug Administration’s Office of New Drugs Division of Gastrointestinal and Hematology Drug Products where she was responsible for reviewing efficacy and safety data for new drug indications, as well as post-marketing safety data for over 40 drugs. Dr. Buck worked at AstraZeneca where she served as a Global Safety Physician and Global Study Physician. Her experience ranges over multiple therapeutic indications including meeting our financial obligations under various licensingcardiovascular/metabolic, rare diseases, gastrointestinal, neuroscience, oncology, immunology, and other strategic arrangements,women’s health.
Dr. Buck is a board certified and licensed physician who received her medical degree from the fundingPennsylvania State University School of Medicine and completed her internship and residency in Internal Medicine at Abington Memorial Hospital before working in a private practice as a primary care physician.
Governance of Caladrius Biosciences, Inc.
Director Independence
The current Caladrius Board members consist of Dr. Brown, Dr. Davidson, Ms. Flowers, Mr. Klosk, Dr. Mazzo, Mr. Myers, Dr. Traber and Ms. Whitaker. The Caladrius Board has reviewed the materiality of any relationship that each of our clinical trials for product candidates,directors has with Caladrius, either directly or indirectly. Based upon this review, the Caladrius Board has determined that Dr. Brown, Dr.
Davidson, Ms. Flowers, Mr. Klosk, Mr. Myers, Dr. Traber and Ms. Whitaker are “independent directors” applying the commercializationdefinition of independence under the listing standards of Nasdaq.
Board Leadership Structure and Role in Risk Oversight
Dr. Brown serves as the Chairman of the relevant technology;Board. When present, our Chairman presides over all Caladrius Board meetings. Dr. Brown coordinates with our President and Chief Executive Officer and Corporate Secretary to set the agenda for Caladrius Board meetings, chairs executive sessions of the independent directors, and performs any other duties assigned from time to time by the Caladrius Board. We believe that the separation of the Chairman and Chief Executive Officer roles at Caladrius enhances good corporate governance principles through reduction of conflicts of interest and greater board independence.
The Caladrius Board oversees our risk management. This oversight is administered primarily through the following:
•The Caladrius Board’s review and approval of our abilitybusiness plans and budget (prepared and presented to buildthe Caladrius Board by the President and maintainChief Executive Officer and other management), including the managementprojected opportunities and human resources infrastructure necessary to support the growth ofchallenges facing our business;
•whether a market is established forAt least quarterly review of our cell-based productsbusiness developments, business plan implementation and services and our ability to capture a meaningful share of this market;financial results;
•scientific, regulatory and medical developments beyond our control;
•our ability to obtain and maintain, as applicable, appropriate governmental licenses, accreditations or certifications or to comply with healthcare laws and regulations or any other adverse effect or limitations caused by government regulationOur Audit Committee’s oversight of our business;
•whether anyinternal control over cybersecurity and financial reporting and its discussions with management and the independent accountants regarding the quality and adequacy of our current or future patent applications result in issued patents, the scope of those patentsinternal controls and our ability to obtain and maintain other rights to technology required or desirable for the conduct of our business; and our ability to commercialize products without infringing upon the claims of third-party patents;
•whether any potential strategic or financial benefits of various licensing agreements will be realized;
•the results of our development activities;
•our ability to complete our other planned clinical trials (or initiate other trials) in accordance with our estimated timelines due to delays associated with enrolling patients due to the novelty of the treatment, the size of the patient population and the need of patients to meet the inclusion criteria of the trial or otherwise;reporting; and
•Our Compensation Committee’s review and approval of our executive officer compensation, executive and general compensation policies and its relationship to our business plans.
Committees
The Caladrius Board has established (i) an Audit Committee, (ii) a Compensation Committee and (iii) a Nominating and Governance Committee. Each of these Committees has only independent directors as members. In addition, the extentCaladrius Board has established a Science and Technology Committee for which it has not imposed any membership rules regarding director independence, and which committee assists with reviewing development and regulatory strategy, R&D staffing and budgets, and recommendations regarding business development opportunities.
Audit Committee
The Audit Committee consists of four directors: Dr. Brown (Chairman), Ms. Flowers, Messrs. Klosk and Myers. Each member of the committee is independent applying the definition of independence under the listing standards of Nasdaq and SEC regulations. The Audit Committee met five times during the year. Dr. Brown, Ms. Flowers, Messrs. Klosk and Myers each qualify as an “audit committee financial expert” as defined by Item 407(d)(5)(ii) of Regulation S-K.
Pursuant to the terms of the Audit Committee charter, the Audit Committee is required to consist of at least three of our “independent” directors and shall serve at the pleasure of the Caladrius Board. An “independent” director is defined as an individual who (a) is not our officer or salaried employee or an affiliate, (b) does not have any relationship that, in the opinion of the Caladrius Board, would interfere with his or her exercise of independent judgment as an Audit Committee member, (c) meets the independence requirements of the SEC and Nasdaq or such other securities exchange or market on which our securities are traded and (d) except as permitted by the SEC and Nasdaq or such other securities exchange or market on which our securities are traded, does not accept any consulting, advisory or other compensatory fee from us. The Audit Committee’s charter requires the committee to oversee our accounting and financial reporting process, our system of internal controls regarding cybersecurity, finance, accounting, legal compliance and ethics, and the audits of our financial statements. A current copy of such charter is available to stockholders on our website, www.caladrius.com. The primary duties of the Audit Committee consist of, among other things:
•serving as an independent and objective party to monitor our financial reporting process, internal control system, cybersecurity policy and disclosure control system;
•reviewing and appraising the audit efforts of our independent accountants;
•assuming direct responsibility for the appointment, compensation, retention and oversight of the work of the outside auditors and for the resolution of disputes between the outside auditors and our management regarding financial reporting issues;
•providing an open avenue of communication among the independent accountants, financial and senior management and the Caladrius Board; and
•reviewing and approving all related party transactions.
Compensation Committee
Our Compensation Committee consists of four directors: Mr. Klosk (Chairman), Dr. Brown, Mr. Myers and Ms. Whitaker. Each such member of the Compensation Committee is independent applying the definition of independence under the listing standards of Nasdaq. The Compensation Committee met six times during the year.
Each member of our Compensation Committee must (i) be one of our independent directors satisfying the independence requirements of Nasdaq and other applicable regulatory requirements; (ii) qualify as an “outside director” under Section 162(m) of the Internal Revenue Code of 1986 (the "Code") and (iii) meet the requirements of a “non-employee director” for purposes of Section 16 of the Exchange Act. Except as permitted by Nasdaq, members of the Compensation Committee must not accept any consulting, advisory or the other compensatory fee from us or any of our subsidiaries. In determining whether a director is eligible to serve on the Compensation Committee, the Caladrius Board must consider whether the director is affiliated with us, one of our subsidiaries or an affiliate of one of our subsidiaries to determine whether such affiliation would impair the director’s judgment as a member of the Compensation Committee.
The Compensation Committee oversees the determination of all matters relating to employee compensation and benefits and specifically determines and approves salaries, bonuses and equity-based compensation for our executive officers.
We have adopted a Compensation Committee charter which outlines the Compensation Committee’s primary duties which are to:
•evaluate the performance of the President and Chief Executive Officer considering, inter alia, achievement of committee-approved goals and objectives and determine and approve the President and Chief Executive Officer’s compensation based on this evaluation and such other factors as the Compensation Committee shall deem appropriate;
•determine and approve all executive officer compensation;
•approve the aggregate amounts and methodology for determination of all salary, bonus, and long-term incentive awards for all employees other than executive officers;
•review and recommend equity-based compensation plans to the full Board and approve all grants and awards thereunder;
•review and approve changes to our equity-based compensation plans other than those changes that require stockholder approval under the plans, the requirements of Nasdaq or any exchange on which our securities may be listed and/or any applicable law;
•review and recommend to the full Board changes to our equity-based compensation plans that require stockholder approval under the plans, the requirements of Nasdaq or any exchange on which our securities may be listed and/or any applicable law;
•review and approve changes in our retirement, health, welfare and other benefit programs that result in a material change in costs or the benefit levels provided;
•administer our equity-based compensation plans; and
•approve, as required by applicable law, the annual Compensation Committee report on executive compensation for inclusion in our proxy statement.
The Compensation Committee has the authority, in its sole discretion, to retain or obtain advice from compensation consultants, independent legal counsel and other advisers, and is directly responsible for the retention, termination, compensation and oversight of the work of any such consultant, counsel or other adviser. In selecting a consultant, counsel or other adviser, the Compensation Committee must, as required by Nasdaq rules, take into consideration all factors relevant to such person’s independence from management, including all factors that Nasdaq identifies in its listing standards.
Since March 2015, the Compensation Committee engaged the services of Radford/AON (“Radford”), a national executive compensation consulting firm, with expertise in the life science industry to review and provide recommendations concerning all of the components of Caladrius’ executive and director compensation program. Radford performs services solely on behalf of the Compensation Committee and has no relationship with the Company or management except as may relate to performing such services. Radford assisted the Compensation Committee in defining the appropriate market of the Company’s peer companies for executive compensation and practices and in benchmarking our executive compensation program against the
peer group for 2021 and in years past compensation actions. Radford also assisted the Compensation Committee in benchmarking our director compensation program and practices against those of our peers. The Compensation Committee has assessed the independence of Radford pursuant to SEC rules and the corporate governance rules of Nasdaq and concluded that no conflict of interest exists that would prevent Radford from independently representing the Compensation Committee.
A current copy of the Compensation Committee charter is available to stockholders on our website, www.caladrius.com. The Compensation Committee may form and delegate its authority to subcommittees as appropriate. Additionally, the President and Chief Executive Officer may make recommendations to the Compensation Committee relating to executive and director compensation, but consistent with Nasdaq rules, he may not be present during deliberations or voting regarding his own compensation.
Nominating and Governance Committee
Our Nominating and Governance Committee consists of three directors: Mr. Myers (Chairman), Dr. Davidson and Dr. Traber. The Nominating and Governance Committee is empowered by the Caladrius Board to recommend to the Caladrius Board qualified individuals to serve on the Caladrius Board and to identify the manner in which the COVID-19 coronavirusNominating and Governance Committee evaluates nominees recommended for the Caladrius Board. All members of the Nominating and Governance Committee have been determined to be “independent directors” pursuant to the definition contained in the rules of Nasdaq and SEC regulations. The Nominating and Governance Committee met four times during the year.
The Caladrius Board has adopted a Nominating and Governance Committee charter to govern the Nominating and Governance Committee, a current copy of which is available to stockholders on our website, www.caladrius.com.
Additional Board Committee:
The Caladrius Board also maintains the following additional committee:
Science and Technology Committee: The Science and Technology Committee consists of Drs. Davidson (Chairman), Brown, Traber, Mazzo, Ms. Flowers, Mr. Klosk and Ms. Whitaker. This committee is authorized to review the science, clinical and regulatory strategy underlying Caladrius’ research and development programs, as well as associated staffing and budgets. It also reviews the interactions of the research and development organization with healthcare providers and regulatory bodies. The Science and Technology Committee met four times during the year.
Qualifications for Board Membership
The Nominating and Governance Committee Charter mandates that the Committee consider and recruit qualified candidates in consultation with the Company's Chief Executive Officer and affords the Committee the flexibility to determine the desired qualifications, expertise and characteristics most suited to the needs of the Caladrius Board at any given time.
Diversity Considerations in Director Nominations
We do not have a formal diversity policy. Notwithstanding this, Caladrius is in compliance with current Nasdaq rules regarding board diversity. We believe the Caladrius Board represents a collection of individuals with a variety of complementary skills which, as a group, constitute the appropriate skills and experience to oversee Caladrius’ business. Our directors come from diverse backgrounds, including medicine, private equity, and management of pharmaceutical and healthcare-related companies. In accordance with the mission set out in its charter, our Nominating and Governance Committee considers a wide variety of qualifications, attributes and other factors and recognizes that a diversity of viewpoints and practical experiences can enhance the effectiveness of the Caladrius Board. As part of its evaluation of each candidate, our Nominating and Governance Committee takes into account how that candidate’s background, experience, qualifications, attributes and skills may impactcomplement, supplement or duplicate those of other directors or prospective candidates.
Nominating and Governance Committee Procedures
The Caladrius Board generally believes that we are well-served by our business,current directors. In the ordinary course, absent special circumstances or a material change in the criteria for Board membership, the Caladrius Board will re-nominate incumbent directors who continue to be qualified for Board service and are willing to continue as directors. If an incumbent director is not standing for re-election or is not re-nominated if a vacancy on the Caladrius Board occurs between annual stockholder meetings or if the Caladrius Board believes it is in our best interests to expand its size, the Caladrius Board may seek out potential candidates for Caladrius Board appointment who meet the criteria for selection as a nominee and have the specific qualities or skills being sought. Nominees for director must be discussed by the full Board and approved for nomination by the affirmative vote of a majority of the Caladrius Board, including our clinical trialsthe affirmative vote of a majority of the independent directors.
The Nominating and financial condition.Governance Committee assists the Caladrius Board by identifying qualified candidates for director and recommends to the Caladrius Board the director nominees for the annual meeting of stockholders. The Caladrius Board will conduct a process of making a preliminary assessment of each proposed nominee based upon the nominee’s resume and
biographical information, an indication of the individual’s willingness to serve and other background information. This information is evaluated against specific needs at that time. Based upon a preliminary assessment of the candidate(s), those who appear best suited to meet our needs may be invited to participate in a series of interviews, which are used as a further means of evaluating potential candidates. Based on information learned during this process, the Caladrius Board will determine which nominee(s) to include in the slate of candidates that the Caladrius Board recommends for election at each annual meeting of our stockholders.
Procedures for Considering Nominations Made by Stockholders
The factors discussed herein, including those risksprocedures for stockholders submitting nominating recommendations described in "Item 1A. Risk Factors"our By-laws detail the procedures for nominations to be submitted by stockholders, other than candidates who have previously served on the Caladrius Board or who are recommended by the Caladrius Board. Our By-laws state that: "For any nomination or other business proposal to be properly brought before an Annual Meeting by a stockholder pursuant to clause (iii) of Article I, Section 1.10(A)(1) of these By-laws, the stockholder must (i) have given Timely Notice (as defined below) thereof in writing to the Secretary of the Corporation, (ii) have provided any updates or supplements to such notice at the times and in the Company's other periodic filingsforms required by these By-laws and, (iii) together with the SEC, which are available for reviewbeneficial owner(s), if any, on whose behalf the nomination or other business proposal is made, have acted in accordance with the representations set forth in the Solicitation Statement (as defined below) required by these By-laws. To be timely, a stockholder’s written notice shall be received by the Secretary at www.sec.gov, could cause actual resultsthe principal executive offices of the Corporation not later than the close of business on the one hundred and developmentstwentieth (120th) day nor earlier than the close of business on the one hundred fiftieth (150th) day prior to the one-year anniversary of the preceding year’s Annual Meeting date; provided that, in the event the Annual Meeting is first convened more than thirty (30) days before or more than sixty (60) days after the one-year anniversary of the preceding year’s Annual Meeting date, or if no Annual Meeting was held in the preceding year, notice by the stockholder to be materially different from those expressedtimely must be received by the Secretary of the Corporation not later than the close of business on the later of the ninetieth (90th) day prior to the scheduled date of such Annual Meeting or implied by such statements. All forward-looking statements attributable to us are expressly qualified in their entirety by these and other factors. Readers are cautioned not to place undue reliancethe tenth (10th) day following the day on these forward-looking statements, which speak only aspublic announcement of the date they were made. Exceptof such meeting is first made (such notice within such time periods shall be referred to as required“Timely Notice”)."
There will be no differences in the manner in which the Caladrius Board evaluates nominees recommended by law, we undertakestockholders and nominees recommended by the Caladrius Board or management, except that no obligationspecific process shall be mandated with respect to updatethe nomination of any forward-looking statements, whether asindividuals who have previously served on the Caladrius Board.
Stockholder Communications
The Caladrius Board has established a resultprocedure that enables stockholders to communicate in writing with members of new information, future events or otherwise.
PART I
ITEM 1. BUSINESS.
Overview
the Caladrius Board. Any such communication should be addressed to our Corporate Secretary and should be sent to such individual c/o Caladrius Biosciences, Inc. (“we,” “us,” "our," “Caladrius” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to the development and commercialization of cellular therapies designed to reverse disease and/or promote the regeneration of damaged tissue. We are developing first-in-class therapeutics based on the characteristics of naturally occurring CD34+ cells and their ability to stimulate the growth of new microvasculature. Our technology leverages these cells to enable the body's natural repair mechanisms using formulations unique to each medical indication.
Our leadership team has decades of collective biopharmaceutical development experience. Our goal is to develop and commercialize products that address important unmet medical needs based on a broad and versatile portfolio of candidates. The Company’s current product candidates include: CLBS16, the subject of both a recently completed positive Phase 2a study and a newly initiated Phase 2b (FREEDOM) study in the U.S. for the treatment of coronary microvascular dysfunction (“CMD”); HONEDRA® (CLBS12), recipient of SAKIGAKE designation and eligible for early conditional approval in Japan for the treatment of critical limb ischemia (“CLI”) and Buerger’s Disease based on the results of an ongoing clinical trial; CLBS201, designed to assess the safety and efficacy of CD34+ cell therapy as a treatment for patients with pre-dialysis chronic kidney disease (“CKD”) and OLOGO™ (CLBS14), a Regenerative Medicine Advanced Therapy (“RMAT”) designated therapy for which the Company is in discussion with the U.S. Food and Drug Administration (the “FDA”) to finalize a Phase 3 protocol of reduced size and scope for a confirmatory trial in subjects with no-option refractory disabling angina (“NORDA”).
Corporate Information
We incorporated in 1980as a Delaware corporation and our principal executive offices are located at 110 Allen Road, Second Floor, Basking Ridge, NJ 07920. Our telephoneAny such communication must state, in a conspicuous manner, that it is intended for distribution to the entire Board. Under the procedures established by the Caladrius Board, upon our Secretary’s receipt of such a communication, a copy of such communication will be sent to each member of the Caladrius Board, identifying it as a communication received from a stockholder. Absent unusual circumstances, at the next regularly scheduled meeting of the Caladrius Board held more than two days after such communication has been distributed, the Caladrius Board will consider the substance of any such communication.
Board and Committee Meeting Attendance
During the year ended December 31, 2021, the Caladrius Board held four meetings, the Audit Committee held five meetings, the Compensation Committee held six meetings, the Nominating and Governance Committee held four meetings and the Science and Technology Committee held five meetings. The Caladrius Board took additional actions by written consent. Each director attended (or participated by telephone) in 100% of the total number is (908) 842-0100of meetings of the Caladrius Board and our corporate website address is www.caladrius.com. We include our website address in thiscommittees on which he or she served, with the exception of one Audit meeting and one Nominating and Governance meeting at which one member was absent at each.
Director Attendance at Annual Report on Form 10-K only as an inactive textual reference andStockholder Meetings
We do not intend ithave a formal policy regarding attendance by directors at our annual meetings of stockholders but invite and encourage all directors to be an active linkattend. We make every effort to schedule our website. The information on our website is not incorporated by reference into this Annual Report on Form 10-K.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, as well as other documents we file with the U.S. Securities and Exchange Commission ("SEC"), are available free of charge through the Investors section of our website as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The public can obtain documents that we file with the SEC at www.sec.gov.
This Annual Report on Form 10-K includes the following trademark owned by us: Caladrius®. This trademark is the property of Caladrius and its affiliates. This Annual Report on Form 10-K also includes other trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks and traded names included herein are the property of their respective owners.
Ischemic Repair (CD34 Cell Technology)
The CD34+ cell was discovered as a result of the deliberate search for a stem cell capable of stimulating the development and/or repair of blood vessels. All tissues in the body maintain their function by replacing cells over time. In addition to the maintenance function, the body must also be capable of building new blood vessels after injury. A CD34+ cell is a stem cell that has the ability to stimulate new blood vessel formation at the level of the microvasculature. No other native cell discovered to date has demonstrated this same capability.
Our proprietary cell technology using autologous (a patient’s own naturally occurring) CD34+ cells has led to the development of therapeutic product candidates designed to address diseases and conditions caused by ischemia. Ischemia occurs when the supply of oxygenated blood to healthy tissue is restricted. Through the administration of CD34+ cells, we seek to promote the development and formation of new microvasculature and thereby increase blood flow to the impacted area. We believe that a number of conditions caused by underlying ischemic injury can be improved through our CD34+ cell technology including but not limited to CLI, CMD, NORDA and CKD.
HONEDRA® for Treatment of Critical Limb Ischemia
Our randomized and open-label, registration-eligible study of HONEDRA® in Japan for the treatment of CLI has shown strong results to date. The initial responses observed in the subjects who have reached an endpoint in this open label study are consistent with a positive therapeutic effect and safety profile as reported by previously published clinical trials in Japan. Although the study's enrollment has been slowed by the COVID-19 pandemic's impact in Japan, we are encouraged by the
patient pre-screening pipeline that has been identified and expect to conclude trial enrollment during the second quarter of 2021. While the final outcome of the trial will depend on all data from all subjects, data, to date, are very encouraging.
OLOGOTM for Treatment of No Option Refractory Disabling Angina
We acquired the rights to data and regulatory filings for a CD34+ cell therapy program for refractory angina that had been advanced to Phase 3 by a previous sponsor.
Based on the clinical evidence from the completed studies that a single administration of OLOGOTMreduces mortality, improves angina and increases exercise capacity in patients with otherwise untreatable angina, this product received Regenerative Medicine Advanced Therapy (“RMAT”) designation from the FDA. We remain in discussion with the FDA regarding the size and scope of a phase 3 trial which, in combination with previously filed Phase 1, 2 and 3 data, will be considered for the registration of OLOGOTM. Notably, the RMAT designation affords the product a 6-month review time for a biologics license application ("BLA"), once submitted.
CLBS16 for Treatment of Coronary Microvascular Dysfunction
In 2017, with the assistance of a $1.9 million grant from the National Institutes of Health (Award Number R44HL135889), we initiated our program for CLBS16 for the treatment of CMD, a disease that afflicts millions of patients with no current targeted treatment options. That study, the ESCaPE-CMD trial, was a Phase 2a proof-of-concept study that enrolled patients at the Mayo Clinic in Rochester, MN and Cedars-Sinai Medical Center in Los Angeles, CA. In June 2019, we announced the completion of enrollment in this study. Results of the first 17 of 20 patients enrolled in this trial who reached 6-month follow-up were presented as a rapid fire oral presentation on November 16, 2019 at the annual meeting of the American Heart Association in Philadelphia, PA by one of the principal investigators, Dr. Noel Bairey Merz, FACC, FAHA, FESC, the director of the Barbra Streisand Women's Heart Center at Cedars-Sinai in Los Angeles, CA. That data set showed a positive therapeutic effect with a statistically significant improvement in angina frequency, coronary flow reserve, Canadian Cardiovascular Society Angina Class and Seattle Questionnaire score, as well as an acceptable safety profile. The full data set from that study was presented at the SCAI 2020 Scientific Sessions Virtual Conference on May 14, 2020 by Dr. Timothy Henry, FACC, of the Christ Hospital in Cincinnati, Ohio. In December 2020, we commenced enrollment in our Phase 2b FREEDOM trial of CLBS16 as a therapy for CMD. The first patient in the study was subsequently treated in January 2021 at The Christ Hospital Health Network in Cincinnati, Ohio. This 105-patient double-blind randomized and placebo-controlled clinical trial (FREEDOM trial) is designed to further evaluate the efficacy and safety of intracoronary delivery of autologous CD34+ cells in subjects with CMD and without obstructive coronary artery disease. To our knowledge, this is the first controlled regenerative medicine trial in CMD.
CLBS201 for Treatment of Chronic Kidney Disease
We are planning to file an IND for the clinical study of CLBS201, a CD34+ investigational product for administration into the renal arteries to slow the deterioration or reverse the decline of renal function in patients with chronic kidney disease who, althoughstockholders at a pre-dialysis stage, exhibit rapidly progressive disease. Progressive kidney failure is associated with attrition of the microcirculation of the kidney. Pre-clinical studies in kidney diseasetime and injury models have demonstrated that protection or replenishment of the microcirculation results in improved kidney function. A Phase 2 proof of concept, randomized, placebo-controlled study is being considered for initiation in the 2nd half of 2021.
Additional Out-licensing Opportunities
Our broad intellectual property portfolio of cell therapy assets includes notable programs available for out-licensing in order to continue their clinical development. Our current long-term strategy focuses on advancing our therapies through development with the ultimate objective of obtaining market authorizations and entering commercialization, either alone or with partners, to provide treatment options to patients suffering from life-threatening medical conditions. We believe that we are well-positioned to realize potentially meaningful value increases within our own proprietary pipeline if we are successful in advancing our product candidates to their next significant development milestones.
Coronavirus Considerations
In December 2019, a novel strain of coronavirus (SARS-CoV-2), which causes COVID-19, was reported to have surfaced in China. In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic, and the world's economies began to experience pronounced effects. Despite the FDA approval of multiple COVID-19 vaccines in late 2020, there remains uncertainty around the extent and duration of disruption and any future related financial impact cannot be reasonably estimated at this time. In response to the pandemic, we have implemented work from home as well as social distancing and other hygiene policies for employees when they must be in the office. Our clinical study of HONEDRA® in Japan has experienced delays in enrollment due to the “State of Emergency” in effect in Japan for most of 2020 and re-
implemented in Japan on Jan 7, 2021 and now extending through March 7, 2021 covering Tokyo and other regions in response to increased number of COVID-19 patients.
THE FIELD OF CELL THERAPY
Regenerative medicine is defined as the process of replacing or regenerating human cells, tissues or organs to restore normal function. Among the categories of therapeutic technology platforms within this field are cell therapy, tissue engineering, tools, device diagnostics and aesthetic medicine. All living complex organisms start as a single cell that replicates and then individual groups of cells differentiate (mature into complex cell types), thereby yielding the diversity of organs and organ systems in an adult organism. Cell therapy is a process that uses cells to prevent, treat or cure disease, or to regenerate damaged or aged tissue. Since the 1970s, bone marrow and blood and umbilical cord-derived stem cells have been used to restore bone marrow, as well as blood and immune system cells damaged by the chemotherapy and radiation historically used to treat many cancers. Notably, this approach holds curative potential for patients with otherwise fatal conditions.
There are two general classes of cell therapies: autologous and allogeneic. When cells are collected from a person (donor) and transplanted or used to develop a treatment solely for that same person (recipient or patient) with or without modification, the treatment paradigm is known as “autologous” cell therapy. For long-term repair of cardiovascular tissues, evidence indicates that the repair cells must remain in the target tissue for a period of time. Since autologous cells are not destroyed by the immune system, autologous cell therapy can be expected to result in long-term residence of the administered cells. When the donor and the recipient are not the same individual, the procedures are referred to as “allogeneic” cell therapy.
Various cell therapies are in clinical development for an array of human diseases, including autoimmune, oncologic, cardiovascular, neurologic and orthopedic diseases, among other indications. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy holds the promise to better the human experience and minimize or ameliorate the pain and suffering from many common and often life-threatening diseases. The FDA has been investing significant resources into policies and organizational changes to advance the cell and gene therapy fields in recent years through what the agency has labeled its “comprehensive regenerative medicine policy framework,” as first announced in late 2017 and incrementally developed since that time through various agency actions.
TECHNOLOGY OUT-LICENSING OPPORTUNITIES
Ischemic Repair (CD34+ Cell Technology)
Our CD34+ Cell Technology is an autologous cell platform technology with potential application to a broad array of ischemic conditions and we will seek to out-license our technology in geographies or indications where we do not intend to pursue development ourselves.
Intellectual Property Platform
Our developed and owned ischemic repair patent portfolio comprises the following:
a.Nine U.S. patents, three EU patents (each filed in 5 individual countries) and ten other patents in Japan, Canada, Russia and Hong Kong;
b.Claims cover, inter alia, a pharmaceutical composition that contains a therapeutic concentration of non-expanded CD34+ stem cells that move in response to SDF-1 or VEGF, together with a stabilizing amount of serum, that can be delivered to repair an injury caused by vascular insufficiency;
c.Issued and pending claims can be applied to a broad range of conditions caused by underlying ischemia, including acute myocardial infarction, chronic myocardial ischemia post-AMI, chronic heart failure, critical limb ischemia, and ischemic brain injury; and
d.One pending patent application outside the United States.
Market Opportunity for CLI
In Japan, there are approximately 300,000 patients with CLI, of whom approximately 51,000 are not candidates for revascularization, making the addressable population for HONEDRA® approximately 560,000 patients in the EU and 300,000 in the U.S.
The field of cardiovascular cell therapy development is competitive. There are a number of companies that are developing cell-based therapies for cardiovascular diseases. These companies are utilizing a number of different therapeutic approaches in their development efforts. There are both autologous and allogeneic based competitive therapies that derive cells principally from four sources: fat, peripheral blood, cord blood, and bone marrow. HONEDRA® is an autologous therapy that derives its cells from the peripheral blood of the patient via apheresis.
Market Opportunity for CMD
In the United States, there is an addressable population of approximately 400,000 to 1,600,000 patients with CMD, while the addressable population is roughly 1,200,000 to 4,800,000 in the EU and between 43,000 and 166,000 in Japan.
Market Opportunity for NORDA
In the United States, we have identified fewer than 100,000 patients with no-option refractory disabling angina as candidates for OLOGOTM, making this an indication of orphan size.
Market Opportunity for CKD
In the United States, stages 3 and 4 CKD patients represent an addressable population of approximately 15,000,000 to 18,000,000 and there is an estimated addressable population of 11,500,000 to 14,200,000 patients in the EU.
GOVERNMENT REGULATION
The healthcare industry is one of the most highly regulated industries in the United States and abroad. Various governmental regulatory authorities, as well as private accreditation organizations, oversee and monitor the activities of individuals and businesses engaged in the development, manufacture and delivery of health care products and services. The following is a general description of certain current laws and regulations that are relevant to our business:
Premarket Review and Approval of Pharmaceutical and Biological Products in the United States
In the United States, pharmaceutical and biological products, including cellular therapies, are subject to extensive pre- and post- market regulation by the FDA. The Federal Food, Drug, and Cosmetic Act (“FD&C Act”) and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products, including biological products, intended for therapeutic uses. Biological products are approved for marketing under provisions of the Public Health Service Act ("PHS Act"). However, biological products that also meet the definition of “drugs” under the FD&C Act are also subject to regulation under FD&C Act provisions and to applicable provisions from two sets of FDA implementing regulations, those for biological products and those for drugs. Another distinction between pharmaceuticals and cellular therapies is that the PHS Act requires the submission of a BLA, rather than a New Drug Application ("NDA"), for market authorization of a cellular therapy candidate like ours. Generally, the application process and requirements for product approval under BLA is similar to those for an NDA, and the review process for biological products is associated with similar approval risks and application costs as for chemical entity drug products.
Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as the FDA refusal to approve pending NDAs or BLAs, withdrawal of an approval, issuance of warning letters and other types of enforcement letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice, or DOJ, or other governmental entities. Under certain circumstances, individual members of company management may also be subject to civil or criminal penalties related to company violations of applicable legal requirements.
An applicant seeking approval to market and distribute a new pharmaceutical or biological product in the United States typically must undertake the following:
•completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA's good laboratory practice or GLP regulations;
•submission to the FDA of an IND, which includes the detailed clinical protocol, which must take effect before human clinical trials can commence;
•approval of the clinical trial protocol and the sponsor's safeguards for human subjects by one or more institutional review boards, or "IRBs," depending on the numbers of clinical sites and other features of the study design, before each clinical trial may be initiated;
•performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or "GCPs," to establish the safety and efficacy of the proposed drug or biological product for each proposed indication for which FDA approval is sought;
•satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;
•preparation and submission to the FDA of an NDA or BLA, as appropriate;
•review of the product by an FDA advisory committee, where appropriate or if applicable, as determined by the FDA at its discretion;
•satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with the regulations establishing current Good Manufacturing Practices, or “cGMPs,” and current Good Tissue Practices or “cGTPs” (if applicable), and to assure that the facilities, methods and controls used for the manufacture, processing and packing of the drug or biological product are adequate to preserve the product’s identity, strength, quality and purity; and
•payment of applicable user fees and securing FDA approval of the NDA or BLA.
Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease. Moreover, submission of an IND may not result in FDA authorization to initiate a clinical trial if the FDA raises concerns or questions about the design of the clinical trial or the preclinical or manufacturing information supporting it, including concerns that human research subjects will be exposed to unreasonable health risks. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development. After a trial is initiated, the FDA may order the temporary or permanent discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial is not being conducted in accordance with FDA requirements, or presents an unacceptable risk to the clinical trial patients.
Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted in compliance with federal regulations and GCPs, which are meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors. In addition, sponsors of most clinical trials involving FDA regulated products, including drugs and biologics, are required to register and disclose certain clinical trial information on a public registry and results database managed by the National Institutes of Health called ClinicalTrials.gov. Registration information that must be submitted includes information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs. Failure to comply with applicable clinical trial registration or results reporting obligations can result in civil monetary penalties or the withholding of grant funds from a federally funded grantee.
Clinical trials to support NDAs or BLAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap or may be combined. Under certain circumstances, a fourth post-approval phase may be required.
•Phase 1: Trials in this phase are initially conducted in a limited population of healthy volunteers to test the product candidate for safety, dose tolerance, absorption, metabolism, distribution and excretion in healthy humans or, on occasion, in patients, such as cancer patients, when the drug or biologic is too toxic to be ethically given to healthy individuals.
•Phase 2: These clinical trials are generally conducted in a limited patient population to determine the presence and approximate magnitude of therapeutic effect of the product for specific targeted indications and to identify appropriate therapeutic dose and dose frequency as well as any corresponding additional possible adverse effects and safety risks. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
•Phase 3: These are commonly referred to as pivotal or registration studies. When Phase 2 evaluations demonstrate that a dose range of the product is effective and has an acceptable safety profile, Phase 3 clinical trials are typically undertaken in a larger patient population to further evaluate dosage, to provide substantial evidence of clinical efficacy and to further test for safety in an expanded and diverse patient population at multiple and geographically-dispersed clinical trial sites. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug or biologic as a requirement for marketing authorization.
•Phase 4: In some cases, the FDA may condition approval of an NDA or BLA for a product candidate on the sponsor's agreement to conduct additional clinical trials after NDA or BLA approval. In other cases, a sponsor may voluntarily carry out additional trials post approval to gain more information about the drug or biologic.
Submission of an NDA or BLA to the FDA
Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among
other things, are submitted to the FDA as part of an NDA or BLA seeking approval to market the drug product for one or more indications. FDA approval of the NDA or BLA is required before marketing of the product may begin in the United States. The cost of preparing and submitting an NDA or BLA is substantial. Under federal law, most NDA or BLA submissions are additionally subject to a substantial application user fee. The current fee for FY2021 is $2,875,842 (some small businesses may qualify for a waiver under certain circumstances) and an annual program fee, currently $336,432, must also be paid for each approved prescription drug or biological product. These fees are typically adjusted annually.
The FDA has 60 days from its receipt of an NDA or BLA to determine whether the application will be accepted for filing based on the Agency's threshold determination that the application is sufficiently completedate to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. If the application is not sufficiently complete, the FDA may issue a Refusal to File, or RTF, letter, although the FDA may permit an applicant to correct certain easily correctable deficiencies in the NDA/BLA before filing without taking an official RTF action. Under certain NDA and BLA review performance goals to which the FDA has agreed, most applications for standard review of drug or biological products are reviewed within ten to twelve months, and most applications for priority review drugs or biologics are reviewed within six to eight months. If a sponsor submits a major amendment to a filed NDA or BLA at any time during the review cycle, the FDA may extend these reviewsattendance by three months although only one such extension is permitted during a review cycle. Priority review can be applied to drugs or biologics that, in the FDA's determination, offer major advances in treatment or provide a treatment for a disease or condition for which no adequate therapy exists. For biologics, priority review is further limited to products intended to treat a serious or life-threatening disease relative to currently approved products. Priority review requests must be submitted in conjunction with the original NDA/BLA for which the sponsor is seeking the designation, and the FDA decision will be made in conjunction with its official action to file the application and begin the substantive review process.
Before approving an NDA or BLA, the FDA will typically inspect one or more clinical trial sites to ensure compliance with GCPs. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. These pre-approval inspections cover all facilities associated with an NDA or BLA submission, including drug component manufacturing (such as active pharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with applicable cGMP and cGTP requirements and are adequate to assure consistent production of the drug or biological product within required specifications and the NDA or BLA contains data that provide substantial evidence that the drug or biologic is safe and effective for the proposed indication.
The FDA may refer applications for novel drug or biological products, or drug or biological products that present difficult questions of safety or efficacy, to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation, and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but the FDA will carefully consider them.
After the FDA fully evaluates the NDA or BLA and the relevant manufacturing facilities, the FDA will issue either an approval/licensure letter or a complete response letter (“CRL”). A CRL generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA's satisfaction in a resubmitted NDA or BLA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions within two or six months, depending on the type of information being provided to address the deficiencies in the CRL. Even with the submission of this additional information, however, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
If the FDA approves a drug or biological product for marketing in the U.S., it may limit the approved indications for use for the product; require that contraindications, warnings or precautions be included in the product labeling; require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s safety after approval; require testing and surveillance programs to monitor the product after commercialization; or impose other conditions, including distribution restrictions or other risk management mechanisms, such as a risk evaluation and mitigation strategy or “REMS,” which can materially affect the potential market and profitability of the product. The FDA also may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications or patient populations, making certain types of manufacturing changes or seeking to make additional labeling claims, are subject to further testing requirements and FDA review and approval.
One potential condition of approval is that the FDA may require an applicant to develop a REMS to ensure that the benefits of the drug outweigh its risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS requirements are tailored to the specific risk/benefit profile of a drug and can include requirements such as medication guides for patients, detailed communication plans for health care professionals, and elements to assure safe use, or “ETASU.” ETASU may
include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, restricted distribution, and the use of patient registries. The FDA may require a REMS as a condition of approval or may add such a requirement at any point post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS and the specific components that are involved can materially affect the potential market and profitability of a product. If the FDA concludes a REMS plan is needed, the sponsor of the NDA or BLA must submit a proposed REMS. The FDA will not approve an NDA without a REMS, if required.
Expedited Review Programs (Fast Track, Breakthrough, RMAT) and Accelerated Approval Pathways
The FDA is authorized to facilitate the development and expedite the review of certain drugs or biologics that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Under the Fast Track Program, the sponsor of an IND for a drug candidate may request that the FDA designate the drug candidate for a specific indication as a Fast Track drug concurrent with, or after, the submission of the IND for the drug candidate. The FDA must determine if the drug candidate qualifies for Fast Track designation within 60 days of receipt of the sponsor’s request. In addition to other benefits such as the ability to engage in more frequent interactions with the FDA, The FDA may initiate review of sections of a Fast Track drug’s NDA or BLA before the application is complete. This "rolling review' is available if the applicant provides, and the FDA approves, a schedule for the submission of the remaining information and the applicant pays applicable user fees. The FDA’s time period goal for reviewing an application, however, does not begin until the last section of the NDA/BLA is submitted. Additionally, the Fast Track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
Separately, under the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients beyond existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit,directors, taking into account the severity, rarity or prevalence of the conditiondirectors’ schedules and the availability or lacktiming requirements of alternative treatments.
In clinical trials,applicable law. During the COVID-19 pandemic we implemented a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, will allow the FDA to withdraw approval of the drug such that accelerated approval also referred to as U.S. "conditional" approval. Products granted accelerated approval also are subject to additional requirementsvirtual meeting format for the pre-dissemination review by the FDA of proposed promotional materials both during the NDA review process and for 120 days after marketing approval.
In addition to the above, the FDA may designate an investigational product as a Breakthrough Therapy or as a Regenerative Medicine Advanced Therapy ("RMAT"), depending on the type of investigational product and its ability to meet applicable eligibility criteria. Breakthrough Therapy designation is a process designed to expedite the development and review of drugs that are intended to treat a serious condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint(s). The RMAT designation requires similar eligibility criteria to be met, but it is available only to cell therapies, tissue therapies, and other products that meet the statutory definition of a “regenerative medicine therapy.” Specifically, a biological product is eligible for RMAT designation if: (a) the product candidate is a regenerative medicine therapy, which is defined in the FD&C Act as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, except for those regulated solely under the PHS Act (that is, excluding those biological products that are not also regulated as “drugs” under the FD&C Act); (b) the product candidate is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (c) preliminary clinical evidence indicates that the product candidate has the potential to address unmet medical needs for such disease or condition. Both Breakthrough Therapy and RMAT designations are intended to help accelerate product development by allowing more frequent interactions with the FDA and receiving intensive FDA guidance on efficient drug development.
Pediatric Information
Under the Pediatric Research Equity Act ("PREA"), NDAs or BLAs or supplements to NDAs or BLAs must contain data that are adequate to assess the safety and effectiveness of the drug or biologic for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. Sponsors must also submit pediatric trial plans prior to the assessment data, and those plans must contain an
outline of the proposed pediatric trial or trials the applicant plans to conduct, including trial objectives and design, any deferral or waiver requests and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time. The FDA may grant full or partial waivers or deferrals for submission of data. Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation, although the FDA has recently taken steps to limit what it considers abuse of this statutory exemption in PREA by announcing that it does not intend to grant any additional orphan drug designations for rare pediatric subpopulations of what is otherwise a common disease.
The Best Pharmaceuticals for Children Act ("BPCA") provides approved NDA and BLA holders a six-month extension of any exclusivity that attaches to the end of all existing marketing exclusivities and patents for the drug or biologic. Conditions for exclusivity include the FDA’s determination that information relating to the use of a new drug or biologic in the pediatric population may produce health benefits in that population, the FDA making a written request for pediatric studies, and the applicant agreeing to perform, and reporting on, the requested studies within the statutory timeframe. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA's request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.
Orphan Drugs
Under the Orphan Drug Act, the FDA may designate a candidate as an orphan drug if it is intended to treat a rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the U.S.) Orphan drug designation must be requested by an applicant before submitting an NDA or BLA for the relevant drug candidate. If the FDA grants orphan drug designation, the FDA will publicly disclose the generic identity of the drug candidate and its potential orphan use. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
If a product with orphan status receives the first FDA approval for the disease or condition for which it has such designation, the product generally will receive orphan drug exclusivity. Orphan drug exclusivity means that the FDA may not approve any other applications for the same product for the same indication for seven years, except in certain limited circumstances comprising methods by which a second sponsor can demonstrate clinical superiority of its drug in comparison to the first approved orphan drug. Regardless of the orphan drug designation, a competitor may receive FDA approval for a different product (i.e., a different therapeutic agent from the orphan drug) for the same indication for which the orphan product has exclusivity and may obtain approval for the same product (i.e., the same therapeutic agent as the orphan drug) but for a different indication. If a designated orphan drug ultimately receives marketing approval for an indication broader than what was described in its orphan drug designation request, it may not be entitled to exclusivity under the Orphan Drug Act. Among the other benefits of orphan drug designation, the sponsor receives a waiver of the NDA or BLA application user fee and is eligible for tax credits for certain research (although the amount of this potential tax credit was decreased from 50% to 25% of qualified clinical testing expenses with the 2017 overhaul of the U.S. Tax Code, effective in 2018).
Post-Approval Requirements
Drugs and biological products manufactured, marketed or distributed pursuant to FDA approval decisions are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion, and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to FDA review and approval before they can be implemented. There also are continuing, annual program fee requirements for any marketed, approved prescription products, as well as new application fees for supplemental applications.
In addition, drug manufacturers and other entities involved in the manufacture of approved drugs are required to register their facilities with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA for compliance with cGMP/cGTP requirements. Prescription drug distribution facilities are also subject to state licensure, including inspections, by the relevant local regulatory authority. Changes to the manufacturing process, specifications or container closure system for an approved drug or biologic are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP or cGTP and impose reporting and documentation requirements upon the sponsor and others involved in the product’s manufacturing process. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our productsshareholders, directors and management. All incumbent Board members attended Caladrius’ virtual annual meeting in accordance with cGMP regulations. These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance, the maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Accordingly, manufacturers must continue to expend time, money and effort in the area of production2021.
and quality control to maintain cGMP/cGTP compliance and ensure ongoing compliance with other statutory requirements the FD&C Act, such as the requirements for making manufacturing changes to an approved NDA or BLA.Delinquent Section 16(a) Reports
Even after a new drug or biologic approval is granted, the FDA may withdraw that approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. If a previously unknown problem, including adverse events of unanticipated severity or frequency, or with manufacturing processes, is discovered or the manufacturer fails to comply with regulatory requirements, the FDA may require revisions to the approved labeling to add new safety information; may impose additional post-market studies or clinical trials to assess new safety risks; or may impose distribution or other restrictions under a REMS program. Other potential consequences of regulatory non-compliance include, among other things:
•restrictions on the marketing or manufacturingSection 16(a) of the product, complete withdrawalExchange Act requires Caladrius’ directors, certain officers of Caladrius, and persons who beneficially own more than 10% of a registered class of Caladrius’ equity securities, to file initial reports of ownership and reports of changes in ownership with the SEC. These persons are required by the SEC to furnish Caladrius with copies of all Section 16(a) reports that they file.
Based solely on a review of Forms 3 and 4 and amendments thereto furnished to Caladrius during 2021, filed by our officers, directors, and any person whom we understand to own more than 10% of our common stock, all Section 16(a) filings were timely filed to our knowledge, with the exception of the product from the marketfiling on November 8, 2021 of a Form 3 filed by Todd Girolamo, which should have been filed by June 25, 2021. This Form 3 covered zero transactions.
Code of Ethics
We have adopted a code of ethics that applies to our directors, officers and employees, except to our Chief Executive Officer, principal financial officer, and any principal accounting officer, controller, or product recalls;persons performing similar functions (“Senior Financial Officers”), who are subject to a separate code of ethics. Both codes of ethics are available on our website, www.caladrius.com.
•fines, warning letters or holds on post-approval clinical trials;
•refusal of the FDA to approve pending NDAs/BLAs or supplements to approved NDAs/BLAs, or suspension or revocation of product license approvals;
•product seizure or detention, or refusal to permit the import or export of products;
•injunctions or the imposition of civil or criminal penalties;
•consent degrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; orITEM 11. EXECUTIVE COMPENSATION
•mandated modification of promotional materials and labeling and the issuance of corrective information.Summary Compensation Table
The FDA strictly regulates marketing, labeling, advertisingfollowing table sets forth the total compensation paid or accrued during the last two fiscal years with respect to (i) our President and promotionChief Executive Officer, (ii) our two other most highly compensated executive officers, who each earned more than $100,000 during the fiscal year ended December 31, 2021, and were serving as executive officers as of prescription drugsuch date.
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Name and
Principal Position | Year | Salary | | Bonus | | Stock
Awards
(1) | | Option
Awards
(1) | | All Other
Compensation | | Total
Compensation |
David J. Mazzo,
President and Chief Executive Officer | 2021 | $ | 631,495 | | | $ | 295,942 | | | $ | 313,230 | | (2) | $ | 64,298 | | | $ | 30,250 | | (3) | $ | 1,335,216 | |
| 2020 | $ | 613,102 | | | $ | 329,576 | | | $ | 235,783 | | (4) | $ | 149,190 | | | $ | 30,250 | | (5) | $ | 1,357,901 | |
Kristen K. Buck, M.D., Executive Vice President R&D and Chief Medical Officer (10) | 2021 | $ | 183,333 | | | $ | 275,000 | | | $ | 400,000 | | | $ | 1,000,000 | | | $ | — | | | $ | 1,858,333 | |
| 2020 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Todd Girolamo, Former Chief Legal Officer and Corporate Secretary (11) | 2021 | $ | 359,801 | | | $ | 130,427 | | | $ | 84,270 | | (6) | $ | 19,289 | | | $ | 8,250 | | (7) | $ | 602,037 | |
| 2020 | $ | 333,373 | | | $ | 114,771 | | | $ | 103,683 | | (8) | $ | 95,120 | | | $ | 8,250 | | (9) | $ | 655,197 | |
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(1)Amounts shown under “Stock Awards” and biological products that are placed on“Option Awards” represent the market. Drugs may be promoted only for the approved indications andaggregate grant date fair value computed in accordance with FASB ASC Topic 718, in accordance with SEC rules. See Note 10 to the provisionsNotes to the Consolidated Financial Statements in our 2021 Form 10-K, for a discussion of assumptions made in such valuations. All stock awards, option awards and other shares discussed in this table were issued under the 2018 Plan, with a per share price generally equal to the fair market value of a share of our common stock on the date of grant.
(2)Includes the grant of performance stock units valued at $124,020, which is also the maximum potential value at the time of the approved label.grant. The FDAperformance criteria was met in 2021 for half of the performance stock units, and other agencies actively enforceas a result, half of the lawsperformance stock units valued at $62,010 were canceled in 2021.
(3)Consisted of (i) a car allowance of $12,000, (ii) $8,250 of Company 401(k) match, and regulations prohibiting(iii) a life and disability insurance allowance of $10,000.
(4)Includes the promotiongrant of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant penalties. In addition, the distribution of prescription pharmaceutical products is subject to a variety of federal and state laws, the most recent ofperformance stock units valued at $84,903, which is still inalso the process of being phased into the U.S. supply chain and regulatory framework.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samplesmaximum potential value at the federal level and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. Most recently, the Drug Supply Chain Security Act, or DSCSA, was enacted with the aim of building an electronic system to identify and trace certain prescription drugs distributed in the United States, including most biological products. The DSCSA mandates phased-in and resource-intensive obligations for pharmaceutical manufacturers, wholesale distributors, and dispensers over a 10‑year period that is expected to culminate in November 2023. From time to time, new legislation and regulations may be implemented that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. It is impossible to predict whether further legislative or regulatory changes will be enacted, or FDA regulations, guidance or interpretations changed or what the impact of such changes, if any, may be.
Other Health Care Regulations
If our product candidates are approved in the United States, we will have to comply with various U.S. federal and state laws, rules and regulations pertaining to health care fraud and abuse, including anti-kickback laws and physician self-referral laws, rules and regulations. Violations of the fraudgrant. The performance criteria was not met in 2020, and abuse laws are punishable by criminal and civil sanctions, including,as a result, the performance stock units were canceled in some instances, exclusion from participation in federal and state health care programs, including Medicare and Medicaid. Other federal and state laws and regulations that could directly or indirectly affect our ability to operate the business and/or financial performance include:
–state and local licensure, applicable to the processing and storage of human cells and tissues;2020.
–(5)lawsConsisted of (i) a car allowance of $12,000, (ii) $8,250 of Company 401(k) match, and regulations administered by the United States Department(iii) a life and disability insurance allowance of Health and Human Services, including the Office for Human Research Protections and the Office of Inspector General;$10,000.
–(6)state lawsIncludes the grant of performance stock units valued at $28,620, which is also the maximum potential value at the time of the grant. The performance criteria was met in 2021 for half of the performance stock units, and regulations governing human subject research;as a result, half of the performance stock units valued at $14,310 were canceled in 2021.
–(7)federal and state coverage and reimbursement laws and regulations, including laws and regulations administered by the Centers for Medicare & Medicaid Services and state Medicaid agencies;
–the federal Medicare and Medicaid Anti-Kickback Law and similar state laws and regulations;Consisted of $8,250 of Company 401(k) match.
–(8)Includes the federal Health Insurance Portabilitygrant of performance stock units valued at $41,363, which is also the maximum potential value at the time of the grant. The performance criteria was not met in 2020, and Accountability Act of 1996 ("HIPAA"), as amended bya result, the Health Information Technology for Economic and Clinical Health Act and similar state laws and regulations;performance stock units were canceled in 2020.
–(9)the federal physician self-referral prohibition commonly known as the Stark Law, and state equivalentsConsisted of the Stark Law;$8,250 of Company 401(k) match.
–(10)Dr. Buck joined the federal transparency requirements under the Physician Payments Sunshine Act that require manufacturers of FDA-approved drugs, devices, biologicsCompany in September 2021 and medical supplies covered by Medicare or Medicaid to report, onher salary represents an annual basis, to the Departmentamount prorated for time in position in 2021. The bonus was part of Health and Human Services information related to payments and other transfers of value physicians, teaching hospitals, and certain advanced non-physician health care practitioners and physician ownership and investment interests;her recruitment package.
–Occupational Safety and Health Administration requirements;
–state and local laws and regulations dealing with the handling and disposal of medical waste; and
–the Intermediate Sanctions rules of the IRS providing for potential financial sanctions with respect to “Excess Benefit Transactions” with tax-exempt organizations.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines, or the relevant compliance guidance promulgated by the federal government, in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures to the extent that those laws impose requirements that are more stringent than the Physician Payments Sunshine Act. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Japan's Pharmaceutical and Medical Device Authority Regulation of Regenerative Medicine
Prior to 2014, there was no specific regulatory oversight of regenerative medicine products in Japan. However, in November 2013, the Japanese authorities revised the Pharmaceutical Affairs Law and renamed it the Pharmaceuticals, Medical Devices, and Other Therapeutic Products Act (the "PMD Act"). The new legislation became effective on November 25, 2014 and provides for a timely introduction of innovative regenerative medicine products. The new legislation formalizes a legal basis for development of regenerative medicine therapies. The new legislation defines regenerative medicine products as processed human cells that are intended to be used for either (1) the reconstructive repair, or formation of structures or functions of the human body; (2) the treatment or prevention of human diseases; or (3) gene therapy.
The legislation allows the PMDA/Ministry of Health, Labour and Welfare ("MHLW") to award conditional approval to a regenerative medicine therapy if there is evidence of adequate safety and results which predict likely efficacy. The evidence for efficacy may be based on surrogate endpoints and may come from an exploratory study. This conditional approval is time-limited, and there must be an agreement with PMDA/MHLW as to follow-up collection of information which confirms efficacy and safety, similar to a post-marketing commitment in the United States.
Under the PMD Act, products under consideration may also be given a SAKIGAKE designation (similar to an FDA "Breakthrough" or "RMAT" designation in certain respects) with a priority 6 months review period. Additionally, there is a commitment that the PMDA will facilitate research and development by giving scientific and regulatory advice to sponsors from the early stage of development.
According to the new legislation, the sponsor prepares a marketing authorization application which is submitted for review to the PMDA. The PMDA reviews the application and prepares a review report and recommendation which is submitted to the MHLW. The MHLW reviews the recommendation and makes a decision regarding approval of the product. This procedure is followed for both a conditional approval and subsequently for a full approval after the post-marketing commitments have been fulfilled.
SUMMARY OF RISK FACTORS
Our business, financial condition, operating results and cash flows are subject to numerous risks and uncertainties that are summarized below. The below summary of risk factors should be read together with the more detailed discussion of risks set forth following this section under the heading “Risk Factors,” as well as elsewhere in this Annual Report on Form 10-K.
•(11)We have incurred substantial losses and negative cash flowMr. Girolamo resigned from operationsthe Company in the past and expect to continue to incur losses and negative cash flow for the foreseeable future. Additionally, we anticipate that we will need substantialMarch 2022.
CALADRIUS EMPLOYMENT AGREEMENTS AND EQUITY GRANTS
Employment Agreements and Other Arrangements with Executive Officers
This section contains a description of the employment agreements and certain other arrangements that Caladrius has or had during the years ended December 31, 2019 through March 2022, with the Named Executive Officers listed in the Summary Compensation Table. All descriptions are qualified in their entirety by reference to such agreements. The descriptions to follow provide further information about the compensation that is shown in the Summary Compensation Table and the Grants of Plan Based Awards Table for the respective officers. They also give you information about payments that could be received by these officers under certain circumstances at such time as their employment with Caladrius ends, for example, certain severance arrangements.
David J. Mazzo, Ph.D. - President and Chief Executive Officer
In connection with his appointment as the Company's Chief Executive Officer, Dr. Mazzo and the Company entered into an Amended and Restated Employment Agreement dated and effective as of March 19, 2021, (the “Mazzo Agreement”). The Mazzo Agreement amends and restates the initial employment agreement entered into between the Company and Dr. Mazzo on January 5, 2015, as amended on January 16, 2015, July 25, 2016, September 18, 2017 and December 6, 2018, setting forth the terms and conditions of Dr. Mazzo’s employment with the Company. Under the terms of the Mazzo Agreement, Dr. Mazzo received an annual base salary of $633,032 for 2021 (the “Mazzo Base Salary”) which subsequently adjustable based on the discretion of the Compensation Committee of the Board of Directors. The Mazzo Agreement has an initial term expiring on December 31, 2022, which shall be automatically extended for additional financingone-year periods, unless Dr. Mazzo is provided written notice by the Company no later than ninety (90) days prior to continue our operations; if we are unablethe expiration of the initial term. The Mazzo Agreement also provides Dr. Mazzo with the option to raise additional capital, we may be forced to delay, reduce or eliminate oneterminate his employment with the Company if: (i) the Company relocates Dr. Mazzo’s principal place of employment, without Dr. Mazzo’s consent, in a manner than lengthens his one-way commute distance by fifty (50) miles or more, and/or (ii) if Dr. Mazzo provides the Company with thirty (30) days’ prior written notice.
The Mazzo Agreement provides Dr. Mazzo with certain benefits, including but not limited to: (i) twenty-nine (29) days paid time off, (ii) severance payments and COBRA medical and dental insurance for fifteen (15) months following a termination of our product development programs,his employment with the Company, and our business will be harmed.
•If our status as a smaller reporting company changes, Section 404(b)(iii) bonus payments equal to 125% of his target bonus (which is 55% of the Sarbanes-Oxley ActMazzo Base Salary), without proration, upon termination of 2002 may requirehis employment with the Company. The Mazzo Agreement is also governed by New Jersey law, to remain consistent with the Company’s principal place of business.
Effective September 18, 2017, the Board approved an independent registered public accounting firmamendment to reportthe Mazzo Agreement, which provides that upon the occurrence of the events in connection with a Change of Control (as described in the amendment), Dr. Mazzo shall instead receive (i) payment of his salary as then in effect through the eighteen-month anniversary of the Termination Date and (ii) a lump sum payment equal to 1.5 times his target bonus as then in effect. The Amendment also provides for the continuation of Dr. Mazzo’s benefits for a period of eighteen months from the Termination Date, instead of the fifteen month period previously provided for in the Mazzo Agreement.
Kristen K. Buck, M.D. - Executive Vice President R&D and Chief Medical Officer
In connection with her appointment as Executive Vice President, R&D and Chief Medical Officer, Dr. Buck and the Company entered into an Employment Agreement dated and effective as of July 26, 2021 (the “Buck Agreement”), setting forth the terms and conditions of Dr. Buck’s employment with the Company. Under the terms of the Buck Agreement, Dr. Buck received an annual base salary of $550,000 for 2021 (“Base Salary”) which is subsequently adjustable based on the effectivenessdiscretion of our internal control over financial reporting. Any delaysthe Compensation Committee of the Board of Directors. The Buck Agreement has an initial term expiring on September 1, 2024, which shall be automatically extended for additional one-year periods unless Dr. Buck is provided written notice by the Company no later than ninety (90) days prior to the expiration of the initial term. In connection with her hire, Dr. Buck was granted options to purchase $1,000,000 of common stock and restricted stock awards with a value of $400,000, both of which vest in three equal annual installments starting on September 1, 2021 in addition to annual bonus set at 50% of her Base Salary.
The Buck Agreement provides Dr. Buck with certain benefits, including but not limited to: (i) twenty-nine (29) days paid time off, (ii) severance payments and COBRA medical and dental insurance for twelve (12) months following a termination of her employment with the Company without Cause or difficulty in satisfying these requirements could adversely affect our future results of operations and our stock price.
•Our future success may be dependent on the timely and successful continued development and commercialization of HONEDRA®, our experimental product candidate for CLI and Buerger's Disease that is in clinical development in Japan, CLBS16 for CMD, CLBS201 for CKD and OLOGOTM for NORDA, and if we encounter delays or further difficultiesGood Reason (each as defined in the developmentBuck Agreement), and (iii) bonus payments equal to 100% of these product candidates, our business prospects wouldher target bonus (which is 50% of his Base Salary) prorated for the number of days employed in the calendar year upon termination of her employment with the Company and provide that the time period for the exercise of option equity awards shall be significantly harmed.
•Our business has been and may continue to be adversely affected by the COVID-19 pandemic.
•We may experience delays in completing our clinical trials and in enrolling patients in our clinical trials, which could delay or prevent the receipt of necessary regulatory approvals.
•We may be unable to manage multiple late stage clinical trialsextended for a variety of product candidates simultaneously.
•The development of our cell therapy product candidates is subject to uncertainty because autologous cell therapy is inherently variable.
•Any disruption to our accessperiod equal to the reagents we are usingshorter of one year following the termination date or the remaining term of the award.. The Buck Agreement is also governed by New Jersey law, to remain consistent with the Company’s principal place of business.
The Buck Agreement provides that upon the occurrence of the events in connection with a Change of Control (as described in the clinical developmentagreement), Dr. Buck shall instead receive (i) payment of our cell therapy product candidates could adversely affect our ability to perform clinical trials and seek future regulatory submissions.
•The initiation of pivotal Phase 3 clinical trials for cell therapy product candidates requiresher salary as then in effect through the validation and establishment of manufacturing controls that may delay product development timelines.
•If serious or unacceptable side effects are identified during the development of any of our product candidate, we may need to abandon or limit our development of that product candidate.
•A Fast Track designation by the FDA and other similar regulatory designations may not lead to a faster development, regulatory review or approval process.
•Our clinical trials may fail to demonstrate adequately the safety and efficacy of our product candidates, which would prevent or delay regulatory approval and commercialization.
•We presently rely on contract manufacturing organizations to produce our product candidates at development and commercial scale quantities and have not yet qualified an alternate manufacturing supply, which could negatively impact our ability to meet any future demand for the products.
•We may form or seek collaborations or strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.
•Our cell therapy business is based on novel technologies that are inherently expensive, risky and may not be understood by or accepted in the marketplace, which could adversely affect our future value.
•If competitors develop and market products that are more effective, safer, or less expensive than our product candidates or offer other advantages, our commercial prospects will be limited.
•We may be subject to significant product liability claims and litigation, including potential exposure from the use of our product candidates in human subjects, and our insurance may be inadequate to cover claims that may arise.
•We may be unable to retain key officers or employees or hire new key officers or employees needed to implement our business strategy and develop our products and businesses.
•Our internal computer systems, or those used by our clinical investigators, clinical research organizations or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of development programs for our product candidates. Additionally, the increasing use of social media platforms presents new risks and challenges.
•Contract development and manufacturing organizations have a finite cell manufacturing capacity, which could inhibit the long-term growth prospects of our business and we will need to improve manufacturing efficiency at our contract manufacturers in order to establish cost of goods levels that will permit approved products to succeed commercially.fifteenth-month
anniversary of the Termination Date and (ii) a lump sum payment equal to 125% of her target bonus as then in effect. The Amendment also provides for the continuation of Dr. Buck's benefits for a period of fifteen months from the Termination Date, the vesting of all outstanding unvested time-based equity awards and provide that the time period for the exercise of option equity awards shall be extended for a period equal to the shorter of one year following the termination date or the remaining term of the award.
Todd C. Girolamo, J.D., M.B.A. - Former Chief Legal Officer and Corporate Secretary
Mr. Girolamo and the Company entered into a Change of Control Agreement (the “Girolamo Agreement”) dated and effective as of July 25, 2016. The Girolamo Agreement provides that upon the occurrence of the events in connection with a Change of Control (as described in the agreement), Mr. Girolamo shall instead receive (i) payment of his salary as then in effect through the twelve-month anniversary of the Termination Date and (ii) a lump sum payment equal to 100% of his target bonus as then in effect, and (iii) the continuation of his benefits for a period of twelve months from the Termination Date.
Indemnification Agreements
We enter into indemnification agreements with each of our executive officers and each of our directors from time to time pursuant to which we have agreed to indemnify such party to the full extent permitted by law, subject to certain exceptions, if such party becomes subject to an action because such party is our director, officer, employee, agent or fiduciary.
Acceleration of Vesting Under Equity Compensation Plans
Generally, in the event of a Change in Control of Caladrius (as defined in the 2009 Plan, the 2015 Plan and the 2018 Plan) and either (i) the failure of Caladrius' successor to assume a participant's awards or (ii) such assumption of awards is followed by the participant's termination without cause on or within the one-year period following the Change in Control, (a) all outstanding options and stock appreciation rights of each participant granted prior to the change in control shall be fully vested and immediately exercisable in their entirety, and (b) all unvested stock awards, restricted stock units, restricted stock, performance-based awards, and other awards shall become fully vested, including without limitation, the following: (i) the restrictions to which any shares of restricted stock granted prior to the change in control are subject shall lapse as if the applicable restriction period had ended upon such change in control, and (ii) the conditions required for vesting of any unvested performance-based awards shall be deemed to be satisfied upon such change in control.
Termination or Change in Control Payments
The following table sets forth aggregate estimated payment obligations to each of the Named Executive Officers assuming a termination occurred on December 31, 2021 under the circumstances specified below:
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| | | Before Change in Control Termination w/o Cause or for Good Reason | | After Change in Control Termination w/o Cause or for Good Reason | | Voluntary Termination |
| Name | Benefit | | ($) | | ($) | | ($) |
| David J. Mazzo | Severance | | 1,226,500 | | | 1,471,799 | | | — | |
| Health Benefits | | 43,473 | | | 52,168 | | | — | |
| Equity Award Acceleration | | — | | | 104,160 | | | — | |
| Total | | 1,269,973 | | | 1,628,127 | | | — | |
| Kristen Buck | Severance | | 825,000 | | | 1,031,250 | | | — | |
| Health Benefits | | 17,652 | | | 22,064 | | | — | |
| Equity Award Acceleration | | — | | | 175,875 | | | — | |
| Total | | 842,652 | | | 1,229,189 | | | — | |
| Todd Girolamo | Severance | | — | | | 514,360 | | | — | |
| Health Benefits | | — | | | 44,595 | | | — | |
| Equity Award Acceleration | | — | | | 33,390 | | | — | |
| Total | | — | | | 592,345 | | | — | |
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information on option awards outstanding at December 31, 2021 for Caladrius' Named Executive Officers.
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| Name | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#) Unexercisable | | Option
Exercise
Price** | | Option
Expiration
Date | | Number of shares or units of stock that have not vested (#) | | Market value of shares or units of stock that have not vested $(***) |
| David J. Mazzo | 40,000 | | (1) | — | | | $35.00 | | 1/5/2025 | | | | |
| 35,000 | | (2) | — | | | $6.30 | | 1/25/2026 | | | | |
| 50,919 | | (3) | — | | | $4.77 | | 9/29/2026 | | | | |
| 50,000 | | (4) | — | | | $3.54 | | 1/9/2027 | | | | |
| 50,000 | | (5) | — | | | $3.79 | | 1/8/2028 | | | | |
| 53,250 | | (6) | 17,750 | | (6) | $4.95 | | 1/14/2029 | | | | |
| 34,500 | | (7) | 34,500 | | (7) | $3.28 | | 1/13/2030 | | | | |
| 15,000 | | (8) | 45,000 | | (8) | $1.59 | | 1/11/2031 | | | | |
| | | | | | | | | | |
| | | | | | | | 124,000 | | $104,160 |
| Kristen Buck | 375,511 | | (9) | 762,404 | | (9) | $1.28 | | 9/1/2031 | | | | |
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| | | | | | | | 209,375 | | $175,875 |
| Todd Girolamo | 750 | | (10) | — | | | $52.00 | | 1/4/2022 | | | | |
| 1,251 | | (11) | — | | | $62.00 | | 1/2/2023 | | | | |
| 2,500 | | (12) | — | | | $77.70 | | 1/2/2024 | | | | |
| 2,500 | | (13) | — | | | $62.10 | | 8/1/2024 | | | | |
| 2,752 | | (14) | — | | | $38.70 | | 2/17/2025 | | | | |
| 2,000 | | (15) | — | | | $22.60 | | 6/2/2025 | | | | |
| 5,000 | | (16) | — | | | $6.30 | | 1/25/2026 | | | | |
| 12,103 | | (17) | — | | | $4.77 | | 9/29/2026 | | | | |
| 15,000 | | (18) | — | | | $3.54 | | 1/9/2027 | | | | |
| 20,000 | | (19) | — | | | $3.79 | | 1/8/2028 | | | | |
| 18,000 | | (20) | 6,000 | | (20) | $4.95 | | 1/14/2029 | | | | |
| 14,500 | | (21) | 14,500 | | (21) | $3.28 | | 1/13/2030 | | | | |
| 4,500 | | (22) | 13,500 | | (22) | $1.59 | | 1/11/2031 | | | | |
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| | | | | | | | | 39,750 | | $33,390 |
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** All option awards were made under and are governed by the terms of the Company’s 2003 Equity Participation Plan, the 2009 Plan, the 2015 Plan or the 2018 Plan.
*** Calculated by multiplying the closing market price of Caladrius’ common stock on December 31, 2021 by the number of shares of restricted stock held by the applicable Named Executive Officer.
(1)Consists of options granted to Dr. Mazzo pursuant to the terms of his employment agreement dated as of January 5, 2015 and amended on January 16, 2015.
(2)Consists of options granted to Dr. Mazzo by the Compensation Committee on January 25, 2016.
(3)Consists of options granted to Dr. Mazzo by the Compensation Committee on September 29, 2016.
(4)Consists of options granted to Dr. Mazzo by the Compensation Committee on January 9, 2017.
(5)Consists of options granted to Dr. Mazzo by the Compensation Committee on January 8, 2018.
(6)Consists of options granted to Dr. Mazzo by the Compensation Committee on January 14, 2019.
(7)Consists of options granted to Dr. Mazzo by the Compensation Committee on January 13, 2020.
(8)Consists of options granted to Dr. Mazzo by the Compensation Committee on January 11, 2021.
(9)Consists of options granted to Dr. Buck by the Compensation Committee on July 27, 2021.
(10)Consists of options granted to Mr. Girolamo by the Compensation Committee on January 4, 2012.
(11)Consists of options granted to Mr. Girolamo by the Compensation Committee on January 2, 2013.
(12)Consists of options granted to Mr. Girolamo by the Compensation Committee on January 2, 2014.
(13)Consists of options granted to Mr. Girolamo effective on August 1, 2014, all of which are vested.
(14)Consists of options granted to Mr. Girolamo by the Compensation Committee on February 17, 2015.
(15)Consists of options granted to Mr. Girolamo by the Compensation Committee on June 2, 2015.
(16)Consists of options granted to Mr. Girolamo by the Compensation Committee on January 25, 2016.
(17)Consists of options granted to Mr. Girolamo by the Compensation Committee on September 29, 2016.
(18)Consists of options granted to Mr. Girolamo by the Compensation Committee on January 9, 2017.
(19)Consists of options granted to Mr. Girolamo by the Compensation Committee on January 8, 2018.
(20)Consists of options granted to Mr. Girolamo by the Compensation Committee on January 14, 2019.
(21)Consists of options granted to Mr. Girolamo by the Compensation Committee on January 13, 2020.
(22)Consists of options granted to Mr. Girolamo by the Compensation Committee on January 11, 2021.
Pension Benefits
We do not have any qualified or non-qualified defined benefit plans.
Non-qualified Deferred Compensation
We do not have any non-qualified defined contribution plans or other deferred compensation plans.
CALADRIUS DIRECTOR COMPENSATION
General Information
Directors who are employees of Caladrius or its subsidiaries do not receive additional cash compensation for serving as directors. Caladrius' non-employee directors are reimbursed for out-of-pocket travel expenses incurred in their capacity as Caladrius directors. Pursuant to the 2018 Plan, all directors (including independent directors) are eligible to receive equity awards.
The following table sets forth information on all compensation to Caladrius' directors (other than as reflected in the Summary Compensation Table) for the year ended December 31, 2021.
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| | Fees Earned | | | | | | |
| | | Or | | Stock | | Option | | Total |
| Name | | Paid in Cash | | Awards(1) | | Awards(1) | | Compensation |
Gregory B. Brown, M.D. (2) | | $ | 98,500 | | | $ | 59,999 | | | $ | — | | | $158,499 |
Michael H. Davidson, M.D. (3) | | $ | 53,500 | | | $ | 59,999 | | | $ | — | | | $113,499 |
Cynthia L. Flowers (4) | | $ | 52,500 | | | $ | 59,999 | | | $ | — | | | $112,499 |
Steven M. Klosk (5) | | $ | 64,500 | | | $ | 59,999 | | | $ | — | | | $124,499 |
Steven S. Myers (6) | | $ | 63,000 | | | $ | 59,999 | | | $ | — | | | $122,999 |
Peter G. Traber, M.D.(7) | | $ | 49,000 | | | $ | 59,999 | | | $ | — | | | $108,999 |
Anne Whitaker(8) | | $ | 50,500 | | | $ | 59,999 | | | $ | — | | | $110,499 |
| Total | | $ | 431,500 | | | $ | 419,993 | | | $ | — | | | $851,493 |
(1)Amounts shown under “Stock Awards”, “Restricted Stock Unit Awards” and “Option Awards” represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, in accordance with SEC rules. See Note 10 to the Notes to the Consolidated Financial Statements in our 2021 Form 10-K for a discussion of assumptions made in such valuations. All stock awards, option awards and other shares discussed in this table were issued under Caladrius' 2018 Plan, with a per share price generally equal to the fair market value of a share of our common stock on the date of grant.
(2)On January 11, 2021, Dr. Brown was granted 37,735 shares of restricted stock unit awards, none of which are vested.
(3)On January 11, 2021, Dr. Davidson was granted 37,735 shares of restricted stock unit awards, none of which are vested.
(4)On January 11, 2021, Ms. Flowers was granted 37,735 shares of restricted stock unit awards, none of which are vested.
(5)On January 11, 2021, Mr. Klosk was granted 37,735 shares of restricted stock unit awards, none of which are vested.
(6)On January 11, 2021, Mr. Myers was granted 37,735 shares of restricted stock unit awards, none of which are vested.
(7)On January 11, 2021, Dr. Traber was granted 37,735 shares of restricted stock unit awards, none of which are vested.
(8)On January 11, 2021, Ms. Whitaker was granted 37,735 shares of restricted stock unit awards, none of which are vested.
The Company’s Board of Directors’ Compensation Plan (the “Directors’ Compensation Plan”), which is only applicable to our non-employee directors, provides the following:
•an annual cash retainer for each non-employee director of $40,000;
•an additional annual cash compensation retainer of $30,000 for the non-executive chair;
•an annual cash retainer for serving as chairperson of a committee as follows: Audit ($18,000); Compensation ($12,000); Nominating and Governance ($9,000); Science and Technology ($9,000);
•an annual cash retainer for serving as a member of a committee as follows: Audit ($8,000); Compensation ($6,000); Nominating and Governance ($4,500); and Science and Technology ($4,500);
•The developmentnew non-employee directors receive an initial grant of restricted stock units with a value of 2x the annual grant with the number of shares to be issued on the grant date calculated based on the grant date fair value with one-third vesting annually on each of the first, second and commercializationthird anniversaries of our product candidates are subject to extensive regulation by the FDAgrant date; and other regulatory agencies in the United States and abroad, and the failure to receive regulatory approvals for our cell therapy product candidates would likely have a material and adverse effect on our business and prospects.
•We may be subjectan annual equity grant on the second Monday in January a grant of restricted stock units with a value of $60,000, vesting at one year from the grant date.
The effective date for any annual equity grant to numerousemployees and varying privacy and security laws, and our failure to comply could resultnon-employee directors is the second Monday in penalties and reputational damage.
•We will continue to be subject to extensive regulation following any product approvals, and if we fail to comply with these regulations, we may suffer a significant setback in our business.
•Health care companies have been the subject of federal and state investigations, and we could become subject to investigations in the future.
•It is uncertain to what extent government, private health insurers and third-party payors will approve coverage or provide reimbursement for the therapies and products to which our research and development relate. Availability for such reimbursement may be further limited by an increasing uninsured population and reductions in Medicare and Medicaid funding in the United States.
•Competitor companies or hospitals may be able to take advantage of EU rules permitting sales of unlicensed medicines for individual patients to sell competing products without a marketing authorization.
•We may be unable to obtain or maintain patent protection for our products and product candidates, which could have a material adverse effect on our business.
•Litigation and third-party claims relating to intellectual property is expensive, time-consuming and uncertain, and we may be unsuccessful in our efforts to protect against infringement by third parties or defend ourselves against claims of infringement.
•In certain countries, patent holders may be required to grant compulsory licenses, which would likely have a significant and detrimental effect on any future revenues in such country.
•Our stock price has been, and will likely continue to be, highly volatile.
•In addition to potential dilution associated with future fundraising transactions, we currently have significant numbers of securities outstanding that are exercisable for our common stock, which could result in significant additional dilution and downward pressure on our stock price.
•Provisions in our amended and restated certificate of incorporation and by-laws and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our common stock and could entrench management.
•Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
•We may fail to complyJanuary, with the continued listing requirementsexercise price of options granted set at the Nasdaq Capital Market, such that our common stock may be delisted and theclosing price of our common stock on the date of grant.
INCENTIVE COMPENSATION RECOUPMENT POLICY
On December 5, 2017, the Company adopted an Incentive Compensation Recoupment Policy that applies to an employee of the Company who is serving as an “officer” within the meaning of Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended.
The Compensation Committee of the Board may seek Recoupment of any Recoverable Payment, when in its judgment, after reviewing relevant facts and our abilitycircumstances, it determines that: (a) an Executive (i) engaged in serious misconduct, or (ii) failed to accesssupervise a subordinate employee who engaged in serious misconduct which the capital markets couldExecutive knew, or was reckless in not knowing, was occurring, and (b) such misconduct resulted in a material violation of law or a written Company policy that caused significant financial or reputational harm to the Company. As used in this Policy, “serious misconduct” may be negatively impacted.only found to have occurred where an Executive or a supervised employee acted knowingly, intentionally, or recklessly in violating a law or written Company policy. For the avoidance of doubt, an Executive’s business judgment made in good faith and in the reasonable belief that such judgments and related actions were in or not opposed to the best interests of the Company shall not subject the Executive’s Incentive Compensation to Recoupment.
EMPLOYEES"Incentive Compensation" means (i) any equity or equity-based award granted on or after the Effective Date, and (ii) any cash-based performance or incentive award (i.e., bonus or cash incentive plan payment, including any amounts deferred with respect thereto) made to an Executive with respect to the Company’s 2019 fiscal year or any subsequent fiscal year.
As of December 31, 2020, we had 24 full-time employees. Our senior managementThe determination by the Committee whether and professional employees have had prior experience in pharmaceutical or biotechnology companies. None of our employees are covered by collective bargaining agreements. We believe that our relations with our employees are good.
ITEM 1A. RISK FACTORS.
Our business, financial condition, operating results and cash flows canthe extent to which to seek Recoupment may be affectedinfluenced by a numbervariety of factors, including, but not limited to, those set forth below, any one(i) the elements of which could cause our actual resultsthe compensation received by the Executive, (ii) retention, promotion, or succession planning considerations, (iii) pay equity factors, (iv) whether the underlying conduct was an isolated occurrence, (v) feasibility and cost of implementation, (vi) legal and compliance factors, (vii) whether other disciplinary actions have been taken against the Executive, and (viii) the objective of administering the Policy in a way that does not discourage settlement of disputes when settlements are in the best long-term interests of the Company and its stockholders.
Based on the facts and circumstances, the Committee may decide on the appropriate Recoupment method, including whether to vary materially from recent results or from our anticipated future results. The risks described below are not the only ones we face, but those we currently consider to be material. There may be other risks which we now consider immaterial, or which are unknown or unpredictable, with respect to our business, our competition, the regulatory environmentseek Recoupment of Recoverable Payments already paid or otherwise seek Recoupment (totally or partially) of Recoverable Payments that could have not vested or have not been paid. However, the Committee may not seek Recoupment of any Recoverable Payments (a) following a material adverse effect on our business, financial condition and results of operations.
RISKS RELATED TO OUR FINANCIAL CONDITION AND CAPITAL REQUIREMENTS
We have incurred substantial losses and negative cash flow from operationschange in control (as defined in the pastExecutive’s employment agreement) or (b) that were awarded more than three years prior to the first event giving rise to the Recoupment. This Policy shall operate prospectively from the Effective Date and expectshall be construed so as not to continue to incur losses and negative cash flow for the foreseeable future.
We have a limited operating history, limited capital, and limited sources of revenue. Since our inception in 1980 through December 31, 2020, we have incurred aggregate net losses of approximately $425.6 million. Our net losses from continuing operations attributable to common stockholders for the years ended December 31, 2020 and December 31, 2019 were approximately $8.2 million and $19.4 million, respectively. As of December 31, 2020, our cash and cash equivalents and marketable securities were $34.6 million. Our current business has not generated revenues in the past and for the foreseeable future we do not expect it to generate revenue to be sufficient to cover costs attributable to that business or to our operations as a whole, including our development activities associated with our product candidates. Ultimately, we may never generate sufficient revenue from our business to reach profitability, generate positive cash flow or sustain, on an ongoing basis, our current or projected levels of product development and other operations.
We anticipate that we will need substantial additional financing to continue our operations; if we are unable to raise additional capital, we may be forced to delay, reduce or eliminate one or more of our product development programs, and our business will be harmed.
Our current operating plan will require significant levels of additional capital to fund the continued development of our cell therapy product candidates and our clinical development activities.
Our clinical activities are expected to continue to grow as our programs are advanced and they will require significant investment over a period of several years before they could potentially be approved by the FDA and commercialized by us or a partner, if ever. Even if data from our current clinical trials for our product candidates were deemed positive, we may be required to conduct additional clinical trialsviolate any legally binding commitment of the product candidates, including largerCompany arising prior to the Effective Date. Recoupment determinations pursuant to this Policy shall only be made to the extent permitted by law, and more expensive pivotal Phase 3 trials,this Policy shall be interpreted so as not to pursue commercialization of the candidates. To do so, we will need to raise additional capital, enter into collaboration agreements with third partiesviolate any law or undertake any combination thereof. If we are unsuccessful in our efforts to raise capital or find collaborative partners, we will likely need to otherwise delay or abandon the trials.
The amount and timing of our future capital requirements also will likely depend on many other factors, including:regulation.
•the scope, progress, results, costs, timing and outcomes of our cell therapy research and development programs and product candidates;
•our ability to enter into any collaboration agreements with third parties for our product candidates and the timing and terms of any such agreements;
•the costs associated with the consummation of one or more strategic transactions;
•
the timing of and the costs involved in obtaining regulatory approvals for our product candidates, a process which could be particularly lengthy, or complex given the FDA's limited experience with marketing approval for cell therapy products;
•the costs of maintaining, expanding and protecting our intellectual property portfolio, including potential litigation costs and liabilities relating thereto;
•the cost of expansion of our development operations and personnel; and
•the availability of, or our access to, state or federal government awards.
To both fund our clinical trials and support our future operations, we would likely seek to raise capital through a variety of different public and/or private financings vehicles. This could include, but not be limited to, equity sales pursuant to our purchase agreement with Lincoln Park Capital Fund, L.L.C., potential issuances of other debt or equity securities in public or private financings and/or sale or licensing of assets. If we raise capital through the sale of equity, or securities convertible into
equity, it will result in dilution to our then-existing stockholders. Servicing the interest and principal repayment obligations under debt we incur, or whether any such debt is called, would divert funds that might otherwise be available to support research and development, clinical or commercialization activities. In addition, debt financing involves covenants that restrict our ability to operate our business. In certain cases, we also may seek funding through collaborative arrangements that would likely require us to relinquish certain rights to our technology or product candidates and diminish our share in the future revenues associated with the partnered product.
Ultimately, we may be unable to raise capital or enter into collaborative relationships on terms that are acceptable to us, if at all. Our inability to obtain necessary capital or financing to fund our future operating needs could adversely affect our business, results of operations and financial condition.
We have never generated any revenue from product sales and our ability to generate revenue from product sales and become profitable depends significantly on our success in a number of factors.
We have no products approved for commercial sale, have not generated any revenue from product sales, and do not anticipate generating any revenue from product sales until sometime after we have received regulatory approval for the commercial sale of a product candidate, which may never occur. Our ability to generate revenue from product sales and achieve profitability depends significantly on our success in many factors, including:
•completing research regarding, and nonclinical and clinical development of, our product candidates;
•obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical trials;
•developing a sustainable and scalable manufacturing process for our product candidates;
•identifying and contracting with contract manufacturers that have the ability and capacity to manufacture our development products and make them at an acceptable cost;
•launching and commercializing product candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor;
•obtaining market acceptance of our product candidates as viable treatment options;
•ensuring ongoing regulatory compliance post-approval and with respect to sales and marketing of future products;
•addressing any competing technological and market developments;
•identifying, assessing, acquiring and/or developing new product candidates;
•negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;
•maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and
•attracting, hiring, and retaining qualified personnel.
Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the FDA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types of studies in addition to those that we currently anticipate. If we are successful in obtaining regulatory approvals to market one or more of our product candidates, our revenue will depend, in part, upon the size of the markets in the territories for which we obtain regulatory approval, the accepted price for the product, the ability to receive reimbursement at any price, and whether we own the commercial rights for that territory. If the number of our addressable disease patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved. If we are not able to generate revenue from the sale of any approved products, we may never become profitable.
If our status as a smaller reporting company changes, Section 404(b) of the Sarbanes-Oxley Act of 2002 may require an independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting.
Any delays or difficulty in satisfying these requirements could adversely affect our future results of operations and our stock price.
Section 404(b) of the Sarbanes-Oxley Act of 2002 requires an independent registered public accounting firm to test the internal control over financial reporting of public companies, and to report on the effectiveness of such controls, for each fiscal year ending after June 15, 2010. Under the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010, we are exempt from Section 404(b) as long as we remain a smaller reporting company or a non-accelerated filer. If our status as a smaller reporting company changes, we may be required to comply with this auditor attestation requirement.
In addition, we may in the future discover areas of our internal controls that need improvement, particularly with respect to businesses that we may acquire. If so, we cannot be certain that any remedial measure we take will ensure that we have adequate internal controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal controls over financial reporting, or if it becomes necessary for our independent registered public accounting firm to provide us with an unqualified report regarding the effectiveness of our internal control over financial reporting and it is unable to do so, investors could lose confidence in the reliability of our financial statements. This could result in a decrease in the value of our common stock.
RISKS RELATED TO OUR CELL THERAPY PRODUCT DEVELOPMENT EFFORTS
Our future success may be dependent on the timely and successful continued development and commercialization of HONEDRA®, our experimental product candidate for CLI and Buerger's Disease that is in clinical development in Japan, CLBS16 for CMD, CLBS201 for CKD and OLOGOTM for NORDA, and if we encounter delays or further difficulties in the development of these product candidates, our business prospects would be significantly harmed.
We are dependent upon the successful development, approval and commercialization of our product candidates. Before we are able to seek regulatory approval of our product candidates, we must conduct and complete extensive clinical trials to demonstrate their safety and efficacy in humans. We have never taken a product through the regulatory approval process or successfully to U.S. or international commercialization.
In early 2018, we treated the first patient in a clinical trial in Japan for HONEDRA® for use in CLI taking advantage of the paradigm of potential conditional approval for regenerative medicine products established by new regulations in Japan for products that show sufficient safety evidence and some evidence of efficacy. We also recently reported complete data from the 6-month follow-up of patients in a clinical trial (ESCaPE-CMD) using CD34+ cells to treat CMD (CLBS16). Additionally, we currently have an open IND for OLOGOTM, a program for which discussions continue with FDA to define phase 3 trial size and scope for registration in the U.S. in patients with NORDA.
Clinical testing is expensive, difficult to design and implement, and can take many years to complete. Importantly, a failure of one or more of these or any other clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of clinical trials that could delay or prevent our ability to complete our clinical trials, receive regulatory approval or commercialize our cell therapy product candidates, including the following:
•suspensions, delays or changes in the design, initiation, enrollment, implementation or completion of required clinical trials;
•adverse changes in our financial position or significant and unexpected increases in the cost of our clinical development program;
•changes or uncertainties in, or additions to, the regulatory approval process that require us to alter our current development strategy;
•clinical trial results that are negative, inconclusive or even less than desired as to safety and/or efficacy, which could result in the need for additional clinical trials or the termination of the product's development;
•delays in our ability to manufacture the product in quantities or in a form that is suitable for any required clinical trials;
•intellectual property constraints that prevent us from making, using, or commercializing any of our cell therapy product candidates;
•the supply or quality of our product candidates or other materials necessary to conduct clinical trials of these product candidates may be insufficient or inadequate;
•inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of clinical trials;
•delays in reaching agreement on acceptable terms with prospective contract research organizations ("CROs"), contract manufacturing organizations ("CMOs"), and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs, CMOs and clinical trial sites;
•delays in obtaining required IRB approval at each clinical trial site;
•inability to file INDs with the FDA for our development candidates or comparable clinical trial applications with other regulatory authorities outside of the U.S.;
•imposition of a temporary or permanent clinical hold by the FDA or similar restrictions by other regulatory agencies for a number of reasons, including after review of an IND or amendment, or equivalent application or amendment; as a result of a new safety finding that presents unreasonable risk to clinical trial participants; a negative finding from an inspection of our clinical trial operations or clinical trial sites; developments on trials conducted by competitors or approved products post-market for related technology that raises FDA concerns about risk to patients of the technology broadly; or if the FDA finds that the investigational protocol or plan is clearly deficient to meet its stated objectives;
•difficulty collaborating with patient groups and investigators;
•failure by our CROs, CMOs other third parties, or us to adhere to clinical trial requirements;
•failure to perform in accordance with the FDA or international GCP requirements;
•failure to reach agreement with the FDA on a satisfactory development path of our development candidates;
•delays in having patients qualify for or complete participation in a trial or return for post-treatment follow-up;
•patients dropping out of a clinical trial;
•occurrence of adverse events associated with the product candidate;
•changes in the standard of care on which a clinical development plan was based, which may require new or additional trials or abandoning existing trials;
•transfer of manufacturing processes from our academic collaborators to larger-scale facilities operated by either a contract manufacturing organization, or CMO, or by us, and delays or failure by our CMOs or us to make any necessary changes to such manufacturing process;
•delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing; and
•the FDA may not accept clinical data from trials that are conducted in countries where the standard of care is potentially different from the United States.
Any inability to successfully complete nonclinical and clinical development could result in additional costs to us or impair our ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates, we may be required to, or we may elect to, conduct bridging studies to demonstrate the equivalence of our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which our products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.
Our business has been and may continue to be adversely affected by the COVID-19 pandemic.
The COVID-19 pandemic has affected our operations and may materially affect our business. In response to the pandemic, we have limited operations, including implemented work from home and social distancing policies. For instance, our clinical trials may suffer from lower than anticipated patient recruitment or enrollment and we may be forced to temporarily delay certain ongoing clinical trials. In addition, we risk a delay, default and/or nonperformance under our existing agreements arising from force majeure. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the effectiveness and availability of the COVID-19 vaccines, among others.
In addition, COVID-19 has resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions, social distancing and business shutdowns. We have taken temporary precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily allowing all employees to work remotely. We have already suspended non-essential travel worldwide for our employees and are discouraging employee attendance at other gatherings. These measures could negatively affect our business. For instance,
temporarily requiringITEM 12. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The tables below provide information regarding the beneficial ownership of Caladrius’ common stock as of April 21, 2022by: (i) each of Caladrius’ directors; (ii) Caladrius’ Named Executive Officers; (iii) all employeesof Caladrius’ current directors and executive officers as a group; and (iv) each beneficial owner of more than five percent of Caladrius’ common stock.
Beneficial ownership is determined in accordance with SEC rules and regulations, and generally includes voting power or investment power with respect to work remotely may induce absenteeism, disrupt our operations or increasesecurities held. Unless otherwise indicated and subject to applicable community property laws, we believe that each of the risk of a cybersecurity incident. COVID-19 has also caused volatilityCaladrius stockholders named in the global financial marketstable below has sole voting and threatened a slowdown in the global economy, which may negatively affect our ability to raise additional capital on attractive terms or at all.
The extent to which COVID-19 will continue to impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, the severity of COVID-19 or the effectiveness of actions to contain and treat COVID-19, particularly in the geographies where we or our third party suppliers, contract manufacturers, or contract research organizations operate. We cannot presently predict the scope and severity of any potential business shutdowns or disruptions. If we or any of the third parties with whom we engage, however, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively affected, which could have a material adverse impact on our business and our results of operations and financial condition.
Even if we are able to successfully complete our clinical development programs for our product candidates and receive regulatory approval to market one or more of the products, if the commercial opportunities are smaller than we anticipate, our future revenues may be adversely affected, and our business may suffer.
If the size of the commercial opportunities in any of our target indications is smaller than we anticipate, or if the FDA grants our candidates approval to treat only specific subpopulations or otherwise approves the products for more narrow indications for use than we are seeking, we may not be able to achieve profitability and growth.
Even if we are able to successfully complete our clinical development program for our product candidates, and ultimately receive regulatory approval to market one or more of the products, we may, among other things:
•obtain approval for indications that are not as broad as the indications we sought;
•have the product removed from the market after obtaining marketing approval;
•encounter problemsinvestment power with respect to the manufacturingshares shown as beneficially owned. Securities that may be beneficially acquired within 60 days after April 21, 2022 are deemed to be beneficially owned by the person holding such securities for the purpose of commercial supplies;computing the ownership of such person, but are not treated as outstanding for the purpose of computing the ownership of any other person.
The tables below list the number and percentage of shares beneficially owned based on 60,521,635 shares of Caladrius common stock outstanding as of April 21, 2022.
Directors and Named Executive Officers
| | | | | | | | | | | |
| Name of Beneficial Owner | Total Shares of Common Stock Beneficially Owned (#) | | Percentage |
| David J. Mazzo, Ph.D. President and Chief Executive Officer | 1,059,734 | | (1) | 1.7% |
| Kristen K. Buck, MD., Executive Vice President R&D and Chief Medical Officer | 702,839 | | (2) | 1.2% |
| Todd Girolamo, Former Chief Legal Officer and Corporate Secretary | 240,933 | | (3) | * |
| Gregory B. Brown, M.D., Chairman of the Board | 90,510 | | (4) | * |
| Michael Davidson, M.D., Director | 110,281 | | (5) | * |
| Cynthia L. Flowers, Director | 80,417 | | (6) | * |
| Steven Klosk, Director | 93,330 | | (7) | * |
| Steven S. Myers, Director | 163,531 | | (8) | * |
| Peter G. Traber, M.D., Director | 92,060 | | (9) | * |
| Anne C. Whitaker, Director | 64,225 | | (10) | * |
| All directors and executive officers as a group | 2,797,550 | | (11) | 4.6% |
| | | |
| | | |
____________
* Beneficial ownership is less than 1%
(1)Includes options to purchase up to 428,669 shares of our common stock which are exercisable within 60 days of April 21, 2022.
•(2)be subjectIncludes options to additional post-marketing testing requirements; and/orpurchase up to 383,636 shares of our common stock which are exercisable within 60 days of April 21, 2022.
•(3)be subjectIncludes options to restrictions on how the product is distributed or used.
We may experience delays in enrolling patients in our clinical trials, which could delay or prevent the receipt of necessary regulatory approvals.
We may not be ablepurchase up to initiate or complete as planned any clinical trials if we are unable to identify and enroll a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other regulatory authorities. We also may be unable to engage a sufficient number of clinical trial sites to conduct our trials. Moreover, our ability to conduct trials outside of the United States may be constrained by our inability to transport trial materials to foreign destinations within the expiry period of such materials unless and until we commence operation outside of the United States or find another source of supply.
We may face challenges in enrolling patients to participate in our clinical trials due to the novelty199,106 shares of our cell-based therapies, the sizecommon stock which are exercisable within 60 days of the patient populations, the eligibility criteria for enrollment in the trialApril 21, 2022.
(4)Includes 79,460 fully vested restricted stock units and COVID-19 impact. Moreover, changesoptions to enrollment criteria may be prohibited by regulating agencies, may have no impact on enrollment rates and may change or harm the outcome of the study. In addition, some patients may have concerns or negative perceptions regarding cell therapy that may affect their decisionpurchase up to enroll in the trials. Furthermore, patients suffering from diseases within target indications may enroll in competing clinical trials, which could negatively affect our ability to complete enrollment6,900 shares of our trials. Enrollment challenges in clinical trials often result in increased development costs for a product candidate, significant delays and potentially the abandonmentcommon stock which are exercisable within 60 days of the clinical trial.
Outside of the unique aspects of conducting a clinical trial for a cell therapy candidate, patient enrollment in general is affected by many factors, including:
•size of the target patient population;April 21, 2022.
•(5)severityIncludes 54,756 fully vested restricted stock units which are exercisable within 60 days of the disease or disorder under investigation;April 21, 2022.
•(6)eligibility criteria for the clinical trial in question;Includes 80,417 fully vested restricted stock units which are exercisable within 60 days of April 21, 2022.
•(7)other clinical trials being conducted at the same time involving patients who have the disease or disorder under investigation;Includes 79,460 fully vested restricted stock units and options to purchase up to 7,370 shares of our common stock which are exercisable within 60 days of April 21, 2022.
•(8)perceived risksIncludes 79,460 fully vested restricted stock units and benefitsoptions to purchase up to 5,500 shares of the product candidate under study;our common stock which are exercisable within 60 days of April 21, 2022.
(9)Includes 79,460 fully vested restricted stock units and options to purchase up to 8,300 shares of our common stock which are exercisable within 60 days of April 21, 2022.
•(10)approval and availabilityIncludes 64,225 fully vested restricted stock units which are exercisable within 60 days of other therapies to treat the disease or disorder that is being investigated in the clinical trial;April 21, 2022.
•(11)willingness or unwillingnessIncludes 517,238 fully vested restricted stock units and options to participate in a placebo controlled clinical trial;
•efforts to facilitate timely enrollment in clinical trials;
•patient referral practices of physicians;
•the ability to monitor patients adequately during and after treatment; and
•proximity and availability of clinical trial sites for prospective patients.
Our inability to enroll a sufficient number of patients in any of our planned clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether.
We may have other delays in completing our clinical trials and we may not complete them at all.
We have not completed the clinical trials necessary to obtain FDA approval to market HONEDRA®, OLOGOTM, CLBS201 or CLBS16 or any of our other product candidates in development. Our operational team lacks significant experience in completing Phase 3 pivotal clinical trials and bringing a drug or biological product through commercialization. Clinical trials for products in development may be delayed or terminated as a result of many factors, including the following:
•patients failing to complete clinical trials due to dissatisfaction with the treatment, side effects or other reasons;
•failure by regulators, IRBs, or independent ethics committees to authorize us or our investigators at individual sites to commence a clinical trial;
•suspension or termination by regulators of clinical research for many reasons, including concerns about patient safety or failure of our contract manufacturers to comply with applicable cGMP/cGTP requirements for the clinical supplies of the cell therapy candidate;
•delays or failure to obtain clinical supply for our products necessary to conduct clinical trials from contract manufacturers, including commercial grade clinical supply for our trials;
•our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
•treatment candidates demonstrating a lack of efficacy during clinical trials;
•inability to continue to fund clinical trials or to find a partner to fund the clinical trials;
•competition with ongoing clinical trials and scheduling conflicts with participating clinicians; and
•delays in completing data collection and analysis for clinical trials.
Any delay or failure to complete clinical trials and obtain FDA approval for our product candidates could have a material adverse effect on our cost to develop and commercialize, and our ability to generate revenue from, a particular product candidate.
We may be unable to manage multiple late stage clinical trials for a variety of product candidates simultaneously.
As our current clinical trials progress, we may need to manage multiple late stage clinical trials simultaneously in order to continue developing all of our current products. Our management team does not have significant experience in completing late stage clinical trials and the management of late stage clinical trials is more complex and time consuming than early stage trials. Typically, early stage trials involve several hundred patients in no more than 30 clinical sites. Late stage (Phase 3) trials may involvepurchase up to several thousand patients in up to several hundred clinical sites and may require facilities in several countries. Therefore, the project management required to supervise and control such an extensive program is substantially larger than early stage programs. As the need for these resources is not known until some months before the trials begin, it is necessary to recruit large numbers of experienced and talented individuals very quickly. If the labor market does not allow this team to be recruited quickly, the sponsor is faced with a decision to delay the program or to initiate it with inadequate management resources. This may result in recruitment of inappropriate patients, inadequate monitoring of clinical investigators and inappropriate handling of data or data analysis. Consequently, it is possible that conclusions of efficacy or safety may not be acceptable to permit submission of a BLA for any one of the above reasons or a combination of several.
The development of our cell therapy product candidates is subject to uncertainty because autologous cell therapy is inherently variable.
When manufacturing an autologous cell therapy, the number and the composition of the cell population varies from patient to patient. Such variability in the number and composition of these cells could adversely affect our ability to manufacture autologous cell therapies in a cost-effective or profitable manner and meet acceptable product release specifications for use in a clinical trial or, if approved, for commercial sale. As a consequence, the development and regulatory approval process for autologous cell therapy products could be delayed or may never be completed. Our product development costs will also increase if manufacturing processes and controls require unexpected investments, which could harm our business and results of operations.
Any disruption to our access to the reagents we are using in the clinical development of our cell therapy product candidates could adversely affect our ability to perform clinical trials and seek future regulatory submissions.
Reagents, devices, materials and systems that we are using in our clinical trials, that we intend to use in our planned clinical trials and that we may need or use in commercial production, are provided by unaffiliated third parties. Any lack of continued availability of these reagents, devices, materials and systems for any reason would have a material adverse effect on our ability to complete these studies and could adversely impact our ability to achieve commercial manufacture of our planned therapeutic products. Although other available sources for these reagents, devices, materials and systems may exist in the marketplace, we have not evaluated their cost, effectiveness, or intellectual property foundation and therefore cannot guarantee the suitability or availability of such other potential sources.
The initiation of pivotal Phase 3 clinical trials for cell therapy product candidates requires the validation and establishment of manufacturing controls that may delay product development timelines.
To conduct pivotal Phase 3 clinical trials, we are required to have certain validated and established manufacturing controls with respect to the safety, purity and potency of our product when administered to patients. If we determine that the results of any Phase 2 clinical trial we may conduct supports Phase 3 development, we expect to initiate and complete one or more pivotal Phase 3 clinical trials for such programs and would need to address any outstanding chemistry, manufacturing and control CMC issues raised by the FDA prior to initiating such trials. We may not be successful in our efforts to address any CMC issues raised by the FDA. If we cannot initiate, or if we are delayed in initiating, a pivotal Phase 3 clinical program as a result of our failure to satisfy the FDA's CMC concerns or otherwise, the timing of regulatory submission for commercialization of our product candidates would be delayed, or we may be unable to seek regulatory approval to commercialize our products at all.
Product candidates that appear promising in research and development may be delayed or may fail to reach later stages of clinical development.
The successful development of pharmaceutical product candidates is highly uncertain. Product candidates that appear promising in research and development and early clinical trials may be delayed or fail to reach later stages of development. Decisions regarding the further development of product candidates must be made with limited and incomplete data, which makes it difficult to ensure or even accurately predict whether the allocation of limited resources and the expenditure of additional capital on specific product candidates will result in desired outcomes. Preclinical and clinical data can be interpreted in different ways, and negative or inconclusive results or adverse events during a clinical trial could delay, limit or prevent the development of a product candidate.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Exploratory trends and results observed in earlier stage clinical trials, particularly trends and results observed for small subsets that were not pre-specified, may not be replicated in later stage clinical trials. Product candidates in Phase 3 clinical trials may fail to demonstrate sufficient efficacy despite having progressed through initial clinical trials, even if certain exploratory subset analyses of primary or secondary endpoints in those early trials showed trends toward efficacy or, in some analyses, nominal statistical significance. The results of clinical trials in one set of patients or line of treatment may not be predictive of those obtained in another.
If serious or unacceptable side effects are identified during the development of any of our product candidate, we may need to abandon or limit our development of that product candidate.
All of our product candidates are in clinical development and their risk of failure is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive marketing approval. If our product candidates are associated with undesirable side effects or have other unexpected, unacceptable characteristics, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many investigational products that initially showed promise in clinical or earlier stage testing have later been found to cause side effects or other safety issues that prevented further development. Even if we receive regulatory approval for a candidate with a known safety risk, such an approved product may not achieve market acceptance by physicians, patients, third-party payors or others in the medical community, which would materially and adversely affect our business.
A Fast Track designation by the FDA and other similar regulatory designations may not lead to a faster development, regulatory review or approval process.
We were granted SAKIGAKE designation in Japan and Advanced Therapeutic Medicinal Product ("ATMP") designation in Europe for HONEDRA® for the treatment of CLI and Buerger's Disease, and RMAT designation for OLOGOTM for the treatment of no-option refractory disabling angina. However, SAKIGAKE, ATMP and RMAT designations do not ensure that we will experience a faster development, regulatory review or approval process compared to conventional FDA or Japan PMDA procedures. Additionally, a regulatory authority may withdraw a designation if it believes that the designation is no longer supported by data from the clinical development program. Moreover, award of a particular designation does not imply a higher probability of success of a product in the approval process.
Our clinical trials may fail to demonstrate adequately the safety and efficacy of our product candidates, which would prevent or delay regulatory approval and commercialization.
The clinical trials of our product candidates are, and the manufacturing and marketing of our products will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and market our product candidates. Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication. In particular, because our cell therapy candidates are subject to regulation as biological drug products, we will need to demonstrate that they are safe, pure, and potent for use in their target indications. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use. The risk/benefit profile required for product licensure will vary depending on these factors and may include adequate duration of response, a delay in the progression of the disease, and/or an improvement in survival. For example, response rates from the use of our product candidates may not be sufficient to obtain regulatory approval unless we can also show an adequate duration of response.
We expect there may be greater variability in results for products processed and administered on a patient-by-patient basis, as anticipated for our product candidates, than for “off-the-shelf” products, like many other drugs. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization.
Data from earlier studies conducted by the third-party research institutions should not be relied upon as evidence that later or larger-scale clinical trials will succeed. Some future trials may have different patient populations than current studies and will test our product candidates in different indications, among other differences. In addition, our proposed manufacturing processes for our product candidates include what we believe will be process improvements that are not part of the production processes that were previously used in the earlier conducted clinical trials being conducted by the research institutions. Accordingly, our results with our product candidates may not be consistent with the results of the clinical trials.
In addition, even if such trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as do we, and more trials could be required before we submit our product candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates.
We presently rely on contract manufacturing organizations to produce our product candidates at development and commercial scale quantities and have not yet qualified an alternate manufacturing supply, which could negatively impact our ability to meet any future demand for the products.
We currently rely on contract manufacturers to provide the cell processing services necessary for clinical production for our various CD34+ cell therapy product candidates. The Foundation for Biomedical Research and Innovation, a Japanese corporation with its principal place of business in Kobe, Japan ("FBRI") provide all cell processing services for the HONEDRA® CLI trial in Japan. Minaris Regenerative Medicine and FBRI also provide services and produce materials for clinical trials on behalf of unaffiliated third parties. To date, neither has produced any products at commercial scale quantities. We expect that Minaris Regenerative Medicine and FBRI would need to expand significantly their manufacturing capabilities to meet potential commercial demand for HONEDRA®, OLOGOTM, CLBS201 and CLBS16 and any other of our product candidates, if approved, as well as any of our other product candidates that might attain regulatory approval. Such expansion would require additional regulatory approvals. Even if they increase their manufacturing capabilities, it is possible that they may still lack sufficient capacity to meet demand. Ultimately, if we are unable to supply our products to meet commercial demand, whether because of processing constraints or other disruptions, delays or difficulties that we experience, sales of the products and their long-term commercial prospects could be significantly damaged.
We do not presently have redundant suppliers for any of our product candidates. If the facilities where our product candidates are being manufactured and/or the associated equipment were significantly damaged or destroyed, or if there were other disruptions, delays or difficulties affecting manufacturing capacity, our planned and future clinical trials and commercial production for these product candidates would likely be significantly disrupted and delayed. It would be both time consuming and expensive to replace this capacity with third parties, particularly since any new facility would need to comply with regulatory requirements.
Ultimately, if we are unable to supply our cell therapy product candidates to meet commercial demand, were commercial approval to be obtained, whether because of processing constraints or other disruptions, delays or difficulties that we experience, our production costs could increase dramatically, and sales of the product and its long-term commercial prospects could be significantly damaged.
The commercial potential and profitability of our products are unknown and subject to significant risk and uncertainty.
Even if we successfully develop and obtain regulatory approval for our cell therapy product candidates, the market may not understand or accept the products, which could adversely affect both the timing and level of future sales. Ultimately, the degree of market acceptance of our product candidates (or any of our future product candidates) will depend on a number of factors, including:
•the efficacy and potential advantages compared to alternative treatments or competitive products;
•the prevalence and severity of any side effects;
•physician acceptance of our cell therapy approach to our target disease indications, include the ease or difficulty of administering the future products;
•restrictions on how the product is distributed or used;
•the strength of our marketing and distribution support, including whether we receive support from any patient advocacy groups;
•the adequacy of product supply in light of complex manufacturing and distribution processes;
•our ability to distinguish our products (which involve adult cells) from any ethical and political controversies associated with stem cell products derived from human embryonic or fetal tissue; and
•the cost of the product, the reimbursement policies of government and third-party payors and our ability to obtain sufficient third-party coverage or reimbursement.
Even if we are successful in achieving sales of our product candidates, it is not clear to what extent, if any, the products will be profitable. The costs of goods associated with production of cell therapy products are significant. While we are working to improve the speed and efficiency and lower the cost of our manufacturing processes, there can be no assurance that we will be successful in these efforts. In addition, some changes in manufacturing processes or procedures generally require FDA or foreign regulatory authority review and approval prior to implementation. Thus, we may need to conduct additional nonclinical studies and clinical trials to support approval of any such changes. Furthermore, this review process could be costly and time-consuming and could delay or prevent the commercialization of product candidates.
We may form or seek collaborations or strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.
We may form or seek strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties that we believe are essential to product commercialization or will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute the shares of our existing stockholders, or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy.
Further, collaborations involving our product candidates, such as our collaborations with third-party research institutions, are subject to numerous risks, which may include the following:
•collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;
•collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities;
•collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing;
•collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates;
•a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing and distribution;
•collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;
•disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our product candidates, or that result in costly litigation or arbitration that diverts management attention and resources;
•collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; and
•collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property.
As a result, if we enter into collaboration agreements and strategic partnerships or license our products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new collaborations or strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition and results of operations.
We have limited experience in the development and marketing of cell therapies and may be unsuccessful in our efforts to establish a profitable business.
We have limited experience in the areas of cell therapy product development and marketing, and in the related regulatory issues and processes. Although we have recruited a team that has experience with designing and conducting clinical trials, as a company we have limited experience in conducting clinical trials and no experience in conducting clinical trials through to
regulatory approval of any product candidate. In part because of this lack of experience, we cannot be certain that ongoing or planned clinical trials will begin or be completed on time, if at all.
Our cell therapy business is based on novel technologies that are inherently expensive, risky and may not be understood by or accepted in the marketplace, which could adversely affect our future value.
The clinical development, commercialization and marketing of cell and tissue-based therapies are at an early stage, substantially research-oriented and financially speculative. To date, very few companies have been successful in their efforts to develop and commercialize a cell therapy product. In general, cell-based or tissue-based products may be susceptible to various risks, including undesirable and unintended side effects, unintended immune system responses, inadequate therapeutic efficacy, or other characteristics that may prevent or limit their approval or commercial use. Regulatory approval of novel product candidates such as HONEDRA®, OLOGOTM, CLBS201 and CLBS16, which are each manufactured using novel and proprietary manufacturing processes, can be more complex and expensive and take longer than other, more well-known or extensively studied pharmaceutical or biopharmaceutical products, due to the FDA’s lack of experience with them. To our knowledge, the FDA has only approved five autologous cell therapy products to date.
This lack of experience may lengthen the regulatory review process, require us to conduct additional studies or clinical trials, which would increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these product candidates or lead to significant post-approval limitations or restrictions. Furthermore, the number of people who may use cell or tissue-based therapies is difficult to forecast with accuracy. Our future success is dependent on the establishment of a large global market for cell- and tissue-based therapies and our ability to capture a share of this market with our product candidates.
If competitors develop and market products that are more effective, safer, or less expensive than our product candidates or offer other advantages, our commercial prospects will be limited.
Our cell therapy development programs now face, and will continue to face, intense competition from pharmaceutical, biopharmaceutical and biotechnology companies, as well as numerous academic and research institutions and governmental agencies engaged in drug discovery activities or funding, both in the United States and abroad. Some of these competitors are pursuing the development of drugs and other therapies that target the same diseases and conditions that we are targeting with our product candidates.
As a general matter, we also face competition from many other companies that are researching and developing cell therapies. Many of these companies have financial and other resources substantially greater than ours. In addition, many of these competitors have significantly greater experience in testing pharmaceutical and other therapeutic products, obtaining FDA and other regulatory approvals, and marketing and selling FDA-approved products in highly regulated commercial health care markets. If we ultimately obtain regulatory approval for any of our product candidates, we also will be competing with respect to manufacturing efficiency and marketing capabilities, areas in which we have limited or no commercial-scale experience. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in resources being even more concentrated by our competitors. Competition may increase further as a result of advances made in the commercial applicability of our technologies and greater availability of capital for investment in these fields.
Our cell therapy product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated pathway for licensure of so-called biosimilar and interchangeable biological products, both of which have specific defined meanings under the law. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing reference product. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original reference product is approved for marketing in the U.S. a stand-alone BLA. The law is complex and is still being interpreted and implemented by the FDA. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.
There is a risk that the FDA will not consider any of our therapeutic candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Additionally, this period of regulatory exclusivity does not apply to companies pursuing regulatory approval via their own traditional BLA, rather than via the abbreviated pathway. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing, as well as unique state laws and government/private policies.
We may be subject to significant product liability claims and litigation, including potential exposure from the use of our product candidates in human subjects, and our insurance may be inadequate to cover claims that may arise.
Our business exposes us to potential product liability risks inherent in the testing, processing and marketing of cell therapy products. Such liability claims may be expensive to defend and result in large judgments against us. We face an inherent risk of product liability exposure related to the testing of our current and any future product candidates in human clinical trials and will face an even greater risk with respect to any commercial sales of our products should they be approved. None of our product candidates have been widely used over an extended period of time, and therefore relevant safety data are limited. Cell therapy companies also derive the raw materials for manufacturing of product candidates from human cell sources, and therefore the manufacturing process and handling requirements, including ensuring compliance with cGTPs, are extensive, which increases the risk of quality failures and subsequent product liability claims. We presently have product liability insurance limited to $10 million per incident and $10 million in annual aggregate.
We will need to increase our insurance coverage when we begin commercializing product candidates, if ever. At that time, we may not be able to obtain or maintain product liability insurance on acceptable terms with adequate coverage or at all, or if claims against us substantially exceed our coverage, then our financial position could be significantly impaired.
Whether or not we are ultimately successful in any product liability litigation that may arise, such litigation could consume substantial amounts of our financial and managerial resources, decrease demand for our products and injure our reputation.
We seek to maintain errors and omissions, directors and officers, workers' compensation and other insurance at levels we believe to be appropriate to our business activities. If, however, we were subject to a claim in excess of this coverage or to a claim not covered by our insurance and the claim succeeded, we would be required to pay the claim from our own limited resources, which could have a material adverse effect on our financial condition, results of operations and business. Additionally, liability or alleged liability could harm our business by diverting the attention and resources of our management and damaging our reputation.
We may be unable to retain key officers or employees or hire new key officers or employees needed to implement our business strategy and develop our products and businesses.
Given the specialized nature of cell therapy and that it is a relatively new field, there is an inherent scarcity of experienced personnel in the field. We are substantially dependent on the skills and efforts of current senior management for their management and operations, as well as for the implementation of our business strategy. In addition, our future success depends upon our ability to attract and retain additional qualified personnel (including medical, scientific, technical, commercial, business and administrative personnel) necessary to support our anticipated growth, develop our business, perform our contractual obligations to third parties and maintain appropriate licensure. There can be no assurance that we will be successful in attracting or retaining personnel required by us to continue to grow our operations. The loss of a key employee, the failure of a key employee to perform in his or her current position or our inability to attract and/or retain skilled employees, as needed, could result in our inability to continue to grow our business or to implement our business strategy, or may have a material adverse effect on our business, financial condition and operating results.
Our internal computer systems, or those used by our clinical investigators, clinical research organizations or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of development programs for our product candidates.
We rely on information technology systems to keep financial records, maintain laboratory and corporate records, communicate with staff and external parties and operate other critical functions. Any significant insufficiency degradation or failure of these computer systems could cause us to inaccurately calculate or lose our data. Despite the implementation of security measures, these internal computer systems and those used by our clinical investigators, clinical research organizations, and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures. The techniques that could be used by criminal elements or foreign governments to attack these computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world. While we have not experienced any such system failure, theft of information, accident or security breach to date, if such an event were to occur and cause interruptions in its operations, it could result in a material disruption of our clinical development activities. For example, the loss of clinical trial data from historical or future clinical trials could result in delays in regulatory approval efforts and significantly increase costs to recover or reproduce the data. To the extent that any disruption, theft of information, or security breach were to result in a loss of or damage to data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the clinical development, and the future development of our product candidates could be delayed.
The increasing use of social media platforms presents new risks and challenges.
Social media is increasingly being used to communicate information about our products and the diseases that our therapies are designed to treat. Social media practices in our industry continue to evolve and regulations related to such use are not always clear. This evolution creates uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients and others may use social media channels to comment on the effectiveness of a product or to report an alleged adverse event. When such disclosures occur, we may fail to monitor and comply with applicable adverse event reporting obligations or we may not be able to defend against political and market pressures generated by social media due to restrictions on what we may say about our products. There is also a risk of inappropriate disclosure of sensitive information or negative or inaccurate comments about us on any social networking website. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face overly restrictive regulatory actions or incur other harm to our business.
RISKS RELATED TO MANUFACTURING OUR DEVELOPMENT PRODUCT CANDIDATES
We have no internal capacity to manufacture our development product candidates and have no assurance that we will continue to have access to manufacturers in our industry that can effectively make our development products or make them at an affordable, salable or otherwise commercially reasonable price or quantity.
Contract development and manufacturing organizations have a finite cell manufacturing capacity, which could inhibit the long-term growth prospects of our business.
We currently have minimal manufacturing contracts to produce materials for our clinical trials in the United States. It is possible that the demand for our products could exceed existing manufacturing capacity. We expect that, as our own cell therapy development programs progress and demand for cell therapy services in the industry expand, it may become necessary or desirable for us to expand our manufacturing vendors for cell therapy services and products in the future, which may require us to invest significant amounts of capital and to obtain regulatory approvals. If manufacturers are unable to meet our rising demand for products and services on a timely basis or unable to maintain cGMP/cGTP compliance standards, then it is likely that the progress of our own programs will be impaired which could materially and adversely affect the overall success of our development programs.
Components of therapeutic products approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with cGMPs and manufacturers of cell-based product candidates must comply with cGTPs. In addition, manufacturers of therapeutic products may be required to modify their manufacturing processes from time to time in response to regulatory requests. The manufacture of live cellular-based products is complex and imposes significant regulatory burdens that may change over time. We may encounter difficulties in the production of our product candidates due to our limited manufacturing experience.
We will need to improve manufacturing efficiency at our contract manufacturers in order to establish cost of goods levels that will permit approved products to succeed commercially.
CMOs cannot provide assurances that they will be able to develop process enhancements that are acceptable to regulators or other comparable regulatory authorities, on a timely basis, on commercially reasonable terms, or at all, or that any expected improvement in profitability will be realized. If they are unsuccessful in their efforts to develop necessary improvements, we may be unable to develop commercially viable products, which would impair our ability to continue our operations.
Lack of access to safe, reliable and effective transportation options could adversely affect our ability to meet our needs.
To effectively and efficiently deliver our cell therapy product, we also need to establish and maintain cost-effective relationships with reliable and experienced transportation carriers. Most existing transportation carriers are not optimally designed for the transportation of cell therapy products. For example, these carriers generally lack a true point-to-point chain of control, may have non-controlled X-ray and inspection, do not guarantee package orientation, handling or storage conditions and, in many cases, lack a standard, documented and tracked operating procedures. While reliable ground carriers with experience in the transport of blood products exist in major U.S. metropolitan areas, air carriers meeting such needs are limited. If carriers we currently use should cease medical shipping operations or otherwise become unable to properly meet our transportation needs or comply with applicable customs and import regulations, the lack of access to safe, reliable and effective transportation options could adversely affect our ability to meet our needs.
RISKS RELATED TO GOVERNMENT REGULATION
The development and commercialization of our product candidates are subject to extensive regulation by the FDA and other regulatory agencies in the United States and abroad, and the failure to receive regulatory approvals for our cell therapy product candidates would likely have a material and adverse effect on our business and prospects.
Government authorities in the United States, at the federal, state and local level, and in other countries, extensively regulate, among other things, the research, development, testing, manufacture, including any manufacturing changes, packaging, storage, recordkeeping, labeling, advertising and promotion, distribution, marketing, import and export of pharmaceutical and biological products, such as HONEDRA®, OLOGOTM, CLBS201 and CLBS16. The process of obtaining required regulatory approvals and the subsequent compliance with appropriate statutes and regulations requires the expenditure of substantial time and money, and there is no guarantee that we will successfully complete the steps needed to obtain regulatory approval of HONEDRA®, OLOGOTM, CLBS201 or CLBS16 or any future product candidates. There also are extensive and ongoing post-marketing compliance obligations to which we would be subject following FDA approval of any of our product candidates. In addition, these federal regulations may change, and our product candidates may be subject to new laws or regulations due to the rapid advancement of the regenerative medicine field and legislators'/regulators' interest in it.
To date, we have not received regulatory approval to market any of our product candidates in any jurisdiction. If we seek approval of any of our cell therapy product candidates, we will be required to submit to FDA and Japanese and potentially other regulatory authorities extensive preclinical and clinical data supporting the safety and efficacy of such products, as well as information about the manufacturing process and to undergo inspection of manufacturing facilities, among other things. The process of obtaining FDA and other regulatory approvals is expensive, typically takes many years and is subject to numerous risks and uncertainties, particularly with complex and/or novel product candidates such as our cell-based product candidates. Changes in regulatory approval policies during the clinical research and development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application or may make it easier for our competitors to gain regulatory approval to enter the marketplace. Ultimately, the FDA and other regulatory agencies have substantial discretion in the approval/licensure process and may refuse to accept any application or may decide that our product candidate data are insufficient for approval without the submission of additional preclinical, clinical or other time-consuming studies. In addition, varying agency interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent regulatory approval of a product candidate. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
Any of the following factors, among others, could cause regulatory approval for our product candidates to be delayed, limited or denied:
•the product candidates require significant clinical testing to demonstrate safety and effectiveness before applications for marketing approval can be submitted to the FDA and other regulatory authorities;
•data obtained from animal testing and other nonclinical testing and clinical trials can be interpreted in different ways, and regulatory authorities may not agree with our respective interpretations or may require us to conduct additional testing;
•negative or inconclusive results or the occurrence of serious or unexpected adverse events during a clinical trial could cause us to delay or terminate development efforts for a product candidate; and/or
•the FDA and other regulatory authorities may require expansion of the size and scope of the clinical trials.
Any difficulties or failures that we encounter in securing regulatory approval for our product candidates would likely have a substantial adverse impact on our ability to generate product sales and could make any search for a collaborative partner more difficult.
We may be unsuccessful in our efforts to comply with applicable federal, state and international laws and regulations, which could result in loss of licensure, certification or accreditation or other government enforcement actions or impact our ability to secure regulatory approval of our product candidates.
Although we seek to conduct our business in compliance with applicable laws and regulations, these laws and regulations are exceedingly complex and often subject to varying interpretations. The cell therapy industry is the topic of significant government interest, and thus the laws and regulations applicable to our business are subject to frequent change and/or reinterpretation. As such, there can be no assurance that we will be able, or will have the resources, to maintain compliance with all applicable biopharmaceutical and health care laws and regulations. Failure to comply with such biopharmaceutical and
health care laws and regulations could result in significant enforcement actions, civil or criminal penalties, which along with the costs associated with such compliance or with enforcement of such biopharmaceutical and health care laws and regulations, may have a material adverse effect on our operations or may require restructuring of our operations or impair our ability to operate profitably.
Facilities engaged in the recovery, processing, storage, labeling, packaging or distribution of any human cells, tissues or cellular- and tissue-based products, or the screening or testing of a donor, are required to register with the applicable regulatory agencies. Any third party retained by us to process our samples must be similarly registered with regulators and comply with applicable regulations as well as applicable cGTP regulations and any failure to comply with these requirements could adversely affect our business.
In addition to cGTPs, cGMP regulations govern the manufacture, processing, packaging and holding of cell therapy products that are regulated as drugs. Any third-party manufacturers that prepare our products must comply with cGMP requirements including quality control, quality assurance and the maintenance of records and documentation for certain products. They may be unable to comply with these cGMP requirements and with other national regulators and state and local regulatory requirements. These requirements may change over time and we or third-party manufacturers may be unable to comply with the revised requirements.
If we are unable to conduct clinical trials in accordance with regulations and accepted standards, we may be delayed in receiving, or may never receive, regulatory approvals of our product candidates from the FDA and other regulatory authorities.
To obtain marketing approvals for our product candidates in the United States and abroad, we must, among other requirements, complete adequate and well-controlled clinical trials sufficient to demonstrate to the FDA and other regulatory bodies that the product candidate is safe and effective for each indication for which approval is sought. If the FDA finds that patients enrolled in the trial are or would be exposed to an unreasonable and significant risk of illness or injury due to, among other things, occurrence of one or more serious adverse events in an ongoing clinical trial, the FDA can place one or more of our clinical trials on partial or full clinical hold. If safety concerns develop, we may, or the FDA, a foreign regulatory authority, or an IRB may require us to, stop the affected trials before completion.
The completion of our clinical trials also may be delayed or terminated for a number of other reasons, including if:
•third-party clinical investigators do not perform the clinical trials on the anticipated schedule or consistent with the clinical trial protocol, GCPs required by the FDA and other regulatory requirements, or other third parties do not perform data collection and analysis in a timely or accurate manner;
•inspections of clinical trial sites by the FDA or by IRBs of research institutions participating in the clinical trials, reveal regulatory violations that require the sponsor of the trial to undertake corrective action, suspend or terminate one or more sites, or prohibit use of some or all of the data in support of marketing applications; or
•the FDA or one or more IRBs suspends or terminates the trial at an investigational site or precludes enrollment of additional subjects.
Our development costs will increase if there are material delays in our clinical trials, or if we are required to modify, suspend, terminate or repeat a clinical trial. If we are unable to conduct our clinical trials properly, we may never receive regulatory approval to market our product candidates.
We may be subject to numerous and varying privacy and security laws, and our failure to comply could result in penalties and reputational damage.
We are subject to laws and regulations covering data privacy and the protection of personal information including health information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues which may affect our business. In the U.S., we may be subject to state security breach notification laws, state health information privacy laws and federal and state consumer protections laws which impose requirements for the collection, use, disclosure and transmission of personal information. Each of these laws are subject to varying interpretations by courts and government agencies, creating complex compliance issues for us. If we fail to comply with applicable laws and regulations we could be subject to penalties or sanctions, including criminal penalties if we knowingly obtain individually identifiable health information from a covered entity in a manner that is not authorized or permitted by HIPAA or for aiding and abetting the violation of HIPAA.
Numerous other countries have, or are developing, laws governing the collection, use and transmission of personal information as well. EU member states and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. In May 2016, the European Union formally adopted the General Data Protection Regulation
(GDPR), which applies to all EU member states from May 25, 2018 and replaced the EU Data Protection Directive The regulation introduces stringent new data protection requirements in the European Union and substantial fines for breaches of the data protection rules. It has increased our responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with the new EU data protection rules. The GDPR is a complex law and the regulatory guidance is still evolving, including with respect to how the GDPR should be applied in the context of clinical studies. Furthermore, many of the countries within the European Union are still in the process of drafting supplementary data protection legislation in key fields where the GDPR allows for national variation, including the fields of clinical study and other health-related information. These variations in the law may raise our costs of compliance and result in greater legal risks.
We will continue to be subject to extensive regulation following any product approvals, and if we fail to comply with these regulations, we may suffer a significant setback in our business.
Even if we are successful in obtaining regulatory approval of our product candidates, we will continue to be subject to the requirements of and review by, the FDA and comparable regulatory authorities in the areas of manufacturing processes, quality assurance, post-approval clinical data, adverse event reporting, labeling, advertising and promotional activities, among other things. In addition, any marketing approval we receive may be limited in terms of the approved product indication or require costly post-marketing testing and surveillance. Discovery after approval of previously unknown problems with a product, manufacturer or manufacturing process, or a failure to comply with regulatory requirements, may result in actions such as:
•warning letters or untitled letters or other actions requiring changes in product manufacturing processes or restrictions on product marketing or distribution;
•product recalls or seizures or the temporary or permanent withdrawal of a product from the market; and
•fines, restitution or disgorgement of profits or revenue, the imposition of civil penalties or criminal prosecution.
The occurrence of any of these actions would likely cause a material adverse effect on our business, financial condition and results of operations.
Additionally, if we or others identify undesirable side effects, or other previously unknown problems, caused by our product candidates after obtaining U.S. or foreign regulatory approval or other products with the same or related active ingredients, a number of potential consequences could result, including:
•regulatory authorities may withdraw their approval of the product;
•regulatory authorities may require a recall of the product or we may voluntarily recall a product;
•regulatory authorities may require the addition of warnings or contradictions in the product labeling, narrowing of the indication in the product label or issuance of field alerts to physicians and pharmacies;
•we may be required to create a medication guide outlining the risks of such side effects for distribution to patients or institute a REMS;
•we may be subject to limitation as to how we promote the product;
•we may be required to change the way the product is administered or modify the product in some other way;
•the FDA or applicable foreign regulatory authority may require additional clinical trials or costly post-marketing testing and surveillance to monitor the safety or efficacy of the product;
•sales of the product may decrease significantly;
•we could be sued and held liable for harm caused to patients; and
•our brand and reputation may suffer.
Health care companies have been the subject of federal and state investigations, and we could become subject to investigations in the future.
Both federal and state government agencies have heightened civil and criminal enforcement efforts. There are numerous ongoing investigations of health care companies, including drug, biologic and medical device companies, as well as their executives and managers. In addition, amendments to the Federal False Claims Act, including under health care reform, have made it easier for private parties to bring “qui tam” (whistleblower) lawsuits against companies under which the whistleblower may be entitled to receive a percentage of any money paid to the government. The Federal False Claims Act provides, in part,
that an action can be brought against any person or entity that has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved. The government has taken the position that claims presented in violation of the federal anti-kickback law, Stark Law or other health care-related laws, including laws enforced by the FDA, may be considered a violation of the Federal False Claims Act. Penalties include substantial fines for each false claim, plus three times the amount of damages that the federal government sustained because of the act of that person or entity and/or exclusion from the Medicare program. In addition, a majority of states have adopted similar state whistleblower and false claims provisions.
We are not aware of any government investigations involving any of our facilities or management. While we believe that we are in material compliance with applicable governmental health care laws and regulations, any future investigations of our business or executives could cause us to incur substantial costs, and result in significant liabilities or penalties, as well as damage to our reputation.
It is uncertain to what extent government, private health insurers and third-party payors will approve coverage or provide reimbursement for the therapies and products to which our research and development relate. Availability for such reimbursement may be further limited by an increasing uninsured population and reductions in Medicare and Medicaid funding in the United States.
To the extent that health care providers cannot obtain coverage or reimbursement for our therapies and products, they may elect not to provide such therapies and products to their patients and, thus, may not need our services. Further, as cost containment pressures are increasing in the health care industry, government and private payors may adopt strategies designed to limit the amount of reimbursement paid to health care providers.
Similarly, the trend toward managed health care and bundled pricing for health care services in the United States, could significantly influence the purchase of health care services and products, resulting in lower prices and reduced demand for our therapeutic products under development.
We may receive a portion of our revenues from services rendered to patients enrolled in federal health care programs, such as Medicare, and we may also directly or indirectly receive revenues from federal health care programs. Federal health care programs are subject to changes in coverage and reimbursement rules and procedures, including retroactive rate adjustments. These contingencies could materially decrease the range of services covered by such programs or the reimbursement rates paid directly or indirectly for our products and services. To the extent that any health care reform favors the reimbursement of other therapies over our therapeutic products under development, such reform could affect our ability to sell our services, which may have a material adverse effect on our revenues.
The limitation on reimbursement available from private and government payors may reduce the demand for, or the price of, our services, which could have a material adverse effect on our revenues. Additional legislation or regulation relating to the health care industry or third-party coverage and reimbursement may be enacted in the future which could adversely affect the revenues generated from the sale of our products and services.
Furthermore, there has been a trend in recent years towards reductions in overall funding for Medicare and Medicaid. There has also been an increase in the number of people who do not have any form of health care coverage in recent years and who are not eligible for or enrolled in Medicare, Medicaid or other governmental programs. The extent to which the reforms brought about under health care reform may be successful in reducing the number of such uninsured is unclear, and the reduced funding of governmental programs and increase in uninsured populations could have a negative impact on the demand for our services to the extent they relate to products and services which are reimbursed by government and private payors.
Unintended consequences of health care reform legislation in the U.S. may adversely affect our business.
The health care industry is undergoing fundamental changes resulting from political, economic and regulatory influences. In the U.S., comprehensive programs are under consideration that seek to, among other things, increase access to health care for the uninsured and control the escalation of health care expenditures within the economy. In March 2010, the Patient Protection and Affordable Care Act (“PPACA”), as amended by the Health Care and Education Reconciliation Act, or the Affordable Care Act, was passed, which substantially changes the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. While we do not believe this legislation will have a direct impact on our business, the legislation requires the adoption of implementing regulations, which may have unintended consequences or indirectly impact our business. For instance, the scope and implications of the amendments pursuant to the Fraud Enforcement and Recovery Act of 2009 (“FERA”), have yet to be fully determined or adjudicated and as a result it is difficult to predict how future enforcement initiatives may impact our business. Also, in some instances our clients may be health insurers that will be subject to limitations on their administrative expenses and federal review of “unreasonable” rate increases that could impact the prices they pay for our services. If the legislation causes such unintended consequences or indirect impact, it could have a material adverse effect on our business, financial condition and results of operations.
In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, creates the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect on April 1, 2013. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Strong, partisan disagreement in Congress has prevented implementation of various PPACA provisions, and the Trump Administration has made repeal of the PPACA a priority. One of the first executive orders of the Trump administration granted federal agencies broad powers to unwind regulations under the PPACA. On January 11, 2017, the Senate voted to approve a “budget blueprint” allowing Republicans to repeal parts of the law while avoiding Democrat filibuster. The “Obamacare Repeal Resolution” passed 51-48. Certain legislators are continuing their efforts to repeal the PPACA, although there is little clarity on how such a repeal would be implemented and what a PPACA replacement might look like. For the immediate future, there is significant uncertainty regarding the health care, health care coverage and health care insurance markets.
The U.S. government has in the past considered, is currently considering and may in the future consider health care policies and proposals intended to curb rising health care costs, including those that could significantly affect both private and public reimbursement for health care services. State and local governments, as well as a number of foreign governments, are also considering or have adopted similar types of policies. Future significant changes in the health care systems in the United States or elsewhere, and current uncertainty about whether and how changes may be implemented, could have a negative impact on the demand for our products. We are unable to predict whether other health care policies, including policies stemming from legislation or regulations affecting our business, may be proposed or enacted in the future; what effect such policies would have on our business; or the effect ongoing uncertainty about these matters will have on the purchasing decisions of our customers.
We expect that additional state and federal health care reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for health care products and services, which could result in reduced demand for our products or additional pricing pressures.
Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries, particularly the member states of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries where we may seek to market our product candidates in the future, we may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our product candidate to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on prices or reimbursement levels within the country of publication and other countries. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.
Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, upon completion of
this offering and in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Competitor companies or hospitals may be able to take advantage of EU rules permitting sales of unlicensed medicines for individual patients to sell competing products without a marketing authorization.
The EU medicines rules allow individual member states to permit the supply of a medicinal product without a marketing authorization to fulfill special needs, where the product is supplied in response to a bona fide unsolicited order, formulated in accordance with the specifications of a health care professional and for use by an individual patient under his direct personal responsibility. This may in certain countries also apply to products manufactured in a country outside the EU and imported to treat specific patients or small groups of patients. In addition, designated advanced therapy medicinal products do not need a marketing authorization if they are prepared on a non-routine basis and are used within the same EU member state in a hospital in accordance with a medical prescription for an individual patient.
These exemptions could allow our competitors to make sales in the EU without having obtained a marketing authorization and without undergoing the expense of clinical trials, especially if those competitors have cell processing facilities in the relevant EU member state. Similarly, certain hospitals may be able to compete with us on the basis of these rules. Because any such sales would be made without a marketing authorization, there would be no need for the competitor company or hospital to refer to the clinical data in our marketing authorization dossiers, and so any data exclusivity protection that we may obtain for our products would not prevent such competing sales.
A variety of risks associated with operating our business internationally could materially adversely affect our business.
We plan to seek regulatory approval of our product candidates outside of the United States and, accordingly, we expect that we, and any potential collaborators in those jurisdictions, will be subject to additional risks related to operating in foreign countries, including:
•differing regulatory requirements in foreign countries;
•differing coverage and reimbursement requirements in foreign countries;
•unexpected changes in tariffs, trade barriers, price and exchange controls, and other regulatory requirements;
•economic weakness, including inflation, or political instability in particular foreign economies and markets;
•compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad;
•foreign taxes, including withholding of payroll taxes;
•foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;
•difficulties staffing and managing foreign operations;
•workforce uncertainty in countries where labor unrest is more common than in the United States;
•potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign laws, such as the U.K. Anti-Bribery Act;
•challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;
•production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
•business interruptions resulting from geo-political actions, including war and terrorism.
These and other risks associated with our planned international operations may materially adversely affect our ability to attain or maintain profitable operations.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY
We may be unable to obtain or maintain patent protection for our products and product candidates, which could have a material adverse effect on our business.
Our commercial success will depend, in part, on obtaining and maintaining patent protection for new technologies, product candidates, products and processes and successfully defending such patents against third-party challenges. To that end, we file
patent applications, and have been issued patents, that are intended to cover certain methods and uses of human cells as well as compositions and methods relating to hematopoietic stem cells. These patent applications may never result in the issuance of patents.
The patent positions of biotechnology companies can be highly uncertain and involve complex legal, scientific and factual questions and recent court decisions have introduced significant uncertainty regarding the strength of patents in the industry. Moreover, the legal systems of some foreign countries do not favor the aggressive enforcement of patents and may not protect our intellectual property rights to the same extent as the laws of the United States. Any of the issued patents we own or license may be challenged by third parties and held to be invalid, unenforceable or with a narrower or different scope of coverage than what we currently believe, effectively reducing or eliminating protection we believed we had against competitors with similar products or technologies. If we ultimately engage in and lose any such patent disputes, we could be subject to competition and/or significant liabilities, we could be required to enter into third-party licenses or we could be required to cease using the disputed technology or product. In addition, even if such licenses are available, the terms of any license requested by a third party could be unacceptable or unaffordable to us.
Product development and approval timelines in the biotechnology industry are very lengthy. As such, it is possible that any patents that may cover an approved product may have expired at the time of commercialization or only have a short remaining period of exclusivity, thereby reducing the commercial advantages of the patent. In such case, we would then rely solely on other forms of exclusivity, such as regulatory exclusivity provided by the FDC Act, which may provide less protection to our competitive position.
Litigation relating to intellectual property is expensive, time-consuming and uncertain, and we may be unsuccessful in our efforts to protect against infringement by third parties or defend ourselves against claims of infringement.
To protect our intellectual property, we may initiate litigation or other proceedings. In general, intellectual property litigation is costly, time-consuming, diverts the attention of management and technical personnel and could result in substantial uncertainty regarding our future viability, even if we ultimately prevail. Some of our competitors may be able to sustain the costs of such litigation or other proceedings more effectively than can we because of their substantially greater financial resources. The loss or narrowing of our intellectual property protection, the inability to secure or enforce our intellectual property rights or a finding that we have infringed the intellectual property rights of a third party could limit our ability to develop or market our products and services in the future or adversely affect our revenues. Furthermore, any public announcements related to such litigation or regulatory proceedings could adversely affect the price of our common stock.
Third parties may allege that the research, development and commercialization activities we conduct infringe patents or other proprietary rights owned by such parties. While we do not believe any of our current activities infringe the rights of others, we have not conducted an exhaustive search or analysis of third-party patent rights to determine whether our pre-clinical or clinical research and development or activities may infringe or be alleged to infringe any third-party patent rights. If we are found to have infringed the patents of a third party, we may be required to pay substantial damages; we also may be required to seek from such party a license, which may not be available on acceptable terms, if at all, to continue our activities. A judicial finding or infringement or the failure to obtain necessary licenses could prevent us from commercializing our products, which would have a material adverse effect on our business, operating results and financial condition.
If we are unable to maintain our licenses, patents or other intellectual property we could lose important protections that are material to continuing our operations and our future prospects.
To obtain and maintain patent protection and licensing rights under certain of our license agreement, we must, among other things, ensure the timely payment of all applicable filing and maintenance fees. Any failure to do so could result in the loss of some or all of our rights to proprietary technology or the inability to secure or enforce intellectual property protection.
Additionally, our license agreements require us to meet certain diligence obligations in the development of the licensed products. Our failure to meet these diligence obligations could result in the loss of some or all of our rights, which could materially and adversely affect our business and future prospects.
If we are unable to protect the confidentiality of trade secrets, our competitive position could be impaired.
A significant amount of our technology, especially regarding manufacturing processes, is unpatented and is maintained as trade secrets and /or know-how. We expend significant energy, resources and know-how in an effort to protect these trade secrets and know-how, including through the use of confidentiality agreements. Even so, improper use or disclosure of our
confidential information could occur, and in such case, adequate remedies may not exist. The disclosure of trade secrets and know-how could impair our competitive position.
In certain countries, patent holders may be required to grant compulsory licenses, which would likely have a significant and detrimental effect on any future revenues in such country.
Many countries, including some countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, most countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may be limited to monetary relief and may be unable to enjoin infringement, which could materially diminish the value of the patent. Compulsory licensing of life-saving products is also becoming increasingly common in developing countries, either through direct legislation or international initiatives. Such compulsory licenses could be extended to our product candidates, which may limit our potential revenue opportunities, including with respect to any future revenues that may result from our product candidates.
Changes to U.S. patent law may have a material adverse effect on our intellectual property rights.
The Leahy-Smith America Invents Act (AIA), which was signed into law on September 16, 2011, significantly changed United States patent law. It may take some time to establish what the law means, since it is just being interpreted by the lower courts, and any lower court decisions have not been reviewed by either the Federal Circuit Court of Appeals or the Supreme Court, a process that will take years. The first major change is that AIA switches the U.S. patent system from a “first to invent” system to a “first to file” system. Now that the first to file system is in effect, there is a risk that another company may independently develop identical or similar patents at approximately the same time and be awarded the patents instead of us. Further, in the second major change, AIA abolished interference proceedings, and establishes derivation proceedings to replace interference proceedings in all cases in which the time period for instituting an interference proceeding has not lapsed where an inventor named in an earlier application derived the claimed invention from a named inventor. Now that the derivation proceedings are in effect, there is a risk that the inventorship of any pending patent application can be challenged for reasons of derivation. The third major change is that AIA established post-grant opposition proceedings that will apply only to patent applications filed after “first to file” became effective. Post-grant opposition will enable a person who is not the patent owner to initiate proceedings in the patent office within 9 months after the grant of a patent that can result in cancellation of a patent as invalid. There is a risk, therefore, that any of our patents once granted after the effective date of these provisions of the AIA (March 16, 2013) may be subject to post-grant opposition, which will increase uncertainty on the validity of any newly granted patent or may ultimately result in cancellation of the patent.
Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.
Our commercial success depends in part on our avoiding infringement of the patents, trademarks and proprietary rights of third parties. There have been many lawsuits and other proceedings involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, and reexamination proceedings before the U.S. Patent and Trade Office (the "USPTO") and corresponding foreign patent offices and trademark violations. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing products and services. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our products and services may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to devices, materials, formulations, methods of manufacture, or methods for treatment related to the use or manufacture of our products and services. We have conducted freedom to operate analyses with respect to only certain of our products and services, and therefore we do not know whether there are any third-party patents that would impair our ability to commercialize these products and services. We also cannot guarantee that any of our analyses are complete and thorough, nor can we be sure that we have identified each and every patent and pending application in the United States and abroad that is relevant or necessary to the commercialization of our products and services. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our products or services may infringe upon.
In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover aspects of our products or services, the holders of any such patents may be able to block our ability to commercialize such products or services unless we obtained a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable. Such a license may not be available on commercially reasonable terms or at all.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our products or services. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
RISKS RELATED TO OUR CAPITAL STOCK
Our stock price has been, and will likely continue to be, highly volatile.
The market price of our common stock has been, and in the future may continue to be, highly volatile. For example, from January 1, 2020 through February 25, 2021 our common stock traded as low as $1.05 per share and as high as $4.89 per share.
The market price for our common stock is highly dependent on, among other things, stock market conditions in general, our clinical development efforts and the growth of our business in general, the amount of our available cash and investments and our level of cash utilization. Future events could increase the volatility seen in our common stock and ultimately cause a significant decline in the price of our common stock and ultimately impact our ability to raise additional capital in the future. These events could include the following, among others:
•low levels of trading volume for our shares;
•capital-raising or other transactions that are, or may in the future be, dilutive to existing stockholders or that involve the issuance of debt securities;
•delays in our clinical trials, negative clinical trial results or adverse regulatory decisions relating to our product candidates;
•adverse fluctuations in our revenues or operating results or financial results that otherwise fall below the market's expectations;
•disappointing developments concerning our cell therapy product candidates;
•positive developments concerning our cell therapy product candidates that lead to the need for additional capital to complete the development process; and
•legal challenges, disputes and/or other adverse developments impacting our patents or other proprietary rights that protect our products.
In addition, broader external events, such as news concerning economic or market conditions in the general economy or within our industry, the activities of our competitors, changes (or the threat of changes) in U.S. or foreign government regulations impacting the life sciences industry or the movement of capital into or out of our industry, are likely to affect the price of our common stock. There can be no assurance that the market price of our common stock will not continue to fluctuate or decline significantly in the future.
In addition to potential dilution associated with future fundraising transactions, we currently have significant numbers of securities outstanding that are exercisable for our common stock, which could result in significant additional dilution and downward pressure on our stock price.
As of December 31, 2020, there were 19,378,3331,039,481 shares of our common stock outstanding. In addition, there were outstanding stock options, restricted stock units and warrants representing the potential issuancewhich are exercisable within 60 days of an additional 3,942,000 shares of our common stock. The issuance of these shares in the future would result in significant dilution to our current stockholders and could adversely affect the price of our common stock and the terms on which we could raise additional capital. In addition, the issuance and subsequent trading of shares could cause the supply of our common stock available for purchase in the market to exceed the purchase demand for our common stock. Such supply in excess of demand could cause the market price of our common stock to decline.
Provisions in our amended and restated certificate of incorporation and by-laws and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our common stock and could entrench management.
Our amended and restated certificate of incorporation and by-laws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. Our board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year.
As a result, at a given annual meeting only a minority of the board of directors may be considered for election. Since our staggered board of directors may prevent our stockholders from replacing a majority of our board of directors at any given annual meeting, it may entrench management and discourage unsolicited stockholder proposals that may be in the best interests of stockholders. Moreover, our board of directors has the ability to designate the terms of and issue new series of preferred stock without stockholder approval.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
During the course of testing our disclosure controls and procedures and internal control over financial reporting, we may identify and disclose material weaknesses or significant deficiencies in internal control over financial reporting that will have to be remedied. Implementing any appropriate changes to our internal control may require specific compliance training of our directors, officers and employees, entail substantial costs to modify our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal control over financial reporting, and any failure to maintain that adequacy or inability to produce accurate financial statements on a timely basis could result in our financial statements being unreliable, increase our operating costs and materially impair our ability to operate our business.
Failure to achieve and maintain effective internal control over financial reporting could result in a loss of investor confidence in our financial reports and could have a material adverse effect on our stock price. Additionally, failure to maintain effective internal control over our financial reporting could result in government investigation or sanctions by regulatory authorities.
We may fail to comply with the continued listing requirements of the Nasdaq Capital Market, such that our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
Our common stock is listed for trading on the Nasdaq Capital Market. We must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for 30 consecutive business days. If a company trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice to the company, advising that it has been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements.
A delisting of our common stock from Nasdaq could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
Our corporate headquarters are in Basking Ridge, New Jersey. The space is approximately 11,600 rentable square feet. The base monthly rent is approximately $25,000 and the lease term ends May 31, 2022. In addition, there are two five-year renewal options. In July 2019, we executed a three-year lease extension for the approximately 3,400 rentable square feet in our Rye Brook, New York office, which extension expires in March 2023. The base monthly rent for our Rye Brook office is approximately $8,900. We believe the total leased space is sufficient for the near future.
ITEM 3. LEGAL PROCEEDINGS.
We are party to certain legal proceedings in the ordinary course of business. We do not believe that any current legal proceedings are likely to have a material effect on our business, financial condition or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market for Our Common Equity
Our common stock trades on The Nasdaq Capital Market under the symbol “CLBS.”
Holders
As of February 25, 2021, there were approximately 603 stockholders of record of our common stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of our common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.
Dividends and Dividend Policy
We have not paid cash dividends on our common stock. The holders of our common stock are each entitled to receive dividends when and if declared by the board of directors out of funds legally available therefor, subject to the terms of any outstanding series of preferred stock. We intend to retain any future earnings to fund the development and growth of our business, and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Equity Compensation Plan Information
The following table provides information as of December 31, 20202021 regarding shares of our common stock that may be issued under our existing equity compensation plans, including our 2018 Equity Incentive Compensation Plan (the "2018 Plan"“2018 Plan”), our 2015 Equity Compensation Plan (the "2015 Plan"“2015 Plan”), our 2009 Stock Option and Incentive Plan (the “2009 Plan”), and our amended 2017 Employee Stock Purchase Plan (the "Amended“Amended 2017 ESPP"ESPP”).
| | | Equity Compensation Plan Information | | Equity Compensation Plan Information |
| | Number of securities to be issued upon exercise of outstanding options (1) | Weighted Average exercise price of outstanding options and rights | Number of securities remaining available for future issuance under equity compensation plan (excluding securities referenced in column (a)) | | | Number of securities to be issued upon exercise of outstanding options (1) | Weighted Average exercise price of outstanding options and rights | Number of securities remaining available for future issuance under equity compensation plan (excluding securities referenced in column (a)) | |
| Equity compensation plans approved by security holders (2) | Equity compensation plans approved by security holders (2) | 963,700 | $14.64 | 1,723,739 | (3) | Equity compensation plans approved by security holders (2) | 2,131,849 | $5.64 | 5,886,238 | (3) |
| Equity compensation plans not approved by security holders | Equity compensation plans not approved by security holders | 0 | — | 0 | | Equity compensation plans not approved by security holders | 0 | — | 0 | |
(1)Includes stock options only; does not include purchase rights accruing under the Amended 2017 ESPP Plan because the purchase price (and therefore the number of shares to be purchased) will not be determined until the end of the purchase period.
(2)Consists of the 2018 Plan, the 2015 Plan, the 2009 Plan, and the Amended 2017 ESPP.
(3)Includes shares available for future issuance under the 2018 Plan and the Amended 2017 ESPP.
Recent Sales of Unregistered Securities
None.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” herein. The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report.
Overview
We are a clinical-stage biopharmaceutical company dedicated to the development and commercialization of cellular therapies designed to reverse disease and/or promote the regeneration of damaged tissue. We are developing first-in-class therapeutics based on the characteristics of naturally occurring CD34+ cells and their ability to stimulate the growth of new microvasculature. Our technology leverages these cells to enable the body's natural repair mechanisms using formulations unique to each medical indication.
Our leadership team has decades of collective biopharmaceutical development experience. Our goal is to develop and commercialize products that address important unmet medical needs based on a broad and versatile portfolio of candidates. The Company’s current product candidates include: CLBS16, the subject of both a recently completed positive Phase 2a study and a newly initiated Phase 2b study in the U.S. for the treatment of coronary microvascular dysfunction (“CMD”); HONEDRA® (CLBS12), recipient of SAKIGAKE designation and eligible for early conditional approval in Japan for the treatment of critical limb ischemia (“CLI”) and Buerger’s Disease based on the results of an ongoing clinical trial; CLBS201, designed to assess the safety and efficacy of CD34+ cell therapy as a treatment for pre-dialysis patients with chronic kidney disease (“CKD”) and OLOGO™ (CLBS14), a Regenerative Medicine Advanced Therapy (“RMAT”) designated therapy for which the Company is in discussion with the U.S. Food and Drug Administration (the “FDA”) to finalize a Phase 3 protocol of reduced size and scope for a confirmatory trial in subjects with no-option refractory disabling angina (“NORDA”).
Results of Operations
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Overall, net losses were $8.1 million and $19.4 million for the years ended December 31, 2020 and 2019, respectively.
Operating Expenses
For the year ended December 31, 2020, operating expenses totaled $19.1 million compared to $20.1 million for the year ended December 31, 2019, representing a decrease of $0.9 million or 5%. Operating expenses comprise the following:
•Research and development expenses were approximately $9.3 million for the year ended December 31, 2020 compared to $10.8 million for the year ended December 31, 2019, representing a decrease of approximately $1.5 million, or 14%. Research and development in both periods focused on the advancement of our ischemic repair platform and related to:
◦expenses associated with investigational new drug application and planning for commencement in the third quarter of 2020 of a pilot study of CLBS119, a CD34+ cell therapy for repair of COVID-19 induced lung damage targeting patients with severe SARS-CoV-2 infection that required ventilatory support due to respiratory failure;
◦ongoing registration-eligible study expenses for HONEDRA® in critical limb ischemia in Japan, whereby we continue to focus spending on our patient enrollment. We may continue to experience delays in enrollment in that study due to the “State of Emergency” issued in Japan on Jan 7, 2021 and now extending through March 7, 2021 covering Tokyo and other regions in response to increased number of COVID-19 patients as well as a severe shortage of beds in intensive care units (and other hospital beds) affecting all of our clinical sites. We expect to complete enrollment during the second quarter of 2021;
◦expenses associated with the proof-of-concept study for CLBS16 in coronary microvascular dysfunction, whereby study enrollment was completed in the second quarter of 2019 and full results reported in May 2020 and continuing efforts to advance CLBS16 into a Phase 2b study (the FREEDOM study) in the second half of 2020; and
◦expenses associated with the preparation of our confirmatory Phase 3 study of OLOGOTM in NORDA in the second quarter of 2019. In late 2019, we projected that the Phase 3 study then agreed with the FDA would
cost approximately $70 million in external expenses over the next several years, and as a result, we elected to postpone the initiation of the study until we have confidence that we can access sufficient capital to allow us to complete the study uninterrupted. Discussions with FDA aimed at reducing the size and scope of the Phase 3 requirement continue.
•General and administrative expenses were approximately $9.9 million for the year ended December 31, 2020, compared to $9.3 million for the year ended December 31, 2019, representing an increase of approximately $0.6 million, or 6%. Our general and administrative expenses focus on general corporate-related activities.
Historically, to minimize our use of cash, we have used a variety of equity and equity-linked instruments as compensation to employees, consultants, directors and other service providers. The use of these instruments has resulted in charges to the results of operations, which has been significant in the past.
Other Income (Expense)
Total other income (expense) is primarily comprised of investment income on cash and marketable securities.
Income Tax Benefit
In April 2020, we received approval from the New Jersey Economic Development Authority ("NJEDA") to participate in the Technology Business Tax Certificate Transfer Program (the "Program"), whereby we qualified to sell a percentage of our New Jersey net operating losses ("NJ NOLs"). We subsequently sold a portion of our NJ NOLs to a qualifying and approved buyer pursuant to the Program for net proceeds of $10.9 million.
Analysis of Liquidity and Capital Resources
At December 31, 2020, we had cash, cash equivalents, and marketable securities of approximately $34.6 million, working capital of approximately $31.8 million, and stockholders’ equity of approximately $32.5 million.
During the year ended December 31, 2020, we met our immediate cash requirements through existing cash balances. Additionally, we used equity and equity-linked instruments to pay for services and compensation.
Net cash provided by or used in operating, investing and financing activities were as follows (in thousands):
| | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2020 | | 2019 | | |
| Net cash used in operating activities | $ | (8,823) | | | $ | (18,882) | | | |
| Net cash (used in) provided by investing activities | (7,277) | | | 21,432 | | | |
| Net cash provided by financing activities | 18,580 | | | 1,183 | | | |
Operating Activities
Our cash used in operating activities during the year ended December 31, 2020 totaled approximately $8.8 million, which is the sum of (i) our net loss of $8.1 million, as adjusted for non-cash income and expenses totaling $1.6 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities of approximately $2.3 million.
Our cash used in operating activities during the year ended December 31, 2019 totaled approximately $18.9 million, which is the sum of (i) our net loss of $19.4 million, as adjusted for non-cash income and expenses totaling $1.6 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities of approximately $1.1 million.
Investing Activities
Our cash used in investing activities during the year ended December 31, 2020 totaled approximately $7.3 million and was primarily due to net purchases of marketable securities (net of sales of marketable securities).
Our cash provided by investing activities during the year ended December 31, 2019 totaled approximately $21.4 million and was primarily due to net proceeds from the sale of marketable securities (net of purchases of marketable securities).
Financing Activities
Our cash provided by financing activities during the year ended December 31, 2020, consisted of (i) net proceeds of $4.5 million through the issuance of common shares and warrants in our April 2020 registered direct offering, (ii) net proceeds of $3.8 million through the issuance of common shares and warrants in our May 2020 registered direct offering, (iii) net proceeds of $1.9 million through the issuance of common shares and warrants in our July 2020 private placement offering, and (iii) net proceeds of $8.4 million through the issuance of common shares under our common stock sales agreement with H.C. Wainwright, which was partially offset by tax withholding-related payments on net share settlement equity awards to employees.
Our cash provided by financing activities during the year ended December 31, 2019 consisted of proceeds of $1.0 million through the issuance of shares of our common stock under the provisions of our common stock purchase agreement with Lincoln Park Capital, and proceeds of $0.3 million through the issuance of shares of our common stock under the provisions of our Common Stock Sales Agreement with H.C. Wainwright, which was partially offset by tax withholding-related payments on net share settlement equity awards to employees.
Liquidity and Capital Requirements Outlook
To meet our short and long-term liquidity needs, we expect to use existing cash balances and a variety of other means. Other sources of liquidity could include additional potential issuances of debt or equity securities in public or private financings, partnerships and/or collaborations and/or sale of assets. Our history of operating losses and liquidity challenges may make it difficult for us to raise capital on acceptable terms or at all. The demand for the equity and debt of biopharmaceutical companies like ours is dependent upon many factors, including the general state of the financial markets. During times of extreme market volatility, capital may not be available on favorable terms, if at all. Our inability to obtain such additional capital could materially and adversely affect our business operations. We will also continue to seek, as appropriate, grants for scientific and clinical studies from various governmental agencies and foundations, and other sources of non-dilutive funding. We believe that our cash on hand will enable us to fund operating expenses for at least the next 12 months following the issuance of our financial statements considering the assumption that any initiation of an OLOGOTM Phase 3 study is contingent on our acquisition of additional capital to fund such a study.
On February 12, 2021, we entered into a Securities Purchase Agreement (the “Institutional Purchase Agreement”) with certain institutional investors (the “Institutional Purchasers”). Pursuant to the terms of the Institutional Purchase Agreement, we sold to the Institutional Purchasers in a registered direct offering an aggregate of 24,906,134 shares of our common stock and warrants to purchase an aggregate of 12,453,067 shares of our common stock at a combined purchase price equal to $2.45 per share and associated warrant. Each warrant features an exercise price equal to $2.90 per share, is exercisable immediately upon issuance and will expire five years from the issuance date. Additionally, in a concurrent non-brokered registered direct offering, we entered into a Securities Purchase Agreement (the “Additional Purchase Agreement”) with certain accredited investors (the “Additional Purchasers”). Pursuant to the terms of the Additional Purchase Agreement, we sold to the Additional Purchasers an aggregate of 1,632,652 shares of our common stock and warrants to purchase an aggregate of 816,326 shares of our common stock at a combined purchase price equal to $2.45 per share and associated warrant. Each warrant features an exercise price equal to $2.90 per share, is exercisable immediately upon issuance and will expire five years from the issuance date. The closing of the offerings occurred on February 17, 2021. In connection with the registered direct offerings, we received net proceeds of approximately $60.7 million.
On February 12, 2021, we suspended the use of the at-the-market transactions facility (the “ATM”) and terminated the continuous offering pursuant to the Common Stock Sales Agreement (“Sales Agreement”) entered into in February 2018 with H.C. Wainwright & Co., LLC (“HCW”). In accordance with the terms of the Sales Agreement, we could offer and sell shares of our common stock having an aggregate offering price of up to $25.0 million from time to time through HCW pursuant to the ATM program. As of February 12, 2021, we had sold an aggregate of 3,784,912 shares of our common stock pursuant to the Sales Agreement for aggregate gross proceeds of $9.5 million. We will no longer make any sales of our common stock pursuant to the Sales Agreement unless and until a new prospectus supplement is filed with the Securities and Exchange Commission.
In January 2021, we entered into a Securities Purchase Agreement (the “January Purchase Agreement”) with certain institutional and accredited investors (the “January Purchasers”), pursuant to which the Company issued and sold to the January Purchasers in a private placement an aggregate of (i) 12,500,000 shares of common stock, and (ii) warrants exercisable for up to an aggregate of 6,250,000 shares of common stock at a combined offering price of $2.00 per share of common stock and associated warrant. The warrants have an exercise price of $2.90 per share. Each warrant will be immediately exercisable and will expire five and one-half years from the issuance date. The closing of the offering occurred on January 25, 2021. We received gross proceeds of $25.0 million in connection with the private placement, before deducting placement agent fees and related offering expenses.
In July 2020, we entered into a securities purchase agreement (the “July Private Placement”) with certain investors (the “July Purchasers”). Pursuant to the terms of the July Private Placement, we sold to the July Purchasers an aggregate of 969,694
shares of our common stock at a purchase price equal to $2.0625 per share, along with warrants to purchase an aggregate of 484,847 shares of our common stock. In connection with the July Private Placement, we received gross proceeds of $2.0 million. Each warrant is exercisable for one share of common stock and features an exercise price equal to $2.0625 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.
In May 2020, we entered into a securities purchase agreement (the “May Purchase Agreement”) with certain investors (the “May Purchasers”). Pursuant to the terms of the May Purchase Agreement, we sold to the May Purchasers an aggregate of 2,084,850 shares of our common stock at a purchase price equal to $2.0625 per share. In a concurrent private placement, we issued to the May Purchasers warrants to purchase an aggregate of 1,042,425 shares of our common stock. In connection with the registered direct offering and concurrent private placement, we received gross proceeds of $4.3 million. Each warrant is exercisable for one share of common stock and features an exercise price equal to $2.0625 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.
In April 2020, we entered into a securities purchase agreement (the “April Purchase Agreement”) with certain investors (the “April Purchasers”). Pursuant to the terms of the April Purchase Agreement, we sold to the Purchasers an aggregate of 2,162,166 shares of our common stock at a purchase price equal to $2.3125 per share. In a concurrent private placement, we issued to the April Purchasers warrants to purchase an aggregate of 1,081,083 shares of our common stock. In connection with the registered direct offering and concurrent private placement, we received gross proceeds of $5.0 million. Each warrant is exercisable for one share of common stock and features an exercise price equal to $2.25 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.
In December 2019, we received preliminary approval from the New Jersey Economic Development Authority ("NJEDA") to participate in the Technology Business Tax Certificate Transfer Program (the "Program"). The Program permits qualified companies to sell a percentage of their New Jersey net operating losses ("NJ NOLs") to unrelated profitable corporations. On April 21, 2020, we received final approval from NJEDA, and we subsequently sold a portion of our NJ NOLs to a qualifying and approved buyer pursuant to the Program for net proceeds of $10.9 million.
In March 2019, we and Lincoln Park Capital Fund, LLC (“Lincoln Park”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”), pursuant to which we have the right to sell to Lincoln Park shares of our common stock having an aggregate value of up to $26 million, subject to certain limitations and conditions set forth in the Purchase Agreement (the “Offering”). As consideration for entering into the Purchase Agreement, we issued to Lincoln Park an additional 181,510 shares of common stock as commitment shares. Pursuant to the Purchase Agreement, Lincoln Park purchased 250,000 shares of common stock, at a price of $4.00 per share, for a total gross purchase price of $1.0 million (the “Initial Purchase”) upon commencement. Thereafter, as often as every business day from and after one business day following the date of the Initial Purchase and over the 36-month term of the Purchase Agreement, we have the right, from time to time, at its sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 100,000 shares of common stock, with such amount increasing as the closing sale price of the common stock increases; provided Lincoln Park’s obligation under any single such purchase will not exceed $2,500,000, unless we and Lincoln Park mutually agree to increase the maximum amount of such single purchase (each, a “Regular Purchase”). If we direct Lincoln Park to purchase the maximum number of shares of common stock it then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, we may direct Lincoln Park in an “accelerated purchase” to purchase an additional amount of common stock that may not exceed the lesser of (i) 300% the number of shares purchased pursuant to the corresponding Regular Purchase or (ii) 30% of the total number of shares of our common stock traded during a specified period on the applicable purchase date as set forth in the Purchase Agreement. Under certain circumstances and in accordance with the Purchase Agreement, we may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day. As of December 31, 2020, the Company had not made any sales of common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase.
While we continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital generating efforts may worsen as existing resources are used. Additional equity financing may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; our stock price may not reach levels necessary to induce option or warrant exercises; and asset sales may not be possible on terms we consider acceptable. If we are unable to access capital necessary to meet our long-term liquidity needs, we may have to delay the expansion of our business or raise funds on terms that we currently consider unfavorable.
SEASONALITY
We do not believe that our operations are seasonal in nature.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the financial statements. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
An accounting policy is considered to be critical if it is important to our financial condition and results of operations and if it requires management’s most difficult, subjective and complex judgments in its application. For a summary of all of our significant accounting policies, see Note 2 to our Consolidated Financial Statements.
Share-Based Compensation
We expense all share-based payment awards to employees, directors, and consultants, including grants of stock options, warrants, and restricted stock, over the requisite service period based on the grant date fair value of the awards. Consultant awards are remeasured each reporting period through vesting. For awards with performance-based vesting criteria, we estimate the probability of achievement of the performance criteria and recognize compensation expense related to those awards expected to vest. We determine the fair value of option awards using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options or warrants. The fair value of our restricted stock and restricted stock units is based on the closing market price of our common stock on the date of grant.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and notes thereto required to be filed under this Item are presented commencing on page 50 of this Annual Report on Form 10-K.
Caladrius Biosciences, Inc. and Subsidiaries
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Caladrius Biosciences, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Caladrius Biosciences, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2011.
New York, New York
February 25, 2021
CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| | | | | | | | | | | |
| December 31,
2020 | | December 31,
2019 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 16,512 | | | $ | 14,032 | |
| Marketable securities | 18,061 | | | 11,125 | |
| Prepaid and other current assets | 758 | | | 815 | |
| Total current assets | 35,331 | | | 25,972 | |
| Property and equipment, net | 57 | | | 100 | |
| | | |
| Other assets | 614 | | | 1,081 | |
| Total assets | $ | 36,002 | | | $ | 27,153 | |
| LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY | | | |
| Liabilities | | | |
| Accounts payable | $ | 1,020 | | | $ | 1,490 | |
| Accrued liabilities | 2,486 | | | 4,486 | |
| | | |
| Total current liabilities | 3,506 | | | 5,976 | |
| Other long-term liabilities | 254 | | | 624 | |
| Total liabilities | 3,760 | | | 6,600 | |
| Commitments and Contingencies | 0 | | 0 |
| Stockholders' Equity | | | |
Preferred stock; authorized, 20,000,000 shares Series B convertible redeemable preferred stock liquidation value, 0.001 share of common stock, $0.01 par value; 825,000 shares designated; issued and outstanding, 10,000 shares at December 31, 2020 and December 31, 2019, respectively | 0 | | | 0 | |
| Common stock, $0.001 par value, authorized 500,000,000 shares; issued 19,389,413 and 10,528,689 shares, at December 31, 2020 and December 31, 2019, respectively; and outstanding, 19,378,333 and 10,517,609 shares, at December 31, 2020 and December 31, 2019, respectively | 19 | | | 11 | |
| Additional paid-in capital | 458,748 | | | 438,911 | |
| Treasury stock, at cost; 11,080 shares at December 31, 2020 and December 31, 2019 respectively | (708) | | | (708) | |
| Accumulated deficit | (425,550) | | | (417,400) | |
| Accumulated other comprehensive (loss) income | (13) | | | 2 | |
| Total Caladrius Biosciences, Inc. stockholders' equity | 32,496 | | | 20,816 | |
| Noncontrolling interests | (254) | | | (263) | |
| Total equity | 32,242 | | | 20,553 | |
| Total liabilities, non-controlling interests and equity | $ | 36,002 | | | $ | 27,153 | |
See accompanying notes to consolidated financial statements.
CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| | | | | | | | | | | |
| | Year Ended December 31, |
| | 2020 | | 2019 |
| Operating Expenses: | | | |
| Research and development | $ | 9,253 | | | $ | 10,797 | |
| General, and administrative | 9,892 | | | 9,295 | |
| Operating expenses | 19,145 | | | 20,092 | |
| | | |
| Operating loss | (19,145) | | | (20,092) | |
| | | |
| Other income: | | | |
| Other income, net | 132 | | | 740 | |
| | | |
| Total other income, net | 132 | | | 740 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Net loss before benefit from income taxes and noncontrolling interests | (19,013) | | | (19,352) | |
| Benefit from income taxes | (10,872) | | | 0 | |
| Net loss | $ | (8,141) | | | $ | (19,352) | |
| Less - net income attributable to noncontrolling interests | 9 | | | 9 | |
| | | |
| Net loss attributable to Caladrius Biosciences, Inc. common shareholders | $ | (8,150) | | | $ | (19,361) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Basic and diluted loss per share: | | | |
| | | |
| | | |
| | | |
| Caladrius Biosciences, Inc. common shareholders | $ | (0.53) | | | $ | (1.88) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Weighted average common shares outstanding: | | | |
| Basic and diluted shares | 15,440 | | | 10,325 | |
| | | |
See accompanying notes to consolidated financial statements.
CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
| | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2020 | | 2019 | | |
| Net loss | $ | (8,141) | | | $ | (19,352) | | | |
| | | | | |
| Other comprehensive loss: | | | | | |
| Available for sale securities - net unrealized (loss) income | (15) | | | 34 | | | |
| Total other comprehensive (loss) income | (15) | | | 34 | | | |
| | | | | |
| Comprehensive loss | (8,156) | | | (19,318) | | | |
| | | | | |
| Comprehensive income attributable to noncontrolling interests | 9 | | | 9 | | | |
| | | | | |
| Comprehensive loss attributable to Caladrius Biosciences, Inc. common stockholders | $ | (8,165) | | | $ | (19,327) | | | |
See accompanying notes to consolidated financial statements.
CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Series B Convertible
Preferred Stock | | Common Stock | | Additional
Paid in
Capital | | Accumulated
Other
Comprehensive
Income (Loss) | | Accumulated
Deficit | | Treasury
Stock | | Total
Caladrius Biosciences,
Inc.
Stockholders'
Equity | | Non-
Controlling
Interest in
Subsidiary | | Total
Equity
|
| | Shares | | Amount | | Shares | | Amount | | | | | | | |
| Balance at December 31, 2018 | 10 | | | $ | 0 | | | 9,866 | | | $ | 10 | | | $ | 436,433 | | | $ | (32) | | | $ | (397,977) | | | $ | (708) | | | $ | 37,726 | | | $ | (272) | | | $ | 37,454 | |
| Adoption of accounting standard | — | | | — | | | — | | | — | | | — | | | — | | | (62) | | | — | | | (62) | | | — | | | (62) | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | (19,361) | | | — | | | (19,361) | | | 9 | | | (19,352) | |
| Unrealized gain on marketable securities | — | | | — | | | — | | | — | | | — | | | 34 | | | — | | | — | | | 34 | | | — | | | 34 | |
| Share-based compensation | — | | | — | | | 94 | | | 0 | | | 1,165 | | | — | | | — | | | — | | | 1,165 | | | — | | | 1,165 | |
| Net proceeds from issuance of common stock | — | | | — | | | 569 | | | 1 | | | 1,313 | | | — | | | — | | | — | | | 1,314 | | | — | | | 1,314 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2019 | 10 | | | $ | 0 | | | 10,529 | | | $ | 11 | | | $ | 438,911 | | | $ | 2 | | | $ | (417,400) | | | $ | (708) | | | $ | 20,816 | | | $ | (263) | | | $ | 20,553 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | — | | | (8,150) | | | — | | | (8,150) | | | 9 | | | (8,141) | |
| Unrealized loss on marketable securities | — | | | — | | | — | | | — | | | — | | | (15) | | | — | | | — | | | (15) | | | — | | | (15) | |
| Share-based compensation | — | | | — | | | 53 | | | 0 | | | 1,117 | | | — | | | — | | | — | | | 1,117 | | | — | | | 1,117 | |
| Net proceeds from issuance of common stock and warrants | — | | | — | | | 8,807 | | | 8 | | | 18,720 | | | — | | | — | | | — | | | 18,728 | | | — | | | 18,728 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2020 | 10 | | | $ | 0 | | | 19,389 | | | $ | 19 | | | $ | 458,748 | | | $ | (13) | | | $ | (425,550) | | | $ | (708) | | | $ | 32,496 | | | $ | (254) | | | $ | 32,242 | |
See accompanying notes to consolidated financial statements.
CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2020 | | 2019 | | |
| Cash flows from operating activities: | | | | | |
| Net loss | $ | (8,141) | | | $ | (19,352) | | | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
| Equity-based compensation expense | 1,265 | | | 1,295 | | | |
| Depreciation and amortization | 63 | | | 65 | | | |
| | | | | |
| | | | | |
| | | | | |
| Amortization/accretion on marketable securities | 307 | | | 232 | | | |
| Changes in operating assets and liabilities: | | | | | |
| Prepaid and other current assets | 56 | | | 238 | | | |
| Other assets | 466 | | | 504 | | | |
| Accounts payable, accrued liabilities and other liabilities | (2,839) | | | (1,864) | | | |
| Net cash used in operating activities | (8,823) | | | (18,882) | | | |
| Cash flows from investing activities: | | | | | |
| Purchase of marketable securities | (34,799) | | | (32,938) | | | |
| Sales of marketable securities | 27,542 | | | 54,370 | | | |
| | | | | |
| Purchases of property and equipment | (20) | | | 0 | | | |
| Net cash (used in) provided by investing activities | (7,277) | | | 21,432 | | | |
| Cash flows from financing activities: | | | | | |
| | | | | |
| Tax withholding payments on net share settlement equity awards | (148) | | | (130) | | | |
| Net proceeds from issuance of capital stock | 18,728 | | | 1,313 | | | |
| | | | | |
| | | | | |
| | | | | |
| Net cash provided by financing activities | 18,580 | | | 1,183 | | | |
| Net increase in cash and cash equivalents | 2,480 | | | 3,733 | | | |
| Cash and cash equivalents at beginning of year | 14,032 | | | 10,299 | | | |
| Cash and cash equivalents at end of year | $ | 16,512 | | | $ | 14,032 | | | |
| | | | | |
| Supplemental Disclosure of Cash Flow Information: | | | | | |
| Cash paid during the period for: | | | | | |
| Interest | $ | 0 | | | $ | 0 | | | |
| Taxes | 0 | | | 0 | | | |
See accompanying notes to consolidated financial statements.
CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – The Business
OVERVIEW
Caladrius Biosciences, Inc. (“we,” “us,” "our," “Caladrius” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to the development and commercialization of cellular therapies designed to reverse disease and/or promote the regeneration of damaged tissue. The Company is developing first-in-class therapeutics based on the characteristics of naturally occurring autologous CD34+ cells and their ability to stimulate the growth of new microvasculature. The Company's technology leverages these cells to enable the body's natural repair mechanisms using formulations unique to each medical indication.
The Company's goal is to develop and commercialize products that address important unmet medical needs based on a broad and versatile portfolio of candidates. The Company’s current product candidates include: CLBS16, the subject of both a recently completed positive Phase 2a study and a newly initiated Phase 2b study in the U.S. for the treatment of coronary microvascular dysfunction (“CMD”); HONEDRA® (CLBS12), recipient of SAKIGAKE designation and eligible for early conditional approval in Japan for the treatment of critical limb ischemia (“CLI”) and Buerger’s Disease based on the results of an ongoing clinical trial; CLBS201, designed to assess the safety and efficacy of CD34+ cell therapy as a treatment for pre-dialysis patients with chronic kidney disease (“CKD”) and OLOGO™ (CLBS14), a Regenerative Medicine Advanced Therapy (“RMAT”) designated therapy for which the Company is in discussion with the U.S. Food and Drug Administration (the “FDA”) to finalize a Phase 3 protocol of reduced size and scope for a confirmatory trial in subjects with no-option refractory disabling angina (“NORDA”).
Coronavirus Considerations
In December 2019, a novel strain of coronavirus (SARS-CoV-2), which causes COVID-19, was reported to have surfaced in China. In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic, and the world's economies began to experience pronounced effects. Despite the FDA approval of multiple COVID-19 vaccines in late 2020, there remains uncertainty around the extent and duration of disruption and any future related financial impact cannot be reasonably estimated at this time. In response to the pandemic, we have implemented work from home as well as social distancing and other hygiene policies for employees when they must be in the office. Our clinical study of HONEDRA® in Japan has experienced delays in enrollment due to the “State of Emergency” in effect in Japan for most of 2020 and re-implemented in Japan on Jan 7, 2021 and now extending through March 7, 2021 covering Tokyo and other regions in response to increased number of COVID-19 patients.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Use of Estimates
The preparation of financial statements in conformity with GAAP 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 consolidated financial statements. Estimates also affect the reported amounts of expenses during the reporting period. The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Company makes critical estimate and assumptions in determining stock-based awards values. Accordingly, actual results could differ from those estimates and assumptions.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Caladrius Biosciences, Inc. and its wholly owned and majority owned subsidiaries and affiliates. All intercompany activities have been eliminated in consolidation.
Note 2 – Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents include short-term, highly liquid, investments with maturities of ninety days or less when purchased.
Concentration of Risks
The Company is subject to credit risk from its portfolio of cash, cash equivalents and marketable securities. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. Cash is held at major banks in the United States. Therefore, the Company is not exposed to any significant concentrations of credit risk from these financial instruments. The goals of the Company's investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk, liquidity of investments sufficient to meet cash flow requirements, and a competitive after-tax rate of return.
Marketable Securities
The Company determines the appropriate classification of its marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. All of the Company's marketable securities are considered as available-for-sale and carried at estimated fair values and reported in cash equivalents and marketable securities. Unrealized gains and losses on available-for-sale securities are excluded from net income and reported in accumulated other comprehensive income (loss) as a separate component of stockholders' equity. Other income (expense), net, includes interest, dividends, amortization of purchase premiums and discounts, realized gains and losses on sales of securities and other-than-temporary declines in the fair value of securities, if any. The cost of securities sold is based on the specific identification method. The Company regularly reviews all of its investments for other-than-temporary declines in fair value. The Company's review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not that it will be required to sell the securities before the recovery of their amortized cost basis. When the Company determines that the decline in fair value of an investment is below its accounting basis and this decline is other-than-temporary, it reduces the carrying value of the security it holds and records a loss for the amount of such decline.
Property and Equipment
The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line method. Repairs and maintenance expenditures that do not extend original asset lives are charged to expense as incurred. The estimated useful lives of property and equipment are as follows:
| | | | | |
Furniture and fixtures | 10 years |
Computer equipment | 3 years |
Software | 3 years |
Leasehold improvements | Life of lease |
Long-lived Assets
Long-lived assets consist of property and equipment. The assets are amortized on a straight line basis over their respective useful lives. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds the fair value of the asset. If other events or changes in circumstances indicate that the carrying amount of an asset that the Company expects to hold and use may not be recoverable, the Company will estimate the undiscounted future cash flows expected to result from the use of the asset and/or its eventual disposition, and recognize an impairment loss, if any. The impairment loss, if determined to be necessary, would be measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Share-Based Compensation
The Company expenses all share-based payment awards to employees, directors, and consultants, including grants of stock options, warrants, and restricted stock, over the requisite service period based on the grant date fair value of the awards. Consultant awards are remeasured each reporting period through vesting. For awards with performance-based vesting criteria, the Company estimates the probability of achievement of the performance criteria and recognizes compensation expense related to those awards expected to vest. The Company determines the fair value of option awards using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options or warrants. The fair value of the Company’s restricted stock and restricted stock units is based on the closing market price of the Company’s common stock on the date of grant.
Loss Per Share
Basic loss per share is based on the weighted effect of all common shares issued and outstanding and is calculated by dividing net loss attributable to common stockholders by the weighted average shares outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares used in the basic loss per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding. Diluted loss per share is not presented as such potentially dilutive securities are anti-dilutive to losses incurred in all periods presented.
Treasury Stock
Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. Gains or losses on the subsequent reissuance of shares are credited or charged to additional paid in capital.
Research and Development Costs
Research and development (“R&D”) expenses include salaries, benefits, and other headcount related costs, clinical trial and related clinical manufacturing costs, contract and other outside service fees including sponsored research agreements, and facilities and overhead costs. The Company expenses the costs associated with research and development activities when incurred.
To further drive the Company’s cell therapy initiatives, the Company will continue targeting key governmental agencies, congressional committees and not-for-profit organizations to contribute funds for the Company’s research and development programs. The Company accounts for such grants as a deduction to the related expense in research and development operating expenses when earned.
New Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses, which will require companies to present assets held at amortized cost and available for sale debt securities net of the amount expected to be collected. The guidance requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability. The guidance was effective for fiscal years and interim periods beginning after December 15, 2019 and early adoption was permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.
In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections", to codify the SEC releases that clarify and improve the disclosure and presentation requirements of a variety of codification topics, thereby eliminating certain disclosure requirements that were redundant, duplicative, overlapping, outdated, or superseded. For public companies, the amendments are effective upon issuance. The Company determined that the adoption of this new accounting guidance did not have a material impact on its consolidated financial statements and footnote disclosures.
In October 2019, the FASB issued ASU 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company believes that the adoption of this new accounting guidance will not have a material impact on its financial statements and footnote disclosures.
Note 3 – Available-for-Sale-Securities
The following table is a summary of available-for-sale securities recorded in cash and cash equivalents in the Company's Consolidated Balance Sheets (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value | | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
| Corporate debt securities | $ | 8,406 | | | $ | 0 | | | $ | (7) | | | $ | 8,399 | | | $ | 11,673 | | | $ | 3 | | | $ | (1) | | | $ | 11,675 | |
| Money market funds | 7,591 | | | 0 | | | 0 | | 7,591 | | | 11,093 | | | 0 | | 0 | | 11,093 | |
| Municipal debt securities | $ | 14,753 | | | 0 | | | $ | (6) | | | 14,747 | | | $ | 0 | | | 0 | | | $ | 0 | | | 0 | |
| | | | | | | | | | | | | | | |
| Total | $ | 30,750 | | | $ | 0 | | | $ | (13) | | | $ | 30,737 | | | $ | 22,766 | | | $ | 3 | | | $ | (1) | | | $ | 22,768 | |
| | | | | | | | | | | | | | | |
Estimated fair values of available-for-sale securities are generally based on prices obtained from commercial pricing services. The following table summarizes the classification of the available-for-sale debt securities on the Company's Consolidated Balance Sheets (in thousands):
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Cash and cash equivalents | $ | 12,676 | | | $ | 11,643 | |
| Marketable securities | 18,061 | | | 11,125 | |
| Total | $ | 30,737 | | | $ | 22,768 | |
The following table summarizes the Company's portfolio of available-for-sale securities by contractual maturity (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Amortized Cost | | Estimated Fair Value | | Amortized Cost | | Estimated Fair Value |
| Less than one year | $ | 30,750 | | | $ | 30,737 | | | $ | 22,766 | | | $ | 22,768 | |
| Greater than one year | 0 | | | 0 | | | 0 | | | 0 | |
| Total | $ | 30,750 | | | $ | 30,737 | | | $ | 22,766 | | | $ | 22,768 | |
Note 4 – Property and Equipment
Property and equipment consisted of the following (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2020 | | 2019 |
| Furniture and fixtures | $ | 26 | | | $ | 26 | |
| Computer equipment | 254 | | | 247 | |
| Leasehold improvements | 90 | | | 76 | |
| Property and equipment, gross | 370 | | | 349 | |
| Accumulated depreciation | (313) | | | (249) | |
| Property and equipment, net | $ | 57 | | | $ | 100 | |
The Company’s results included depreciation expense of approximately $0.1 million and $0.1 million for the years ended December 31, 2020 and 2019, respectively.
Note 5 – Loss Per Share
For the years ended December 31, 2020 and 2019, the Company incurred net losses and therefore no common stock equivalents were utilized in the calculation of loss per share as they are anti-dilutive in the periods presented. At December 31, 2020 and 2019, the Company excluded the following potentially dilutive securities (in thousands):
| | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 | | |
| Stock Options | 964 | | | 1,044 | | | |
| Warrants | 2,638 | | | 30 | | | |
| Restricted Stock Units | 340 | | | 118 | | | |
Note 6 – Fair Value Measurements
Fair value of financial assets and liabilities that are being measured and reported are defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date (exit price). The Company is required to classify fair value measurements in one of the following categories:
Level 1 inputs are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 inputs are defined as inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
Level 3 inputs are defined as unobservable inputs for the assets or liabilities. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
The Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2020 and December 31, 2019 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
| | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | | | | | | | | | | |
| Marketable securities - available for sale | | $ | 0 | | | $ | 18,061 | | | $ | 0 | | | $ | 18,061 | | | $ | 0 | | | $ | 11,125 | | | $ | 0 | | | $ | 11,125 | |
| | $ | 0 | | | $ | 18,061 | | | $ | 0 | | | $ | 18,061 | | | $ | 0 | | | $ | 11,125 | | | $ | 0 | | | $ | 11,125 | |
The carrying values of cash, cash equivalents, accounts payable and accrued expenses approximate fair value at December 31, 2020 and December 31, 2019, due to the short maturity nature of these items.
Note 7 – Accrued Liabilities
Accrued liabilities were as follow (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2020 | | 2019 |
| Salaries, employee benefits and related taxes | $ | 1,716 | | | $ | 1,834 | |
| Operating lease liabilities - current | 370 | | | 354 | |
| CIRM upfront funding - current | 0 | | | 1,600 | |
| Other | 400 | | | 698 | |
| $ | 2,486 | | | $ | 4,486 | |
Note 8 – Operating Leases
The Company adopted ASU No. 2016-02, Leases (Topic 842) on January 1, 2019 and recognized leases with duration greater than 12 months on the balance sheet using the modified retrospective approach. The Company has operating leases for two offices with terms that expire in 2022 and 2023. The Company estimates its incremental borrowing rate at lease commencement to determine the present value of lease payments since most of the Company's leases do not provide an implicit rate of return. The Company recognizes lease expense on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company elected to account for non-lease components associated with its leases and lease components as a single lease component. Each of the Company's leases includes options for the Company to extend the lease term and/or sub-lease space in whole or in part.
Operating lease liabilities and right-of-use assets were recorded in the following captions of our balance sheet as follows (in thousands):
| | | | | | | | |
| December 31, 2020 | December 31, 2019 |
| Right-of Use Assets: | | |
| Other assets | $ | 574 | | 906 | |
| Total Right-of-Use Asset | $ | 574 | | 906 | |
| | |
| Operating Lease Liabilities: | | |
| Accrued liabilities | $ | 370 | | $ | 353 | |
| Other long-term liabilities | 254 | | 624 | |
| Total Operating Lease Liabilities | $ | 624 | | $ | 977 | |
As of December 31, 2020, the weighted average remaining lease term for our operating leases was 1.83 years, and the weighted average discount rate for our operating leases was 9.625%. Future minimum lease payments under the lease agreements as of December 31, 2020 were as follows (in thousands):
| | | | | |
| Years ended | Operating Leases |
| 2021 | $ | 414 | |
| 2022 | 239 | |
| 2023 | 26 | |
| Total lease payments | 679 | |
| Less: Amounts representing interest | (55) | |
| Present value of lease liabilities | $ | 624 | |
Note 9 – Stockholders' Equity
Equity Plans
The Company has used long-term incentive plans for the purpose of granting equity awards to employees of the Company, including officers, and nonemployees, including consultants and nonemployee members of the Company's board of directors (collectively, "Participants"). The Participants may receive awards as determined by a committee of independent members of the Company's board of directors or, to the extent authorized by such committee with respect to certain Participants, a duly authorized employee (collectively, the "Committee"). The incentive plan currently used by the Company is the 2018 Equity Incentive Compensation Plan (the "2018 Plan"), which was adopted by the stockholders of the Company in June 2018, and subsequently increased by the stockholders of the Company in June of 2020 with 2,500,000 shares authorized for issuance thereunder, plus any shares awarded under the 2015 Equity Compensation Plan (the "2015 Plan") or the Amended and Restated 2009 Equity Compensation Plan (the "2009 Plan") that are not issued due to their subsequent forfeiture, cancellation, or other settlement thereof. Concurrent with the adoption of the 2018 Plan, no future awards will occur under the 2015 Plan or the 2009 Plan. The awards that may be made under the 2018 Plan include: (a) incentive stock options and nonqualified stock options, (b) shares of restricted stock, (c) restricted stock units, and (d) other kinds of equity-based compensation awards. All stock options under the 2015 Plan and 2009 Plan were granted and the 2018 Plan are granted at the fair market value of the common stock at the grant date. Stock options vest either on the date of grant, ratably over a period determined at time of grant, or upon the accomplishment of specified business milestones, and generally expire 2, 3, or 10 years from the grant date depending on the status of the recipient as a nonemployee, employee or director of the Company. As of December 31, 2020, there
were 1,376,030 shares available for future grants under the 2018 Plan. No additional awards may be made under the 2015 Plan or the 2009 Plan.
The Company adopted an employee stock purchase plan effective January 1, 2013 and authorized 50,000 shares under the plan (the "2012 ESPP"). The plan has 2 six-month offering periods per year under which eligible employees may contribute up to 15% of their compensation toward the purchase of the Company's common stock per offering period (with a $25,000 cap per calendar year). The employee's purchase price is equal to (i) 85% of the closing price of a share of the Company's common stock on the enrollment date of such offering period or (ii) 85% of the closing price of a share of the Company's common stock on the Exercise Date of such Offering Period, whichever is lower. In May 2017, the Company's stockholders approved an amendment and restatement to the 2012 ESPP (the "2017 ESPP") in order to effect an increase of authorized shares from 50,000 to 100,000. In June 2018, the Company's stockholders approved an amendment to the 2017 ESPP (the " Amended 2017 ESPP") in order to effect an increase of authorized shares from 100,000 to 500,000. During the year ended December 31, 2020, 32,137 shares were issued under the Amended 2017 ESPP. At December 31, 2020, the Company had 347,709 shares of the Company's common stock available for future grant in connection with this plan.
Equity Issuances
Purchase Agreement
In March 2019, the Company and Lincoln Park Capital Fund, LLC (“Lincoln Park”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company has the right to sell to Lincoln Park shares of the Company’s common stock having an aggregate value of up to $26.0 million, subject to certain limitations and conditions set forth in the Purchase Agreement (the “Offering”). As consideration for entering into the Purchase Agreement, the Company issued to Lincoln Park an additional 181,510 shares of common stock as commitment shares.
Pursuant to the Purchase Agreement, Lincoln Park purchased 250,000 shares of common stock, at a price of $4.00 per share, for a total gross purchase price of $1,000,000 (the “Initial Purchase”) upon commencement. Thereafter, as often as every business day from and after one business day following the date of the Initial Purchase and over the 36-month term of the Purchase Agreement the Company has the right, from time to time, at its sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 100,000 shares of common stock, with such amount increasing as the closing sale price of the common stock increases; provided Lincoln Park’s obligation under any single such purchase will not exceed $2,500,000, unless the Company and Lincoln Park mutually agree to increase the maximum amount of such single purchase (each, a “Regular Purchase”). If the Company directs Lincoln Park to purchase the maximum number of shares of common stock it then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park in an “accelerated purchase” to purchase an additional amount of common stock that may not exceed the lesser of (i) 300% the number of shares purchased pursuant to the corresponding Regular Purchase or (ii) 30% of the total number of shares of the Company’s common stock traded during a specified period on the applicable purchase date as set forth in the Purchase Agreement. Under certain circumstances and in accordance with the Purchase Agreement, the Company may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day.
The Company controls the timing and amount of any sales of its common stock to Lincoln Park. There is no upper limit on the price per share that Lincoln Park must pay for its common stock under the Purchase Agreement, but in no event will shares be sold to Lincoln Park on a day the closing price is less than the floor price specified in the Purchase Agreement. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the purchase agreement if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.
The Purchase Agreement does not limit the Company’s ability to raise capital from other sources at the Company’s sole discretion, except that (subject to certain exceptions) the Company may not enter into any Variable Rate Transaction (as defined in the Purchase Agreement, including the issuance of any floating conversion rate or variable priced equity-like securities) during the 36 months after the date of the Purchase Agreement. The Company has the right to terminate the Purchase Agreement at any time, at no cost to the Company.
As of December 31, 2020, the Company had not made any sales of common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase.
Common Stock Sales Agreement
In February 2018, the Company entered into a common stock sales agreement with H.C. Wainwright & Co., LLC ("HCW") as sales agent, which was subsequently amended in August 2018 (the "Sales Agreement"), in connection with an “at the market offering” under which the Company from time to time may offer and sell shares of its common stock, having an
aggregate offering price of not more than $25.0 million. In March 2019, subsequent to the filing of the Company's 2018 Form 10-K, the aggregate market value of its outstanding common stock held by non-affiliates was approximately $52.8 million. Pursuant to General Instruction I.B.6 of Form S-3, since the aggregate market value of the Company's outstanding common stock held by non-affiliates was below $75.0 million at the time of its 2018 Form 10-K filing, the aggregate amount of securities that the Company was permitted to offer and sell at such time was reduced to $17.6 million (or a maximum of 4.8 million shares), which was equal to one-third of the aggregate market value of the Company's common stock held by non-affiliates at such time.
Subject to the terms and conditions of the Sales Agreement, HCW will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon the Company's instructions, including any price, time or size limits specified by the Company. The Company has provided HCW with customary indemnification rights, and HCW will be entitled to a commission at a fixed commission rate equal to 3.0% of the gross proceeds per share sold. The Company has no obligation to sell any of the shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement. The Sales Agreement will terminate upon the sale of all of the shares under the Sales Agreement unless terminated earlier by either party as permitted under the Sales Agreement.
During the year-ended December 31, 2020, the Company issued 3,558,778 shares of common stock under the Sales Agreement for net proceeds of $8.5 million. As of year-ended December 31, 2020, the Company issued 3,784,912 shares of common stock under the Sales Agreement for net proceeds of $9.5 million since inception.
On February 12, 2021, we suspended the use of the at-the-market transactions facility (the “ATM”) and terminated the continuous offering pursuant to Sales Agreement entered into in February 2018 with HCW. We will no longer make any sales of our common stock pursuant to the Sales Agreement unless and until a new prospectus supplement is filed with the Securities and Exchange Commission.
Registered Direct Offerings
In April 2020, the Company entered into a securities purchase agreement (the “April Purchase Agreement”) with certain investors (the “April Purchasers”). Pursuant to the terms of the April Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate of 2,162,166 shares of its common stock at a purchase price equal to $2.3125 per share. In a concurrent private placement, the Company issued to the April Purchasers warrants to purchase an aggregate of 1,081,083 shares of its common stock. In connection with the registered direct offering and concurrent private placement, the Company received gross proceeds of $5.0 million. Each warrant is exercisable for 1 share of common stock and features an exercise price equal to $2.2500 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.
In May 2020, the Company entered into a securities purchase agreement (the “May Purchase Agreement”) with certain investors (the “May Purchasers”). Pursuant to the terms of the May Purchase Agreement, the Company agreed to sell to the May Purchasers an aggregate of 2,084,850 shares of its common stock at a purchase price equal to $2.0625 per share. In a concurrent private placement, the Company issued to the Purchasers warrants to purchase an aggregate of 1,042,425 shares of its common stock. In connection with the registered direct offering and concurrent private placement, the Company received gross proceeds of $4.3 million. Each warrant is exercisable for 1 share of common stock and features an exercise price equal to $2.0625 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.
Private Placement
On July 10, 2020, the Company entered into a securities purchase agreement (the “Private Placement”) with certain investors (the “Private Placement Purchasers”). Pursuant to the terms of the Private Placement, the Company agreed to sell to the Private Placement Purchasers an aggregate of 969,694 shares of its common stock at a purchase price equal to $2.0625 per share, along with warrants to purchase an aggregate of 484,847 shares of its common stock. In connection with the Private Placement, the Company received gross proceeds of $2.0 million. Each warrant is exercisable for 1 share of common stock and features an exercise price equal to $2.0625 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.
Stock Options and Warrants
The following table summarizes the activity for stock options and warrants for the year ended December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options | | Warrants |
| Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (Years) | | Aggregate Intrinsic Value (In Thousands) | | Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (Years) | | Aggregate Intrinsic Value (In Thousands) |
| Outstanding at December 31, 2019 | 1,044,417 | | | $ | 18.31 | | | 6.06 | | $ | 0 | | | 30,000 | | | $ | 5.89 | | | 3.19 | | $ | 0 | |
| | | | | | | | | | | | | | | |
| Changes during the Year: | | | | | | | | | | | | | | | |
| Granted | 248,176 | | | $ | 3.20 | | | | | | | 2,608,355 | | | $ | 2.14 | | | | | |
| Exercised | 0 | | | $ | 0 | | | | | | | 0 | | | $ | 0 | | | | | |
| Forfeited | (86,251) | | | $ | 3.83 | | | | | | | 0 | | | $ | 0 | | | | | |
| Expired | (242,642) | | | $ | 22.57 | | | | | | | 0 | | | $ | 0 | | | | | |
| Outstanding at December 31, 2020 | 963,700 | | | $ | 14.64 | | | 5.86 | | $ | 0 | | | 2,638,355 | | | $ | 2.18 | | | 4.98 | | $ | 0 | |
| Vested at December 31, 2020 or expected to vest in the future | 949,200 | | | $ | 14.81 | | | 5.82 | | $ | 0 | | | 2,638,355 | | | $ | 2.18 | | | 4.98 | | $ | 0 | |
| Exercisable at December 31, 2020 | 714,426 | | | $ | 18.42 | | | 4.93 | | $ | 0 | | | 2,638,355 | | | $ | 2.18 | | | 4.98 | | $ | 0 | |
Restricted Stock
During the years ended December 31, 2020 and 2019, the Company issued restricted stock for services as follows ($ in thousands, except share data):
| | | | | | | | | | | |
| |
| 2020 | | 2019 |
| Number of Restricted Stock Issued | 156,184 | | | 123,564 | |
| Value of Restricted Stock Issued | $ | 512.3 | | | $ | 611.6 | |
The weighted average estimated fair value of restricted stock issued for services in the years ended December 31, 2020 and 2019 was $3.28 and $4.95 per share, respectively. The fair value of the restricted stock was determined using the Company’s closing stock price on the date of issuance. The vesting terms of restricted stock issuances are generally between one to four years.
Restricted Stock Units
During the years ended December 31, 2020 and 2019, the Company issued restricted stock units for services as follows ($ in thousands, except share data):
| | | | | | | | | | | |
| |
| 2020 | | 2019 |
| Number of Restricted Stock Units Issued | 325,853 | | | 184,454 | |
| Value of Restricted Stock Units Issued | $ | 863.0 | | | $ | 908.6 | |
The weighted average estimated fair value of restricted stock units issued for services in the years ended December 31, 2020 and 2019 was $2.65 and $4.93 per share, respectively. The fair value of the restricted stock units was determined using the Company’s closing stock price on the date of issuance. The vesting terms of restricted stock unit issuances are generally one year, or upon the achievement of performance-based milestones.
Note 10 – Share-Based Compensation
Share-based Compensation
The Company utilizes share-based compensation in the form of stock options and restricted stock. The following table summarizes the components of share-based compensation expense for the years ended December 31, 2020 and 2019 ($ in thousands):
| | | | | | | | | | | | | |
| Year Ended December 31, |
| 2020 | | 2019 | | |
| Research and development | $ | 179 | | | $ | 274 | | | |
| General and administrative | 1,086 | | | 1,021 | | | |
| | | | | |
| Total share-based compensation expense | $ | 1,265 | | | $ | 1,295 | | | |
Total compensation cost related to unvested awards not yet recognized and the weighted-average periods over which the awards are expected to be recognized at December 31, 2020 were as follows ($ in thousands):
| | | | | | | | | | | | | | | | | | | |
| Stock Options | | Restricted Stock Units | | | | Restricted Stock |
| Unrecognized compensation cost | $ | 356 | | | $ | 244 | | | | | $ | 308 | |
| Expected weighted-average period in years of compensation cost to be recognized | 1.61 | | 2.46 | | | | 1.65 |
Total fair value of shares vested and the weighted average estimated fair values of shares granted for the years ended December 31, 2020 and 2019 were as follows ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | |
| | Stock Options | | |
| | Year Ended December 31, | | |
| | 2020 | | 2019 | | | | | | | | |
| Total fair value of shares vested | | $ | 536 | | | $ | 398 | | | | | | | | | |
| Weighted average estimated fair value of shares granted | | 2.11 | | | 3.18 | | | | | | | | | |
Valuation Assumptions
The fair value of stock options at the date of grant was estimated using the Black-Scholes option pricing model. The expected volatility is based upon historical volatility of the Company’s stock. The expected term for the options is based upon observation of actual time elapsed between date of grant and exercise of options for all employees.
The range of assumptions made in calculating the fair values of stock options was as follow:
| | | | | | | | | | | | | | | | | | | |
| Stock Options | | |
| Year Ended December 31, | | |
| 2020 | | 2019 | | | | | | | | |
| Expected term - minimum (in years) | 6 | | 6 | | | | | | | | |
| Expected term - maximum (in years) | 6 | | 6 | | | | | | | | |
| Expected volatility - minimum | 75% | | 74% | | | | | | | | |
| Expected volatility - maximum | 79% | | 74% | | | | | | | | |
| Weighted Average volatility | 75% | | 74% | | | | | | | | |
| Expected dividend yield | 0 | | 0 | | | | | | | | |
| Risk-free interest rate - minimum | 0.40% | | 2.35% | | | | | | | | |
| Risk-free interest rate - maximum | 1.71% | | 2.62% | | | | | | | | |
Note 11 – Research Funding
California Institute of Regenerative Medicine Grant Award
In February 2017, the California Institute for Regenerative Medicine ("CIRM") awarded the Company funds of up to $12.2 million to support the T-Rex Study. The funding is based upon the achievement of certain milestones related to the proportion of subjects enrolled in California, as well as manufacturing and development costs incurred in California. Based on the actual number of subjects enrolled in California, the total amount of funding was revised to $8.6 million, of which $8.2 million has been received through the grant project period completion. The Company received $5.7 million in initial funding in May 2017, a $1.9 million milestone payment in December 2017, a $0.3 million progress payment in March 2018, and a $0.2 million progress payment in May 2019, of which the total was amortized over the estimated award period through July 2020 as a reduction to the related research and development expenses, with the final true up payment of $46 thousand received in September 2020 and recorded as a reduction to the related research and development expenses. During the year ended December 31, 2020 and December 31, 2019, the Company amortized and recognized $1.6 million and $2.7 million in credits, respectively, in research and development related to CIRM funds received.
Note 12 – Income Taxes
The provision (benefit) for income taxes is based on loss from operations before provision for income taxes and noncontrolling interests as follows ($ in thousands):
| | | | | | | | | | | | | |
| Years Ended December 31, |
| Pre-tax book income | 2020 | | 2019 | | |
| United States | $ | (19,013) | | | $ | (19,352) | | | |
| $ | (19,013) | | | $ | (19,352) | | | |
The provision (benefit) from income taxes was as follows ($ in thousands):
| | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | |
| | 2020 | | 2019 | | |
| Current | | | | | | |
| U.S. Federal | | $ | 0 | | | $ | 0 | | | |
| State and local | | 0 | | | 0 | | | |
| | $ | 0 | | | $ | 0 | | | |
| | | | | | |
| Deferred | | | | | | |
| U.S. Federal | | $ | 0 | | | $ | 0 | | | |
| State and local | | (10,872) | | | 0 | | | |
| | $ | (10,872) | | | $ | 0 | | | |
| | | | | | |
| Total | | | | | | |
| U.S. Federal | | $ | 0 | | | $ | 0 | | | |
| State and local | | (10,872) | | | 0 | | | |
| | $ | (10,872) | | | $ | 0 | | | |
The provision (benefit) for income taxes is determined by applying the U.S. Federal statutory rate of 21% to income before income taxes as a result of the following ($ in thousands):
| | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | |
| | 2020 | | 2019 | | |
| U.S. Federal benefit at statutory rate | | $ | (3,993) | | | $ | (4,064) | | | |
| State and local (benefit) / expense net of U.S. federal tax | | 0 | | | 0 | | | |
| Permanent non deductible expenses for U.S. taxes | | 5 | | | 14 | | | |
| AMT credit benefit | | 0 | | | 0 | | | |
| Change in state deferred | | 5,122 | | | (4,720) | | | |
| Return to actual | | 0 | | | (17) | | | |
| Other true ups | | 387 | | | 1,941 | | | |
| Effect of change in deferred tax rate | | 0 | | | 0 | | | |
| Sale of New Jersey State NOL's | | (10,872) | | | 0 | | | |
| Valuation allowance for deferred tax assets | | (1,521) | | | 6,846 | | | |
| Tax provision (benefit) | | $ | (10,872) | | | $ | 0 | | | |
Deferred income taxes at December 31, 2020 and 2019 consist of the following ($ in thousands):
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Deferred Tax Assets: | | | | |
| Accumulated net operating losses (tax effected) | | $ | 68,286 | | | $ | 70,747 | |
| CIRM funding | | 0 | | | 336 | |
| | | | |
| Right of use liability | | 176 | | | 205 | |
| Share-based compensation | | 5,025 | | | 3,584 | |
| Intangibles | | 131 | | | 141 | |
| | | | |
| | | | |
| | | | |
| | | | |
| Accumulated depreciation | | 19 | | | 9 | |
| Accrued payroll | | 167 | | | 121 | |
| | | | |
| Other | | 526 | | | 737 | |
| Deferred tax assets | | 74,330 | | | 75,880 | |
| | | | |
| Deferred Tax Liabilities: | | | | |
| Right of use asset | | $ | (161) | | | $ | (190) | |
| | | | |
| Deferred tax liabilities | | (161) | | | (190) | |
| | 74,169 | | | 75,690 | |
| Valuation allowance | | (74,169) | | | (75,690) | |
| Net deferred tax asset | | $ | 0 | | | $ | 0 | |
In assessing the realizability of deferred tax assets, including the net operating loss carryforwards (NOLs), the Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize its existing deferred tax assets. Based on its assessment, the Company has provided a full valuation allowance against its net deferred tax assets as their future utilization remains uncertain at this time.
As of December 31, 2020, and 2019, the Company had approximately $264 million and $246 million, respectively, of Federal NOLs available to offset future taxable income expiring from 2030 through 2036. As of December 31, 2020 and 2019, the Company had State NOLs available in New Jersey of $99 million and $187 million, respectively, California of $70 million and $70 million, respectively, and New York City of $13 million and $13 million, respectively, to offset future taxable income expiring from 2030 through 2040. In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s NOLs could be limited in the event of a change in ownership. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period when those temporary differences become deductible.
The Company performed an analysis and determined that they have had ownership change of greater than 50% over a 3-year testing period. The last ownership change was determined to be on June 3, 2015. Based on a market capitalization of $125 million and using an applicable federal rate of 2.5% the annual limitation would be approximately $3.0 million. Post change losses from June 3, 2015 would not be subject to 382 limitations.
The Company applies the FASB’s provisions for uncertain tax positions. The Company utilizes the two-step process to determine the amount of recognized tax benefit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties associated with certain tax positions as a component of income tax expense.
As of December 31, 2020, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.
For years prior to 2017 the federal statute of limitations is closed for assessing tax. The Company’s state tax returns remain open to examination for a period of three to four years from date of filing.
In December 2019, the Company received preliminary approval from the New Jersey Economic Development Authority ("NJEDA") to participate in the Technology Business Tax Certificate Transfer Program (the "Program"). The Program permits qualified companies to sell a percentage of their New Jersey net operating losses ("NJ NOLs") to unrelated profitable corporations. On April 21 2020, the Company received final approval from NJEDA to sell $11.5 million of its NJ NOLs, which was subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $10.9 million. The net proceeds have been recorded as a benefit from income taxes in the consolidated financial statements.
Note 13 – Contingencies
From time to time, the Company is subject to legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of pending claims cannot be predicted with certainty, the Company does not believe that the outcome of any pending claims will have a material adverse effect on the Company's financial condition or operating results.
Note 14 – Subsequent Events
Registered Direct Offerings
On February 12, 2021, we entered into a Securities Purchase Agreement (the “Institutional Purchase Agreement”) with certain institutional investors (the “Institutional Purchasers”). Pursuant to the terms of the Institutional Purchase Agreement, we sold to the Institutional Purchasers in a registered direct offering an aggregate of 24,906,134 shares of our common stock and warrants to purchase an aggregate of 12,453,067 shares of our common stock at a combined purchase price equal to $2.45 per share and associated warrant. Each warrant features an exercise price equal to $2.90 per share, is exercisable immediately upon issuance and will expire five years from the issuance date. Additionally, in a concurrent non-brokered registered direct offering, we entered into a Securities Purchase Agreement (the “Additional Purchase Agreement”) with certain accredited investors (the “Additional Purchasers”). Pursuant to the terms of the Additional Purchase Agreement, we sold to the Additional Purchasers an aggregate of 1,632,652 shares of our common stock and warrants to purchase an aggregate of 816,326 shares of our common stock at a combined purchase price equal to $2.45 per share and associated warrant. Each warrant features an exercise price equal to $2.90 per share, is exercisable immediately upon issuance and will expire five years from the issuance date. The closing of the offerings occurred on February 17, 2021. In connection with the registered direct offerings, we received net proceeds of approximately $60.7 million.
Sales Pursuant to Common Stock Sales Agreement
On February 12, 2021, we suspended the use of the at-the-market transactions facility (the “ATM”) and terminated the continuous offering pursuant to the Common Stock Sales Agreement (“Sales Agreement”) entered into in February 2018 with H.C. Wainwright & Co., LLC (“HCW”). In accordance with the terms of the Sales Agreement, we could offer and sell shares of our common stock having an aggregate offering price of up to $25.0 million from time to time through HCW pursuant to the ATM program. As of February 12, 2021, we had sold an aggregate of 3,784,912 shares of our common stock pursuant to the Sales Agreement for aggregate gross proceeds of $9.5 million. We will no longer make any sales of our common stock pursuant to the Sales Agreement unless and until a new prospectus supplement is filed with the Securities and Exchange Commission.
Private Placement Offering
On January 21, 2021, the Company entered into a securities purchase agreement (the “January Private Placement”) with certain investors (the “January Purchasers”). Pursuant to the terms of the January Private Placement, the Company agreed to sell to the January Purchasers an aggregate of 12,500,000 shares of its common stock at a purchase price equal to $2.00 per share, along with warrants to purchase an aggregate of 6,250,000 shares of its common stock. In connection with the January Private Placement, the Company received gross proceeds of $25.0 million. Each warrant is exercisable for 1 share of common stock and features an exercise price equal to $2.90 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.
Warrant Exercises
Subsequent to December 31, 2020 the company issued 801,148 shares of common stock for net proceeds of $1.8 million in connection with warrant exercises associated with the April Purchase Agreement and May Purchase Agreement.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.
On February 22, 2021, we carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Compliance Officer, of the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer/Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective, at the reasonable assurance level, in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the Chief Executive Officer and Chief Compliance Officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the board of directors of the Company; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions or because of declines in the degree of compliance with policies or procedures.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013).
As of December 31, 2020, based on management’s assessment, the Company’s internal control over financial reporting was effective.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The response to this item is incorporated by reference from the discussion responsive thereto under the captions "Management and Corporate and Governance Matters," "Section 16(a) Beneficial Ownership Reporting Compliance," and "Code of Conduct and Ethics" in the Company's Proxy Statement for the 2021 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated by reference from the discussion responsive thereto under the caption “Executive Officer and Director Compensation,” in the Company’s Proxy Statement for the 2021Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transaction Policies
The responseAudit Committee of the Caladrius Board is responsible for reviewing and approving or ratifying all related party transactions. Our Board, acting upon the recommendation of its Audit Committee, has adopted a written policy with regard to related party transactions. The policy provides that related party transactions shall be brought to management’s and the Board’s attention. The procedures specify that at meetings of the Audit Committee, the Audit Committee will be provided with the details of each new, existing or proposed related party transaction, including the terms of the transaction, the business purpose, and the respective benefits to the Company and the relevant related party. The policy sets forth certain factors that the Audit Committee is to take into consideration in determining whether to approve a related party transaction, which include:
•whether the terms of the transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a related party;
•the business reasons for the Company to enter into the transaction;
•whether the transaction would impair the independence of an independent director;
•whether the transaction would present an improper conflict of interest for any director or executive officer, taking into account the size of the transaction, the overall financial position of the director, executive officer or other related party, the direct or indirect nature of the director’s, executive officer’s or other related party’s interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the Audit Committee deems relevant.
The procedures provide that in the event a member of the Audit Committee has an interest in the transaction under discussion, he will abstain from voting on the approval of the transaction, but may, if so requested by the chair of the Audit Committee and permitted under Nasdaq regulations, participate to the extent requested in discussions of the transaction. By “related party transaction,” we mean a transaction requiring disclosure under Item 404(a) of Regulation S-K between the Company or any of its subsidiaries, on the one hand, and an executive officer, director, person known to be a 5% beneficial owner of the Company, or an immediate family member of any of the foregoing, on the other hand.
Director Independence
The current Caladrius Board members consist of Dr. Brown, Dr. Davidson, Ms. Flowers, Mr. Klosk, Dr. Mazzo, Mr. Myers, Dr. Traber and Ms. Whitaker. The Caladrius Board has reviewed the materiality of any relationship that each of our directors has with Caladrius, either directly or indirectly. Based upon this item is incorporated by reference fromreview, the discussion responsive theretoCaladrius Board has determined that Dr. Brown, Dr. Davidson, Ms. Flowers, Mr. Klosk, Mr. Myers, Dr. Traber and Ms. Whitaker are “independent directors” applying the definition of independence under the captions “Certain Relationships and Related Transactions” and “Management and Corporate Governance Matters” in the Company’s Proxy Statement for the 2021 Annual Meetinglisting standards of Stockholders.Nasdaq.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The response
Grant Thornton LLP (New York, NY; PCAOB ID Number 248) was engaged to this item is incorporated by reference from the discussion responsive thereto under the caption “Independent Public Accountants”serve as Caladrius’ independent registered public accounting firm in the Company’s Proxy Statement2021 and 2020 and accordingly, audited Caladrius’ financial statements for the fiscal years ended December 31, 2021 and 2020. The following table sets forth a summary of the fees billed or expected to be billed to us by Grant Thornton LLP for professional services rendered for the fiscal years ended December 31, 2021 and 2020.
| | | | | | | | | | | |
| Fee Category | Fiscal 2021 Fees | | Fiscal 2020 Fees |
Audit Fees(1) | $ | 420,000 | | | $ | 401,000 | |
Audit-Related Fees(2) | $ | — | | | $ | — | |
Tax Fees(3) | $ | — | | | $ | — | |
All Other Fees(4) | $ | — | | | $ | — | |
| Total Fees | $ | 420,000 | | | $ | 401,000 | |
_______________
(1)Audit Fees consist of aggregate fees billed or expected to be billed for professional services rendered for the audit of Caladrius’ annual consolidated financial statements included in Caladrius’ Annual MeetingReports on Form 10-K and review of Stockholders.the interim consolidated financial statements included in Quarterly Reports on Form 10-Q or services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2021 and 2020, respectively.
(2)Audit-Related Fees consist of aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of Caladrius’ consolidated financial statements and are not reported under “Audit Fees.”
(3)Tax Fees consist of aggregate fees billed or expected to be billed for professional services rendered for tax compliance, tax advice and tax planning. These fees related to preparation of Caladrius’ federal and state income tax returns and other tax compliance activities.
(4)All Other Fees consist of aggregate fees billed for products and services provided by Grant Thornton (as applicable), other than those disclosed above.
The Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent registered public accounting firm and approves in advance any services to be performed by the independent registered public accounting firm, whether audit-related or not. The Audit Committee reviews each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the independent registered public accounting firm. All of the fees shown above were pre-approved by the Audit Committee.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The following documents are being filed as part of this Report:
(a)(1) FINANCIAL STATEMENTS:
Reference is made to the Index to Financial Statements on Page 48 of this Annual Report on Form 10-K.
All other schedules have been omitted because the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Financial Statements or Notes thereto.
(a)(3) EXHIBITS:
The following is a list of exhibits filed (or furnished, where specified) as part of this Annual Report on Form 10-K.10-K/A. Exhibits that were previously filed are described below and are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated.
| | | | | | | | |
| Exhibit | | Description |
| | Amended and Restated Certificate of Incorporation of Caladrius Biosciences, Inc., as amended, effective July 27, 2016 (filed as Exhibit 3.1 to the Company’s on Form 10-Q for the quarter ended June 30, 2016, filed with the SEC on August 9, 2016). |
| | |
| | Amended and Restated By-Laws of the Caladrius Biosciences, Inc. as amended, effective as of July 27, 2016 (filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, filed with the SEC on August 9, 2016). |
| | |
| | Amendments to Amended and Restated Bylaws of Caladrius Biosciences, Inc., effective as of September 18, 2017 (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K, filed with the SEC on September 21, 2017). |
| | |
| | Form of Trust Indenture (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-3, File No. 333-206175, filed with the SEC on August 6, 2015). |
| | |
| | Form of Warrant (filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q, filed with the SEC on May 5, 2016). |
| | |
| | Description of Capital Stock. |
| | |
| | Form of Warrant (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed with the SEC on April 24, 2020). |
| | |
| | Form of Warrant (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed with the SEC on May 26, 2020). |
| | |
| | Form of Warrant (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed with the SEC on July 10, 2020). |
| | |
| | Form of Warrant (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed with the SEC on January 25, 2021). |
| | |
| | Director Compensation Policy (filed as Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 22, 2018 and amended on April 2, 2018). |
| | |
| | 2015 Equity Compensation Plan (filed as Annex A to the Company’s Definitive Proxy Statement filed on Schedule 14A, filed with the SEC on June 8, 2015). |
| | |
| + | 2017 Employee Stock Purchase Plan (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 10, 2017). |
| | |
| | Form of Indemnification Agreement for executive officers (filed as Exhibit 10.44 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014 as filed with the SEC on March 2, 2015). |
| | |
| + | Employment Agreement, dated as of January 5, 2015 and effective on January 5, 2015, by and between the Company and David J. Mazzo, Ph.D. (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on January 5, 2015). |
| | |
| + | Amendment, dated as of January 16, 2015, to Employment Agreement, dated as of January 5, 2015 and effective on January 5, 2015, by and between the Company and David J. Mazzo, Ph.D. (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on January 16, 2015). |
| | |
| | | | | | | | |
| + | Amendment to Employment Agreement, dated as of July 25, 2016, by and between the Company and David J. Mazzo, PhD (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q. for the quarter ended June 30, 2016, filed with the SEC on August 9, 2016). |
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| + | Amendment to Employment Agreement with David J. Mazzo, effective September 18, 2017 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 21, 2017). |
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| + | Amendment to Employment Agreement with David J. Mazzo, dated December 6, 2018 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 7, 2018). |
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| + | Employment Agreement, dated as of August 9, 2016, by and between Caladrius Biosciences, Inc. and Douglas W. Losordo, MD (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 9, 2016). |
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| + | Amendment to Employment Letter with Doug Losordo, effective November 1, 2017 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2017). |
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| + | Form of Purchase Agreement, dated April 23, 2020, by and between Caladrius Biosciences, Inc. and each purchaser identified on the signature pages thereto (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on April 24, 2020). |
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| + | Placement Agent Agreement, dated November 5, 2019, as subsequently amended on each of March 11, 2020, April 23, 2020 and May 25, 2020, by and between Caladrius Biosciences, Inc. and H.C. Wainwright & Co., LLC (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the SEC on May 26, 2020). |
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| + | Form of Purchase Agreement, dated May 25, 2020, by and between Caladrius Biosciences, Inc. and and each purchaser identified on the signature pages thereto (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on May 26, 2020). |
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| + | Form of Purchase Agreement, dated July 10, 2020, by and between Caladrius Biosciences, Inc. and each purchaser identified on the signature pages thereto (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on July 10, 2020). |
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| + | Form of Registration Rights Agreement, dated July 10, 2020, by and between Caladrius Biosciences, Inc. and each purchaser identified on the signature pages thereto (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the SEC on July 10, 2020). |
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| + | Form of Purchase Agreement, dated January 21, 2021, by and between Caladrius Biosciences, Inc. and certain Investors, as defined therein (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on January 25, 2021). |
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| + | Form of Registration Rights Agreement, dated January 21, 2021, by and between Caladrius Biosciences, Inc. and each purchaser identified on the signature pages thereto (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the SEC on January 25, 2021). |
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| | Form of Institutional Securities Purchase Agreement, by and between Caladrius Biosciences, Inc. and each purchaser identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed on February 16, 2021). |
| | |
| | Form of Institutional Additional Securities Purchase Agreement, by and between Caladrius Biosciences, Inc. and each purchaser identified on the signature pages thereto (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed on February 16, 2021). |
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| * | Employment Agreement, dated as of July 26, 2021 and effective on September 1, 2021, by and between the Company and Kristen K. Buck, M.D. |
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| * | Code of Ethics for Senior Financial Officers (filed as Exhibit 14.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 14, 2019). |
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| † | Subsidiaries of Caladrius Biosciences, Inc. |
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| † | Consent of Grant Thornton LLP |
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| † | Certification of Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | |
| | | | | | | | |
| * | Certification of Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | |
| † | Certification of Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant Section 302 of the Sarbanes-Oxley Act of 2002 |
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| | | | | | | | |
| 101.INS | † | XBRL Instance Document |
| 101.SCH | † | XBRL Taxonomy Extension Schema |
| 101.CAL | † | XBRL Taxonomy Extension Calculation Linkbase |
| 101.DEF | † | XBRL Taxonomy Extension Definition Linkbase |
| 101.LAB | † | XBRL Taxonomy Extension Label Linkbase |
| 101.PRE | † | XBRL Taxonomy Extension Presentation Linkbase |
| | |
+ | | Management contract or compensatory plan, contract or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 15(b) of Form 10-K. |
† | | Filed herewith. |
†† | | Furnished herewith. |
(1) | | |
+ Management contract or compensatory plan, contract or arrangement required to be filed as an exhibit to this Form 10-K/A pursuant to Item 15(b) of Form 10-K.
* Filed herewith.
† Previously filed.
†† Furnished herewith.
(1) Certain portions of this exhibit were omitted based upon a request for confidential treatment, and the omitted portions were filed separately with the SEC on a confidential basis.
ITEM 16. FORM 10-K SUMMARY
None.
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 to be signed on its behalf by the undersigned, thereunto duly authorized, in Basking Ridge (Bernards Township), State of New Jersey, on February 25, 2021.April 21, 2022.
| | | | | | | | |
| | | |
| | | CALADRIUS BIOSCIENCES, INC. |
| | | By: /s/ David J. Mazzo, PhD
Name: David J. Mazzo Title: President and Chief Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
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| Signature | | Title | | Date |
/s/ David J. Mazzo David J. Mazzo, PhD | | Director, and President and Chief Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | | February 25, 2021April 21, 2022 |
| | | | |
/s/ Gregory B. Brown Gregory B. Brown, MD | | Chairman of the Board of Directors | | February 25, 2021April 21, 2022 |
/s/ Michael H. Davidson Michael H. Davidson | | Director | | April 21, 2022 |
/s/ Cynthia L. Flowers Cynthia L. Flowers | | Director | | April 21, 2022 |
/s/ Steven M. Klosk Steven M. Klosk | | Director | | April 21, 2022 |
/s/ Steven S. Myers Steven S. Myers | | Director | | February 25, 2021 |
/s/ Steven M. Klosk
Steven M. Klosk
| | Director | | February 25, 2021April 21, 2022 |
/s/ Peter G. Traber, MD Peter G. Traber, MD | | Director | | February 25, 2021 |
/s/ Cynthia Schwalm
Cynthia Schwalm
| | Director | | February 25, 2021April 21, 2022 |
/s/ Anne C. Whitaker Anne C. Whitaker | | Director | | February 25, 2021 |
/s/ Michael Davidson
Michael Davidson
| | Director | | February 25, 2021April 21, 2022 |