The information contained in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Shares

1,034,000 Units, Each Unit Consisting of One Share of Common Stock and One-Quarter of a Warrant to Purchase One Share of Common Stock

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This is a firm commitment public offering of shares1,034,000 units of Biostage, Inc., a Delaware corporation (the “Units”), each Unit consisting of one (1) share of our common stock $0.01 par valueand one-quarter (1/4) of a warrant to purchase one share of our common stock.  Each whole warrant entitles the holder thereof to purchase one share of our common stock at a price of $            per share.share, subject to adjustment as described herein. Only whole warrants are exercisable. No fractional warrants will be issued upon separation of the units.  Prior to this offering, shares of our common stock were quoted on the OTC Markets Group, Inc. OTCQB Marketplace under the symbol “BSTG.”  The Units will not be certificated.  The shares of common stock and the warrants are immediately separable and will be issued separately in this offering.

On June 21,October 4, 2022, the last reported sale price for our common stock as reported on the OTCQB Marketplace was $$6.00 per share. The actual public offering price per share of Common Stockunit in this offering will be determined between us and the underwriter at the time of pricing and may be at a discount to the current market price for our Common Stock.common stock. Therefore, the recent market price used throughout this preliminary prospectus, including as an assumed offering price, may not be indicative of the final offering price.

All share and warrant numbers included in this prospectus are based upon an assumed public offering price per unit of $6.00, the closing price of our common stock on the OTCQB Marketplace on October 4, 2022.

We have applied to list our common stock on the Nasdaq Capital Market under the symbol “BSTG.” No assurance can be given that our application will be approved or that an active trading market for our shares will develop. This offering will only occur if Nasdaq approves the listing of our common stock.  There is no established trading market for the warrants being offered, and we do not expect a market to develop. In addition, we do not intend to apply for the listing of the warrants on any national securities exchange or other trading market. Without an active trading market, the liquidity of the warrants will be limited.

One of our executive officers and one of our other affiliates intend to purchase up to approximately 79,166 units (based on an assumed offering price per unit of $6.00) of our common stock to be sold in this offering at the public offering price and on the same terms as the other purchasers in this offering.

We are a “smaller reporting company” under the federal securities laws and, as such, have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings.

Investing in our common stocksecurities involves a high degree of risk. Before buying our shares of common stock,securities, you should carefully review the risks and uncertainties described under the heading “Risk Factors” contained in this prospectus beginning on page 1412 and any applicable prospectus supplement, and under similar headings in the other documents that are incorporated by reference into this prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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($         net of the underwriting discount), and (ii) a public offering price per warrant of $         ($         net of the underwriting discount).

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We have granted a 30-day option to the underwriter to purchase up to 155,100 additional shares of common stock and/or warrants to purchase up to 38,775 additional shares of common stock solely to cover over-allotments, if any. The underwriter expects to deliver the sharessecurities to purchasers on or about               , 2022.

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Newbridge Securities Corporation

The date of this prospectus is        , 2022

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You should rely only on the information contained in this prospectus or in any free writing prospectus that we may provide to you in connection with this offering. Neither we nor any of the underwritersunderwriter has authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus or in any such free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We can provide no assurance as to the reliability of any other information that others may give you. Neither we nor any of the underwritersunderwriter is making an offer to sell or seeking offers to buy these securities in any jurisdiction where or to any person to whom the offer or sale is not permitted. The information in this prospectus is accurate only as of the date on the front cover of this prospectus, and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of such free writing prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates.

“Biostage, Inc.” the “Biostage” logo and other trademarks, trade names or service marks of Biostage, Inc. appearing in this prospectus are the property of Biostage, Inc. All other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus may be referred to without the ^® and ^™ symbols, but such references should not be construed as any indicator that their respective owners will not assert their rights thereto.

For investors outside the United States: Neither we nor the underwritersunderwriter have done anything that would permit this offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any such free writing prospectus outside the United States.

Market and Industry Data

This prospectus contains estimates and other statistical data made by independent parties relating to our industry and the markets in which we operate, including estimates and statistical data about our market position, market opportunity, the incidence of certain medical conditions and other industry data. These data, to the extent they contain estimates or projections, involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates or projections. Although we have not independently verified the accuracy or completeness of the data contained in these industry publications and reports, based on our industry experience we believe that the publications are reliable, the conclusions contained in the publications and reports are reasonable and the third-party information included in this prospectus and in our estimates is accurate and complete.

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RISK FACTORS

Investing in our common stocksecurities involves significant risks. Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You should carefully consider the risks and uncertainties described below, in addition to other information contained in this prospectus, including our consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.

Risks Relating to Our Financial Position, Need for Capital and Operating Risks

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We have generated insignificant revenue to date and have an accumulated deficit. We anticipate that we will incur losses for the foreseeable future. We may never achieve or sustain profitability.

We have generated insignificant revenues to date, and we have generated no revenues from sales of any clinical product candidates, and, as of March 31,June 30, 2022, we had an accumulated deficit of approximately $79.1$80.5 million. We expect to continue to experience losses in the foreseeable future due to our limited anticipated revenues and significant anticipated expenses. We do not anticipate that we will achieve meaningful revenues for the foreseeable future. In addition, we expect that we will continue to incur significant operating expenses as we continue to focus on additional research and development, preclinical testing, clinical testing and regulatory review and/or approvals of our product candidates and technologies. As a result, we cannot predict when, if ever, we might achieve profitability and cannot be certain that we will be able to sustain profitability, if achieved.

Our product candidates are in an early stage of development. If we are unable to develop or market any of our product candidates, our financial condition will be negatively affected, and we may have to curtail or cease our operations.

We are in the early stage of product development. Investors must evaluate us in light of the uncertainties and complexities affecting an early-stage biotechnology company. Our product candidates require additional research and development, preclinical testing, clinical testing and regulatory review and/or approvals or clearances before marketing. In addition, we may not succeed in developing new products as an alternative to our existing portfolio of product candidates. If we fail to successfully develop and commercialize our product candidates, including our esophageal or airway product candidates, our results of operations and financial condition may be negatively affected, and we may have to curtail or cease our operations.

We have a limited operating history, and it is difficult to predict our future growth and operating results.

We have a limited operating history and limited operations and assets. Accordingly, investors should consider our prospects in light of the costs, uncertainties, delays and difficulties encountered by companies in the early stage of development, particularly companies in new and evolving markets, such as bioengineered organ implants, and regenerative medicine. These risks include, but are not limited to, unforeseen capital requirements, delays in obtaining regulatory approvals, failure to gain market acceptance and competition from foreseen and unforeseen sources. As such, our development timelines have been and may continue to be subject to delay that could negatively affect our cash flow and our ability to develop or bring product candidates to market, if at all. Our estimates of patient population are based on published data and analysis of external databases by third parties and are subject to uncertainty and possible future revision as they often require inference or extrapolations from one country to another or one patient condition to another. The effect of any or all of the foregoing could cause a material adverse effect on our business, financial condition or results of operations.

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If we fail to retain key personnel and/or attract satisfactory replacements, we may not be able to compete effectively, which would have an adverse effect on our operations.

Our success is highly dependent on the continued services of key management, technical and scientific personnel and collaborators. Our management and other employees may voluntarily terminate their employment at any time upon short

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Our audited financial statements for the year ended December 31, 2021 contain a going concern qualification. Our financial status creates doubt whether we will continue as a going concern. We will need additional funds in the near future and our operations will be adversely affected if we are unable to obtain needed funding.

We ended March 31,At June 30, 2022, withwe had approximately $0.7$4.6 million of operating cash on-hand. While giving considerationBased on our current business plans anticipating conducting clinical trials, we believe that the net proceeds from this offering, together with our existing cash and cash equivalents and the income from non-dilutive grants, will be sufficient for us to cash proceeds of approximately $5.1 million receivedfund our operating expenses and capital expenditures requirements through May 16, 2022 from a private placement from new and existing investors, we will need to raise additional capital in the firstsecond quarter of 2023 and beyond to fund operations.2024. If we do not raise additional capital from outside sources duringprior to the firstsecond quarter of 2023,2024, we may be forced to further curtail or cease our operations. Based on these circumstances, our ability to continue as a going concern is at risk asand our independent registered public accounting firm included a “going concern” qualification as to our ability to continue as a going concern in its audit report dated March 31, 2022, included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 31, 2022. Our cash requirements and cash resources will vary significantly depending upon the timing, and the financial and other resources that will be required to complete ongoing development and pre-clinical and clinical testing of our product candidates, regulatory efforts and collaborative arrangements necessary for our product candidates that are currently under development. In addition to development and other costs, we expect to incur capital expenditures from time to time. These capital expenditures will be influenced by our regulatory compliance efforts, our success, if any, at developing collaborative arrangements with strategic partners, our needs for additional facilities and capital equipment and the growth, if any, of our business in general. We will require additional funding to continue our anticipated operations and support our capital and operating needs. We are currently seeking and will continue to seek financings from other existing and/or new investors to raise necessary funds through a combination of public or private equity offerings. We may also pursue debt financings, other financing mechanisms, strategic collaborations and

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While this weakness has been remediated, we may in the future identify additional internal control deficiencies that could rise to the level of a material weakness or uncover errors in financial reporting. During the course of our evaluation, we may identify areas requiring improvement and may be required to design additional enhanced processes and controls to address issues identified through this review. In addition, there can be no assurance that our internal control over financial reporting will be effective as a result of these efforts or that any such future deficiencies identified may not be material weaknesses that would be required to be reported in future periods.

If, as a result of deficiencies in our internal control over financial reporting we cannot provide reliable financial statements, our business decision processes may be adversely affected, our business and results of operations could be harmed, investors could lose confidence in our reported financial information and our ability to obtain additional financing, or additional financing on favorable terms, could be adversely affected. In addition, if we fail to remediate this material weakness and maintain an effective system of internal control over financial reporting, we may not be able to rely on the integrity of our financial results, which could result in inaccurate or late reporting of our financial results, as well as delays or the inability to meet our reporting obligations or to comply with SEC rules and regulations. Any of these could result in delisting actions, result in investigation and sanctions by regulatory authorities, impair our ability to produce accurate financial statements on a timely basis, lead to a restatement of our financial statements and adversely affect our business and the trading price of our common stock.

Public perception of ethical and social issues surrounding the use of cell technology may limit or discourage the use of our technologies, which may reduce the demand for our products and technologies and reduce our revenues.

Our success will depend in part upon our and our collaborators’ ability to develop therapeutic approaches incorporating, or discovered through, the use of cells. If bioengineered organ implant technology is perceived negatively by the public for social, ethical, medical or other reasons, governmental authorities in the U.S. and other countries may call for prohibition of, or limits on, cell-based technologies and other approaches to bioengineering and tissue engineering. Although our product candidates have not, to date, used the more controversial stem cells derived from human embryos

● substantial litigation costs;

● injury to our reputation and the reputationTable of our products;Contents

● withdrawal of clinical trial participants; and

● adverse regulatory action.

Any of these results would substantially harm our business.

If restrictions on reimbursements or other conditions imposed by payers limit our customers’ actual or potential financial returns on our products, our customers may not purchase our products or may reduce their purchases.

Our customers’ willingness to use our products will depend in part on the extent to which coverage for these products is available from government payers, private health insurers and other third-party payers. These payers are increasingly challenging the price of medical products and services. Significant uncertainty exists as to the reimbursement status of newly approved treatments and products in the fields of biotechnology and regenerative medicine, and coverage and adequate payments may not be available for these treatments and products. In addition, third-party payers may require additional clinical trial data to establish or continue reimbursement coverage. These clinical trials, if required, could take years to complete and could be expensive. There can be no assurance that the payers will agree to continue reimbursement or provide additional coverage based upon these clinical trials. Failure to obtain adequate reimbursement would result in reduced sales of our products, which could have a material adverse effect on our business, financial condition or results of operations.

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Our products are novel and will require market acceptance.

Even if we receive regulatory approvals for the commercial use of our product candidates, their commercial success will depend upon acceptance by physicians, patients, third party payers such as health insurance companies and other members of the medical community. Market acceptance of our products is also dependent upon our ability to provide acceptable evidence and the perception of the positive characteristics of our products relative to existing or future treatment methods, including their safety, efficacy and/or other positive advantages. If our products fail to gain market acceptance, we may be unable to earn sufficient revenue to continue our business. Market acceptance of, and demand for, any product that we may develop and commercialize will depend on many factors, both within and outside of our control. If our products receive only limited market acceptance, our business, financial condition and results of operations would be materially and adversely affected.

Our long-term growth depends on our ability to develop products for other organs.

Our growth strategy includes expanding the use of our products in treatments pertaining to organs other than the esophagus and airways, such as the lungs, GI tract, and others. These other organs are more complex than the esophagus and airways. There is no assurance that we will be able to successfully apply our technologies to these other more complex organs, which might limit our expected growth.

Our success will depend partly on our ability to operate without infringing on, or misappropriating, the intellectual property or confidentiality rights of others.

We may be sued for infringing on the intellectual property or confidentiality rights of others, including the patent rights, trademarks and trade names and confidential information of third parties. To the extent that any of such claims are valid, if we had utilized, or were to utilize, such patent applications or patents without an agreement from the owner thereof, it could result in infringement of the intellectual property rights of the respective owner. Intellectual property and related litigation is costly and the outcome is uncertain. If we do not prevail in any such intellectual property or related litigation, in addition to any damages we might have to pay, we could be required to stop the infringing activity, or obtain a license to or design around the intellectual property or confidential information in question. If we are unable to obtain a required

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If we are unable to effectively protect our intellectual property, third parties may use our technology, which would impair our ability to compete in our markets.

Our continued success will depend significantly on our ability to obtain and maintain meaningful patent protection for certain of our products throughout the world. Patent law relating to the scope of claims in the biotechnology, regenerative medicine, and medical device fields in which we operate is still evolving. The degree of future protection for our proprietary rights is uncertain. We may rely on patents to protect a significant part of our intellectual property and to enhance our competitive position. However, our presently pending or future patent applications may not be accepted and patents might not be issued, and any patent previously issued to us may be challenged, invalidated, held unenforceable or circumvented. Furthermore, the claims in patents which have been issued or which may be issued to us in the future may not be sufficiently broad to prevent third parties from producing competing products similar to our products. We may also operate in countries where we do not have patent rights and in those countries we would not have patent protection. We also rely on trademarks and trade names in our business. The laws of various foreign countries in which we compete may not protect our intellectual property to the same extent as do the laws of the U.S. If we fail to obtain adequate patent protection for our proprietary technology, our ability to be commercially competitive could be materially impaired. It is also possible that our intellectual property may be stolen via cyber-attacks or similar methods.

In addition to patent protection, we also rely on protection of trade secrets, know-how and confidential and proprietary information. To maintain the confidentiality of trade-secrets and proprietary information, we generally seek to enter into confidentiality agreements with our employees, consultants and strategic partners upon the commencement of a relationship. However, we may not be able to obtain these agreements in all circumstances in part due to local regulations. In the event of unauthorized use or disclosure of this information, these agreements, even if obtained, may not provide meaningful protection for our trade-secrets or other confidential information. In addition, adequate remedies may not exist in the event of unauthorized use or disclosure of this information. The loss or exposure of our trade secrets and other proprietary information would impair our competitive advantages and could have a materially adverse effect on our operating results, financial condition and future growth prospects.

Our competitors and potential competitors may have greater resources than we have and may develop products and technologies that are more effective or commercially attractive than our products and technologies or may develop competing relationships with our key collaborators.

We expect to compete with multiple pharmaceutical, biotechnology, medical device and scientific research product companies. In addition, there are many academic and clinical centers that are developing bioengineered or regenerative organ technologies that may one day become competitors for us. Many of our competitors and potential competitors have substantially greater financial, technological, research and development, marketing, and personnel resources than we do. We cannot, with any accuracy, forecast when or if these companies are likely to bring bioengineered organ or regenerative

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If we do not successfully manage our growth, our business goals may not be achieved.

To manage growth, we will be required to continue to improve existing, and implement additional, operational and financial systems, procedures and controls, and hire, train and manage additional employees. Our current and planned personnel, systems, procedures and controls may not be adequate to support our anticipated growth and we may not be able to hire, train, retain, motivate and manage required personnel. Competition for qualified personnel in the biotechnology and regenerative medicine area is intense, and we operate or plan to operate in geographic locations where labor markets are particularly competitive, including Boston, Massachusetts, where demand for personnel with these skills is extremely high and is likely to remain high. As a result, competition for qualified personnel is intense and the process of hiring suitably qualified personnel is often lengthy and expensive, and may become more expensive in the future. If we are unable to hire and retain a sufficient number of qualified employees or otherwise manage our growth effectively, our ability to conduct and expand our business could be seriously reduced.

Risks Associated with Clinical Trials and Pre-Clinical Development

The results of our clinical trials or pre-clinical development efforts may not support our product claims or may result in the discovery of adverse side effects.

Even if our pre-clinical development efforts or clinical trials are completed as planned, we cannot be certain that their results will support our product claims or that the FDA, foreign regulatory authorities or notified bodies will agree with our conclusions regarding them. Although we have obtained some positive results from the use of our scaffolds and bioreactors for esophageal and trachea implants performed to date, we also discovered that our first-generation trachea product design encountered certain body response issues that we have sought to resolve with our ongoing development of our implant design. We cannot be certain that our implant design or any future modifications or improvements with respect thereto will support our claims, and any such developments may result in the discovery of further adverse side effects. We also may not see positive results when our product candidates undergo clinical testing in humans in the future. Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies. Our pre-clinical development efforts and any clinical trial process may fail to demonstrate that our product candidates are safe and effective for the proposed indicated uses, which could cause us to abandon a product candidate and may delay development of others. Also, patients receiving surgeries using our product candidates under compassionate use or in clinical trials may experience significant adverse events following the surgeries, including serious health complications or death, which may or may not be related to materials provided by us. In 2017, the Biostage Esophageal Implant candidate was used in a human surgery at Mayo Clinic via an FDA-approved single-use expanded access application. In 2013 and 2014 we had provided a previous generation trachea scaffold device that was used in implants in human patients under compassionate use. To date, we believe that at least four of the six patients who received those tracheal implants have died. While we believe that none of those patients died because of a failure of the applicable device, these and any other such events have and may cause or contribute to the delay or termination of our clinical trials or pre-clinical development efforts. Any delay or termination of our pre-clinical development efforts or clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our products and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.

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We rely on regular interaction and guidance from the FDA and other regional/country regulatory authorities/agencies to plan research and development activities across all stages. Due to the COVID-19 pandemic, the FDA and worldwide regulatory authorities have a great deal of resources dedicated to COVID-19 related matters, resulting in disruption in their ability to fully support the regulatory clearance/approval processes. As resources continue to be diverted, regulatory clearances/approvals may continue to be delayed, until the pandemic is under control. Therefore, delays with approvals, clearances, inspections, and meetings that are currently being experienced may continue for the foreseeable future. Postponement of these interactions could delay us from bringing our product candidates to market.

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Clinical trials necessary to support a biological product license or other marketing authorization for our product candidates will be expensive and will require the enrollment of sufficient patients to adequately demonstrate safety and efficacy for the product’s target populations. Suitable patients may be difficult to identify and recruit. Delays or failures in our clinical trials will prevent us from commercializing any products and will adversely affect our business, operating results and prospects.

In the U.S., initiating and completing clinical trials necessary to support Biological License Applications, or BLAs, will be time consuming, expensive and the outcome uncertain. Moreover, the FDA may not agree that clinical trial results support an application for the indications sought in the application for the product. In other jurisdictions such as the E.U., the conduct of extensive and expensive clinical trials may also be required in order to demonstrate the quality, safety and efficacy of our product candidates, depending on each specific product candidate, the claims being studied, and the target condition or disease. The outcome of these clinical trials, which can be expensive and are heavily regulated, will also be uncertain. Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product candidate we advance into clinical trials following initial positive results in early clinical trials may not have favorable results in later clinical trials.

Conducting successful clinical trials will require the enrollment of a sufficient number of patients to support each trial’s claims, and suitable patients may be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population, the nature of the trial protocol, the attractiveness of, or the discomfort and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigators, support staff, and proximity of patients to clinical sites and ability to comply with the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of our product candidates, or if they determine that the treatments received under the trial protocols are not attractive or involve unacceptable risks or discomfort. Also, patients may not participate in our clinical trials if they choose to participate in contemporaneous clinical trials of competitive products. In addition, patients participating in clinical trials may die before completion of the trial or suffer adverse medical events unrelated to investigational products.

Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required and we may not adequately develop such protocols to support clearance and approval. Further, the FDA and foreign regulatory authorities may require us to submit data on a greater number of patients than we originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays in the approval and attempted commercialization of our products or result in the failure of the clinical trial. In addition, despite considerable time and expense invested in our clinical trials, the FDA and foreign regulatory authorities may not consider our data adequate to demonstrate safety and efficacy. Although FDA regulations allow submission of

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If the third parties on which we rely to conduct our clinical trials and to assist us with pre-clinical development do not perform as contractually-required or expected, we may not be able to obtain regulatory approval for or commercialize our product candidates.

We do not have the ability to independently conduct our pre-clinical and clinical trials for our product candidates and we must rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct, or assist us in conducting, such trials, including data collection and analysis. We do not have direct control over such third parties’ personnel or operations. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or any regulatory requirements, or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to seek or obtain regulatory approval for, or successfully commercialize, our product candidates on a timely basis, if at all. Our business, operating results and prospects may also be adversely affected. Furthermore, any third-party clinical trial investigators pertaining to our product candidates may be delayed in conducting our clinical trials for reasons outside of their control.

Risks Associated with Regulatory Approvals

If we fail to obtain, or experience significant delays in obtaining, regulatory approvals in the U.S., China or the E.U. for our products, including those for the esophagus and airways, or are unable to maintain such clearances or approvals for our products, our ability to commercially distribute and market these products would be adversely impacted.

We currently do not have regulatory approval to market any of our implant product candidates, including those for the esophagus, or trachea and bronchus. Our product candidates are subject to rigorous regulation by the FDA, and numerous other federal and state governmental authorities in the U.S., as well as foreign governmental authorities. In the U.S., the FDA permits commercial distribution of new medical products only after approval of a Premarket Approval, or PMA, New Drug Application, or NDA, or BLA, unless the product is specifically exempt from those requirements. A PMA, NDA or BLA must be supported by extensive data, including, but not limited to, technical, pre-clinical, clinical trial, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the product for its intended use. There are similar approval processes in China, the E.U. and other foreign jurisdictions. Our failure to receive or obtain such clearances or approvals on a timely basis or at all would have an adverse effect on our results of operations.

The first bioengineered trachea implant approved in the U.S. using our first-generation trachea scaffold in an implant was approved under the IND pathway through the FDA’s Center for Biologics Evaluation and Research, or CBER, for a single compassionate use. Such initial U.S. surgery was led by Professor Paolo Macchiarini, M.D., a surgeon pioneering tracheal replacement techniques. Dr. Macchiarini was not employed or affiliated with our company, and we did not pay him any compensation or consulting fees. In June 2014, we ceased support of any human surgeries with Dr. Macchiarini. Since the time we withdrew from involvement with Dr. Macchiarini, allegations that Dr. Macchiarini had failed to obtain informed consent and accurately report patient conditions, among other things, for surgeries performed at the Karolinska Institutet in Stockholm, Sweden, were made public.

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The Karolinska Institutet investigated the allegations and concluded that while in some instances Dr. Macchiarini did act without due care, his actions did not qualify as scientific misconduct. Subsequent to this investigation, further negative publicity and claims continued to be released questioning the conduct of Dr. Macchiarini, the Karolinska Institutet, the Krasnodar Regional Hospital in Krasnodar, Russia as well as our company relating to surgeries performed by Dr. Macchiarini and other surgeons at such facilities. In February 2015, the Karolinska Institutet announced that it would conduct an additional investigation into the allegations made about Dr. Macchiarini and the Karolinska Institutet’s response and actions in the earlier investigation. In March 2015, the Karolinska Institutet announced that it was terminating Dr. Macchiarini’s employment, and in December 2016 the Karolinska Institutet found Dr. Macchiarini, along with three co-authors, guilty of scientific misconduct. In May 2022, Dr. Macchiarini was tried in Solna District Court in Sweden for aggravated assault against three patients treated at the Karolinska University Hospital. On June 16, 2022, Dr. Macchiarini

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In the E.U., our esophagus product candidate will likely be regulated as a combined advanced therapy medicinal product and our other product candidates, including for the trachea or bronchus, may also be viewed as advanced therapy medicinal products, which could delay approvals and clearances and increase costs of obtaining such approvals and clearances.

On May 28, 2014, we received notice from the European Medicines Agency, or EMA, that our first-generation trachea product candidate would be regulated as a combined advanced therapy medicinal product. While we have not had any formal interaction with the EMA with respect to our Biostage Esophageal Implant, we believe that such implant technology would likely be regulated as a combined advanced therapy medicinal product. In the event of such classification, it would be necessary to seek a marketing authorization for these products granted by the European Commission before being marketed in the E.U.

Other products we may develop, including any products pertaining to the airways or otherwise, may similarly be regulated as advanced therapy medicinal products or combined advanced therapy medicinal products. The regulatory procedures leading to marketing approval of our products vary among jurisdictions and can involve substantial additional testing. Compliance with the FDA requirements does not ensure clearance or approval in other jurisdictions, and the ability to legally market our products in any one foreign country does not ensure clearance, or approval by regulatory authorities in other foreign jurisdictions. The foreign regulatory process leading to the marketing of the products may include all of the risks associated with obtaining FDA approval in addition to other risks. In addition, the time required to comply with

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The occurrence of any of these events could have a material adverse effect on our business, financial condition or results of operations

Post-market enforcement actions can generate adverse commercial consequences.

Even if regulatory approval of a product is granted, such clearance or approval may be subject to limitations on the intended uses for which the product may be marketed and reduce our potential to successfully commercialize the product and generate revenue from the product. If the FDA or a foreign regulatory authority determines that our promotional materials, labeling, training or other marketing or educational activities constitute promotion of an unapproved use, it could request that we cease or modify our training or promotional materials or subject us to regulatory enforcement actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our training or other

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Any disputes that arise between us and HBIO with respect to our past and ongoing relationships could harm our business operations.

Disputes may arise between HBIO and us in a number of areas relating to our past and ongoing relationships, including:

We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with a different party.

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Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.

Our principal stockholders hold a significant percentage of our voting power and will be able to exert significant control over us.

The stockholders who purchased shares of our common stock and related warrants pursuant to a Securities Purchase Agreement dated December 27, 2017 collectively hold shares of common stock that represent approximately 32% of all outstanding voting power prior to the closing of this Offering, and as such may significantly influence the results of matters voted on by our shareholders.stockholders. The interests of these stockholders may conflict with your interests. This significant concentration of share ownership may adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in companies with controlling stockholders.

A trading market that will provide you with adequate liquidity may not develop for our common stock , and you may not be able to resell your common stock at or above the public offering price.

The current public market for our common stock has limited trading volume and liquidity. We cannot predict the extent to which investor interest in our company will lead to the development of a more active trading market in our common stock, or how liquid that market might be. Although we have applied to have our common stock listed on the Nasdaq Capital Market, an active public market for our shares may not develop or be sustained after this offering. We and the underwriter will determine the initial public offering price of our common stockthe units through negotiation. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our sharessecurities following this offering. In

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Substantial sales of common stock have and may continue to occur, or may be anticipated, which have and could continue to cause our stock price to decline.

We expect that we will seek to raise additional capital from time to time in the future, which may involve the issuance of additional shares of common stock, or securities convertible into or exercisable for common stock. The purchasers of the shares of common stock and warrants to purchase shares of common stock from our public offerings and private placements may sell significant quantities of our common stock in the market, which may cause a decline in the price of our common stock. Further, we cannot predict the effect, if any, that any additional market sales of common stock, or

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The lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus. Based upon the number of shares outstanding as of ,October 4, 2022 plus 669,666 shares of our common stock issuable upon conversion of our Series E Preferred Stock (assuming a public offering price of $$6.00 per share, the last reported sale price of our common stock on the OTCQB Marketplace on      , 2022)unit), 1,888,622 shares of common stock upon the assumed exercise of all outstanding warrants, after the lock-up agreements expire and 258,500 shares of common stock issuable upon exercise of the warrants contained in the units offered by this prospectus, up to approximately 14,263,619 additional shares of common stock will be eligible for sale in the public market, approximately 7,327,712 of which shares are held by directors, executive officers and other affiliates and will be subject to Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. Newbridge Securities Corporation may, however, in their sole discretion, permit our officers, directors and other stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

We have broad discretion to determine how to use the funds raised in this offering and may use them in ways that may not enhance our operating results or the price of our common stock.

Our management will have broad discretion over the use of proceeds from this offering, and we could spend the proceeds from this offering in ways our stockholders may not agree with or that do not yield a favorable return, if at all. We currently expect to use the net proceeds from this offering to fund research and development of our product candidates and development programs, including our planned clinical trial for our first esophageal product candidate, the Biostage Esophageal Implant, and the remainder for our other research and development activities, as well as for working capital and other general corporate purposes. However, our use of these proceeds may differ substantially from our current plans. If we do not invest or apply the proceeds of this offering in ways that improve our operating results, we may fail to achieve expected financial results, which could cause our stock price to decline.

There is no public market for the warrants to purchase shares of our common stock being offered by us in this offering.

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There is no established public trading market for the warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the warrants on any national securities exchange or other nationally recognized trading system, including The Nasdaq Capital Market. Without an active market, the liquidity of the warrants will be limited.

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The warrants are speculative in nature.

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The warrants do not confer any rights of common stock ownership on its holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of common stock at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the warrants may exercise their right to acquire the common stock and pay an exercise price of $         per share, subject to certain adjustments, prior to four years from the date on which such warrants become exercisable, after which date any unexercised warrants will expire and have no further value. Moreover, following this offering, the market value of the warrants, if any, is uncertain and there can be no assurance that the market value of the warrants will equal or exceed their imputed offering price. The warrants will not be listed on any national securities exchange. There can be no assurance that the market price of the common stock will ever equal or exceed the exercise price of the warrants, and consequently, whether it will ever be profitable for holders of the warrants to exercise the warrants.

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Provisions of the warrants offered by this prospectus could discourage an acquisition of us by a third party.

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In addition to the provisions of our certificate of incorporation and bylaws discussed below, certain provisions of the warrants offered by this prospectus could make it more difficult or expensive for a third party to acquire us. The warrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the warrants. These and other provisions of the warrants offered by this prospectus could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.

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Provisions of Delaware law, of our amended and restated charter and amended and restated bylaws may make a takeover more difficult, which could cause our stock price to decline.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and in the Delaware corporate law may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt, which is opposed by management and the Board of Directors. Public stockholders who might desire to participate in such a transaction may not have an opportunity to do so. We have a staggered Board of Directors that makes it difficult

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adverse impact to the global economy, continue to evolve. Accordingly, the significance of the future impact to our business, financial condition and results of operations remains subject to significant uncertainty.

We are subject to new U.S. foreign investment regulations, which may impose additional burdens on or may limit certain investors’ ability to purchase our common stock, potentially making our common stock less attractive to investors, and may also impact our ability to generate revenues outside of the U.S.

In October 2018, the U.S. Department of Treasury announced a pilot program to implement part of the FIRRMA, effective November 10, 2018. The pilot program expands the jurisdiction of CFIUS to include certain direct or indirect foreign investments in a defined category of U.S. companies, which may include companies such as Biostage in the biotechnology

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Local economic conditions, legal, regulatory or political considerations, disruptions from strikes, the effectiveness of our sales representatives and distributors, local competition and changes in local medical practice could also affect our sales to foreign markets. Relationships with customers and effective terms of sale frequently vary by country, often with longer-term receivables than are typical in the U.S.

Comprehensive tax reform legislation could adversely affect our business and financial condition.

In December 2017, the U.S. government enacted the Tax Cuts and Jobs Act of 2017, or TCJA, which significantly reforms the Internal Revenue Code of 1986, as amended. The TCJA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, effective January 1, 2018; limitation of the tax deduction for interest expense; limitation of the deduction for net operating losses

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implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.

Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law. The TCJA includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Additionally, on January 22, 2018, former President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax, an annual fee on certain high-cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the Medical Device Excise Tax, or MDET, on non-exempt medical devices. Since then, The Further Consolidated Appropriations Act, 2020 H.R. 1865, signed into law on December 20, 2019, repealed the MDET. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to reduce the coverage gap in most Medicare

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If we fail to complete the required IRS forms for exemptions, make timely semi-monthly payments of collected excise taxes, or submit quarterly reports as required by the MDET, we may be subject to penalties, such as Section 6656 penalties for any failure to make timely deposits.

Section 4191 of the Internal Revenue Code, enacted by Section 1405 of the Health Care and Education Reconciliation Act of 2010, Public Law 111-152 (124 Stat. 1029 (2010)), in conjunction with the Patient Protection and the ACA, Public Law 111-148 (124 Stat. 119 (2010)), imposed as of January 1, 2013, an excise tax on the sale of certain medical devices. The MDET imposed by Section 4191 is 2.3% of the price for which a taxable medical device is sold within the U.S. If we fail to collect this tax, we may be face penalties, which could have a material adveseadverse effect on our business, financial condition or results of operations.

We are a smaller reporting company and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

We are a smaller reporting company, or SRC, and a non-accelerated filer, which allows us to take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not SRCs or non-accelerated filers, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations, including disclosures regarding executive compensation, in our Annual Report and our periodic reports and proxy statements and providing only two years of audited financial statements in our Annual Report and our periodic reports. We will remain an SRC until (a) the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day our most recently completed second fiscal quarter exceeds $250 million or (b) in the event we have over $100 million in annual revenues, and the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day our most recently completed

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” All statements other than statements of historical facts contained in this prospectus may be forward-looking statements. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “continues,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will,” “would” or “should” or, in each case, their negative or other variations or comparable terminology. They appear in a number of places throughout this prospectus, and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, future acquisitions and the industry in which we operate.

These forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause our actual results of operations, financial condition, liquidity, performance, prospects, opportunities, achievements or industry results, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. These forward-looking statements are based on assumptions regarding our present and future business strategies and the environment in which we operate. Important factors that could cause those differences include, but are not limited to:

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USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of our common stock in this offering will be approximately $$5.2 million (or $$6.1 million if the underwriters exercise theirunderwriter exercises its over-allotment option in full), based on an assumed public offering price of $$6.00 per shareunit (which is based on the last reported saleclosing price per share of our common stock on the OTCQB Marketplace on ,October 4, 2022), after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.us and excluding the proceeds, if any, from the exercise of the warrants issued pursuant to this offering. Each $1.00 increase (decrease) in the assumed public offering price would increase (decrease) the net proceeds to us from this offering by approximately $        million$960,000 (or $        million$1,100,000 if the underwriters exercise theirunderwriter exercises its over-allotment option in full), assuming the number of sharesunits we sell, as set forth on the cover page of this prospectus, remains the same, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. For each 100,000 share increase (decrease) in the number of sharesunits sold in this offering, the net proceeds to us from this offering will change by approximately $        million$560,000 (or $         million$640,000 if the underwriters exercise their over-allotment option in full), assuming the assumed public offering price remains the same, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. Each 100,000 share increase (decrease) in the number of shares offered and sold would increase (decrease) the net proceeds to us from this offering by approximately $        million (or $        million if the underwriters exercise theirunderwriter exercises its over-allotment option in full), assuming the assumed public offering price remains the same, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.

We intend to use the net proceeds for working capital, research, development, including funding preclinical and clinical trials, business development, sales and marketing, capital expenditures, and other general corporate business purposes. The expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. As a result, our management will have broad discretion over how these proceeds are used.

Pending these uses, we intend to invest the net proceeds to us from this offering in a variety of capital preservation investments, including short-term, investment-grade and interest-bearing instruments. The precise amounts and timing of the application of proceeds will depend upon our funding requirements and the availability of other funds. We may find it necessary or advisable to use the net proceeds for other purposes, and we will have broad discretion in the application of

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MARKET FOR OUR COMMON STOCK

Prior to this offering, the shares of our common stock were quoted on the OTC Markets Group, Inc. OTCQB Marketplace under the symbol “BSTG.” and quoted on the predecessor to the OTCQB Marketplace since October 6, 2017. Trading on the OTCQB Marketplace has been infrequent and limited in volume, therefore the prices at which such transactions occurred may not necessarily reflect the price that would be paid for our common stock in a more liquid market.

As of June 21,October 4, 2022, there were approximately 150155 record holders of our common stock. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.

We have applied to list our common stock on the Nasdaq Capital Market under the symbol “BSTG.” However, we cannot assure you that a liquid trading market for our common stock will develop or be sustained after this offering. You may not be able to sell your shares quickly or at the market price if trading in our common stock is not active. See “Underwriting” for more information regarding our arrangements with the underwritersunderwriter and the factors considered in setting the public offering price.

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DIVIDEND POLICY

Since our inception, we have not paid any dividends on our common stock, and we currently expect that, for the foreseeable future, all earnings, if any, will be retained for use in the development and operation of our business. In the future, our Board may decide, at its discretion, whether dividends may be declared and paid to holders of our common stock.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of March 31,June 30, 2022:

This table should be read in conjunction with, and is qualified in its entirety by reference to, “Use of Proceeds,” “Selected Historical Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus, including to the extent incorporated by reference herein.

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DILUTION

If you invest in our common stock in this offering,securities, your interest will be diluted to the extent of the difference between the public offering price per share of our common stockunit and the pro forma as adjusted net tangible book value per share of our common stock immediately after the closing of this offering. Net tangible book value per share represents our total tangible assets less our total liabilities, divided by the number of outstanding shares of common stock. Our historical net tangible book value (deficit) of our common stock as of March 31,June 30, 2022 was $(5.0) million,($1.2 million), or $(0.46)$0.10 per share.

After giving further effect to the receipt of the net proceeds from our sale of shares of common stock1,034,000 units in this offering at the assumed public offering price of $$6.00 per unit (which is based on the closing price per share (the last reported sale price of our common stock on the OTCQB Marketplace on ,2022)October 4, 2022), including 669,666 shares of common stock issuable upon the automatic conversion of all of our outstanding Series E Convertible Preferred Stock upon the closing of this offering based on an assumed offering price of $6.00, excluding shares that may be issued upon exercise of the underwriter’s overallotment option and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of ,June 30, 2022, would have been $$8.1 million, or $$0.61 per share.share, which excludes the warrants to purchase 258,500 shares of our common stock to be issued to investors in this offering. This represents an immediate increase in pro forma as adjusted net tangible book value of $          per share$0.38 to our existing stockholders and an immediate dilution of $$5.39 per share to investors purchasing common stock in this offering.

We calculate dilution per share to new investors by subtracting the pro forma as adjusted net tangible book value per share from the public offering price paid by the new investor. The following table illustrates the dilution to new investors on a per share basis:

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The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $$6.00 per shareunit would increase (decrease) our pro forma as adjusted net tangible book value as of March, 31,June 30, 2022, after this offering by $$0.08 per share, and would increase (decrease) dilution to new investors by $$0.92 per ordinary share. An increase of 100,000 in the number of sharesunits we are offering would increase our pro forma as adjusted net tangible book value as of March 31,June 30, 2022, after this offering by $$0.05 per share, and would decrease dilution to new investors by $$0.05 per share, assuming the assumed initial public offering price per ordinary shareunit remains the same.

If the underwriters’underwriter’s option to purchase additional shares and/or warrants to cover over-allotments is exercised in full, the pro forma as adjusted net tangible book value per share after giving effect to this offering, assuming the public offering price of $$6.00 per share,unit, would be $            ,$0.65, representing an immediate increase to existing stockholders of $$0.75 per share, and immediate dilution to new investors in this offering of $$5.35 per share.

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BUSINESS

Overview

We are a clinical-stage biotechnology company focused on the development of regenerative medicine treatments for disorders of the gastro-intestinal system and the airway that result from cancer, trauma or birth defects. Our technology is based on our proprietary cell-therapy platform that uses a patient’s own stem cells to regenerate and restore function to damaged organs. We believe that our technology represents a next generation solution for restoring organ function because it allows the patient to regenerate their own organ, thus eliminating the need for human donor or animal transplants, the sacrificing of another of the patient’s own organs or permanent artificial implants.

We conducted the world’s first successful regeneration of the esophagus in a cancer patient in August 2017. This surgery was performed by Dr. Denis Wigle, Chair of Thoracic Surgery at the Mayo Clinic in a patient with esophageal cancer. The results were published in the Journal of Thoracic Oncology Clinical and Research Reports in August 2021. The procedure demonstrated that using the Biostage technology, we were able to successfully regenerate esophageal tissue, including the mucosal lining, to restore the integrity, continuity and functionality of the esophageal tube.

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Our Pipeline

We believe our organ-regeneration technology has the potential for broad applications in the field of medicine, for the repair or replacement of diseased or damaged organs. We are initially targeting conditions of the esophagus, including cancer, traumatic injury and birth defects. Additional product candidates in our development pipeline include ones to treat cancer, injury and birth defects of the bronchus. Based on discussions with surgeons familiar with regenerative medicine techniques, we believe that our technology may also be applicable to treating cancer, injury and birth defects in the colon and intestine.

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Our Strategy

Our strategy is to develop and advance our pipeline of products, beginning with our lead product for the treatment of esophageal cancer, through clinical development and commercialization. The key elements of our strategy include:

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Our Solution – Biostage Organ-Regeneration Technology

Our organ-regeneration technology uses a patient’s own stem cells seeded on a temporary scaffold to regrow and restore their damaged organ. We believe our technology has numerous advantages over other attempts to restore organ function because the Biostage implant is not a transplant of a human-donor organ, it is not a transplant of an animal organ, it is not a piece of one of the patient’s other organs, and it is not an artificial implant that remains permanently in the body. Biostage implants will allow the patient to regenerate their own organ inside their own body.

The Biostage Implant consists of a hollow, tubular scaffold consisting of a thin polyurethane fiber mesh that is formed in the shape of the damaged section of the organ. This scaffold is designed to be seeded with the patient’s own mesenchymal stem cells which are obtained a few weeks before surgery through a biopsy of adipose (fat) tissue from the patient’s abdomen. The stem cells will then be isolated and expanded and then seeded onto the tubular scaffold. The scaffold will then be placed into a customized bioreactor for incubation and further cell expansion. During several days of incubation in our bioreactor, the stem cells will attach to and grow on and into the outer 25% of the scaffold. The stem cell-seeded scaffold will then surgically be implanted into the patient to bridge the gap created where the part of the organ that was diseased or damaged was removed.

The stem cells then stimulate the body’s natural wound-healing process, and the scaffold is designed to guide the growth of new cells and tissue into a reconstructed organ tube. After approximately one month, a complete biological tube, or conduit, will have formed and after approximately three months, the tube will have developed into a layered structure that

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Biostage Esophageal Implant

Advantages of the Biostage Esophageal Implant

Compared with the current standard of care procedures for esophageal cancer patients, either gastric pull-up or colonic interposition, the Biostage Esophageal Implant offers the following major advantages:

We believe that these significant medical advantages will lead to strong demand from patients and doctors for the Biostage Esophageal Implant. Additionally, we believe that it will receive a favorable reimbursement profile from payors and insurance companies because of the high cost and complications associated with alternative procedures.

First-In-Human Use of the Biostage Esophageal Implant

On August 7, 2017, we announced the use of the Biostage Esophageal Implant in a patient at the Mayo Clinic via an FDA-approved single-use expanded access, or compassionate use, application. The patient was a 75-year-old male with a life-threatening cancerous mass in his chest that spanned his heart, a lung, and his esophagus. The surgery was performed by Dr. Denis Wigle, Chair of Thoracic Surgery, to remove the tumor, repair the heart, part of one lung, and a section of the

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The results were published in the Journal of Thoracic Oncology Clinical and Research Reports in August 2021. The photographs below, taken from the paper, show the explanted esophagus from this procedure. The image on the left is the actual esophagus. As displayed below, the implant zone is visually almost identical to the native esophagus which is both above and below the implant zone. The thickness, color and texture of the regenerated esophagus is nearly indistinguishable from the native esophagus.

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The dark-brown tube in the center of the esophagus is the stent that was added to avoid narrowing of the esophagus. Stenting is common after esophageal surgery. The stent for this patient was changed twice, once prior to the CEIBEI scaffold removal and once after the scaffold and the second stent were removed. The final stent was removed at five and a half months post-surgery. We anticipate that patients treated with the BEI are likely to undergo at least one stent exchange during their recovery with the discontinuation of stents by six to nine months post-surgery. Stents are deployed and retrieved endoscopically, that is, via the mouth, and accordingly, there is no surgical incision in the chest

The images on the righthand side are photographs taken under a microscope to show, from left to right, cells (stained pink), layered structure (stained blue and purple), and muscles (stained yellow). The images show a high level of consistency between the regenerated esophagus and the native esophagus, both to the naked eye and under the microscope. In the right-most panels, the yellowish coloration along the left side of the images shows a continuous line of muscles running up the regenerated esophagus. These muscles are the muscularis mucosae which contract to eject mucous into the esophagus. This mucosal lining is essential to the long-term survival of the patient because it both lubricates the esophagus to allow food to be swallowed and provides a barrier to infection. This mucosal lining was seen at three months in both the human patient and in our pig models.

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Following implantation, CT imaging revealed early tissue deposition and the formation of a contiguous tissue conduit. Endoscopic evaluation at multiple time points revealed complete epithelialization of the lumenal surface by day 90. Histologic evaluation at several necropsy time points, post-implantation, demonstrated that the tissue continues to remodel over the course of a one-year survival time period, resulting in the development of esophageal structural features, including the mucosal epithelium, muscularis mucosae, lamina propria, as well as smooth muscle proliferation/migration initiating the formation of a laminated adventitia. One-year survival demonstrated restoration of oral nutrition, normal animal growth and the overall safety of this treatment regimen.

The image below is taken from a paper published in Nature Partner Journals Regenerative Medicine in January of 2022, in conjunction with our development partner Connecticut Children’s Medical Center.

This image shows an esophagus explanted from a pig 90 days after the Biostage Esophageal Implant was implanted. The implant zone is visually almost identical to the native tissue to the left and right of it. We can note the regeneration of the interior surface of the esophagus and the regeneration of the surrounding tissue that is visible in red at the top of the red box. The red color of the surrounding tissue indicates the presence of a healthy blood supply. We note further the glossy, reflective coating on the inside of the esophagus. This is evidence of the mucosal lining which is essential to the long-term survival of the patient. This mucosal lining was seen at three months in the pigs and was also observed in the human patient. The investigators concluded that at one year it was difficult to distinguish neo-tissue versus the native tissue.

Upcoming Phase 1/2 Clinical Trial

Based on both the successful in-human procedure at the Mayo Clinic and our extensive large-animal research, the FDA has approved our Investigational New Drug application to commence our clinical trial. The trial will be a ten-patient combined phase 1/2 trial, in up to five hospitals in the U.S. that measures both the safety and efficacy of our product candidate in the patient population. Enrollment criteria includes any patient that requires removal of a part of the esophagus that is less than six centimeters long for any medical reason. We expect enrolled patients to include esophageal cancer patients, but we may enroll patients with other esophageal conditions that require regeneration. We expect to initiate the trial in early 2023.

The primary endpoint of the upcoming trial is the establishment of a continuous biological neoconduit, or tube, by three months post surgery.post-surgery. We saw this tube at one month in the human patient and in the pigs. One of the secondary endpoints will be the development of a mucosal lining in the esophagus by twelve months post-surgery. We saw this mucosal lining by three months in the human patient and the pigs. Because we reached the primary endpoint and one of

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Pediatric Esophageal Atresia

Each year, it is estimated that approximately 1,000 children in the U.S. are born with a congenital birth defect known as esophageal atresia. Esophageal atresia is a condition where an infant is born with an esophagus that does not extend completely from the mouth to the stomach. When a long segment of the esophagus is lacking, the current standard of care is a series of surgical procedures where sutures are applied to both ends of the esophagus in an attempt to stretch them and pull them together so they can be surgically connected at a later date.

This surgical process can take several weeks, and the procedure often involves serious complications and high rates of failure. The infant usually must remain in the neonatal intensive-care unit for this time which can cost thousands of dollars per day. This process also requires at least two separate surgical interventions. Other surgical options include the use of the child’s stomach or intestine that would be pulled up into the chest to allow a connection to the mouth. These methods are similar to the use of gastric pull ups and interpositioning used in adult patients and carry similar side effect and safety profiles. We are working in collaboration with the Connecticut Children’s Medical Center, to advance a Biostage Esophageal Implant solution to address esophageal atresia that we believe will be more effective, safer, and less expensive.

Preclinical Development

In January 2022, together with Connecticut Children’s Medical Center, we published in Nature Partner Journals Regenerative Medicine the results of implanting pediatric-sized Biostage Esophageal Implants in 15 piglets. Numerous survival times were histologically analyzed to understand the tissue development and timing of the regeneration. Overall, the graft implantation procedure was deemed safe and feasible. The piglets showed regeneration of a conduit, or tube, by one month and the regeneration of a normal mucosal lining by three months. Additionally, histological evaluation demonstrated that the tissue continued to develop throughout the course of the one-year survival period. Importantly, the piglets also showed normal growth and weight gain which are considered critical in treating human babies.

This research also developed novel post-surgical techniques that closely mimic the hospital care that human babies undergo. These techniques included non-invasive CT imaging of the regenerated tissue and feeding the piglets via G tubes which are normally used to feed human babies after surgeries in the gastro-intestinal tract.

Clinical Pathway

We believe that this study laid both the scientific and clinical groundwork for treating babies with birth defects in the esophagus with the Biostage Esophageal Implant. The FDA approval for the clinical trial allows us to treat children once we have established safety in adult patients in the phase 1/2 clinical trial. Once we have established the safety of the implant in adults, we expect to recruit children into the clinical trial.

Bronchial (Central Lung) Cancer

Lung cancer is the most common form of cancer and the most common cause of death from cancer worldwide. There are more than 700,000 new lung cancer diagnoses annually in the U.S. and Europe. In approximately 25% of all lung cancer cases, the cancerous tumor resides only in a bronchus and not in the lobes of the lungs and is known as central lung cancer. Approximately 33,000 central lung cancer cases diagnosed in the U.S. and Europe are Stage I and II and are considered eligible for surgical resection, often with adjuvanted chemotherapy and radiation.

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We intend to develop the Biostage Bronchial Implant to treat bronchial cancer, bronchial fistulas (holes), and birth defects in the bronchus. Based on discussions with surgeons in the field, we estimate that approximately 7,000 of these conditions in the U.S. and Europe would be potentially treatable with our technology.

Preclinical Development

Using a cell-seeded scaffold, which we call the Biostage Bronchial Implant, we have performed the repair of a bronchus that was surgically removed from a pig. The bronchus regenerated, much as in the esophagus, first forming a tube and later developing into a bronchus with a functional lining known as the respiratory epithelium. The respiratory epithelium was seen in about two months in the pig. This respiratory epithelium is essential to the avoidance of infections such as pneumonia. This pig lived almost two years until scheduled euthanasia.

We believe that a Biostage Bronchial Implant once developed and approved for marketing, has the potential to provide physicians a treatment alternative superior to the pneumonectomy procedure to treat central lung cancer because it avoids sacrificing one of the patient’s lungs. We believe the Biostage Bronchial Implant will result in fewer post-surgery complications, improved mortality rates and improved quality of life for the patient.

The next step in the development of the Biostage Bronchial Implant is to begin large-animal studies in accordance with GLP or Good Laboratory Practices.studies.

Additional Targeted Diseases

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Targeted Diseases

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According to the World Health Organization, or WHO, International Agency for Research on Cancer’s Global Cancer Observatory database, worldwide there were over 600,000 cases of esophageal cancer in 2020. There are over one million cases of colon cancer. In addition, there are approximately 22,000 cases of bronchus cancer that, based on conversations with surgeons, we believe could be treated with our technology. The following are the approximate case counts by certain geographic region pertaining to the cancers noted below:

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Life-threatening conditions of the Trachea

There are approximately 8,000 patients per year in the U.S. and Europe who suffer from a condition of the trachea that put the patient at high risk of death. These conditions can be due to tracheal trauma, tracheal stenosis or trachea cancer. There are approximately 40,000 tracheal trauma patients diagnosed each year in the U.S. Of those, approximately 1,000 are severe enough to need surgical resection procedures. Tracheal stenosis is a rare complication from tracheostomies but may have a devastating impact on respiratory function for patients. Approximately 2,000 patients are diagnosed with stenosis from tracheostomy in the U.S. each year. Trachea cancer is a very rare but extremely deadly cancer. Trachea cancer patients in the U.S. have a median survival of 10 months from diagnosis and a 5-year survival of only 27%. There were approximately 200 cases of primary trachea cancer diagnosed in the U.S. in 2013. Based on these facts, we estimate that there are approximately 8,000 patients in the U.S. and Europe with conditions of the trachea that put them at high risk of death, but for whom there is currently no clinically effective tracheal implant or replacement method currently available.

We believe that a Biostage Tracheal Implant may provide physicians a treatment to re-establish the structural integrity and function of a damaged or diseased trachea to address life-threatening conditions due to tracheal trauma, stenosis, cancer, or birth defects.

We have not performed regeneration of a trachea using a Biostage Tracheal Implant. However, based on the regeneration observed in the bronchus, we believe that regeneration of the trachea may be possible.

Intellectual Property, Licenses, and Related Agreements

We have nineten issued U.S. patents that cover the bioreactor, the scaffold, and the surgical procedure. The patent claims cover the use of synthetic scaffolds for any use in the gastro-intestinal tract and the airways. These patents include the claim of having a removable scaffold. The patent claims cover patches as well as tubes. We intend to research the patch-based approach to treat damage to solid organs. We also have two issued patents in China and there are numerous other filings pending. We expect these patents to provide protection into the mid to late 2030’s.

Sales and Marketing

We expect that most surgeries using the Biostage Esophageal Implant will be performed at a relatively small number of major hospitals in the U.S., China and in the European Union.Europe. In addition, our technology platform is initially aimed at treating the esophagus, the bronchi, and the trachea, all of which are treated by thoracic surgeons. As a result, we expect to employ only a small sales force as compared to companies selling treatments for larger patient populations.

We expect to price the product commensurate with the medical value created for the patient and the costs avoided with the use of our product. Because our products are likely to save or extend lives, improve the quality of life, and save money by reducing the complications associated with current surgical repair techniques, we expect to charge approximentlyapproximately $250,000 per product in the U.S.

We further expect to be paid by the hospital that buys the product from us. Finally, we expect that the hospital would seek reimbursement from payers for the entire transplant procedure, including the use of our products.

Manufacturing and Resources

The bioreactor and scaffold are made in our clean-room facilities in Holliston, Massachusetts and the cell seeding is currently performed at the FDA-approved clinical-grade human cell culture facility at the University of Texas Medical Branch.

Our manufacturing process for the bioreactors and scaffolds has been approved by the FDA for the clinical trial. Based on expected FDA inspections additional development may be necessary for product approval.

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For our scaffolds, our primary materials are medical-grade plastic resins and solvents used to liquefy the resins in our manufacturing process. These materials are readily available from a variety of suppliers and do not currently represent a large proportion of our total costs. For our autoseeders and bioreactors, we perform final assembly and testing of components that we buy from third parties like machine shops, parts distributors, molding facilities and printed circuit board manufacturers. These manufacturing operations are performed primarily at our Holliston, Massachusetts headquarters.

Our Competition

We are not aware of any companies whose products are directly competitive with our cell-seeded biocompatible synthetic-scaffold system. However, in our key markets we may in the future compete with multiple pharmaceutical, biotechnology, and medical device companies, many of which have substantially greater financial, technological, research and development, marketing and personnel resources than we do. In addition, there are many academic and clinical centers that are developing regenerative technologies that may one day become competitors of ours.

We expect that other products will compete with our products and potential products based on efficacy, safety, cost, and intellectual property positions. While we believe that these will be the primary competitive factors, other factors include, in certain instances, obtaining marketing exclusivity under the Orphan Drug Act, availability of supply, manufacturing, marketing and sales expertise and capability, and reimbursement coverage.

Sublicense Agreement with Harvard Bioscience

We own the right to use the brand name “Harvard Apparatus Regenerative Technology” in the medical sciences field under a license agreement with Harvard University via a sublicense from Harvard Bioscience. Harvard Bioscience’s right to use the name arises from a license agreement, effective December 19, 2002, between it and the President and Fellows of Harvard University. Harvard Bioscience began at Harvard University in 1903 as Harvard Apparatus and has a license to the name Harvard Apparatus in research and industrial fields. Our right to use the names in the medical field arises from the sublicense signed when Biostage, Inc., then known as Harvard Apparatus Regenerative Technology, was separated from Harvard Bioscience in 2013, as more fully described below. Harvard Bioscience delegated its right to use the name in the medical field to us and Harvard Bioscience has no right to use the Harvard mark in the medical field. We intend to use this brand name on our products in the future. We do not have the right to use the Harvard or Harvard Apparatus marks alone, but only as Harvard Apparatus Regenerative Technology. We believe we are the only licensee of the Harvard name in the medical products’ field. This license is perpetual, worldwide and royalty-free. There are restrictions on our use of the name such as not using it in the color crimson and not using it in a serifed font. We currently have no affiliation with Harvard University.

Employees, Human Capital and Facilities

As of June 21,October 4, 2022, we had sixseven full-time employees working in our business. At that date, all of our employees were based in the U.S. None of our employees are unionized. In general, we consider our relations with our employees to be good. Our employees are highly skilled, and many hold advanced degrees. Our future performance depends significantly upon the continued service of our key scientific, technical and senior management personnel and our continued ability to attract and retain highly skilled employees. We may take further actions, in compliance with all appropriate government regulations, that we determine to be in the best interest of our employees.

On November 1, 2013 we entered into a sublease of approximately 17,000 square feet of mixed-use space of the facility located at 84 October Hill Road, Suite 11, Holliston, Massachusetts, which is our corporate headquarters, from Harvard Bioscience. Our principal facilities incorporate manufacturing, laboratory, development, sales and marketing, and administration functions. We believe our current facilities are adequate for our needs for the foreseeable future.

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Government Regulation

Our product candidates and our operations are subject to extensive regulation by the U.S. FDA and other federal and state authorities, as well as comparable authorities in foreign jurisdictions, which are discussed below. The FDA is divided into various “Centers” by product type such as the Center for Drug Evaluation and Research, or CDER, the Center for Biologics Evaluation and Research, or CBER, and the Center for Devices and Radiological Health, or CDRH. Different Centers

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The labeling, advertising, promotion, marketing and distribution of biologics and medical devices also must be in compliance with the FDA and U.S. Federal Trade Commission, or FTC, requirements which include, among others, standards and regulations for off-label promotion, industry sponsored scientific and educational activities, promotional activities involving the internet, and direct-to-consumer advertising. The FDA and FTC have very broad enforcement authority, and failure to abide by these regulations can result in penalties, including the issuance of a warning letter directing us to correct deviations from regulatory standards and enforcement actions that can include seizures, injunctions and criminal prosecution. Recently, promotional activities for FDA-regulated products of other companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countries outside the U.S., which can change rapidly with relatively short notice.

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To determine which FDA center or centers will review a combination product candidate submission, companies may submit a request for assignment to the FDA. Those requests may be handled formally or informally. In some cases, jurisdiction may be determined informally based on the FDA’s experience with similar products. However, informal jurisdictional determinations are not binding on the FDA. Companies also may submit a formal “Request for Designation” to the FDA Office of Combination Products. The Office of Combination Products will review the request and make its jurisdictional determination within 60 days of receiving a Request for Designation.

The FDA will determine which center or centers within the FDA will review the product candidate and under what legal authority the product candidate will be reviewed. Depending on how the FDA views the product candidates that are developed, the FDA may have aspects of the product candidate reviewed by CBER, CDRH, or CDER, though one center will be designated as the center with primary jurisdiction, based on the product candidate’s primary mode of action. The FDA determines the primary mode of action based on the single mode of action that provides the most important therapeutic action of the combination product candidate. This would be the mode of action expected to make the greatest contribution to the overall intended therapeutic effects of the combination product candidate. The review of such combination product candidates is often complex and time consuming, as the FDA may select the combination product

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If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it will either issue “not approvable” letter or an “approvable” letter. A “not approvable” letter means that the FDA refuses to approve the application because the BLA or manufacturing facilities do not satisfy the regulatory criteria for approval. An “approvable” letter means that the FDA considers the BLA and manufacturing facilities to be favorable, but the letter will outline the deficiencies and provide the applicant with an opportunity to submit additional information or data to address the deficiencies. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. If a product receives regulatory approval, the approval may be limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase IV testing which involves clinical trials designed to further assess a drug’s safety and effectiveness after BLA approval and may require testing and surveillance programs to monitor the safety of approved products which have been commercialized. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. Separate approval is required for each proposed indication. If we want to expand the use of an approved product, we will have to design additional clinical trials, submit the trial designs to the FDA for review and complete those trials successfully.

The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted in 2012, made permanent the Pediatric Research Equity Act, or PREA, which requires a sponsor to conduct pediatric studies for most biologics with a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, BLAs and supplements thereto, must contain a pediatric assessment unless the sponsor has received a deferral or

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In addition, products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-approval clinical trials to verify and further define the drug’s clinical benefit and safety profile. There can be no assurance that any of our products will receive accelerated approval. Even if accelerated approval is granted, the FDA may withdraw such approval if the sponsor fails to conduct the required post-approval clinical trials, or if the post-approval clinical trials fail to confirm the early benefits seen during the accelerated approval process.

Fast-Track designation and accelerated approval should be distinguished from priority review although products awarded fast track status may also be eligible for priority review. Products regulated by the CBER may receive priority review if they provide significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious or life-threatening disease. Products awarded priority review are given abbreviated review goals by the agency. Under the Prescription Drug User Fee Act of 2007, the agency has agreed to the performance goal of reviewing products awarded priority review within six months, whereas products under standard review receive a ten-month target. The review process, however, is often significantly extended by FDA requests for additional information or clarification regarding information already provided in the submission. Priority review is requested at the time the BLA is submitted, and the FDA makes a decision as part of the agency’s review of the application for filing. We plan to seek priority review for our trachea transplant products but cannot guarantee that the FDA will grant the designation and cannot predict if awarded, what impact, if any, it will have on the review time for approval of our product.

We intend to request Fast Track status, Breakthrough Therapy designation, Regenerative Medicine Advanced Therapy, or RMAT, designation, Accelerated Approval and Priority Review. If we are awarded any of these designations, combined with our Orphan Drug designations, discussed below, we believe that our future clinical trial designs and approval pathway may be streamlined and expedited. Although, if granted, Fast-Track designation, accelerated approval, and priority review may expedite the approval process,  they do not change the standards for approval. On September 30, 2020, Congress provided a short-term extension of the rare pediatric disease Priority Review Voucher Program. According to the current statutory sunset provisions:

The Creating Hope Reauthorization Act, which was received in the Senate on September 30, 2020, proposes to replace those cutoffs with “September 30, 2024” and “September 30, 2026,” respectively, thus extending the authorized period for RPD designation and granting of RPD priority review vouchers from the 21st Century Cures Act by four years.  We cannot be certain that this extension will be granted.

Clinical Trials

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investigators in accordance with international principles for GCP, and conforms to the ethical principles contained in the Declaration of Helsinki, or with the laws and regulations of the country in which the research was conducted, whichever provides greater protection of the human subjects. The FDA, however, has substantial discretion in deciding whether to accept data from foreign non-IND clinical trials.

Clinical trials involving biopharmaceutical products are typically conducted in three sequential phases. The phases may overlap or be combined. A fourth, or post-approval, phase may include additional clinical trials. These phases are described generally below. Briefly, the phases of clinical development generally include the following:

Medical devices, however, typically rely on one or a few pivotal studies rather than Phase I, II, and III clinical trials.

During the development of a new medical product, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND or IDE, at the end of Phase II, and before a BLA or PMA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reach agreement on the next phase of development. Sponsors typically use the end of Phase II meeting to discuss their Phase II clinical results and present their plans for the pivotal Phase III clinical trial that they believe will support approval of the new biologic. Similarly, sponsors typically use the end of feasibility studies to do the same for planning for their pivotal trial or trials for a medical device.

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consistent production of the product within required specifications. The PHSA in particular emphasizes the importance of manufacturing control for products like biologics whose attributes cannot be precisely defined.

Based on the FDA’s approval of our clinical trial for any condition that requires removal of part of the esophagus, we believe that we are able to pursue the treatment of multiple diseases, injuries or birth defects with a single clinical trial. As a result, we believe that this clinical trial will advance the Biostage Esophageal Implant for numerous indications including to treat esophageal cancer, Barrett esophagus, fistulas, traumatic injury to the esophagus and birth defects in the esophagus. Compared to developing treatments for a single underlying medical condition, we believe that addressing multiple medical conditions in a single clinical trial has the potential to significantly reduce our costs to expand the market for our products. Based on discussions with the FDA, we also expect clinical trials for our esophageal implant product candidates to be conducted in two sequential phases:

As with any clinical trial, clinical testing of our Biostage Esophageal Implant may not be completed successfully within any specified time period, if at all. The FDA closely monitors the progress of each phase of clinical trials that are conducted under an IND and may, at its discretion, reevaluate, alter, suspend, or terminate the testing based upon the data accumulated to that point and the FDA’s assessment of the risk/benefit ratio to the patient. The FDA or the sponsor may suspend or terminate clinical trials at any time for various reasons, including a finding that the subjects or patients are being exposed to an unacceptable health risk. The FDA can also request that additional pre-clinical studies or clinical trials be conducted as a condition to product approval.

We will sbmitsubmit a BLA once we have sufficient data from the clinical trials to assess the safety and efficacy of the Biostage Esophageal Implant. We estimate that this process may span a period of three to six years, or longer, considering the uncertainty of a successful clinical trial. We anticipate approvals in countries outside of the United States may be shorter, however, we can give no assurance of such approvals.

Post-Approval Requirements

After BLA approval is obtained, companies are required to comply with a number of post-approval requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and recordkeeping. For example, as a condition of approval of a BLA, the FDA may require post-approval testing and surveillance to monitor the product’s safety or efficacy. In addition, holders of an approved BLA are required to keep extensive records, to report certain adverse reactions and production deviations and problems to the FDA, to provide updated safety and efficacy information and to comply with requirements concerning advertising and promotional labeling for their products. If we fail to comply with the regulatory requirements of the FDA and other applicable U.S. and foreign regulatory authorities, or previously unknown problems with any approved commercial products, manufacturers or manufacturing processes are discovered, we could be subject to administrative or judicially imposed sanctions or other setbacks. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

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Orphan Drug Designation

In November 2016, we were granted Orphan Drug Designation for the Biostage Esophageal Implant by the FDA to restore the structure and function of the esophagus subsequent to esophageal damage due to cancer, injury or congenital abnormalities. We also were granted Orphan Drug Designation for trachea on September 4, 2014.

The Orphan Drug Act provides incentives to manufacturers to develop and market drugs and biologics for rare diseases and conditions affecting fewer than 200,000 persons in the U.S. at the time of application for orphan drug designation, or more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making a drug or biological product available in the U.S. for this type of disease or condition will be recovered from sales of the product. Orphan product designation must be requested before submitting a new drug application, or NDA, or BLA. After the FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. The first developer to receive FDA marketing approval for an orphan biologic is entitled to a seven year exclusive marketing period in the U.S. for that product as well as a waiver of the BLA user fee. The exclusivity prevents FDA approval of another application for the same product for the same indication for a period of seven years, except in limited circumstances where there is a change in formulation in the original product and the second product has been proven to be clinically superior to the first.Infirst. In addition, Orphan Drug Designation provides a seven-year marketing exclusivity period against competition in the U.S. from the date of a product’s approval for marketing. This exclusivity would be in addition to any exclusivity we may obtain from our patents. Additionally, orphan designation provides certain incentives, including tax credits and a waiver of the Biologics License Application, or BLA, fee. We also plan to apply for Orphan Drug Designation for the Biostage Esophageal Implant in Europe. Orphan Drug Designation in Europe would provide market exclusivity in Europe for a period of ten years from the date of the product’s approval for marketing.

History

We were incorporated under the laws of the State of Delaware on May 3, 2012 as a wholly-owned subsidiary of HBIO, to provide a means for separating its regenerative medicine business from its other businesses. Harvard Bioscience decided to separate its regenerative medicine business into our company, a separate corporate entity, or the Separation, and it spun off its interest in our business to its stockholders in November 2013. Since the Separation we have been a separately-traded public company and HBIO has not been a stockholder of our common stock or controlled our operations.

In connection with the Separation and immediately prior to the Distribution, we entered into a Separation and Distribution Agreement, Intellectual Property Matters Agreement, Product Distribution Agreement, Tax Sharing Agreement, Transition Services Agreement, and Sublicense Agreement with HBIO to effect the Separation and Distribution and provide a framework for our relationship with HBIO after the Separation. These agreements govern the current relationships among us and Harvard Bioscience and provided for the allocation among us and HBIO of HBIO’s assets, liabilities, and obligations (including employee benefits and tax-related assets and liabilities) attributable to periods prior to the Separation.

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provided by certain of the named defendants and utilized in connection with surgeries performed by third parties in Europe in 2012 and 2013. This lawsuit relates to our first-generation trachea scaffold technology for which we discontinued development in 2014, and not to our current Biostage Esophageal Implant.

On April 27, 2022, the Company and HBIO entered intoexecuted a settlement with the plaintiffs or the Settlement)(the “Settlement”), which resolves all claims relating to the litigation. The Settlement will resultresulted in the dismissal with prejudice of the wrongful death claim, and neither we nor HBIO admitadmitted any fault or liability in connection with the claim. The Settlement also resolvesresolved any and all claims by and between the parties and our products liability insurance carriers, which will resultresulted in the dismissal with prejudice of all claims asserted by or against those carriers, the Company and HBIO. However, based on review of the circumstances surrounding the Settlement, we recorded an accrual for the contingencythis matter of approximately $3.3 million in general and administrative expenses during the year ended December 31, 2021.

In relation to the litigation, we estimate that we will incur an aggregate ofhave incurred approximately $6.0$5.9 million of aggregate costs, inclusive of the valuewhich, approximately $1.3 million remain unpaid as of our recently issued preferred stock, as described below.June 30, 2022. This aggregate amount includes the cost of both the accrual for thiscontingency matter of approximately $3.3 million and approximately $2.7$2.6 million of legal and related costs incurred by us which consist of attorneys’attorney’s fees and advisor and specialist costs as part of our defense in this matter. For the three and six months ended June 30, 2022, we incurred legal and related costs of approximately $0.1 million and $1.2 million, respectively, recorded in general and administrative expenses. On March 3, 2022, we received a cash payment of approximately $0.1 million from Medmarc, our insurance carrier. This amount represented a reimbursement of previously incurred legal costs and was recorded as a reduction to general and administrative expenses during the six months ended June 30, 2022.

We areWith respect to such $5.9 million of costs described above, we were required to either pay thesesuch costs directly or by indemnifyingindemnify HBIO for the amount of these costsas to such amounts it incurs. Of such amounts, we anticipated that HBIO paidwould pay an aggregate amount in excess of $4.0 million.million by the end of the second quarter of 2022. With respect to the indemnification obligation of the Company to HBIO pertaining to such costs, we and HBIO entered into the PIA. In connection with the PIA, we and HBIO agreed that once HBIO had paid at least $4.0 million in such costs, to satisfy our indemnification obligations with respect thereto, in lieu of paying cash, we would issue senior convertible preferred stock to HBIO that will contain terms as described in the PIA, including the term sheet attached thereto.  On June 10, 2022, following the execution of a subscription agreement and HBIO providing evidence of payment of the requisite $4.0 million amount, we issued HBIO 4,000 shares of Series E Convertible Preferred Stock to HBIO, each withat a stated valueprice of $1,000 per share to satisfy our related indemnification obligations aggregating $4.0 million, which included the accrual for contingency of approximately $3.3 million and approximately $0.8 million of legal and related costs paid on behalf of the Company by HBIO.

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MANAGEMENT

Executive Officers

The following table shows information about our executive officers as of October 4, 2022:

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David Green - Founder, Chairman and Interim Chief Executive Officer

Mr. Green was appointed as our Interim Chief Executive Officer on November 26, 2021, and has also served as our Chairman and a member of our Board of Directors since such date. Mr. Green served as President and a member of the Board of Directors of Harvard Bioscience, Inc. from March 1996 until the spin-off of Biostage on November 1, 2013, as Interim CEO of Harvard Bioscience, Inc. from May 2013 and August 2013, and remained a Director of Harvard Bioscience, Inc. from the spin-off until 2017. Mr. Green served on the Board of Directors of Biostage until May 2016 and was the founder and a former Chairman, President, and Chief Executive Officer of Biostage, Inc. Prior to joining Harvard Bioscience, Inc, Mr. Green was a strategy consultant with respectMonitor Company, a strategy consulting company, in Cambridge, Massachusetts and Johannesburg, South Africa from June 1991 until September 1995 and a brand manager for household products with Unilever PLC, a packaged consumer goods company, in London from September 1985 to February 1989. Mr. Green was president and a director of the Harvard Business School Healthcare Alumni Association. Mr. Green graduated from Oxford University with a B.A. Honors degree in physics and holds a M.B.A. degree with distinction from Harvard Business School.

Hong Yu, BS, MS, CFA - President

Mr. Yu has served as our President since May 31, 2018 and has raised over $20 million in capital for Biostage. Mr. Yu is a seasoned executive with extensive experience in fundraising, strategic analytics, wealth management, and investment research. Prior to Biostage, Mr. Yu was a Senior Vice President at Bank of America, where he was employed for nearly 20 years. During his career, Mr. Yu has developed an expertise in matching emerging companies with cross-border investors. Mr. Yu holds a B.S.  degree from Peking University (Beijing, China), and a M.S. degree from University of Illinois (Chicago, IL). Mr. Yu is a Chartered Financial Analyst.

Joseph L. Damasio, Jr. – Chief Financial Officer

Mr. Damasio has served as our Chief Financial Officer since August 8, 2022.  He has over 20 years of finance and accounting experience. Prior to joining our company, he was Vice President of Finance at Inhibikase Therapeutics, a publicly-traded clinical stage biopharmaceutical company, since October 2021. Before joining Inhibikase, Mr. Damasio was Controller at Cue Biopharma from June 2020 to October 2021, Controller at XL Fleet from February 2019 to June 2020, and Chief Financial Officer at Pressure BioSciences, Inc. from April 2017 to February 2019. Mr. Damasio earned a bachelor's degree in accounting, with honors, from the University of Massachusetts. He holds an MBA and MSF from Boston College and is a Certified Public Accountant in Massachusetts.  

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Dr. William Fodor - Chief Scientific Officer

Dr. William Fodor has served as our Chief Scientific Officer since July 2017. On July 2, 2018, Dr. Fodor became an employee of Biostage after serving as a consultant to the $4.0 millionCompany. Dr. Fodor was a founding scientist at Alexion Pharmaceuticals, where he served as an executive management team member and Senior Director of costs incurredthe Cell/Tissue Engineering, Transgenic Animal and paid by HBIO,Transplant Programs. He has also served as an Associate Professor at the University of Connecticut Department of Molecular Cell Biology and the Center for Regenerative Biology, extending research areas into cells and cell engineering. Dr. Fodor was Senior Director of Product Development at ViaCell Inc., leading programs in lieuhematopoietic stem cell process development and manufacturing, mesenchymal stem cell basic research and manufacturing for cardiac repair and pancreatic stem cell research. He was a consultant for the biotechnology industry, serving clients in stem cell research, gene therapy, stem cell manufacturing and stem cell genome engineering. Dr. Fodor has expertise in programs targeting transplant immunology, hematopoiesis, cardiac repair, stem cell potency, gene therapy for liver diseases, tissue engineering, design and oversight of paying cash. These sharespre-clinical non-GLP and GLP animal models and IND Applications (Pre-clinical and CMC Modules). Dr. Fodor earned a PhD. in genetics from Ohio State University. He completed post-doctoral work at Yale University School of preferred stock will automatically convert into sharesMedicine in the department of immunobiology, investigating the regulation of MHC class I and MHC class II genes in the histocompatibility complex.