Company Overview
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Brainstorm Cell Therapeutics Inc. is a leading biotechnology company committed to the development
and commercialization of best-in-class autologous cellular therapies for the treatment of neurodegenerative diseases including:
Amyotrophic Lateral Sclerosis (“ALS”, also known as Lou Gehrig’s disease); Progressive Multiple Sclerosis (“PMS”);
and Parkinson’s disease (“PD”).
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NurOwn® leverages proprietary cell culture methods to induce autologous bone marrow-derived
mesenchymal stem cells (MSCs) to secrete high levels of neurotrophic factors (NTFs), modulate neuroinflammatory and neurodegenerative
disease processes, promote neuronal survival and improve neurological function.
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NurOwn® is currently being evaluated in Phase 3 ALS and Phase 2 PMS clinical trials. Enrollment
for the Phase 3 ALS trial was completed in October 2019 and is expected to generate top-line data in the fourth quarter of 2020.
The Phase 2 PMS trial is actively enrolling participants in the U.S. and is expected to generate top-line data in the fourth quarter
of 2020.
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Our wholly-owned Israeli subsidiary, Brainstorm Cell Therapeutics Ltd. (“Israeli Subsidiary”),
holds exclusive rights to commercialize NurOwn® technology through a licensing agreement with Ramot (“Ramot”),
the technology transfer company of Tel Aviv University, Israel.
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The Israeli Subsidiary was granted approval by the Israeli Ministry of Health (“MoH”) to treat ALS patients with
NurOwn® under the Hospital Exemption Pathway (“HE”).
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NurOwn® has a strong and comprehensive intellectual property portfolio.
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NurOwn®
was granted Fast Track designation by the U.S. Food and Drug Administration (FDA) and
Orphan Drug status by the FDA and the European Medicines Agency (EMA) for ALS. For more
information, visit BrainStorm's website at www.brainstorm-cell.com.
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In advance of the United Kingdom exit from the European Union, the Company had registered an Irish subsidiary,
‘Brainstorm Cell Therapeutics Limited’, which was incorporated on October 1, 2019 under the Companies Act 2014, as
a Private Company Limited by Shares and is fully owned by Brainstorm Cell Therapeutics Ltd (“Israeli Subsidiary”).
The EMA Orphan Drug designation, held by the UK subsidiary (Brainstorm Cell Therapeutics UK Ltd.), was transferred by the European
Commission to the Irish subsidiary as of November 14, 2019.
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Brainstorm Cell Therapeutics Inc. currently employs 32 employees in the United States and in Israel.
Most of the senior management team is based in the United States, and all of Brainstorm’s current clinical trial sites are
located in the United States. Brainstorm’s R&D center is located in Petach Tikva, Israel.
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2019 and Recent Highlights
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The Company has made significant progress in the past 12 months advancing the NurOwn® ALS Phase
3 clinical trial at all 6 U.S. investigative sites (Mass General Hospital, UMass, Mayo Clinic, CPMC, Cedars Sinai and UC Irvine).
This clinical trial builds upon promising efficacy seen in three prior early-stage ALS clinical trials, including a U.S. randomized
placebo-controlled Phase 2 trial. We completed enrollment for NurOwn® ALS Phase 3 trial in October 2019 and the trial is expected
to generate top-line data to support the FDA BLA filing of NurOwn® for ALS in the fourth quarter of 2020.
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The Company was granted FDA approval in December 2018 for the IND Application of NurOwn® in
Progressive Multiple Sclerosis (PMS) (www.clinicalTrials.gov Identifier NCT03799718). The study entitled ‘A Phase 2, open-label,
multicenter study to evaluate the safety and efficacy of repeated administration of NurOwn® (Autologous Mesenchymal Stem Cells
Secreting Neurotrophic Factors; MSC-NTF cells) in participants with Progressive Multiple Sclerosis (MS)’ will be conducted
at 5 leading U.S. Multiple Sclerosis centers. As of the quarter ending December 31, 2019, the first ten (10) study participants
have been enrolled in the study. Enrollment will proceed in 2020 as planned.
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The Israeli MoH has approved the Company’s treatment of up to 13 ALS patients with NurOwn®
under the Israeli Hospital Exemption (HE) regulatory pathway. The Company has enrolled ten (10) patients under the HE pathway as
of December 31, 2019 and is in process of enrolling the entire approved number of patients. Thus far, the Company received approximately
$2.5 million in connection with the treatment of the aforementioned patients.
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On June 11, 2019, we established an at-the-market Common Stock offering program (the “ATM
Program”) to sell shares of our Common Stock, having an aggregate offering amount of up to $20 million. This program provides
additional financial flexibility and an alternative mechanism to access the capital markets at an efficient cost, as and when the
Company needs financing. From June 11, 2019 through December 31, 2019, we sold an aggregate of 724,215 shares of common stock pursuant
to the ATM Distribution Agreement at an average price of $4.01 per share, raising gross proceeds of approximately $2.91 million.
From June 11, 2019 through December 31, 2019, we sold an aggregate of 724,215 shares of common stock pursuant to the ATM Distribution
Agreement at an average price of $4.01 per share, raising gross proceeds of approximately $2.91 million. As of December 31, 2019,
the Company had received gross proceeds of approximately $2.14 million from these ATM sales. In summary, from the initiation
of the ATM through February 14, 2019, we sold an aggregate of 3,914,792 shares of common stock at an average price of $4.75 per
share, raising gross proceeds of approximately $18.58 million.
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On August 2, 2019, the Company entered into a Warrant Exercise Agreement which generated gross
cash proceeds to the Company of approximately $3.3 million.
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On September 6, 2019, the Company appointed Preetam Shah, Ph.D., M.B.A., as Chief Financial Officer.
Dr. Shah is an experienced healthcare finance professional with over 18 years of diverse leadership experience in investment banking
and venture capital, healthcare financial consulting, business development, sales and marketing, and scientific research.
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The independent Phase 3 study Data Safety Monitoring Board (DSMB) completed the second pre-specified
interim analysis of safety outcomes for 106 participants treated with NurOwn® in the Phase 3 ALS trial on October 28, 2019.
The DSMB indicated that the trial should continue without any modifications to the study protocol, and the DSMB chair indicated
that they did not identify any significant safety concerns.
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On November 14, 2019 the Company received a $495,330 grant from the National Multiple
Sclerosis Society, through its Fast Forward program, to advance BrainStorm’s Phase 2 open-label, multicenter clinical trial
of repeated intrathecal administration of NurOwn® in participants with progressive Multiple Sclerosis.
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The independent Phase 2 study Data Safety Monitoring Board (DSMB) completed the first, pre-specified
interim analysis, of safety outcomes for 9 participants enrolled in the Phase 2 open-label, multicenter study of repeated intrathecal
administration of NurOwn® (autologous MSC-NTF cells) in participants with Progressive Multiple Sclerosis (PMS) (NCT03799718)
on December 18, 2019. After careful review of all available clinical trial data, the DSMB unanimously concluded that the study
should continue as planned without any protocol modifications.
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On February 11, 2020 the Company announced that it recently held a high-level meeting with the
U.S. Food and Drug Administration (FDA) to discuss potential NurOwn® regulatory pathways for approval in ALS. In the planned
meeting with senior Center for Biologics Evaluation and Research (CBER) leadership and several leading U.S. ALS experts, the FDA
confirmed that the fully enrolled Phase 3 ALS trial is collecting relevant data critical to the assessment of NurOwn efficacy.
The FDA indicated that they will look at the "totality of the evidence" in the expected Phase 3 clinical trial data.
Furthermore, based on their detailed data assessment, they are committed to work collaboratively with BrainStorm to identify a
regulatory pathway forward, including opportunities to expedite statistical review of data from the Phase 3 trial.
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NurOwn® Proprietary Technology
NurOwn® technology is based on an innovative
manufacturing protocol, which induces the differentiation of purified and expanded bone marrow-derived mesenchymal stem cells (“MSC”)
and consistently generates cells that release high levels of multiple neurotrophic factors (“MSC-NTF” cells) to modulate
neuroinflammatory and neurodegenerative disease processes, promote neuronal survival and improve neurological function. These factors
are known to be critical for the growth, survival and differentiation of neurons, including: glial-derived neurotrophic factor
(“GDNF”); brain-derived neurotrophic factor (“BDNF”); vascular endothelial growth factor (“VEGF”);
and hepatocyte growth factor (“HGF”), among others. GDNF is one of the most potent survival factors for peripheral
motorneurons. VEGF and HGF have demonstrated important neuroprotective effects in ALS and other neurodegenerative diseases. Neuroinflammation
is a prominent and early feature of ALS and other neurodegenerative diseases, as well as of Progressive MS.
NurOwn® manufacturing involves a multi-step
process that includes: harvesting and isolating undifferentiated stem cells from the patient's own bone marrow; processing of cells
at the manufacturing site; cryopreservation to enable multiple treatments from a single bone marrow sample; and intrathecal (“IT”)
injection of MSC-NTF cells into the same patient by standard lumbar puncture. This administration procedure does not require hospitalization
and has been shown to be safe and well tolerated in multiple CNS clinical trials to date. The ongoing NurOwn® U.S. Phase 3
ALS study is evaluating the therapeutic potential of repeated dosing (three doses at bi-monthly intervals).
The proprietary technology and manufacturing
processing of NurOwn® (MSC-NTF cells) for clinical use is conducted in full compliance with current Good Manufacturing Practice
(“cGMP”). The NurOwn® proprietary technology is fully licensed to or developed by Brainstorm Cell Therapeutics
Ltd., our wholly-owned subsidiary (the “Israeli Subsidiary”). All granted patents related to NurOwn® (MSC-NTF cells)
manufacturing process are fully assigned to or owned by Brainstorm Cell Therapeutics Ltd. (see Intellectual Property section for
details).
The NurOwn® Transplantation Process
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Bone marrow aspiration from the patient;
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MSC Isolation and propagation;
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MSC Cryopreservation;
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MSC thawing and differentiation into neurotrophic-factor secreting (MSC-NTF; NurOwn®) cells; and
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Autologous transplantation into the patient’s cerebrospinal fluid by IT injection (standard lumbar puncture).
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Differentiation before Transplantation
The ability to induce autologous adult
mesenchymal stem cells into differentiated MSC-NTF cells makes NurOwn® uniquely suited for the treatment of neurodegenerative
diseases.
The specialized MSC-NTF cells secrete multiple
neurotrophic factors and immunomodulatory cytokines that may result in:
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Protection of existing neurons;
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Promotion of neuronal repair;
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Neuronal functional improvement; and
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Immunomodulation and reduced neuroinflammation.
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Autologous (Self-transplantation)
The NurOwn® technology platform is
autologous, using the patient’s own bone-marrow derived stem cells for “self-transplantation.” In autologous
transplantation, there is no introduction of unrelated donor antigens that may lead to alloimmunity, no risk of rejection and no
need for treatment with immunosuppressive agents, which can cause severe and/or long-term side effects. In addition, the use of
adult stem cells is free of several ethical concerns associated with the use of embryonic-derived stem cells in some countries.
The ALS Clinical Program
NurOwn® is currently in a Phase 3 late
stage clinical development program for the treatment of ALS. It has been granted Fast Track designation by the U.S. Food and Drug
Administration (“FDA”) for this indication, and has been granted Orphan Drug Status, in the U.S. and Europe, which
provides the potential for an extended period of exclusivity.
Phase 1/2 ALS Open Label Trials
We have completed two early stage Phase
1/2 and 2 open-label clinical trials of NurOwn® in patients with ALS at the Hadassah Medical Center (“Hadassah”)
in Jerusalem, Israel, as well as a Phase 2 double-blind, placebo-controlled, multicenter clinical trial at three prestigious U.S.
Medical centers - the Massachusetts General Hospital (MGH) in Boston, Massachusetts Memorial Hospital in Worcester, Massachusetts,
and the Mayo Clinic in Rochester, Minnesota - all highly experienced in the management and investigation of ALS.
The first two open-label trials were approved
by the Israeli Ministry of Health (“MoH”). The first-in-human trial, a Phase 1 safety and efficacy trial of NurOwn®
administered either intramuscularly or intrathecally in 12 ALS patients, was initiated in June 2011. In the Phase 2 dose-escalating
study, 14 ALS patients were administered NurOwn® by a combined route of intramuscular and intrathecal administration. These
studies demonstrated the safety of NurOwn® by both routes of administration and showed preliminary signs of efficacy.
In January 2016, the results of the two
completed Phase 1/2 study and Phase 2 open label trials were published in JAMA Neurology. This demonstrated a slower rate
of disease progression following MSC-NTF cell transplantation as measured by the ALS Functional Rating Score (“ALSFRS-R”),
the gold standard for the evaluation of ALS functional status, and Forced Vital Capacity (“FVC”), a measure of pulmonary
function, as well as positive trends in the rate of decline of muscle volume and the compound motor axon potential (“CMAPs”).
This was the first published clinical data using autologous mesenchymal stem cells, induced under culture conditions to produce
NTFs, with the potential to deliver a combined neuroprotective and immunomodulatory therapeutic effect in ALS and potentially
modify the course of this disease.
Phase 2 ALS Randomized Trial
The Phase 2 U.S. study was conducted under
an FDA Investigational New Drug (“IND”) application. This randomized, double-blind, placebo-controlled multi-center
U.S. Phase 2 clinical trial evaluating NurOwn® in ALS patients was conducted at three clinical sites: (i) the Massachusetts
General Hospital (MGH) in Boston, (ii) Massachusetts Memorial Hospital in Worcester, Massachusetts, and (iii) the Mayo Clinic in
Rochester, Minnesota. For this trial, NurOwn® was manufactured at the Connell and O’Reilly Cell Manipulation Core Facility
at the Dana Farber Cancer Institute in Boston and at the Human Cellular Therapy Lab at the Mayo Clinic. In this study, 48 patients
were randomized 3:1 to receive NurOwn® or placebo.
Results of this Phase 2 Study were published
in the peer reviewed Journal ‘Neurology’. The publication entitled NurOwn, Phase 2, Randomized, Clinical Trial in Patients
With ALS: Safety, Clinical, and Biomarker Results was published in December 2019.
Key findings from the trial were as follows:
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The study achieved its primary objective, demonstrating that NurOwn® transplantation was safe
and well-tolerated. There were no discontinuations from the trial due to AEs and there were no deaths in the study. The most common
adverse events (of mild or moderate severity), were transient procedure-related AEs such as headache, back pain, pyrexia arthralgia
and injection-site discomfort, which were more commonly seen in the NurOwn®-treated participants compared to placebo.
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NurOwn® achieved multiple secondary efficacy endpoints, showing evidence of a clinically meaningful
benefit. Notably, response rates in the ALS functional rating scale (48-point ALSFRS-R outcome measure) were higher in NurOwn®-treated
participants, compared to placebo, at all study timepoints over 24 weeks.
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A pre-specified responder analysis examined percentage improvements in the post treatment
ALSFRS-R slope (change/month) compared to pre-treatment slope and demonstrated that a higher proportion of NurOwn® treated
participants achieved a 100% improvement in the post-treatment vs. pre-treatment slope, compared to the placebo group. This analysis
also demonstrated that a higher proportion of the NurOwn® treated participants achieved a 1.5 point per month or greater
improvement in the post-treatment vs. pre-treatment ALSFRS-R slope, compared to the placebo group.
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The beneficial treatment effects were greater in the rapid progressor subgroup (in which
pretreatment ALSFRS-R declined by 2 or more points in the three months pre-treatment).
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As an important confirmation of NurOwn®’s mechanism of action, levels of neurotrophic
factors and inflammatory markers were measured in the cerebrospinal fluid (“CSF”) samples collected from participants
pre and two weeks post treatment. In the samples of those participants treated with NurOwn®, statistically significant increases
in levels of neurotrophic factors VEGF, HGF and LIF and a statistically significant reduction in inflammatory markers MCP-1, SDF-1
and CHIT-1 were observed post-transplantation. Furthermore, the observed reduction in inflammatory markers correlated with ALS
functional improvements. These clinical-biomarker correlations were not seen in placebo-treated participants, consistent
with the proposed combined neuroprotective and immunomodulatory mechanism of action of NurOwn® in ALS.
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In summary, a higher proportion of NurOwn® treated participants, particularly those with
more rapid disease progression, experienced stabilization or improvement in ALS function, as measured by the post-treatment vs.
pre-treatment ALSFRS-R slope change. These are new and meaningful ALS clinical observations that are being evaluated
in the ongoing Phase 3 study using repeat dosing in ALS rapid progressors.
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Phase 3 ALS Clinical Trial
Following successful completion of the
Phase 2 study, the Company is currently conducting a Phase 3 trial (a multi-dose double-blind, placebo-controlled, multicenter
trial protocol) that has been designed to generate data to support a Biologic License Application (“BLA”) for NurOwn® in
ALS. The clinical trial has completed enrolment of an enriched patient population of rapid progressors (~50% of ALS patients) based
on superior outcomes observed in the Phase-2 pre-specified sub-group.
The primary clinical efficacy outcome measure
is the ALSFRS-R score responder analysis, an outcome that evaluates the proportion of treated participants who achieve a prespecified
level of improvement in the ALSFRS-R post-treatment slope. The Phase 3 trial expands biomarker evaluations to further understand
their potential to predict ALS disease progression, treatment response and confirm the biology of NurOwn® in a larger study
population. The study is being conducted at 6 leading U.S. medical centers, 3 of which participated in the prior Phase 2 study.
Patient enrollment commenced in October 2017, at Massachusetts General Hospital followed by the other 5 study sites, including
University of California Irvine Medical Center, University of Massachusetts Medical Center, Mayo Clinic in Rochester, Minnesota,
the California Pacific Medical Center in San Francisco, and Cedars Sinai Medical Center in Los Angeles. All 6 sites are actively
enrolling study participants. As of October 2019 the study is fully enrolled.
The independent Data Safety Monitoring
Board (“DSMB”) for the study completed its pre-specified interim analysis of safety outcomes for the first 31 participants
treated with NurOwn® in the Phase 3 trial in ALS (NCT03280056) in August 2018. The DSMB indicated there were no significant
safety concerns and recommended that the trial continue, as planned without any modifications to the study protocol.
The DSMB completed the second pre-specified
interim analysis of safety outcomes for 106 participants treated with NurOwn® in the Phase 3 ALS trial on October 28, 2019.
The DSMB indicated that the trial should continue without any modifications to the study protocol, and the DSMB chair indicated
that they did not identify any significant safety concerns.
Top-line efficacy data is expected in
the fourth quarter of 2020. The study is registered at www.clinicaltrials.gov (ClinicalTrials.gov Identifier: NCT03280056).
The Company has developed a validated cryopreservation
process for the long-term storage of MSC, that allows multiple doses of NurOwn® to be created from a single bone marrow
harvest procedure in the multi-dose clinical trial and to avoid the need for patients to undergo repeated bone marrow aspiration.
A validation study was conducted in 2017 comparing NurOwn® derived from fresh MSC to those derived from cryopreserved MSC.
Company scientists were successful in showing that the MSC can be stored in the vapor phase of liquid nitrogen for prolonged periods
of time, while maintaining their characteristics. Cryopreserved MSC are capable of differentiating into NurOwn®, similar to
the NurOwn® derived from fresh MSC from the same patient/donor, prior to cryopreservation and maintain their key functional
properties including immunomodulation and neurotrophic factor secretion.
The Company has contracted with City of Hope's Center for Biomedicine and Genetics to produce clinical supplies of NurOwn®
adult stem cells for the ongoing Phase 3 clinical study. City of Hope is currently supporting the production of NurOwn®
and placebo for the participants treated in the Phase 3 trial. The Connell and O’Reilly Cell Manipulation Core Facility
at the Dana Farber Cancer Institute (DFCI) in Boston has also been contracted to manufacture NurOwn® and placebo for Phase
3 ALS clinical study participants, and commenced manufacturing in October 2018. As of March 2019, The DFCI core manufacturing
facility is also supplying NurOwn for the PMS study.
Special meeting with FDA senior management
In July 2019, the Brainstorm management
team was invited to participate in a special in-person, high-level meeting with the senior management of the FDA’s Drug and
Biologics Centers and, ’I AM ALS’, a grassroots ALS advocacy group advocating for an ALS cure.
FDA’s Dr. Peter Marks, Director of
the Center for Biologics Evaluation and Research (CBER) and Dr. Janet Woodcock Director of the Center for Drug Evaluation and Research
(CDER) were in attendance with senior FDA staff. Brainstorm’s Phase 3 ALS principal Investigators Dr. Robert Brown (Massachusetts
Memorial Hospital, Worcester, Massachusetts) and Dr. Merit Cudkowicz (Massachusetts General Hospital, Boston) joined by teleconference.
The meeting’s purpose was to discuss
Brainstorm’s ongoing Phase 3 ALS clinical trial as well as efforts to speed treatment access to the ALS patient community.
The meeting enabled an open and effective dialogue between the FDA and Brainstorm, setting the stage for future meetings to explore
practical options to quickly bring our investigational treatment to those living with ALS.
On February 11, 2020 the Company announced
that it recently held a high level meeting with the U.S. Food and Drug Administration (FDA) to discuss potential NurOwn® regulatory
pathways for approval in ALS. In the planned meeting with senior Center for Biologics Evaluation and Research (CBER) leadership
and several leading U.S. ALS experts, the FDA confirmed that the fully enrolled Phase 3 ALS trial is collecting relevant data critical
to the assessment of NurOwn efficacy. The FDA indicated that they will look at the "totality of the evidence" in the
expected Phase 3 clinical trial data. Furthermore, based on their detailed data assessment, they are committed to work collaboratively
with BrainStorm to identify a regulatory pathway forward, including opportunities to expedite statistical review of data from the
Phase 3 trial.
Patient Access Programs (ALS)
The Company, working collaboratively with
the Tel Aviv Sourasky Medical Center (Ichilov Hospital), was approved to treat 13 ALS patients with NurOwn®, under the Israel
Hospital Exemption regulatory pathway for Advanced Therapy Medicinal Products (ATMP), which was adopted by the Israeli Ministry
of Health (MoH) from the European Medicine Agency (EMA) regulation. This pathway will enable the Company to make NurOwn® accessible
to ALS patients in Israel, for a fee. Eleven (11) patients have been enrolled in this program so far.
NurOwn in Progressive Multiple Sclerosis
On December 15, 2018, the FDA approved
the Company's IND to conduct a Phase 2 open label trial of repeated intrathecal administration of NurOwn® in progressive MS
(www.clinicaltrials.gov Identifier NCT03799718). The study entitled ‘A Phase 2, open-label, multicenter study to evaluate
the safety and efficacy of repeated administration of NurOwn® (Autologous Mesenchymal Stem Cells Secreting Neurotrophic Factors;
MSC-NTF cells) in participants with Progressive Multiple Sclerosis (MS)’ will recruit 20 progressive MS patients at 5 leading
US MS centers. As of December 31, 2019, the MS clinical trial enrolled the first 10 study participants and is expected to generate
top line data in the fourth quarter of 2020.
On December 18, 2019 the clinical trial
independent Data Safety Monitoring Board (DSMB) for the PMS study completed the first, pre-specified interim analysis, of safety
outcomes for the first 9 participants enrolled in the study. After careful review of all available clinical trial data, the DSMB
unanimously concluded “the study should continue as planned without any protocol modification”.
On November 14, 2019 the Company also received
a $495,330 grant from the National Multiple Sclerosis Society, through its Fast Forward program, to advance BrainStorm’s
Phase 2 open-label, multicenter clinical trial of repeated intrathecal administration of NurOwn® in participants with progressive
Multiple Sclerosis.
Non-Dilutive Funding
In July 2017, the Company was awarded a
grant in the amount of $15,912,000 from the California Institute for Regenerative Medicine (CIRM) to aid in funding the Company’s
pivotal Phase 3 study of NurOwn®, for the treatment of ALS. To date, the Company has received $12,550,000 of the CIRM grant:
$9,050,000 from 2017 through 2018, and an additional $3,500,000 in 2019. The grant does not bear a royalty payment commitment nor
is the grant otherwise refundable. The Company expects to receive approximately $3,362,000 in additional grant funding from CIRM
upon achieving certain milestones.
In 2018 and 2019, the Company was awarded
aggregate grants of approximately $3 million from the Israel Innovation Authority (“IIA”). To date as part of this
award, the Company received approximately $3 million; $2 million in 2018 and $1 million in 2019.
Intellectual Property
A key element of the Company’s overall
strategy is to establish a broad portfolio of patents and other methods described below to protect its proprietary technologies
and products. Brainstorm is the sole licensee or assignee of 15 granted patents 4 allowed patents and 22 patent applications
in the United States, Europe, and Israel, as well as in additional countries worldwide, including countries in the Far East and
South America (in calculating the number of granted patents, each European patent validated in multiple jurisdictions was counted
as a single patent).
In March 2019 the European Patent Office
("EPO") granted a European-wide patent titled 'Mesenchymal Stem Cells for the treatment of CNS Diseases.' The European
Patent Application published in the European Patent Bulletin 19/13 on March 27, 2019, under Patent No. 2620493. The allowed claims
cover the isolated cells as well as their use in the manufacture of a medicament for treating a CNS disease or disorder, selected
from the group consisting of: Parkinson's, multiple sclerosis, epilepsy, amyotrophic lateral sclerosis, stroke, autoimmune encephalomyelitis,
diabetic neuropathy, glaucomatous neuropathy, Alzheimer's disease and Huntingdon's disease.
On August 27, 2019, the Canadian Intellectual
Property Office granted Canadian Patent No. 2,877,223 entitled ‘Methods of Generating Mesenchymal Stem Cells which secrete
Neurotrophic Factors’. The allowed claims cover the method for generating the Mesenchymal Stem Cells Secreting Neurotrophic
Factors (MSC-NTF cells).
On September 16, 2019, the United States
Patent and Trademark Office (USPTO) issued a Notice of Allowance for BrainStorm's new US Patent Application, number: 15/113,105,
titled: ‘Method of Qualifying Cells'. The allowed claims cover a pharmaceutical composition for MSC-NTF cells secreting neurotrophic
factors (NurOwn®) comprising a culture medium as a carrier and an isolated population of differentiated bone marrow-derived
MSCs that secrete neurotrophic factors.
On October
21, 2019, the Japan Patent Office (JPO) issued a Decision to Grant Japanese Patent
Application, number: 2016-548691, titled: ‘Method of Qualifying Cells.’ The patent covers cell populations which are
therapeutic for the treatment of ALS and the method of qualifying the cells for therapeutic use.
On January 29, 2020 the European Patent
Office (EPO) has communicated its intention to grant a European patent titled 'Methods of Generating Mesenchymal Stem Cells which
secrete Neurotrophic Factors'. Allowed claims cover the method for manufacturing MSC-NTF cells (NurOwn®).
Patents protecting NurOwn® have been
issued in the United States, Japan, Europe, Hong-Kong and Israel.
Scientific presentations in 2019
On January 11, 2019, Dr. Ralph Kern provided
an update on the Phase 3 pivotal trial of the autologous MSC-NTF Cellular Therapy (NurOwn®) in ALS at the 9th Annual
California ALS Research Summit in Irvine, CA. The California ALS Research Summit is an annual meeting of researchers, investigators,
clinicians, biotech companies, government representatives, partner organizations, and advocates in ALS and related fields in California.
Two scientific abstracts were presented
at the 71st American Academy of Neurology (AAN) Annual Meeting in Philadelphia, PA, May 4-10, 2019. The scientific abstracts
included: a detailed molecular characterization of enhanced neurotrophic factor production by NurOwn® (MSC-NTF cells); and
correlations of cerebrospinal fluid biomarkers with clinical improvement that was selected by the AAN Science Committee, for a
platform presentation at the prestigious Emerging Science Session. These findings contribute to our overall understanding of the
mechanism of action of NurOwn® and provide further evidence linking ALS clinical outcomes to highly relevant disease biomarkers.
On May 31, 2019, the World Multiple Sclerosis
(MS) Day, a global event that raises awareness of the invisible symptoms of MS, Brainstorm presented a poster of the Company’s
Phase 2 Open-Label, Multicenter Study of Repeated Intrathecal Administration of Autologous MSC-NTF cells in Progressive MS at the
Annual Meeting of the Consortium of Multiple Sclerosis Centers (CMSC), in Seattle. CMSC is the largest North American gathering
for healthcare professionals and researchers engaged in MS care. The poster presented the Phase 2 study design and population,
as well as the study endpoints and its current status.
On October 2, 2019 Brainstorm presented
NurOwn® Phase 2 biomarker data at the 18th Annual NEALS Meeting held October 2-4, 2019 in Clearwater, Florida, discussing
the evolving landscape of ALS clinical trials and potential surrogate and functional endpoints for regulatory approval.
On November 13 2019, the Company’s
Chief Operating and Chief Medical Officer Ralph Kern MD MHSc presented the advances BrainStorm has made with NurOwn at
the 7th International Stem Cell Meeting, which is hosted by the Israel Stem Cell Society and was held in Tel
Aviv, Israel.
On December 4, 2019 Ralph Kern MD
MHSc, delivered a podium presentation entitled “Modulation of innate immunity by MSC-NTF (NurOwn®) cells correlates with
ALS clinical outcomes” at the International Symposium on ALS/MND in Perth, Australia. The symposium is a unique annual
event that brings together leading international researchers and health and social care professionals to present and debate key
innovations in their respective fields. The Company also presented Poster 153: “MSC-NTF Differentiation Increases the
Neurotrophic Effects of MSC Cells: Live Imaging Analysis”, that directly demonstrates the neuroprotective effects of
NurOwn® in a neuronal cell culture model.
On December 11, 2019 BrainStorm was selected
as the Buzz of BIO, in the Public Therapeutics Biotech category, and due to extensive voter participation BrainStorm
also received an invitation to make a complimentary company presentation at the BIO CEO & Investor Conference,
to be held in New York City on February 10-11, 2020.
Research and Development
The Company is also reviewing the potential
for clinical development of NurOwn® in other neurodegenerative disorders, such as Parkinson’s disease, and Alzheimer’s
disease and neurodegenerative eye disease. Research is currently ongoing to develop additional specialized derivative cell products
such as MSC-NTF derived Exosomes. Exosomes are extracellular nano-vesicles (secreted by the cells) that carry various molecular
components of their cell of origin, including nucleic acids, proteins and lipids. Exosomes can transfer molecules from one cell
to another, thereby mediating cell-to-cell communication, ultimately regulating many cell processes, which are suitable for clinical
applications in multiple neurodegenerative diseases. NurOwn® derived exosomes may possess unique features for the enhanced
delivery of therapeutics to the brain, due to their ability to cross the blood brain barrier and to penetrate the brain and spinal
cord. The research efforts are primarily focused on:
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Manufacturing of MSC-NTF exosomes:
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Developing and optimizing large scale cell culture processes
using bioreactors, to generate exosomes.
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Developing advanced scalable purification GMP methods
that can be applied to commercial use.
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2.
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Quantification, characterization of phenotype and exosome
cargo.
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3.
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Assessment of MSC-NTF exosomes potency.
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4.
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Establishment of a method for exosomes modification
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For the ongoing multidose clinical studies
in ALS and MS, the Company has improved the efficiency of NurOwn® production and improved its stability, allowing manufacturing
to take place at centralized clean room facilities from which NurOwn® is distributed to the clinical trial sites, where the
cells are then administered to patients. The Company is also engaged in several research initiatives to further improve and scale-up
manufacturing capacity and extend the shelf life of NurOwn®.
Corporate Information
We are incorporated under the laws of the
State of Delaware. Our principal executive offices are located at 1325 Avenue of Americas, 28th Floor, New York, NY
10019, and our telephone number is (201) 488-0460. We also maintain offices at 12 N State Route 17, Suite 201, Paramus, NJ 07652,
and in Petach Tikva, Israel. We maintain an Internet website at http://www.brainstorm-cell.com. The information on our website
is not incorporated into this Annual Report on Form 10-K.
History
In 2004, the Company entered into a research
and license agreement with Ramot to acquire certain stem cell technology, commenced development of novel cell therapies for neurodegenerative
diseases, and discontinued its previous business selling digital data recorders. The Company was incorporated in the State of Delaware
on November 15, 2006, and previously was incorporated in the State of Washington. In October 2004, the Company formed its wholly-owned
subsidiary, Brainstorm Cell Therapeutics Ltd. In Israel (the “Israeli Subsidiary”). The Israeli Subsidiary formed wholly-owned
subsidiaries Brainstorm Cell Therapeutics UK Ltd., in the United Kingdom on February 19, 2013, Advanced Cell Therapies Ltd. in
Israel on June 21, 2018 and Brainstorm Cell Therapeutics Limited in Ireland on October 1, 2019. A reverse stock split of the Company’s
shares of Common Stock by a ratio of 1-for-15 was effected after market close on September 15, 2014, in connection with the September
30, 2014 listing of the Company’s Shares of Common Stock on the NASDAQ Capital Market. Unless otherwise indicated, all share
numbers and exercise prices in this Annual Report on Form 10-K are split-adjusted.
The Company’s Common Stock trades
on the NASDAQ Capital Market under the ticker symbol “BCLI.”
Company Business Strategy
Our business strategy is to develop and
commercialize NurOwn® for the treatment of neurodegenerative disease. The highest company priority is rapid execution of the
U.S. randomized, double-blind, placebo-controlled ALS Phase 3 trial and open-label, multicenter Phase 2 clinical trial in progressive
MS. Both clinical programs are expected to read out in fourth quarter of 2020.
We are also leveraging strong existing
pre-clinical data, to advance innovative IND-enabling pre-clinical programs in several neurodegenerative disease and we are engaging
scientific and regulatory experts and our scientific advisory board to identify and pursue the most attractive scientific, clinical
and business opportunities. We are actively engaged in several ongoing development projects with the goal of increasing the scale
and efficiency of NurOwn® manufacturing. We are also preparing our manufacturing and supply chain systems for commercial launch.
Therefore, our core business strategy is
to fully execute the Phase 3 and Phase 2 Clinical Trials, generate the highest quality clinical trial data and submit a BLA for
NurOwn® in ALS. We may also choose to seek a strategic partnership with a pharmaceutical or biotechnology company for the global
commercialization of NurOwn® for ALS, or to support the execution of additional BLA-enabling clinical programs in other neurodegenerative
diseases.
NurOwn® in CNS Disease
We are strategically focused on fully executing the clinical
development of NurOwn® in ALS and progressive MS as well as continuing our pre-clinical evaluation of the NurOwn® technology
platform in other CNS disorders based on a broad preclinical experience in ALS, Parkinson’s Disease, Huntington’s Disease,
MS and Autism.
Amyotrophic Lateral Sclerosis (ALS)
ALS, often referred to as “Lou Gehrig's
disease,” is a progressive neurodegenerative disease that primarily affects motor nerve cells in the brain and the spinal
cord. Motor neurons reach from the brain to the spinal cord and from the spinal cord to the muscles throughout the body. The progressive
degeneration of the motor neurons in ALS patients lead to progressive weakness, respiratory failure and eventually, death. The
median survival for ALS patients is between 2 and 5 years from the onset of symptoms. Across the world, the prevalence of ALS is
approximately 4-7 per 100,000. It is estimated that as many as 30,000 Americans have the disease at any given time, with about
51,000 individuals affected in the territory of the European Single Market. Estimated annual treatment and health care costs for
advanced stage patients can be as high as $100,000-$200,000 per annum. Worldwide it is estimated that there are 450,000 patients
with ALS.
Treatment decisions are typically determined
by the patient's symptoms, preferences and the stage of the disease. Approved disease modifying medications include:
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Riluzole –approved by the FDA to treat ALS. Riluzole extends the time to death or ventilation by several months; however, it has not been shown to improve the daily functioning of ALS patients.
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Radicava (Edaravone) – a free radical scavenger- recently approved by FDA (May 2017) based on a single Phase 3 study carried out in Japan.
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Progressive Multiple Sclerosis (PMS)
Progressive Multiple
Sclerosis (PMS) is characterized by the relentless accumulation of central nervous system injury due to peripheral and compartmentalized
inflammation, demyelination, axonal damage, and neuronal degeneration and results in increasing motor, visual, and cognitive impairment
and significant disability that impacts daily living, employment, and socioeconomic status. There is currently no effective regenerative
therapy for this disabling disease that affects approximately one million individuals in the US.
There are currently over 1.25 million
people with PMS worldwide, with roughly 0.5 million of these patients located in the U.S. Over 10,000 new cases are diagnosed annually
in the U.S., mostly affecting women between the ages of 20 and 50. Annual drug treatment costs for MS can be as much as $80,000
a year per patient.
The lack of safe and effective therapies in progressive MS,
the intrinsic immunomodulatory properties of MSC-NTF cells and the potential of MSC-NTF secreted neurotrophic factors to promote
neuronal repair and remyelination makes NurOwn® an attractive treatment option to evaluate in PMS.
Parkinson’s Disease (PD)
PD is a chronic, progressive neurodegenerative disorder in which
dopamine-producing neurons residing in the Substantia Nigra region of the brain undergo degeneration and eventually die, resulting
in progressive impairment in movement and gait. Multiple other cell types throughout the central and peripheral autonomic nervous
system are also involved and the disease is associated with many non-motor symptoms that add to overall disability. The cause of
the disease is presently unknown.
PD is the second-most common neurodegenerative disorder.
Over 7 million people worldwide suffer from PD, of whom about one million are in the United States. Most people are diagnosed with
the disease between the ages of 55 and 65 and about 85% of people with PD are over the age of 65. Prevalence of PD is increasing
in line with the general aging of the population. The total economic burden of the disease has been estimated by the National Parkinson
Foundation to exceed $14 billion annually in the U.S. alone.
Treatment of PD primarily comprises symptomatic
treatment through dopamine replacement, either directly (Levodopa), with dopamine mimetics or by inhibition of its breakdown. These
treatments focus on treating the symptoms of the disease and are not a cure for PD. Levodopa has a propensity to cause serious
motor response complications with long-term use such as on-off phenomenon, motor fluctuations and involuntary movements. Moreover,
effective drug dosage often requires gradual increase, leading to more adverse side effects and eventual resistance to its therapeutic
action. This greatly limits patient benefit. Therefore, physicians and researchers have sought Levodopa-sparing strategies in patients
with early-stage disease to delay the need for Levodopa.
PD is also treated by Deep Brain Stimulation
(“DBS”), which consists of implanting electrodes deep into the brain to provide permanent electrical stimulation to
specific areas of the brain and to cause a delay in the activity in those areas. However, DBS is problematic as it may be associated
with significant treatment morbidity such as bleeding in the brain, infection and depression. In addition, similar to drug therapy,
DBS focuses on treating the symptoms of PD and does not provide a cure.
There is a great unmet need for novel approaches
towards the effective management of PD and the MSC-NTF cell technology platform represents a promising approach.
Intellectual Property
We are committed to the protection of our
technology and intellectual property with patents and other methods described below.
We are the sole licensee or assignee of
17 granted patents 4 allowed patents and 21 patent applications in the United States, Europe, and Israel, as well as in additional
countries worldwide, including countries in the Far East and South America (in calculating the number of granted patents, each
European patent validated in multiple jurisdictions was counted as a single patent).
On June 18, 2006, an International Patent
Application (Publication No. WO 2006/134602) was filed entitled "Isolated Cells and Populations Comprising Same for the Treatment
of CNS Diseases." National phase applications were filed in many jurisdictions including US and Europe. On February 11, 2014,
the U.S. Patent and Trademark Office (“USPTO”) granted US patent, 8,647,874 which claims priority from this PCT application.
This patent relates to the production method of the Company's proprietary stem cells induced to secrete large quantities of neurotrophic
factors.
On September 3, 2014, a European patent
was granted by the European Patent Office (“EPO”) which claims priority from WO 2006/134602. This patent (Pat.
No. 1893747), has been validated in the following European countries: CH, CZ, DE, DK, ES, FR, GB, IE, IT and NL. The granted
claims relate to the method of generating the cells.
On January 30, 2018, the U.S. Patent and
Trademark Office (“USPTO”) granted US patent, No. 9,879,225 which claims priority from this same PCT application This
patent relates to methods of treating amyotrophic lateral sclerosis (ALS) and Parkinson's disease using mesenchymal stem cells
that secrete neurotrophic factors, specifically glial derived neurotrophic factor (GDNF).
On May 26, 2009, an International Patent
Application (Publication No. WO 2009/144718) was filed entitled "Mesenchymal stem cells for the treatment of CNS diseases".
National phase applications were filed in US, Europe and Israel.
On March 4, 2014, we were granted U.S.
Patent (No. 8,663,987) which claims priority from WO 2009/144718. The claims of this granted patent relate to the composition of
cells.
On August 6, 2013, an International Patent
Application (Publication No. WO 2014/024183) was filed entitled "Methods of generating Mesenchymal stem cells which secrete
neurotrophic factors". National phase applications were filed in the US, Europe, Hong Kong, Canada, Brazil, Japan and Israel.
A divisional patent application therefrom
was granted as US Patent No. 8,900,574 on December 2, 2014. The claims of this granted patent relate to a method of treating neurodegenerative
disorders by administering MSC-derived cells which secrete BDNF and do not secrete bNGF. The neurodegenerative diseases include
Parkinson’s disease, amyotrophic lateral sclerosis (ALS) and Huntingdon’s disease.
A subsequent divisional patent application
therefrom was granted on October 25, 2016 as United States Patent No. 9,474,787 titled "Mesenchymal Stem Cells for the
Treatment of CNS Diseases. The granted claims cover mesenchymal stem derived-cells that secrete neurotrophic factors, including
brain-derived neurotrophic factor (BDNF) and glial derived neurotrophic factor (GDNF), as well as pharmaceutical compositions comprising
these factors.
In September 2015, we were granted patent
No. 209604 by Israel’s Patent Office for our application titled “Mesenchymal stem cells for the treatment of CNS diseases
" which claims priority from WO 2009/144718. The claims cover the cell composition itself, the method of generating and the
use of the cells for treating any CNS disease or disorder.
In July, 2018, the European Patent Office
("EPO") granted a Europe-wide patent for Patent No 2285951, which claims priority from WO 2009/144718. The allowed claims
cover methods of treating ALS using mesenchymal stem cells that secrete neurotrophic factors, including brain derived neurotrophic
factor (BDNF). This patent will provide protection for MSC-NTF cells (NurOwn®) in the EU validated states until 2029.
In August, 2018, the USPTO granted US Patent
No 10,052,363 which relates to methods of treating ALS, Parkinson's disease and Huntington Disease with NurOwn®. This patent
will provide protection for MSC-NTF cells (NurOwn®) in the US until 2029.
On July 6, 2018, the Japanese Patent Office
("JPO") granted Japanese patent No. 6,362,596, entitled: 'Methods of Generating Mesenchymal Stem Cells which Secrete
Neurotrophic Factors” which claims priority from WO 2014/024183. This patent will provide protection for MSC-NTF cells (NurOwn®)
in Japan until 2033. The allowed claims cover a method of generating cells which secrete brain derived neurotrophic factor (BDNF),
glial derived neurotrophic factor (GDNF), hepatocyte growth factor (HGF) and vascular endothelial growth factor (VEGF).
On August 24, 2018, the U.S. Patent and
Trademark Office (“USPTO”) granted US Patent No. 10,046,010 titled 'Methods of Generating Mesenchymal Stem Cells which
Secrete Neurotrophic Factors'. Allowed claims cover the method for generating MSC-NTF cells (NurOwn®) in industrial amounts
for clinical practice. This patent will provide protection for MSC-NTF cells (NurOwn®) in the US until 2033.
On October 10th 2018 the European
Patent Office allowed the European Patent Application No. 13164650.7 titled “Mesenchymal stem cells for the treatment of
CNS diseases" which claims priority from WO 2009/144718. The allowed claims cover the isolated cells as well as their use
in the manufacture of a medicament for treating a CNS disease or disorder (selected from the group consisting of Parkinson's, multiple
sclerosis, epilepsy, amyotrophic lateral sclerosis, stroke, autoimmune encephalomyelitis, diabetic neuropathy, glaucomatous neuropathy,
Alzheimer's disease and Huntingdon's disease)
On December 21, 2018, the Israel Patent
Office granted patent No. 237124 titled 'Methods of Generating Mesenchymal Stem Cells which Secrete Neurotrophic Factors'. Allowed
claims cover the isolated population of cells, the method of manufacturing the cells, and the use of the isolated population of
cells for preparation of a medicament for treating a disease (consisting of a neurodegenerative disease, a neurological disease
and an immune disease etc.).
In March 2019 the European Patent Office
("EPO") granted a European-wide patent titled 'Mesenchymal Stem Cells for the treatment of CNS Diseases.' The European
Patent Application published in the European Patent Bulletin 19/13 on March 27, 2019, under Patent No. 2620493. The allowed claims
cover the isolated cells as well as their use in the manufacture of a medicament for treating a CNS disease or disorder, selected
from the group consisting of: Parkinson's, multiple sclerosis, epilepsy, amyotrophic lateral sclerosis, stroke, autoimmune encephalomyelitis,
diabetic neuropathy, glaucomatous neuropathy, Alzheimer's disease and Huntingdon's disease.
On, August 27, 2019, the Canadian Intellectual
Property Office granted Canadian Patent No. 2,877,223 entitled ‘Methods of Generating Mesenchymal Stem Cells which secrete
Neurotrophic Factors’. The allowed claims cover the method for generating the Mesenchymal Stem Cells Secreting Neurotrophic
Factors (MSC-NTF cells).
On September 16, 2019, the United States
Patent and Trademark Office (USPTO) issued a Notice of Allowance for BrainStorm's new US Patent Application, number: 15/113,105,
titled: ‘Method of Qualifying Cells'. The allowed claims cover a pharmaceutical composition for MSC-NTF cells secreting neurotrophic
factors (NurOwn®) comprising a culture medium as a carrier and an isolated population of differentiated bone marrow-derived
MSCs that secrete neurotrophic factors. US Patent No. 10,564,149 for this application was granted on February 18, 2020 and titled
‘Populations of Mesenchymal Stem Cells that secrete Neurotrophic Factors’.
On October
21, 2019, the Japan Patent Office (JPO) issued a Decision to Grant Japanese Patent
Application, number: 2016-548691, titled: ‘Method of Qualifying Cells.’ The patent covers cell populations which are
therapeutic for the treatment of ALS and the method of qualifying the cells for therapeutic use.
On December 6, 2019 the Hong Kong patent
office granted patent No. HK1182133 titled “Mesenchymal stem cells for the treatment of CNS diseases" which claims priority
from WO 2009/144718. The allowed claims cover the isolated cells as well as their use in the manufacture of a medicament for treating
a CNS disease or disorder, selected from the group consisting of: Parkinson's, multiple sclerosis, epilepsy, amyotrophic lateral
sclerosis, stroke, autoimmune encephalomyelitis, diabetic neuropathy, glaucomatous neuropathy, Alzheimer's disease and Huntingdon's
disease.
On January 9, 2020 the European Patent
Office (EPO) communicated its intention to grant a European patent titled 'Methods of Generating Mesenchymal Stem Cells which secrete
Neurotrophic Factors' (Application No. 13767124.4). Allowed claims cover the method for manufacturing MSC-NTF cells (NurOwn®).
On January 27, 2020 the Israeli Patent
Office issued a Notice of Acceptance for Israeli patent application No. 246943 titled ‘Method of Qualifying Cells'. The allowed
claims cover the cells that secrete neurotrophic factors which are qualified to be useful as a therapeutic for treating ALS and
a method for qualifying said cell population.
On January 29, 2020 the European Patent
Office (EPO) has communicated its intention to grant a European patent titled 'Methods of Generating Mesenchymal Stem Cells which
secrete Neurotrophic Factors'. Allowed claims cover the method for manufacturing MSC-NTF cells (NurOwn®).
Patents protecting NurOwn® have been
issued in the United States, Japan, Europe, Hong-Kong and in Israel.
Additional PCT patent applications have
been filed and National phase applications are currently under examination in several jurisdictions worldwide. Specifically, International
Patent Application WO2015/121859 was filed on February 11, 2015, and WO 2018/015945 was filed on July 13, 2017.
The following table provides a description
of our key patents and patent applications and is not intended to represent an assessment of claims, limitations or scope. In some
cases, a jurisdiction is listed as both pending and granted for a single patent family. This is due to pending continuation or
divisional applications of the granted case.
Family No.
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Patent Name/ Int. App. No.
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Pending
Jurisdictions
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Allowed
Jurisdictions
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Granted
Jurisdictions
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Expiry
Date
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1
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Isolated Cells and Populations Comprising Same for the Treatment of CNS Diseases/PCT/IL2006/000699
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US
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Europe, US
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2030
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2
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Mesenchymal Stem Cells for The Treatment of CNS Diseases PCT/ IL2009/000525
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US, Hong Kong, Europe
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US, Israel, Europe, Hong Kong
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2032
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3
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Methods of Generating Mesenchymal Stem Cells which Secrete Neurotrophic Factors / PCT/IL2013/050660
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US, Europe, Hong Kong, Israel, Canada, Brazil, Japan
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Israel
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US, Canada, Japan, Israel, Europe
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2038
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4
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Method of Qualifying Cells /PCT IL2015/050159
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Europe, Hong Kong, Canada, Brazil, Japan
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Japan, Israel
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2040
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Populations of Mesenchymal Stem Cells that secrete Neurotrophic Factors
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US
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5
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Methods of treating ALS PCT/IL2017/050801
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US, Europe, Israel, Japan, S. Korea, Australia, Canada
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2042
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6
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Cell-Type Specific Exosomes and Use Thereof PCT/IL2019/050401
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PCT
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2043
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Trademarks
NurOwn® is a registered trademark (application
no. 85154891, filed October 18, 2010) for use in connection with “compositions of cells derived from stem cells for medical
purposes; stem cells for medical purposes.” US Trademark No. 4641441 for NurOwn® was registered on November 18, 2014.
The patent applications of families #1
and #2 (see table above) as well as relevant know-how and research results are either licensed or joint with Ramot. We intend to
work with Ramot to protect and enhance our mutual intellectual property rights by filing continuations and divisional patent applications.
The current NurOwn® proprietary technology is fully owned by Brainstorm Cell Therapeutics Ltd., our wholly-owned subsidiary
(the “Israeli Subsidiary”). All granted patents related to NurOwn® (MSC-NTF cells) manufacturing process and clinical
development (families #3 through #6) are fully assigned to and owned by Brainstorm Cell Therapeutics Ltd. New discoveries arising
in the course of research and development within the Company were and will be patented by us independently.
Research and License Agreement with
Ramot
The Company has maintained a commercial
relationship with Ramot, the technology transfer group within Tel Aviv University, since July 2004, when the Company and Ramot
entered into a Research and License Agreement (the “Original Agreement”). The Original Agreement was amended
in both March and May of 2006, when the parties signed, respectively, an Amended and Restated Research and License Agreement (the
“Amended and Restated Agreement”) and Amendment Number 1 to the Amended and Restated Agreement. Thereafter, the Company
and Ramot entered into a Letter Agreement in December 2009 which further amended the Amended and Restated Agreement by releasing
the Company from various duties and obligations (including the Company’s commitment to fund three (3) years of additional
Ramot research - a financial commitment of $1,140,000), while converting other payments due and owing to Ramot by the Company into
shares of Common Stock. In December 2011, the Company assigned the Amended and Restated Agreement (as amended) to its Israeli
Subsidiary with the consent of Ramot, provided the Company agreed to guaranty the performance obligations of its Israeli Subsidiary
thereunder. The Amended and Restated Agreement was amended in both April 2014 (Amendment Number 2) and March 2016 (Amendment
Number 3).
In addition to the foregoing, on April
30, 2014, the Israeli Subsidiary executed a consulting agreement (the “Offen Consulting Agreement”) with Professor
Offen of Tel Aviv University, which expressly replaced their previous agreement (signed in July 2004). Pursuant to the Offen Consulting
Agreement, Professor Offen granted our Israeli Subsidiary exclusive rights, title and interest in and to all work product and deliverables
resulting from the provision of his services thereunder, except that any new intellectual property arising from this agreement
would be deemed a joint invention that is jointly owned by both our Israeli Subsidiary and Ramot. No joint inventions resulted
from this consulting agreement and it was terminated on January 18, 2018.
The primary focus of our agreements (and
subsequent amendments) with Ramot has and continues to be the commissioning of a group of scientists within Tel Aviv University
to carry out research in the area of the stem-cell technology referenced above, and the granting of rights to the Company (and
later our Israeli Subsidiary, after the assignment referenced above) in the inventions, know-how and results procured from such
research (the “Ramot IP”).
In consideration for the rights granted
to our Israeli Subsidiary in and to the Ramot IP, our Israeli Subsidiary is required to pay Ramot royalties ranging between three
percent (3%) and five percent (5%) of all net sales realized from the exploitation of the Ramot IP, as well as remittances of between
twenty percent (20%) and twenty-five percent (25%) on revenues received from the sub-licensing of the Ramot IP.
Pursuant to the third amendment of the
Amended and Restated Agreement referenced above, Ramot agreed to convert the exclusive licenses then-existing, to outright transfers
and assignments of the Ramot IP, thereby granting our Israeli Subsidiary ownership thereof.
Government Regulation and Product Approval
Once fully developed, we intend to market
our bone marrow derived differentiated neurotrophic-factor secreting cell products, NurOwn®, for autologous transplantation
in patients by neurosurgeons in medical facilities in the U.S., Europe, Japan and Israel.
In January 2013, the EMA Committee for
Advanced Therapies designated NurOwn® as an Advanced Therapy Medicinal Product.
U.S. Drug Development Process
The FDA regulates drugs under the Federal
Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. Drugs are also subject to other federal, state and local statutes
and regulations. Biologics are subject to regulation by the FDA under the FDCA, the Public Health Service Act, or the PHSA, and
related regulations and other federal, state and local laws and regulations. Biological products include a wide variety of products
including vaccines, blood and blood components, gene therapies, tissue and proteins. Unlike most prescription products made through
chemical processes, biological products generally are made from human and/or animal materials. To be lawfully marketed in interstate
commerce, a biologic product must be the subject of a Biological License Application (“BLA”), issued by the FDA on
the basis of a demonstration that the product is safe, pure and potent, and that the facility in which the product is manufactured
meets standards to assure that it continues to be safe, pure and potent. The FDA has developed and is continuously updating the
requirements with respect to cell and gene therapy products and has issued documents concerning the regulation of cellular and
tissue-based products. Manufacturers of cell and tissue-based products must comply with the FDA’s current good tissue practices,
or cGTP, which are FDA regulations that govern the methods used in, and the facilities and controls used for, the manufacture of
such products. The primary intent of the cGTP requirements is to ensure that cell and tissue-based products are manufactured in
a manner designed to prevent the introduction, transmission and spread of communicable disease.
The process of obtaining regulatory approvals
and ensuring compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of
substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product
development process, approval process, or after approval, may subject an applicant to administrative or judicial sanctions. These
sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning
letters, product recalls, product seizures, product detention, total or partial suspension of production or distribution, injunctions,
fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. The process required by the
FDA before a biological product or drug may be marketed in the United States generally involves the following:
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Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices or other regulations;
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Submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials may begin;
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Performance of adequate and well-controlled clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacy of the proposed biological product or drug for its intended use;
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Submission to the FDA of a new drug application, or NDA, for a new drug; or a biologic license application for a new biological product;
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Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with Good Manufacturing Practices, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the drug’s or biologic’s identity, strength, quality and purity; and
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FDA review and approval of the BLA or NDA.
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The testing and approval process require
substantial time, effort and financial resources and we cannot be certain that any approvals for our stem cell therapies will be
granted on a timely basis, if at all.
All clinical trials must be conducted under
the supervision of one or more qualified investigators in accordance with GCP regulations. These regulations include the requirement
that all research subjects provide informed consent. Further, an institutional review board, or IRB, must review and approve the
plan for any clinical trial before it commences at any institution. An IRB considers, among other things, whether the risks to
individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves
the information regarding the clinical trial and the consent form that must be provided to each clinical trial subject or his or
her legal representative and must monitor the clinical trial until completed. Once an IND is in effect, each new clinical protocol
and any amendments to the protocol must be submitted to the IND for FDA review, and to the IRBs for approval.
Human clinical trials are typically conducted
in three sequential phases that may overlap or be combined:
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Phase 1. The product is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients having the specific disease.
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Phase 2. Phase 2 trials involve investigations in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and the optimal dosage and schedule.
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Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These trials are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for regulatory approval and product labeling.
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Post-approval studies, also called Phase
4 trials, may be conducted after initial marketing approvals. These studies are used to obtain additional experience from the treatment
of patients in the intended therapeutic indication and may be required by the FDA as part of the approval process.
Progress reports detailing the results
of the clinical trials must be submitted at least annually to the FDA and safety reports must be submitted to the FDA and the investigators
for serious and unexpected side effects. Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified
period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a
finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend
or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the
IRB’s requirements or if the stem cell therapy has been associated with unexpected serious harm to patients.
Concurrent with clinical trials, companies
usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics
of the product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.
The manufacturing process must be capable of consistently producing quality batches of the stem cell therapy and, among other things,
the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally,
appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the stem cell therapy
does not undergo unacceptable deterioration over its shelf life.
The results of product development, preclinical
studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the stem cell
therapy, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA or BLA, requesting approval
to market the product. The submission of an NDA or BLA is subject to the payment of substantial user fees which may be waived under
certain limited circumstances.
The approval process is lengthy and difficult
and the FDA may refuse to approve a BLA or NDA if the applicable regulatory criteria are not satisfied or may require additional
clinical data or other data and information.
If a product receives regulatory approval,
the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited,
which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings
or precautions be included in the product labeling. In addition, the FDA may require Phase 4 testing which involves clinical trials
designed to further assess a drug’s or biologic’s safety and effectiveness after BLA or NDA approval and may require
testing and surveillance programs to monitor the safety of approved products that have been commercialized.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may
grant orphan designation to a stem cell therapy intended to treat a rare disease or condition, which is generally a disease or
condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States
and for which there is no reasonable expectation that the cost of developing and making a stem cell therapy available in the United
States for this type of disease or condition will be recovered from sales of the product. Orphan product designation must be requested
before submitting an 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. However, orphan product designation does provide the potential for
a period of exclusivity and we may be eligible for grant funding of up to $400,000 per year for four years to defray costs of clinical
trial expenses, tax credits for clinical research expenses and potential exemption from the FDA application user fee.
If a product that has orphan designation
subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled
to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same stem cell therapy
for the same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan designation is revoked;
(ii) its marketing approval is withdrawn; (iii) the orphan exclusivity holder consents to the approval of another applicant’s
product; (iv) the orphan exclusivity holder is unable to assure the availability of a sufficient quantity of drug; or (v) a showing
of clinical superiority to the product with orphan exclusivity by a competitor product. Competitors, however, may receive approval
of different products for the indication for which the orphan product has exclusivity or obtain approval for the same product but
for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block the approval
of one of our products for seven years if a competitor obtains approval of the same stem cell therapy as defined by the FDA or
if our stem cell therapy is determined to be contained within the competitor's product for the same indication or disease. If a
stem cell therapy designated as an orphan product receives marketing approval for an indication broader than what is designated,
it may not be entitled to orphan product exclusivity. Orphan drug status in the European Union has similar but not identical benefits
in the European Union.
In February 2011, we received Orphan Drug
Designation for NurOwn® for the treatment of ALS in the United States. In July 2013, we received Orphan Medicinal Product Designation
for NurOwn® for the treatment of ALS from the European Commission. Orphan designation grants a 10-year marketing exclusivity
in the EU for the designated indication, as well as several other regulatory incentives.
Patent Term Restoration and Marketing
Exclusivity
Depending upon the timing, duration and
specifics of FDA marketing approval of our stem cell therapies, some of our U.S. patents may be eligible for limited patent term
extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments.
The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product
development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent
beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the
time between (a) the effective date of an IND and the submission date of a BLA or an NDA plus (b) the time between the submission
date of a BLA or an NDA and the approval of that application. Only one patent applicable to an approved stem cell therapy is eligible
for the extension and the application for the extension must be submitted prior to the expiration of the patent and within 60 days
of approval of the stem cell therapy. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves
the application for any patent term extension or restoration.
Post-Approval Requirements
Any drugs for which we receive FDA approval
are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse
effects with the product, reporting of changes in distributed products which would require field alert reports (“FARs”)
for drugs and biological product deviation reports (“BPDRs”), providing the FDA with updated safety and efficacy information,
product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying
with FDA promotion and advertising requirements. In September 2007, the Food and Drug Administration Amendments Act of 2007 was
enacted, giving the FDA enhanced post-marketing authority, including the authority to require post marketing studies and clinical
trials, labeling changes based on new safety information, and compliance with risk evaluations and mitigation strategies, or REMS,
approved by the FDA. The FDA strictly regulates labeling, advertising, promotion and other types of information on products that
are placed on the market. Drugs and biologics may be promoted only for the approved indications and in accordance with the provisions
of the approved label. Further, manufacturers of drugs and biologics must continue to comply with cGMP requirements, which are
extensive and require considerable time, resources and ongoing investment to ensure compliance. In addition, changes to the manufacturing
process generally require prior FDA approval before being implemented and other types of changes to the approved product, such
as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
Drug and biologic manufacturers and other
entities involved in the manufacturing and distribution of approved drugs and biologics are required to register their establishments
with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies
for compliance with cGMP, GTP applicable to biologics, and other laws. The cGMP requirements apply to all stages of the manufacturing
process, including the production, processing, sterilization, packaging, labeling, storage and shipment of the drug. Manufacturers
must establish validated systems to ensure that products meet specifications and regulatory standards, and test each product batch
or lot prior to its release.
The FDA may withdraw a product approval
if compliance with regulatory standards is not maintained or if problems occur after the product reaches the market. Discovery
of previously unknown problems with a product subsequent to its approval may result in restrictions on the product or even complete
withdrawal of the product from the market. Further, the failure to maintain compliance with regulatory requirements may result
in administrative or judicial actions, such as fines, warning letters, holds on clinical trials, product recalls or seizures, product
detention or refusal to permit the import or export of products, refusal to approve pending applications or supplements, restrictions
on marketing or manufacturing, injunctions or civil or criminal penalties.
From time to time, legislation is drafted,
introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing
and marketing of products regulated by the FDA. In addition to new legislation, the FDA regulations and policies are often revised
or reinterpreted by the agency in ways that may significantly affect our business and our stem cell therapies. It is impossible
to predict whether further legislative or FDA regulation or policy changes will be enacted or implemented and what the impact of
such changes, if any, may be.
Foreign Regulation
In addition to regulations in the United
States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution
of our stem cell therapies to the extent we choose to clinically evaluate or sell any products outside of the United States. Whether
or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign
countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from
country to country and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct
of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. As in the United States,
post-approval regulatory requirements, such as those regarding product manufacture, marketing, or distribution would apply to any
product that is approved outside the United States.
Third Party Payor Coverage and Reimbursement
Coverage and reimbursement status of any
approved therapy carries uncertainty and risk. In both the United States and foreign markets, our ability to commercialize our
stem cell therapies successfully, and to attract commercialization partners for our stem cell therapies, depends in significant
part on the availability of adequate financial coverage and reimbursement from third party payors, including, in the United States,
governmental payors such as the Medicare, Medicaid and the Ventrans Affairs Health programs. and private health insurers. Medicare
is a federally funded program managed by the Centers for Medicare and Medicaid Services, or CMS, through local fiscal intermediaries
and carriers that administer coverage and reimbursement for certain healthcare items and services furnished to the elderly and
disabled. Medicaid is an insurance program for certain categories of patients whose income and assets fall below state defined
levels and who are otherwise uninsured that is both federally and state funded and managed by each state. The federal government
sets general guidelines for Medicaid and each state creates specific regulations that govern its individual program. Each payor
has its own process and standards for determining whether it will cover and reimburse a procedure or particular product. Private
payors often rely on the lead of the governmental payors in rendering coverage and reimbursement determinations. Therefore, achieving
favorable CMS coverage and reimbursement is usually a significant gating issue for successful introduction of a new product. The
competitive position of some of our products will depend, in part, upon the extent of coverage and adequate reimbursement for such
products and for the procedures in which such products are used. Prices at which we or our customers seek reimbursement for our
stem cell therapies can be subject to challenge, reduction or denial by the government and other payors.
Possible legislation at the Federal and
State levels in the United States focused on cost containment and price transparency may impact our ability to sell our stem cell
therapies for maximum profitably. It appears likely that the pressure on pharmaceutical pricing will continue, especially under
the Medicare program, which may also increase our regulatory burdens and operating costs. Moreover, additional changes could be
made to governmental healthcare programs that could significantly impact the success of our stem cell therapies.
The 21st Century Cures Act and
its regenerative medicine provisions may be beneficial to the development of our stem cell therapy. The 21st Century
Cures Act was signed into law on December 13, 2016. The goal of this landmark legislation is to accelerate the discovery,
development, and delivery of new treatments. It includes regenerative medicines provisions aimed at bringing new innovations
and advances to patients quicker and more efficiently. On November 16, 2017, the US Food and Drug Administration (FDA) issued
a comprehensive regenerative medicine policy framework. The draft guidance issued by the FDA defines the regenerative medicine
provisions in the 21st Century Cures Act by providing additional information to further the development and access to
innovative regenerative medicine therapies.
The cost of pharmaceuticals continues to
generate substantial governmental and third-party payor interest. We expect that the pharmaceutical industry will experience pricing
pressures due to the trend toward managed healthcare, the increasing influence of managed care organizations and additional legislative
proposals. Our results of operations could be adversely affected by current and future healthcare reforms.
Some third-party payors also require pre-approval
of coverage for new or innovative devices, biologics or drug therapies before they will reimburse healthcare providers that use
such therapies. While we cannot predict whether any proposed cost-containment measures will be adopted or otherwise implemented
in the future, the announcement or adoption of these proposals could have a material adverse effect on our ability to obtain adequate
prices for our stem cell therapies and operate profitably.
Different pricing and reimbursement schemes
exist in other countries. In the European Union, governments influence the price of pharmaceutical products through their pricing
and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers.
Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price
has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials
that compare the cost-effectiveness of a particular stem cell therapy to currently available therapies. Other member states allow
companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care
costs in general, particularly prescription drugs and biologics, has become very intense. As a result, increasingly high barriers
are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert
a commercial pressure on pricing within a country.
Other Healthcare Laws and Compliance
Requirements
In the United States, our activities are
potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers
for Medicare and Medicaid Services, other divisions of the United States Department of Health and Human Services (e.g., the Office
of Inspector General), the United States Department of Justice and individual United States Attorney offices within the Department
of Justice, and state and local governments. These regulations include:
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the federal healthcare program anti-kickback law, which prohibits, among other things, persons from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;
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federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other government reimbursement programs that are false or fraudulent;
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the federal Health Insurance Portability and Accountability Act of 1996, which prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;
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the federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs, devices, biologics, and medical supplies to report to the Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests;
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the FDCA, which among other things, strictly regulates drug and biologic product marketing, prohibits manufacturers from marketing stem cell therapies for off-label use and regulates the distribution of drug samples; and
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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts.
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Compliance with Environmental, Health
and Safety Laws
In addition to FDA regulations, we are
also subject to evolving federal, state and local environmental, health and safety laws and regulations. In the past, compliance
with environmental, health and safety laws and regulations has not had a material effect on our capital expenditures. We believe
that we comply in all material respects with existing environmental, health and safety laws and regulations applicable to us. Compliance
with environmental, health and safety laws and regulations in the future may require additional capital expenditures.
Sales and Marketing
We intend to establish and maintain fully-equipped
cGMP-certified Cell-Processing Centers in strategic locations to conduct NurOwn® production and distribution over the broadest
geographic area. Each Cell-Processing Center would receive an initial bone marrow sample of the patient, harvested at a medical
center. The patient’s MSC cells would be isolated and expanded, in order to produce an initial dose of NurOwn® cells.
A master cell bank for each individual patient would be cryopreserved and maintained for production of subsequent, future NurOwn®
doses on a long-term basis for future treatments. These doses would be produced as needed and transported to the medical centers,
where they would then be transplanted back into the patient.
We intend to seek partnering opportunities
with a strategic partner as we progress towards advanced clinical development and commercialization. We are also initiating activities
to support commercial launch post approval by regulatory authorities. These activities include scaling out production capacity,
logistics and supply. In support of commercialization we are actively pursuing strategic partnerships.
Competition
There are several clinical trials underway
evaluating experimental treatments for ALS, of which only two are stem cell-based trials being conducted by other commercial entities.
US-based Seneca Biopharma (NASDAQ: SNCA, formally Neuralstem) completed a Phase 2 intraspinal transplantation trial for its allogeneic,
human (fetal) spinal cord derived neural stem cells. Data presented in 2015 showed that this product to be safe and well-tolerated
with no acceleration in disease progression due to the therapeutic intervention. Neuralstem has discussed plans for a for a larger,
controlled, registration directed clinical trial but it is not clear if it will proceed with this trial. Q Therapeutics has gained
FDA clearance for a Phase 1/2 cervical surgical transplantation study with its Q-Cells®, purified human glial progenitor
cells isolated from brain tissue. The study is not recruiting patients yet. Corestem, a Korean company has commercialized its NEURONATA-R®
inj., an autologous bone marrow mesenchymal stem cell (BM-MSC) therapy for ALS in South Korea and is searching for a subcontractor
for a Phase 3 study in the US. Alexion has submitted an investigational new drug application (IND) for ULTOMIRIS (ravulizumab)
in ALS to the FDA in the fourth quarter of 2019 and plans to initiate the Phase 3 study this quarter. The 50-week global study,
will evaluate approximately 350 adults across a broad patient population. The study will be conducted at approximately 90 clinical
trial sites across North America, Europe and Asia-Pacific.
Several experimental ALS therapies such
as Masitinib (AB Science), NP-001 (Neuraltus), and Actemra (Tocilizimab, Genentech) are selectively targeting neuroinflammation.
AB Science completed a Phase 3 trial for masitinib in ALS. However, a regulatory filing for masitinib in another indication, indolent
systemic mastocytosis, was rejected by the EU's Committee for Medicinal Products for Human Use (CHMP) because of concerns about
its adherence to good clinical practices. Neuraltus Pharma is developing NP001, is a small molecule that modulates macrophages
to promote an anti-inflammatory state in order to reduce the rate of motoneuron loss. NP001 is currently being tested in a Phase
2 trial that was launched in September 2016, and topline results are expected in 2018. A previous Phase 2 study failed to show
statistically significant benefit. Cytokinetics is a late stage biopharmaceutical company that recently completed a Phase 3 clinical
trial with tirasemtiv, a muscle troponin sensitizer. This study failed to demonstrate an improvement in slow vital capacity, a
measure of breathing strength or other functional improvement, and as a consequence, Cytokinetics has suspended the development
of tirasemtiv. Amylyx Pharmaceuticals is developing AMX0035, a combination of two compounds, sodium phenylbutyrate and
tauroursodeoxycholic acid, that are proposed to have a synergistic effect when administered together. Amylyx recently initiated
a Phase 2 trial in ALS patients and topline results are expected in 2019. Therapies specifically targeting genetic mutations in
a small subset of ALS patents, such as SOD1 and C9ORF72, are being evaluated using antisense oligonucleotide technology (Biogen,
IONIS, and WAVE Therapeutics). In addition, academic institutions are also developing treatment candidates for ALS, including mesenchymal
stem cells genetically modified to increase GDNF expression.
Currently, there are two approved ALS therapies,
Riluzole and Radicava, that have demonstrated mild improvements in survival and ALS function, respectively. Riluzole, approved
by the FDA in 1995, extends the time to death or ventilation by several months; however, it has not been shown to improve the daily
functioning of ALS patients. Radicava (Edaravone) is a free radical scavenger recently approved by FDA (May 2017) based on a single
Phase 3 study carried out in Japan
Employees
We currently have 32 employees, all of
whom are full-time. None of our employees is represented by a labor union.
Additional Information
We maintain a website at www.brainstorm-cell.com.
We make available through our website, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file those
reports with, or furnish them to, the SEC. We also similarly make available, free of charge through our website, the reports filed
with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act. We are not
including the information contained at www.brainstorm-cell.com or at any other Internet address as part of, or incorporating
it by reference into, this Annual Report on Form 10-K.
Risks Related to our Financial Condition
and Capital Requirements
We need to raise additional capital.
If we are unable to raise additional capital in favorable terms and a timely manner, we will not be able to execute our business
plan and we could be forced to restrict or cease our operations.
We will need to raise additional funds
to meet our anticipated expenses so that we can execute our business plan. We expect to incur substantial and increasing net losses
for the foreseeable future as we increase our spending to execute our development programs.
The amount of financing required will depend
on many factors including our financial requirements to fund our research and clinical trials, and our ability to secure partnerships
and achieve partnership milestones as well as to fund other working capital requirements. Our ability to access the capital markets
or to enlist partners is mainly dependent on the progress of our research and development and regulatory approval of our products.
To date, the Company has not generated
revenues from its activities and has incurred substantial operating losses. Management expects the Company to continue to generate
substantial operating losses and to continue to fund its operations primarily through utilization of its current financial resources
and through additional raises of capital.
Management’s plan includes raising
funds from outside potential investors, including under the ATM Program. However, there is no assurance such funding will be available
to the Company or that it will be obtained on terms favorable to the Company or will provide the Company with sufficient funds
to meet its objectives. Should we raise additional funds through the issuance of equity, equity-related or debt securities, these
securities may have rights, preferences or privileges (including registrations rights) senior to those of the rights of our Common
Stock and our stockholders will experience additional dilution.
Our independent registered public
accounting firm has expressed substantial doubt about our ability to continue as a going concern.
As described in Note 1 of our 2019 financial
statements incorporated herein by reference, our auditors in their audit opinion have expressed concern with respect to our ability
to continue as a going concern. Our financial statements do not include any adjustments that may result from the outcome
of this uncertainty. If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in Brainstorm.
Our Company has a history of losses
and we expect to incur losses for the foreseeable future.
As a development stage company, we are
in the early stages of executing our business plan. We had no operational revenues for the fiscal years ended December 31, 2018
or December 31, 2019. Our ability to operate successfully is materially uncertain and our operations are subject to significant
risks inherent in a developing business enterprise. We are currently in the process of introducing the Company to strategic partners.
In the upcoming three years, the Company will focus on clinical trials. We are unable, at this time, to foresee when we will generate
operational revenues from strategic partnerships or otherwise. Furthermore, we expect to incur substantial and increasing operating
losses for the next several years as we increase our spending to execute our development programs. These losses are expected to
have an adverse impact on our working capital, total assets and stockholders’ equity, and we may never achieve profitability.
We are exposed to fluctuations in
currency exchange rates.
A significant portion of our business,
particularly our research and development, is conducted outside the United States. Therefore, we are exposed to currency exchange
fluctuations in other currencies such as the New Israeli Shekels (“NIS”) and the Euro. Moreover, a portion of our expenses
in Israel and Europe are paid in NIS and Euros, respectively, which subjects us to the risks of foreign currency fluctuations.
Our primary expenses paid in NIS are employee salaries, fees for consultants and subcontractors and lease payments on our Israeli
facilities.
The dollar cost of our operations
in Israel will increase to the extent increases in the rate of inflation in Israel are not offset by a devaluation of the NIS in
relation to the dollar, which would harm our results of operations.
Since a considerable portion of our expenses
such as employees' salaries are linked to an extent to the rate of inflation in Israel, the dollar cost of our operations is influenced
by the extent to which any increase in the rate of inflation in Israel is or is not offset by the devaluation of the NIS in relation
to the dollar. As a result, we are exposed to the risk that the NIS, after adjustment for inflation in Israel, will appreciate
in relation to the dollar. In that event, the dollar cost of our operations in Israel will increase and our dollar-measured results
of operations will be adversely affected. During the past few years inflation-adjusted NIS appreciated against the dollar, which
raised the dollar cost of our Israeli operations. We cannot predict whether the NIS will appreciate against the dollar or vice
versa in the future. Any increase in the rate of inflation in Israel, unless the increase is offset on a timely basis by a devaluation
of the NIS in relation to the dollar, will increase labor and other costs, which will increase the dollar cost of our operations
in Israel and harm our results of operations.
Risks Related to our Cell Therapy Product
Development Efforts
If our NurOwn® stem cell therapy
does not demonstrate safety and efficacy sufficient to obtain regulatory approval, it may not receive regulatory approval and we
will be unable to market it.
The therapeutic treatment development and
regulatory approval process is expensive, uncertain and time-consuming. The timing of any future regulatory approval, if any, for
our NurOwn® stem cell therapy cannot be accurately predicted. We do not expect to receive regulatory approval for any of our
stem cell therapies until the end of 2020 if ever. If we fail to obtain regulatory approval for our NurOwn® stem cell therapy,
we will be unable to market and sell it and we may never be profitable.
As part of the regulatory process, we are
conducting Phase 3 clinical trials, for our NurOwn® stem cell therapy to demonstrate safety and efficacy in humans to meet
the requirements of the FDA and regulatory authorities in other countries. If successful, this could be the basis for market authorization
by the FDA and other jurisdictions.
A failure of one or more of our clinical
trials can occur at any stage of testing. Results of later stage clinical trials may fail to show the desired safety and efficacy
despite acceptable results in earlier clinical trials. Moreover, preclinical and clinical data are often susceptible to varying
interpretations and analyses and many companies that have believed their product candidates performed satisfactorily in preclinical
and clinical trials have nonetheless failed to obtain marketing approval of their treatments.
Specifically, we are currently comparing
NurOwn® stem cell therapy against placebo. Comparisons of outcomes of other reported clinical trials may provide some insight
into the efficacy of NurOwn® stem cell therapy, however, these studies may be of limited comparative value due to the many
factors that affect the outcome of clinical trials, some of which are not apparent in published reports.
Our product development programs
are based on novel technologies and are inherently risky.
We are subject to the risks of failure
inherent in the development of products based on new technologies. The novel nature of our stem cell therapy creates significant
challenges with regard to product development and optimization, manufacturing, government regulations, and market acceptance. For
example, the FDA has relatively limited experience with stem cell therapies. None have been approved by them for commercial sale,
and the pathway to regulatory approval for our stem cell therapies may accordingly be more complex and lengthy. As a result, the
development and commercialization pathway for our therapies may be subject to increased uncertainty, as compared to the pathway
for new conventional drugs.
We are faced with uncertainties related
to our research.
Our research programs are based on scientific
hypotheses and experimental approaches that may not lead to desired results. In addition, the timeframe for obtaining proof of
principle and other results may be considerably longer than originally anticipated, or may not be possible given time, resource,
financial, strategic and collaborator scientific constraints. Success in one stage of testing is not necessarily an indication
that the particular program will succeed in later stages of testing and development. It is not possible to predict, based upon
studies in in-vitro models and in animals, whether any of the therapies designed for these programs will prove to be safe, effective,
and suitable for human use. Each therapy will require additional research and development, scale-up, formulation and extensive
clinical testing in humans. Unsatisfactory results obtained from a particular study relating to a program may cause the Company
to abandon its commitment to that program or to the stem cell therapies being tested. The discovery of unexpected toxicities, lack
of sufficient efficacy, unacceptable pharmacology, inability to increase scale of manufacture, market attractiveness, regulatory
hurdles, competition, as well as other factors, may make our targets or stem cell therapies unattractive or unsuitable for human
use, and we may abandon our commitment to that program, target or stem cell therapy. In addition, preliminary results seen in animal
and/or limited human testing may not be substantiated in larger controlled clinical trials.
If serious or unexpected adverse
side effects are identified during the development of our NurOwn® stem cell therapy, we may need to abandon or limit its development.
If patients treated with our NurOwn®
stem cell therapy suffer serious or unexpected adverse effects, we may need to abandon its development or limit development to
certain uses or subpopulations in which these effects are less prevalent, less severe or more acceptable from a risk-benefit perspective.
We have limited experience in conducting
and managing clinical trials and the application process necessary to obtain regulatory approvals.
Our limited experience in conducting and
managing clinical trials and the application process necessary to obtain regulatory approvals might prevent us from successfully
designing or implementing a preclinical study or clinical trial. Many companies in the industry have suffered significant setbacks
in advanced clinical trials, despite promising results in earlier trials. If our clinical trials are unsuccessful, or if we do
not complete our clinical trials, we may not receive regulatory approval for or be able to commercialize our stem cell therapies.
If we do not succeed in conducting and
managing our preclinical development activities or clinical trials, or in obtaining regulatory approvals, we might not be able
to commercialize our stem cell therapies, or might be significantly delayed in doing so, which will materially harm our business.
Our ability to generate revenues from any
of our stem cell therapies will depend on a number of factors, including our ability to successfully complete clinical trials,
obtain necessary regulatory approvals and implement our commercialization strategy. We may, and anticipate that we will need to,
transition from a company with a research and development focus to a company capable of supporting commercial activities and we
may not succeed in such a transition.
We may not be able to secure and
maintain research institutions to conduct our clinical trials.
We rely on research institutions to conduct
our clinical trials. Our reliance upon research institutions, including hospitals and clinics, provides us with less control over
the timing and cost of clinical trials and the ability to recruit subjects. If we are unable to reach agreements with suitable
research institutions on acceptable terms, or if any resulting agreement is terminated, we may be unable to quickly replace the
research institution with another qualified institution on acceptable terms. Furthermore, we may not be able to secure and maintain
suitable research institutions to conduct our clinical trials.
Risks Related to Our Business Operations
and Commercialization of Stem Cell Therapies
The field of stem cell therapy is
relatively new and our development efforts may not yield an effective treatment of human diseases.
Our intended cell therapeutic treatment
for ALS involve a new approach that is yet to be proven in a Phase 3 powered for efficacy trial. We are currently conducting a
Phase 3 placebo-controlled clinical trial for ALS, which, together with other stem cell therapies, may ultimately prove ineffective.
If we cannot successfully implement our NurOwn® stem cell therapy in human testing, we would need to change our business strategy
and we may be forced to cease our operations.
Our NurOwn® stem cell therapy,
even if approved, may not be accepted in the marketplace; therefore, we may not be able to generate significant revenue, if any.
Even if our NurOwn® stem cell therapy
is approved for sale, physicians and the medical community may not ultimately use it or may use it only in applications more restricted
than we anticipate. Our NurOwn® stem cell therapy, if successfully developed, will compete with a number of traditional products
manufactured and marketed by major pharmaceutical and biotechnology companies. Our NurOwn® stem cell therapy may also compete
with new products currently under development by such companies and others. Physicians will prescribe a treatment only if they
determine, based on experience, clinical data, side effect profiles and other factors, that it is beneficial as compared to other
products currently available and in use. Physicians also will prescribe a product based on their traditional preferences. Many
other factors influence the adoption of new products, including patient perceptions and preferences, marketing and distribution
restrictions, adverse publicity, product pricing, views of thought leaders in the medical community and reimbursement by government
and private payers. Any of these factors could have a material adverse effect on our business, financial condition, and results
of operations.
Adoption of our NurOwn® stem
cell therapy for the treatment of patients with ALS, PMS, or other neurodegenerative diseases, even if approved, may be slow or
limited. If our NurOwn® stem cell therapy does not achieve broad acceptance as a treatment option for ALS, PMS, or other neurodegenerative
diseases, our business would be negatively impact our revenue forecast.
If approved, the rate of adoption of our
NurOwn® stem cell therapy as a treatment for ALS, PMS, or other neurodegenerative diseases, and the ultimate sales volume for
our treatment, will depend on several factors, including educating treating physicians on how to use our NurOwn® stem cell
therapy. Our NurOwn® stem cell therapy utilizes individualized stem cell therapy, which is significantly different from the
pharmacological approach currently used to treat neurodegenerative diseases. Acceptance of our NurOwn® stem cell therapy by
treating physicians may require us to provide them with extensive education regarding the mechanism of action of our treatment,
the method of delivery of the treatment, expected side effects and the method of monitoring patients for efficacy and follow-up.
In addition, the manufacturing and delivery processes associated with our treatment will require treating physicians to adjust
their current treatment of patients, which may delay or prevent market adoption of our NurOwn® stem cell therapy as a preferred
therapy, even if approved.
Our success will depend in part on
establishing and maintaining effective strategic partnerships and collaborations, which may impose restrictions on our business
and subject us to additional regulation.
A key aspect of our business strategy is
to establish strategic relationships in order to expand or complement our research and development or commercialization capabilities,
and to reduce the cost of research and development. There can be no assurance that we will enter into such relationships, that
the arrangements will be on favorable terms or that such relationships will be successful. If we are ultimately successful in executing
our strategy of securing collaborations with companies that would undertake advanced clinical development and commercialization
of our products, we may not have day-to-day control over their activities. Any such collaborator may adhere to criteria for determining
whether to proceed with a clinical development program under circumstances where we might have continued such a program. Potential
collaborators may have significant discretion in determining the efforts and amount of resources that they dedicate to our collaborations
or may be unwilling or unable to fulfill their obligations to us, including their development and commercialization. Potential
collaborators may underfund or not commit sufficient resources to the testing, marketing, distribution or other development of
our products. They may also not properly maintain or defend our intellectual property rights or they may utilize our proprietary
information in such a way as to invite litigation that could jeopardize or potentially invalidate our proprietary information or
expose us to potential liability. Potential collaboration partners may have the right to terminate the collaboration on relatively
short notice and if they do so or if they fail to perform or satisfy their obligations to us, the development or commercialization
of products would be delayed and our ability to realize any potential milestone payments and royalty revenue would be adversely
affected.
We will need to develop or acquire
additional capabilities in order to commercialize our NurOwn® stem cell therapy, if approved for sale, and we may encounter
unexpected costs or difficulties in doing so.
We will need to acquire additional capabilities
and effectively manage our operations and facilities to successfully pursue and complete future research, development and, if our
NurOwn® stem cell therapy receives regulatory approval, commercialization efforts. Currently, we have no experience in preparing
applications for marketing approval, commercial-scale manufacturing, managing of large-scale information technology systems or
managing a large-scale distribution system. We will need to add personnel and expand our capabilities, which may strain our existing
managerial, operational, regulatory compliance, financial and other resources. To do this effectively, we must:
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train, manage and motivate a growing employee base;
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accurately forecast demand for our treatment; and
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expand existing operational, financial and management information systems.
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We will need to increase our manufacturing
capacity prior to seeking approval for the sale of our products. If we are not successful in establishing a regulatory compliant
manufacturing process, we may not obtain approval of products or our ability to obtain regulatory approval for sale could be delayed,
which would further delay the period of time when we would be able to generate revenues from the sale of such products, if we are
even able to generate revenues at all.
We expect to expand our development,
regulatory, manufacturing and sales and marketing capabilities, and as a result, we may encounter difficulties in managing our
growth, which could disrupt our operations.
We expect to experience significant growth
in the number of our employees and the scope of our operations, particularly in the areas of product development, regulatory affairs,
manufacturing and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial,
operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due
to our limited financial resources and the limited experience of our management team in managing a company with such anticipated
growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel.
The physical expansion of our operations may lead to significant costs and may divert our management and business development resources.
Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
We have never manufactured our NurOwn®
stem cell therapy at commercial scale and there can be no assurance that it can be manufactured in compliance with regulations
at a cost or in quantities necessary to make it commercially viable.
We have no experience in commercial-scale
manufacturing, the management of large-scale information technology systems or the management of a large-scale distribution system.
We may develop our manufacturing capacity in part by expanding our current facilities and/or by setting up additional facilities
in other regions of the country. These activities would require substantial additional funds and we would need to hire and train
significant numbers of qualified employees to staff these facilities. We may not be able to develop commercial-scale facilities
that are sufficient to produce the stem cell therapies or their components for later-stage clinical trials or commercial use.
Furthermore, we must supply all necessary
documentation, including product characterization and process validation, to regulatory authorities in support of our BLA on a
timely basis and must adhere to cGMP regulations and current Good Tissue Practices (“GTP”) enforced by the regulatory
authority through its facilities inspection program. We have not fully characterized our NurOwn® stem cell therapy and have
not validated our manufacturing process. If the FDA determines that the products used in our clinical trials are not sufficiently
characterized, we may be required to repeat all or a portion of our clinical trials. If our facilities cannot pass a pre-approval
plant inspection, the regulatory approval of the stem cell therapies will not be granted.
Lack of coordination internally among
our employees and externally with physicians, hospitals and third-party suppliers and carriers, could cause manufacturing difficulties,
disruptions or delays and cause us to not meet our expected clinical trial requirements or potential commercial requirements.
Manufacturing our NurOwn® stem cell
therapy requires coordination internally among our employees and externally with physicians, hospitals and third-party suppliers
and carriers. For example, a patient’s physician or clinical site will need to coordinate with us for the shipping of a patient’s
bone marrow to our manufacturing facility, and we will need to coordinate with them for the shipping of the treatment components
to them. Such coordination involves a number of risks that may lead to failures or delays in manufacturing our NurOwn® stem
cell therapy, including:
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failure to obtain a sufficient supply of key raw materials of suitable quality;
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difficulties in manufacturing our stem cell therapies for multiple patients simultaneously;
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difficulties in obtaining adequate patient-specific material, such as bone marrow samples, from physicians;
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difficulties in completing the development and validation of the harvested cells required to ensure the consistency of our NurOwn® stem cell therapy;
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failure to ensure adequate quality control and assurances in the manufacturing process as we increase production quantities;
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difficulties in the timely shipping of patient-specific materials to us or in the shipping of the stem cell therapies to the treating physicians due to errors by third-party carriers, transportation restrictions or other reasons;
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loss or destruction of, or damage to, patient-specific materials or our NurOwn® stem cell therapy during the shipping process due to improper handling by third-party carriers, hospitals, physicians or us;
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loss or destruction of, or damage to, patient-specific materials or our NurOwn® stem cell therapy during storage at our facilities; and
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loss or destruction of, or damage to, patient-specific materials or our NurOwn® stem cell therapy stored at clinical and future commercial sites due to improper handling or holding by clinicians, hospitals or physicians.
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If we are unable to coordinate appropriately,
we may encounter delays or additional costs in achieving our clinical and commercialization objectives, including in obtaining
regulatory approvals of our stem cell therapies and supplying products, which could materially damage our business and financial
position.
We face competition in our efforts
to develop cell therapies for ALS and other neurodegenerative diseases.
We face competition in our efforts to develop
cell therapies and other treatment or procedures to cure or slow the effects of ALS and other neurodegenerative diseases. Among
our competitors are companies that are involved in the fetal-derived cell transplants or embryonic stem cell derived cell therapy
and companies developing adult stem cells. Other companies are developing traditional chemical compounds, new biological drugs,
cloned human proteins and other treatments, which are likely to impact the markets that we intend to target. Some of our competitors
possess longer operating histories and greater financial, managerial, scientific and technical resources than we do and some possess
greater name recognition and established customer bases. Some also have significantly more experience in preclinical testing, human
clinical trials, product manufacturing, the regulatory approval process and marketing and distribution than we do.
The trend towards consolidation in
the pharmaceutical and biotechnology industries may adversely affect us.
There is a trend towards consolidation
in the pharmaceutical and biotechnology industries. This consolidation trend may result in the remaining companies having greater
financial resources and discovery technological capabilities, thus intensifying competition in these industries. This trend may
also result in fewer potential collaborators or licensees for our stem cell therapies. Also, if a consolidating company is already
doing business with our competitors, we may lose existing licensees or collaborators as a result of such consolidation.
There is a scarcity of experienced
professionals in the field of cell therapy and we may not be able to retain key personnel or hire new key personnel needed to implement
our business strategy and develop our products and businesses. If we are unable to retain or hire key personnel, we may be unable
to continue to grow our business or to implement our business strategy, and our business may be materially and adversely affected.
Given the specialized nature of cell therapy
and the fact that it is a young field, there is an inherent scarcity of experienced personnel in the field. Our success depends
on a significant extent to the continued services of certain highly qualified scientific and management personnel. We face competition
for qualified personnel from numerous industry sources, and there can be no assurance that we will be able to attract and retain
qualified personnel on acceptable terms. The loss of service of any of our key personnel could have a material adverse effect on
our operations or financial condition. In the event of the loss of services of such personnel, no assurance can be given that we
will be able to obtain the services of adequate replacement personnel. We do not have key person life insurance on our key personnel.
The future success of the Company also depends upon our ability to attract and retain additional qualified personnel (including
medical, scientific, technical, commercial, business and administrative personnel) necessary to support our anticipated growth,
develop our business, and maintain appropriate licensure, on acceptable terms. There can be no assurance that we will be successful
in attracting or retaining personnel required by us to continue and grow our operations. The loss of a key employee, the failure
of a key employee to perform in his or her current position or our inability to attract and retain skilled employees, as needed,
could result in our inability to continue to grow our business or to implement our business strategy, or may have a material adverse
effect on our business, financial condition and results of operations.
Technological and medical developments
or improvements in conventional therapies could render the use of stem cells and our services and planned products obsolete.
The pharmaceutical industry is characterized
by rapidly changing markets, technology, emerging industry standards and frequent introduction of new products. The introduction
of new products embodying new technologies, including new manufacturing processes, and the emergence of new industry standards
may render our technologies obsolete, less competitive or less marketable. Advances in other treatment methods or in disease prevention
techniques could significantly reduce or entirely eliminate the need for our stem cell services, planned products and therapeutic
efforts. Additionally, technological or medical developments may materially alter the commercial viability of our technology or
services, and require us to incur significant costs to replace or modify equipment in which we have a substantial investment. In
either event, we may experience a material adverse effect on our business, results of operations and financial condition.
We may expend our limited resources
to pursue our NurOwn® stem cell therapy or a specific indication for its use and fail to capitalize on stem cell therapies
or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial
resources, we have focused development of our NurOwn® stem cell therapy for use in patients with ALS. As a result, we may forego
or delay pursuit of opportunities with other stem cell therapies or for other indications that later prove to have greater commercial
potential. Our spending on current and future research and development efforts on our NurOwn® stem cell therapy for this indication
may not yield a commercially viable treatment. Our resource allocation decisions also may cause us to fail to capitalize on a viable
commercial treatment, a more viable indication or profitable market opportunities.
We have based our research and development
efforts on our NurOwn® stem cell therapy. Notwithstanding our large investment to date and anticipated future expenditures
in our NurOwn® stem cell therapy, we have not yet developed, and may never successfully develop, any marketed treatments using
this approach. As a result of pursuing the development of our NurOwn® stem cell therapy, we may fail to develop stem cell therapies
or address indications based on other scientific approaches that may offer greater commercial potential or for which there is a
greater likelihood of success.
Our NurOwn® stem cell therapy
is based on a novel technology, which may raise development issues that we may not be able to resolve, regulatory issues that could
delay or prevent approval or personnel issues that may keep us from being able to develop our treatments.
Regulatory approval of stem cell therapies
that utilize novel technology such as ours can be more expensive and take longer than for other treatments that are based on more
well-known or more extensively studied technology, due to our and the regulatory agencies’ lack of experience with them.
This may lengthen the regulatory review process, require us to perform additional studies, including clinical trials, increase
our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization
of these stem cell therapies or lead to significant post-approval limitations or restrictions. For example, the differentiated
cell component of our NurOwn® stem cell therapy is a complex biologic product that is manufactured from the patient’s
own bone marrow that must be appropriately harvested, isolated, expanded and differentiated so that its identity, strength, quality,
purity and potency may be characterized prior to release for treatment. No differentiated cell treatment for ALS has yet been approved
for marketing by the FDA or any other regulatory agency. The tests that we use to make identity, strength, quality, purity and
potency determinations on our NurOwn® stem cell therapy may not be sufficient to satisfy the FDA’s expectations regarding
the criteria required for release of products for patient treatment and the regulatory agency may require us to employ additional
testing measures for this purpose, which could require us to undertake additional testing and/or additional clinical trials.
The novel nature of our NurOwn® stem
cell therapy also means that fewer people are trained in or experienced with treatments of this type, which may make it difficult
to recruit, hire and retain capable personnel for the research, development and manufacturing positions that will be required to
continue our development and commercialization efforts.
A significant global market for our
services has yet to emerge.
Very few companies have been successful
in their efforts to develop and commercialize a stem cell product. Some stem cell products in general may be susceptible to various
risks, including undesirable and unintended side effects, unintended immune system responses, inadequate therapeutic efficacy,
or other characteristics that may prevent or limit their approval or commercial use. The demand for stem cell processing and the
number of people who may use cell or tissue-based therapies is difficult to forecast. Physicians, patients, formularies, third
party payers or the medical community in general may not accept or utilize any products that the Company or its collaborative partners
may develop. Our success is dependent on the establishment of a large global market for our products and services and our ability
to capture a share of this market.
It is uncertain to what extent the
government, private health insurers and third-party payers will approve coverage or provide reimbursement for the therapies and
products to which our services relate. Availability for such reimbursement may be further limited by an increasing uninsured population
and reductions in Medicare and Medicaid funding in the United States.
Our ability to successfully commercialize
our human therapeutic products will depend significantly on our ability to obtain acceptable prices and the availability of reimbursement
to the patient from third-party payers, such as government and private insurance plans. While we have not commenced discussions
with any such parties, these third-party payers frequently require companies to provide predetermined discounts from list prices,
and they are increasingly challenging the prices charged for pharmaceuticals and other medical products. Our human therapeutic
products may not be considered cost-effective, and reimbursement to the patient may not be available or sufficient to allow us
to sell our products on a competitive basis. Further, as cost containment pressures are increasing in the health care industry,
government and private payers adopt strategies designed to limit the amount of reimbursement paid to health care providers. Such
cost containment measures may include:
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Reducing reimbursement rates;
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Challenging the prices charged for medical products and services;
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Limiting services covered;
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Decreasing utilization of services;
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Negotiating prospective or discounted contract pricing;
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Adopting capitation strategies; and
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Seeking competitive bids.
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Similarly, the trend toward managed health
care and bundled pricing for health care services in the United States could significantly influence the purchase of healthcare
services and products, resulting in lower prices and reduced demand for our therapies.
We may not be able to negotiate favorable
reimbursement rates for our human therapeutic products. If we fail to obtain acceptable prices or an adequate level of reimbursement
for our products, the sales of our products would be adversely affected or there may be no commercially viable market for our products.
Unintended consequences of recently
adopted health reform legislation in the U.S. may adversely affect our business.
The healthcare industry is undergoing fundamental
changes resulting from political, economic and regulatory influences. In the U.S., comprehensive programs are under consideration
that seek to, among other things, increase access to healthcare for the uninsured and control the escalation of healthcare expenditures
within the economy. On March 23, 2010, health reform legislation was approved by Congress and has been signed into law. While we
do not believe this legislation will have a direct impact on our business, the legislation has only recently been enacted and requires
the adoption of implementing regulations, which may have unintended consequences or indirectly impact our business. For instance,
the scope and implications of the recent amendments pursuant to the Fraud Enforcement and Recovery Act of 2009 have yet to be fully
determined or adjudicated and as a result it is difficult to predict how future enforcement initiatives may impact our business.
Also, in some instances our clients may be health insurers that will be subject to limitations on their administrative expenses
and new federal review of “unreasonable” rate increases which could impact the prices they pay for our services. If
the legislation causes such unintended consequences or indirect impact, it could have a material adverse effect on our business,
financial condition and results of operations.
Ethical and other concerns surrounding
the use of stem cell therapy may negatively impact the public perception of our stem cell services, thereby suppressing demand
for our services.
Although our stem cell business pertains
to adult stem cells only, and does not involve the more controversial use of embryonic stem cells, the use of adult human stem
cells for therapy could give rise to similar ethical, legal and social issues as those associated with embryonic stem cells, which
could adversely affect its acceptance by consumers and medical practitioners. Additionally, it is possible that our business could
be negatively impacted by any stigma associated with the use of embryonic stem cells if the public fails to appreciate the distinction
between adult and embryonic stem cells. Delays in achieving public acceptance may materially and adversely affect the results of
our operations and profitability.
We may be subject to significant
product liability claims and litigation which could adversely affect our future earnings and financial condition.
Our business exposes us to potential product
liability risks inherent in the testing, processing and marketing of stem cell therapy products. Specifically, the conduct of clinical
trials in humans involves the potential risk that the use of our stem cell therapy products will result in adverse effects. Such
liability claims may be expensive to defend and result in large judgments against us. We currently maintain liability insurance
for our clinical trials; however, such liability insurance may not be adequate to fully cover any liabilities that arise from clinical
trials of our stem cell therapy products. We also maintain errors and omissions, directors and officers, workers’ compensation
and other insurance appropriate to our business activities. If we were to be subject to a claim in excess of this coverage or to
a claim not covered by our insurance and the claim succeeded, we would be required to pay the claim from our own limited resources,
which could have a material adverse effect on our financial condition, results of operations and business. Additionally, liability
or alleged liability could harm our business by diverting the attention and resources of our management and damaging our reputation
and that of our subsidiaries.
Political, economic and military
instability in Israel may impede our ability to execute our plan of operations.
Our principal operations and the research
and development facilities of the scientific team funded by us under the Second Ramot Agreement are located in Israel. Accordingly,
political, economic and military conditions in Israel may affect our business. Since the establishment of the State of Israel in
1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. Acts of random terrorism periodically occur
which could affect our operations or personnel. Ongoing or revived hostilities or other factors related to Israel could harm our
operations and research and development process and could impede our ability to execute our plan of operations.
In addition, Israeli-based companies and
companies doing business with Israel have been the subject of an economic boycott by members of the Arab League and certain other
predominantly Muslim countries since Israel's establishment. Although Israel has entered into various agreements with certain Arab
countries and the Palestinian Authority, and various declarations have been signed in connection with efforts to resolve some of
the economic and political problems in the Middle East, we cannot predict whether or in what manner these problems will be resolved.
Wars and acts of terrorism have resulted in damage to the Israeli economy, including reducing the level of foreign and local investment.
Furthermore, certain of our officers and
employees may be obligated to perform annual reserve duty in the Israel Defense Forces and are subject to being called up for active
military duty at any time. Israeli citizens who have served in the army may be subject to an obligation to perform reserve duty
until they are between 40 and 49 years old, depending upon the nature of their military service.
Man-Made Problems Such as Computer
Viruses or Terrorism May Disrupt Our Operations and Harm Our Operating Results
Despite our implementation of network security
measures our servers are vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering with our
computer systems. Any such event could have a material adverse effect on our business, operating results, and financial condition.
Efforts to limit the ability of malicious third parties to disrupt the operations of the internet or undermine our own security
efforts may meet with resistance. In addition, the continued threat of terrorism and heightened security and military action in
response to this threat, or any future acts of terrorism, may cause further disruptions to the economies of the United States,
Israel and other countries and create further uncertainties or otherwise materially harm our business, operating results, and financial
condition. Likewise, events such as widespread blackouts could have similar negative impacts. To the extent that such disruptions
or uncertainties result in delays or access to data or personal information, our business, operating results, and financial condition
could be materially and adversely affected.
Risks Related to Government Regulation
We are subject to a strict regulatory
environment. If we fail to obtain and maintain required regulatory approvals for our potential cell therapy products, our ability
to commercialize our potential cell therapy products will be severely limited.
None of our stem cell therapies have received
regulatory approval for commercial sale yet. We do not expect to receive regulatory approval for any of our stem cell therapies
until at least the end of 2020, if ever.
Numerous statutes and regulations govern
human testing and the manufacture and sale of human therapeutic products in the United States and other countries where we intend
to market our products. Such legislation and regulation bears upon, among other things, the approval of protocols and human testing,
the approval of manufacturing facilities, testing procedures and controlled research, review and approval of manufacturing, preclinical
and clinical data prior to marketing approval including adherence to GMP during production and storage as well as regulation of
marketing activities including advertising and labeling.
The completion of the clinical testing
of our stem cell therapies and the obtaining of required approvals are expected to take several years and require the expenditure
of substantial resources. We may experience numerous unforeseen events during, or as a result of, the clinical trial process that
could delay or prevent regulatory approval and/or commercialization of our stem cell therapies, including the following:
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The FDA or similar foreign regulatory authorities may find that our stem cell therapies are not sufficiently safe or effective or may find our processes or facilities unsatisfactory;
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Officials at the Israeli MoH, the FDA or similar foreign regulatory authorities may interpret data from preclinical studies and clinical trials differently than we do;
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Our clinical trials may produce negative or inconclusive results or may not meet the level of statistical significance required by the Israeli MoH, the FDA or other regulatory authorities, and we may decide, or regulators may require us, to conduct additional preclinical studies and/or clinical trials or to abandon one or more of our development programs;
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The Israeli MoH, the FDA or similar foreign regulatory authorities may change their approval policies or adopt new regulations;
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There may be delays or failure in obtaining approval of our clinical trial protocols from the Israeli MoH, the FDA or other regulatory authorities or obtaining institutional review board approvals or government approvals to conduct clinical trials at prospective sites;
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We, or regulators, may suspend or terminate our clinical trials because the participating patients are being exposed to unacceptable health risks or undesirable side effects;
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We may experience difficulties in managing multiple clinical sites;
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Enrollment in our clinical trials for our stem cell therapies may occur more slowly than we anticipate, or we may experience high drop-out rates of subjects in our clinical trials, resulting in significant delays; and
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We may be unable to manufacture or obtain from third party manufacturers sufficient quantities of our stem cell therapies for use in clinical trials.
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Investors should be aware of the risks,
problems, delays, expenses and difficulties which may be encountered by us in light of the extensive regulatory environment in
which our business operates. In particular, our development costs will increase if we have material delays in our clinical trials,
or if we are required to modify, suspend, terminate or repeat a clinical trial. If we are unable to conduct our clinical trials
properly and on schedule, marketing approval may be delayed or denied by the Israeli MoH or the FDA.
Even if a stem cell therapy is approved
by the Israeli MoH, the FDA or any other regulatory authority, we may not obtain approval for an indication whose market is large
enough to recoup our investment in that stem cell therapy. We may never obtain the required regulatory approvals for any of our
stem cell therapies. Later discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions
on the product or manufacturer, including a withdrawal of the product from the market.
Even if regulatory approvals are
obtained for our stem cell therapies, we will be subject to ongoing government regulation. If we or one or more of our partners
or collaborators fail to comply with applicable current and future laws and government regulations, our business and financial
results could be adversely affected.
The healthcare industry is one of the most
highly regulated industries in the United States. The federal government, individual state and local governments and private accreditation
organizations all oversee and monitor the activities of individuals and businesses engaged in the delivery of health care products
and services. Even if regulatory authorities approve any of our human stem cell therapies, current laws, rules and regulations
that could directly or indirectly affect our ability and the ability of our strategic partners and customers to operate each of
their businesses could include, without limitation, the following:
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State and local licensing, registration and regulation of laboratories, the collection, processing and storage of human cells and tissue, and the development and manufacture of pharmaceuticals and biologics;
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The federal Clinical Laboratory Improvement Act and amendments of 1988;
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Laws and regulations administered by the FDA, including the Federal Food Drug and Cosmetic Act and related laws and regulations;
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The Public Health Service Act and related laws and regulations;
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Laws and regulations administered by the United States Department of Health and Human Services, including the Office for Human Research Protections;
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State laws and regulations governing human subject research;
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Occupational Safety and Health requirements; and
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State and local laws and regulations dealing with the handling and disposal of medical waste.
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Compliance with such regulation may be
expensive and consume substantial financial and management resources. If we, or any future marketing collaborators or contract
manufacturers, fail to comply with applicable regulatory requirements, we may be subject to sanctions including fines, product
recalls or seizures, injunctions, total or partial suspension of production, civil penalties, withdrawal of regulatory approvals
and criminal prosecution. Any of these sanctions could delay or prevent the promotion, marketing or sale of our products.
We are subject to environmental,
health and safety laws.
We are subject to various laws and regulations
relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and humans, emissions
and wastewater discharges, and the use and disposal of hazardous or potentially hazardous substances used in connection with our
research. We also cannot accurately predict the extent of regulations that might result from any future legislative or administrative
action. Any of these laws or regulations could cause us to incur additional expense or restrict our operations.
Compliance with environmental laws and
regulations may be expensive, and current or future environmental regulations may impair our research, development or production
efforts.
We are subject to significant regulation
with respect to manufacturing of our NurOwn® stem cell therapy.
All entities involved in the preparation
of a therapeutic biological for clinical trials or commercial sale are subject to extensive regulation. Our NurOwn® stem cell
therapy must be manufactured in accordance with cGMP and GTP before it can be used in our clinical trials or approved for commercial
sale. These regulations govern manufacturing processes and procedures and the implementation and operation of quality systems to
control and assure the quality of investigational stem cell therapies and treatments, including treatment component characterization
and process validation, approved for sale. Our facilities and quality systems and the facilities and quality systems of some or
all of our third party suppliers must pass a pre-approval inspection for compliance with the applicable regulations as a condition
of regulatory approval of our NurOwn® stem cell therapy. If any inspection or audit of our manufacturing facilities identifies
a failure to comply with applicable regulations, or if a violation of applicable regulations occurs independent of an inspection
or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time consuming for us
or a third party to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales
or the temporary or permanent closure of a facility. Any such remedial measures imposed on us or third parties with whom we contract
could materially harm our business.
Our long-term business plan is to develop
our NurOwn® stem cell therapy for the treatment of neurodegenerative diseases, such as ALS, MS and PD. Even if we successfully
develop our NurOwn® stem cell therapy for use in one indication, we may not be successful in our efforts to identify or discover
additional indications for it. Clinical programs to develop new indications for our NurOwn® stem cell therapy will require
substantial technical, financial and human resources. These development programs may initially show promise in identifying potential
treatment indications, yet fail to obtain regulatory approval for commercial sale.
If we do not accurately evaluate the commercial
potential or target market for our NurOwn® stem cell therapy, we may relinquish valuable rights to that treatment through collaboration,
licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development
and commercialization rights.
Risks Related to Our Intellectual Property
Part of our business in the foreseeable
future will be based on technology licensed from Ramot and if this license were to be terminated upon failure to make required
royalty payments in the future, we would need to change our business strategy and we may be forced to cease our operations.
Agreements we and our Israeli Subsidiary
have with Ramot impose on us royalty payment obligations. If we fail to comply with these obligations, Ramot may have the right
to terminate the license under certain circumstances. If Ramot elects to terminate our license, we would need to change our business
strategy and we may be forced to cease our operations. We currently do not owe Ramot any overdue payments. Royalties are due upon
commencement of revenues by the Company.
If Ramot is unable to obtain patents
on the patent applications and technology licensed to our Israeli Subsidiary or if patents are obtained but do not provide meaningful
protection, we may not be able to successfully market our proposed products.
We rely upon the patent applications filed
by Ramot, the technology licensing company of Tel Aviv University, and the license granted to us by Ramot, all in accordance with
the Second Ramot Agreement dated as of July 26, 2007. We further agreed under the Second Ramot Agreement that Ramot, in consultation
with us, is responsible for obtaining patent protection for technology owned by Ramot and licensed to us. No assurance can be given
that any of our pending or future patent applications will be approved, that the scope of any patent protection granted will exclude
competitors or provide us with competitive advantages, that any of the patents that may be issued to us will be held valid if subsequently
challenged, or that other parties will not claim rights to or ownership of our patents or other proprietary rights that we hold
license to. Furthermore, there can be no assurance that others have not developed or will not develop similar products, duplicate
any of our technology or products or design around any patents that have been or may be issued to us or any future licensors. Since
patent applications in the United States and in Europe are not disclosed until applications are published, there can be no assurance
that others did not first file applications for products covered by our pending patent applications, nor can we be certain that
we will not infringe any patents that may be issued to others. Also, we have abandoned our rights to certain patents of Ramot in
certain countries in connection with the Letter Agreement by and between us and Ramot dated December 24, 2009, which may limit
our ability to fully market our proposed products.
We also rely upon unpatented proprietary
technology, know-how and trade secrets and seek to protect them through confidentiality agreements with employees, consultants
and advisors. If these confidentiality agreements are breached, we may not have adequate remedies for the breach. In addition,
others may independently develop or otherwise acquire substantially the same proprietary technology as our technology and trade
secrets.
We may be unable to protect our intellectual
property from infringement by third parties.
Despite our efforts to protect our intellectual
property, third parties may infringe or misappropriate our intellectual property. Our competitors may also independently develop
similar technology, duplicate our processes or services or design around our intellectual property rights. We may have to litigate
to enforce and protect our intellectual property rights to determine their scope, validity or enforceability. Intellectual property
litigation is costly, time-consuming, diverts the attention of management and technical personnel and could result in substantial
uncertainty regarding our future viability. The loss of intellectual property protection or the inability to secure or enforce
intellectual property protection would limit our ability to develop or market our services in the future. This would also likely
have an adverse effect on the revenues generated by any sale or license of such intellectual property. Furthermore, any public
announcements related to such litigation or regulatory proceedings could adversely affect the price of our Common Stock.
Third parties may claim that we infringe
on their intellectual property.
We may be subject to costly litigation
in the event our technology is claimed to infringe upon the proprietary rights of others. Third parties may have, or may eventually
be issued, patents that would be infringed by our technology. Any of these third parties could make a claim of infringement against
us with respect to our technology. We may also be subject to claims by third parties for breach of copyright, trademark or license
usage rights. Litigation and patent interference proceedings could result in substantial expense to us and significant diversion
of efforts by our technical and management personnel. An adverse determination in any such proceeding or in patent litigation could
subject us to significant liabilities to third parties or require us to seek licenses from third parties. Such licenses may not
be available on acceptable terms or at all. Adverse determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent us from commercializing our products, which would have a material adverse effect on our business,
results of operations and financial condition.
As a result of our reliance on consultants,
we may not be able to protect the confidentiality of our technology, which, if disseminated, could negatively impact our plan of
operations.
We currently have relationships with academic
and industry consultants and subcontractors who are not directly employed by us, and we may enter into additional relationships
of such nature in the future. We have limited control over the activities of these consultants and can expect only limited amounts
of their time to be dedicated to our activities. These persons may have consulting, employment or advisory arrangements with other
entities that may conflict with or compete with their obligations to us. Our consultants typically sign agreements that provide
for confidentiality of our proprietary information and results of studies. However, in connection with every relationship, we may
not be able to maintain the confidentiality of our technology, the dissemination of which could hurt our competitive position and
results of operations. To the extent that our scientific consultants develop inventions or processes independently that may be
applicable to our proposed products, disputes may arise as to the ownership of the proprietary rights to such information, we may
expend significant resources in such disputes and we may not win those disputes.
We received grants from the Israel
Innovation Authority, or IIA, we are subject to on-going restrictions.
We have received royalty-bearing grants
from the IIA, for research and development programs that meet specified criteria. The terms of the IIA’s grants may limit
various technology transfer know-how developed under an approved research and development program outside of Israel.
Risks related to our Common Stock
The price of our stock is expected
to be volatile.
The market price of our Common Stock has
fluctuated significantly, and is likely to continue to be highly volatile. To date, the trading volume in our stock has been relatively
low and significant price fluctuations can occur as a result. An active public market for our Common Stock may not continue to
develop or be sustained. If the low trading volumes experienced to date continue, such price fluctuations could occur in the future
and the sale price of our Common Stock could decline significantly. Investors may therefore have difficulty selling their shares.
Your percentage ownership will be
diluted by future issuances of our securities.
In order to meet our financing needs, we
may issue additional significant amounts of our Common Stock and warrants to purchase shares of our Common Stock. The precise terms
of any future financings will be determined by us and potential investors and such future financings may also significantly dilute
your percentage ownership in the Company.
ACCBT holds equity participation
rights and other rights that could affect our ability to raise funds.
Pursuant to the Subscription Agreement
with ACCBT Corp. (“ACCBT”), a company under the control of Mr. Chaim Lebovits, our President and Chief Executive Officer,
we granted ACCBT the right to acquire additional shares of our Common Stock whenever we issue additional shares of Common Stock
or other securities of the Company, or options or rights to purchase shares of the Company or other securities directly or indirectly
convertible into or exercisable for shares of the Company (including shares of any newly created class or series). This participation
right could limit our ability to enter into equity financings and to raise funds from third parties. ACCBT is entitled to purchase
its pro rata share of any additional securities we offer, so that its percentage ownership of the Company remains the same after
any such issuance of additional securities. Such additional securities will be offered to ACCBT at the same price and on the same
terms as the other investors in the transaction. ACCBT will have 30 days from the date of our notice to ACCBT of any intended transaction,
to decide whether it wishes to exercise its participation rights in the transaction. We also are prohibited from taking certain
corporate actions without the consent of ACCBT, including entering into transactions greater than $500,000. Further, ACCBT also
has the right to appoint 30% of our Board. In connection with the Subscription Agreement, we entered into a registration rights
agreement with ACCBT pursuant to which we granted piggyback registration rights to ACCBT. In addition, we issued ACCBT warrants
to purchase up to 2,016,666 shares of Common Stock, of which 2,016,666 warrants are presently outstanding. The outstanding warrants
contain cashless exercise provisions, which permit the cashless exercise of up to 50% of the underlying shares of Common Stock.
672,222 of such warrants have an exercise price of $3.00 and the remainder have an exercise price of $4.35. We registered 1,920,461
shares of Common Stock and 2,016,666 shares of Common Stock underlying the ACCBT Warrants on registration statement No. 333-201705
dated January 26, 2015 pursuant to ACCBT’s registration rights. ACCBT has waived its participation rights and anti-dilution
rights with respect to issuances that were made on or prior to November 2, 2017. In March 2014, we entered into an agreement with
ACCBT according to which ACCBT waived certain anti-dilution rights. On November 2, 2017, the Company entered into a Warrant Amendment
Agreement with ACCBT, pursuant to which the expiration date of each Warrant held by ACCBT was extended until November 5, 2022,
in consideration of ACCBT having provided a series of waivers of their rights and reduction of rights.
You may experience difficulties in
attempting to enforce liabilities based upon U.S. federal securities laws against us and our non-U.S. resident directors and officers.
Our principal operations are located through
our subsidiary in Israel and our principal assets are located outside the U.S. Our Chief Financial Officer and Chief Business Officer
and some of our directors are foreign citizens and do not reside in the U.S. It may be difficult for courts in the U.S. to obtain
jurisdiction over our foreign assets or these persons and as a result, it may be difficult or impossible for you to enforce judgments
rendered against us or our directors or executive officers in U.S. courts. Thus, should any situation arise in the future in which
you have a cause of action against these persons or entities, you are at greater risk in investing in our Company rather than a
domestic company because of greater potential difficulties in bringing lawsuits or, if successful, collecting judgments against
these persons or entities as opposed to domestic persons or entities.
If we fail to implement and maintain
an effective system of internal controls, we may be unable to accurately report our results of operations or prevent fraud, and
investor confidence and the market price of our Common Stock may be materially and adversely affected.
As a public company in the United States,
we are subject to the reporting obligations under the U.S. securities laws. The SEC, as required under Section 404 of the Sarbanes-Oxley
Act of 2002, has adopted rules requiring every public company to include a report of management on the effectiveness of such company’s
internal control over financial reporting in its annual report. In prior years, management has identified material weaknesses in
our internal control over financial reporting. If any of our prior material weaknesses recurs, or if we identify additional weaknesses
or fail to timely and successfully implement new or improved controls, our ability to assure timely and accurate financial reporting
may be adversely affected, and we could suffer a loss of investor confidence in the reliability of our financial statements, which
in turn could negatively impact the trading price of our shares of Common Stock, result in lawsuits being filed against us by our
stockholders, or otherwise harm our reputation. If material weaknesses are identified in the future, it could be costly to remediate
such material weaknesses, which may adversely affect our results of operations. In addition, our auditor is not required to attest
to the effectiveness of our internal controls over financial reporting due to our status of qualifying as a smaller reporting company.
As a result, current and potential investors could lose confidence in our financial reporting, which could harm our business and
have an adverse effect on our share price.
Delaware law could discourage a change
in control, or an acquisition of us by a third party, even if the acquisition would be favorable to you, and thereby adversely
affect existing stockholders.
The Delaware General Corporation Law contain
provisions that may have the effect of making more difficult or delaying attempts by others to obtain control of our Company, even
when these attempts may be in the best interests of stockholders. Delaware law imposes conditions on certain business combination
transactions with “interested stockholders.” These provisions and others that could be adopted in the future could
deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders
might otherwise receive a premium for their shares over then current market prices. These provisions may also limit the ability
of stockholders to approve transactions that they may deem to be in their best interests.
We do not expect to pay dividends
in the foreseeable future, and accordingly you must rely on stock appreciation for any return on your investment.
We have paid no cash dividends on our Common
Stock to date, and we currently intend to retain our future earnings, if any, to fund the continued development and growth of our
business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Further, any payment of cash dividends
will also depend on our financial condition, results of operations, capital requirements and other factors, including contractual
restrictions to which we may be subject, and will be at the discretion of our Board.