Registration No. 333-197255
This prospectus relates to the offer and sale of up to 260,600,707
shares of common stock, par value $0.001, of Advanced Cell Technology, Inc., a Delaware corporation, by Lincoln Park Capital Fund,
LLC, or Lincoln Park or the selling stockholder.
The shares of common stock being offered by the selling stockholder
have been or may be issued pursuant to the purchase agreement dated June 27, 2014 that we entered into with Lincoln Park. See “The
Lincoln Park Transaction” for a description of that agreement and “Selling Stockholder” for additional information
regarding Lincoln Park. The prices at which Lincoln Park may sell the shares will be determined by the prevailing market price
for the shares or in negotiated transactions.
We are not selling any securities under this prospectus and
will not receive any of the proceeds from the sale of shares by the selling stockholder.
The selling stockholder may sell the shares of common stock
described in this prospectus in a number of different ways and at varying prices. See “Plan of Distribution” for more
information about how the selling stockholder may sell the shares of common stock being registered pursuant to this prospectus.
The selling stockholder is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as
amended.
We will pay the expenses incurred in registering the shares,
including legal and accounting fees. See “Plan of Distribution”.
Our common stock is currently quoted on the OTCQB, under the
symbol “ACTC.” On July 21, 2014, the last reported sales price per share of our common stock on the OTCQB was $0.08.
ABOUT THIS PROSPECTUS
You should rely only on the information contained or incorporated
by reference in this prospectus and any prospectus supplement. Neither we nor the selling stockholders have authorized anyone to
provide you with additional or different information. If anyone provides you with different or inconsistent information, you should
not rely on it. The selling stockholders are not making an offer of these securities in any jurisdiction where the offer or sale
is not permitted. You should assume that the information in this prospectus or any prospectus supplement is accurate only as of
the date on the front of that document and that any information we have incorporated by reference is accurate only as of the date
of the document incorporated by reference. Our business, financial condition, results of operations and prospects may have changed
materially since those dates.
In this prospectus, unless otherwise indicated, “our company,”
“we,” “us” or “our” refer to Advanced Cell Technology, Inc., a Delaware corporation, and its
consolidated subsidiaries.
PROSPECTUS SUMMARY
This prospectus summary highlights certain information about
our company and other information contained elsewhere in this prospectus or in documents incorporated by reference. This summary
does not contain all of the information that you should consider before making an investment decision. You should carefully read
the entire prospectus, any prospectus supplement, including the section entitled “Risk Factors” and the documents incorporated
by reference into this prospectus, before making an investment decision.
Our Business
We are a biotechnology company focused on
the development and commercialization of human embryonic stem cell (hESC) and adult stem cell technology. Our
most
advanced products are in clinical trials for the treatment of dry age-related macular degeneration, Stargardt’s macular degeneration
and myopic macular degeneration. We are also developing several pre-clinical cell therapies for the treatment of other ocular disorders
and for diseases outside the field of ophthalmology, including autoimmune, inflammatory and wound healing-related disorders.
We
have unique scientific leadership and research competencies which we believe provide opportunities for discovery and innovation
in regenerative medicine.
We pursue differentiation approaches to
generating transplantable tissues both in-house and through collaborations with other researchers who have particular interests
in, and skills related to, cellular differentiation. Our research in this area includes projects focusing on developing many different
cell types that may be used to treat a range of diseases across several therapeutic categories. Control of differentiation and
the culture and growth of stem and differentiated cells are important current areas of research for us.
Ophthalmology Programs
We are developing a pipeline of stem cell
derived therapeutics which may have use as treatment for degenerative diseases of the eye. In some instances, stem cell derived
therapies may repair and replace damaged tissue in the eye, permitting restoration of otherwise lost vision. As our understanding
of the underlying pathophysiology of ocular disease increases, we believe we will have additional opportunities to develop other
therapeutic products for the ophthalmology market.
Macular Degeneration Programs
The largest indication involving macular
degeneration is “age-related macular degeneration”, or AMD. AMD is the leading cause of blindness and visual impairment
in adults over fifty years of age. It is estimated that the clinically detectable AMD patient population in North America and Europe
includes about 25-30 million people across the range of disease, from early-stage to late-stage, or legal blindness. AMD represents
one of the largest unmet medical needs in medicine today in terms of the lack of useful therapeutics. There is an exponential rise
in prevalence and incidence rates with age, with the prevalence rates of late-stage AMD quadrupling every decade of life after
the age of 40. Based on population aging trends, a recent article in the
Lancet
has projected that globally the number of
people with AMD in 2020 will be about 196 million, increasing to 288 million by 2040.
Retinal pigment epithelium, or RPE, is a
single layer of pigmented cells that form part of the blood/ocular barrier. The presence and integrity of the RPE layer is required
for normal vision. RPE cells are positioned between the photoreceptor cell layer of the retina and the Bruch’s membrane and
choroid, a layer filled with blood vessels. Because the photoreceptors see no direct blood supply, it is the role of the RPE layer
to transport nutrients and oxygen to the photoreceptor cells, as well as to supply, recycle, and detoxify products involved with
the phototransduction process – the process by which the photoreceptors turn light into a signal to be propagated along the
optic nerve to the brain. In particular, the RPE layer serves as the transport layer that maintains the structure of the photoreceptor
environment by acting as an intermediary between the nerve layer and blood vessels, supplying small molecules, transporting ions
and water from the blood vessels to the photoreceptor layer. The RPE takes up nutrients such as glucose, retinol (Vitamin A), and
fatty acids from the blood and delivers these nutrients to photoreceptors. The RPE layer also prevents the buildup of toxic metabolites
around the nerve cells by transporting the metabolites to the blood. In addition, the RPE is able to secrete a variety of growth
factors helping to maintain the structural integrity and organization of the photoreceptors.
As the name implies, age-related macular
degeneration usually affects older adults, with loss of central vision required for reading, driving and other important activities
of daily living due to chronic damage of the central retina. It occurs in “dry” (aka “atrophic” or “geographic”)
and “wet” (aka “neovascular” or “exudative”) forms. In the case of dry AMD, the disease process
appears to begin with loss of RPE cells (cell death) followed by some period of photoreceptor atrophy and inactivity, and after
sufficient time, photoreceptor death. For most dry AMD patients, gradual loss of central vision occurs first. Wet AMD is an end-stage
manifestation seen in approximately 10 percent of dry AMD patients, with the loss of the RPE layer and its ability to maintain
the Bruch’s membrane function as a barrier resulting in failure of the membrane’s integrity and new blood capillaries
penetrating into the photoreceptor space with ensuing rapid loss of vision. In addition to AMD, there are nearly 200 other forms
of macular degenerative diseases which, even if the underlying causes are different, appear to follow a similar course of RPE loss
followed by atrophy, inactivity and ultimately death of the photoreceptor. These include, for example, an inherited juvenile onset
form of macular degeneration called Stargardt’s Macular Degeneration, or SMD.
It had been reported in scientific journal
articles that a portion of the RPE layer can be transplanted from one part of the eye to the macula to allow rescue of photoreceptor
function. In some instances, the investigators demonstrated that photoreceptors appeared present but were not functional, apparently
due to the loss of an adjacent functional RPE layer. However, transplantation of a healthy RPE layer to the macula enabled photoreceptor
function. Although limited in its potential as a therapeutic modality, RPE translocation is an important proof-of-principle regarding
the use of the retinal pigment epithelium as treatment for vision loss secondary to macular degeneration.
Our research has indicated that RPE cells
generated from pluripotent stem cell sources, such as an hESC line, could potentially solve the sourcing of transplantable RPE
cells for treating macular degenerative conditions. It is likely that the area in which the RPE layer exists will maintain its
relative immune-privilege in dry AMD patients, meaning that donor matching is not likely to be a significant limitation so that
a single and scalable allogeneic source of RPE cells, one that can be manufactured in culture, might provide a therapeutic solution
for the millions of patients affected by this disease. We have created a GMP-compliant hESC master stem cell bank and a GMP protocol
for scaled-up manufacturing of human RPE cells from our hESC master bank. Extensive animal testing of the human RPE cells generated
in culture has been conducted and has established that when injected into the eyes of test animals as a suspension of cells, the
human RPE cells were able to home to areas of damage in the RPE layer, with engraftment and recapitulation of the correct anatomical
structure in the back of the eye of the animals. As published in
Stem Cells
, we have also demonstrated that in animal models
of macular degeneration, not only did the human RPE cells reform the correct structure, but also that the injection of the cells
resulted in preservation of the photoreceptor layer and its function. That is, the injected human RPE cells repaired and restored
the function of the RPE layer in animal models of disease.
This data, along with safety data we collected
on the human RPE cells, or (our RPE Program), formed the basis of several Investigative New Drug, or IND, applications filed and
approved by the U.S. Food and Drug Administration, or FDA, and an Investigational Medicinal Product Dossier, or IMPD, approved
by the U.K. Medicines and Healthcare Products Regulatory Agency. In the U.S., one of our ongoing clinical trials is a Phase I/II
study for treating dry AMD patients by injection of RPE cells made in culture from an hESC line. We are also conducting Phase I/II
studies in both the U.S. and the U.K. for the treatment of SMD patients using the RPE cell injections.
We are conducting these three trials in
cooperation with leading retinal surgeons at the top eye hospitals in the U.S. and the U.K. including: Jules Stein Eye Institute
(UCLA), Wills Eye Institute, Bascom Palmer Eye Institute (University of Miami) and Massachusetts Eye and Ear Infirmary. The U.K.
study is being led by investigators at Moorfields Eye Hospital in London. To ensure patient safety, the trials are being overseen
by an independent Data Safety and Monitoring Board, or DSMB also comprised of leading retinal surgeons.
The design of the three ongoing trials is
similar. Each is an ascending dosage trial, with review of each dosing group by the DSMB, and were originally designed to have
enrolled a total of twelve patients in each. The first patients were treated July 2011. Upon reaching the halfway point for all
three trials (the dosing of a total of 18 patients) without any adverse events associated with the injection of the RPE cells,
approval was granted by the FDA to enroll earlier stage patients in the two U.S. studies.
We believe that the results from the SMD
and dry AMD clinical trials, though very preliminary and representing a limited number of patients in an open-label study design,
are promising. Preliminary results for the first dry AMD and first SMD patient were published in early 2012 in the
Lancet
.
There have been no serious adverse events due to the injected RPE cells, which is the primary endpoint of the Phase 1 aspect of
these studies. The trial sites have provided regular follow-up on all of the patients, and have been able to include data relating
to the engraftment and persistence of the injected cells as well as impacts on visual acuity. The preliminary data suggest that
the injected cells are well tolerated and appear generally to be capable of engrafting at the site of injection, forming the appropriate
anatomical monolayer structure around the injected area. Visual acuity improvement was observed to varying degrees in several of
these very late-stage patients, a result that was not anticipated in the original design of these studies.
In February 2013, we announced that our
clinical partner, the Jules Stein Eye Institute at the University of California, Los Angeles had received approval of its Investigator
IND Application to initiate a Phase 1/2 study using our RPE cells to treat myopic macular degeneration, or MMD, a form of macular
degeneration that can occur in association with severe forms of myopia. Myopia, or nearsightedness, is the most common eye disorder
in the world, and is a significant global public health concern. MMD is an important world-health issue lacking safe and effective
treatments. Overall, MMD is reported to be the seventh ranking cause of legal blindness in the United States, the fourth ranking
cause in Hong Kong and the second in parts of China and Japan. In June 2014, we announced that Jules Stein Eye Institute has initiated
the trial.
MMD seems to be associated with stress on
the RPE layer as a consequence to elongation of the eyeball structure in myopic patients. The stress can induce fissures in the
RPE layer, leading to RPE cell death and ultimately macular dystrophy and degeneration. We are in the final stages of completing
all of the necessary paperwork with Jules Stein Eye Institute and UCLA so that we can begin treating patients in this trial.
As we continue to manage our clinical trials
and expand the indications for which our RPE cell therapy is being investigated, we have also begun to take the steps to define
our final product formulation, as well as to lay the early ground work to support appropriate pricing and reimbursement programs.
We believe that our RPE therapy provides pricing justification across all categories of consideration by Medicare, Medicaid, National
Health Service (UK) and private payers. Our SMD program has been granted Orphan Drug status in both the U.S. and Europe, which
could accordingly lead to accelerated regulatory approval, potential FDA grant opportunities, and opportunities for early and favorable
pricing considerations.
Photoreceptor Progenitor Program
Photoreceptors mediate the first step in
vision, capturing light and turning that into nerve signals to the brain. Rod photoreceptors are active in dim light, while cone
photoreceptors are active in bright light and are required for color vision. The photoreceptor atrophy, and subsequent cell death
and permanent loss of photoreceptors is seen in later stages of AMD. Loss of photoreceptors is also a consequence to diseases such
as diabetes, retinitis pigmentosa, and elevated intraocular pressure typically associated with glaucoma, and represents additional
and significant causes of blindness in developed countries. We recognize the potential value of being able to repair the retina
with replacement photoreceptor cells derived from pluripotent stem cell sources such as hESCs. We believe those therapies can provide
the basis for new approaches for treating a wide variety of retinal degenerations in diseases where photoreceptors malfunction
and/or die, either alone or in combination with our RPE therapy.
We have developed a human photoreceptor
progenitor cell. We believe that our photoreceptor progenitor cells are unique with respect to both the markers they express as
well as their plasticity, meaning that they can differentiate into both rods and cones, and therefore provide a viable source of
new photoreceptors for retinal repair. In addition, our photoreceptor progenitors appear to secrete neuroprotective factors, and
have the ability to phagocytose (digest) such materials as the drusen deposits that build up in the eyes of dry AMD patients, and
so may provide additional benefits beyond forming new photoreceptors when injected into the subretinal space in the eyes of patients.
We will continue our preclinical investigation in animal models, establish appropriate correlation between integration of the transplanted
cells and visual function in the animals, and then consider preparation of an IND and/or IMPD application to commence clinical
studies with these cells. As part of our evaluation of this program, we will consider, among other things, the data generated from
pre-clinical studies, our understanding of the potential market opportunity, and our ability to allocate capital resources to adequately
fund the program to the next milestone.
Retinal Ganglion Cell Progenitor Program
In the United States alone, approximately
100,000 people are legally blind from glaucoma. The only proven treatment is drug therapy or surgically lowering the intraocular
pressure, but many patients lose vision despite receiving these treatments. In glaucoma, retinal ganglion cells degenerate before
photoreceptors are lost. We are currently conducting pre-clinical research and development activities regarding differentiation
of stem cells into retinal ganglion cells and demonstration of the ability of those cells to protect against elevated intraocular
pressure in glaucoma models. We have succeeded in generating a unique human ganglion progenitor cell which, when injected in animal
models of glaucoma, appear to protect against damage and to form new ganglion nerve cells. We will continue our preclinical investigation
in animal models, establish appropriate correlation between integration and visual function in the animals, and then consider preparation
of an IND and/or IMPD application to commence clinical studies with these cells. As part of our evaluation of this program, we
will consider, among other things, the data generated from pre-clinical studies, our understanding of the potential market opportunity,
and our ability to allocate capital resources to adequately fund the program to the next milestone.
Corneal Endothelial Program
We have been able to generate sheets of
corneal endothelial cells, with Descemet membrane, from hESCs. These endothelial sheets, which resemble fetal cornea in cell density,
and thickness and durability of the tissue graft, could serve as the transplanted tissue in DSEK. In culture, our corneal endothelial
cells have all the hallmarks, both marker expression and morphology, of native human corneal endothelium. We are testing these
cells in several animal models of corneal diseases. We will continue our pre-clinical investigation in animal models, with the
goal of establishing that the transplanted tissue functions correctly in the animals, and then consider preparation of an IND and/or
IMPD application to commence clinical studies with these cells. As part of our evaluation of this program, we will consider, among
other things, the data generated from pre-clinical studies, our understanding of the potential market opportunity, and our ability
to allocate capital resources to adequately fund the program to the next milestone.
Other Programs
In addition to our ophthalmology programs
we are investing resources into our other programs where we feel that we can leverage our expertise in cellular and developmental
biology to generate allogeneic therapies that have the potential to improve health care in other prevalent degenerative diseases
and diseases of aging. At the core of our pipeline planning are approaches intended to address large unmet medical needs with allogeneic
stem cell-derived therapeutics. The criteria for prioritizing these programs include stem cell capability, competitive landscape
within the therapeutic area and severity/prevalence of the therapeutic area. We also utilize a proof-of-concept, or POC, approach
in our product development process, testing our candidate therapies in relevant animal models of human disease in order to assess
the likelihood of success when it comes time to try those therapies in human patients. Our POC approach allows us to focus only
on the most promising projects by verifying the science behind many ideas early in the development process while terminating those
programs with a low probability of success.
Mesenchymal Stem Cells
Pluripotent stem-cell derived mesenchymal
stem cells, or MSCs is the most active, of our “other programs”. MSCs regulate immune and inflammatory responses, providing
therapeutic potential for treating diseases characterized by the presence of an inflammatory component, which makes them an attractive
tool for the cellular treatment of autoimmunity and inflammation. Their underlying molecular mechanisms of action together with
their clinical benefit — for example, in autoimmunity — are, in our opinion, being revealed by an increasing number
of clinical trials and preclinical studies of MSCs. The immunosuppressive/ immunomodulatory activity of these cells allows MSCs
to be transplanted nearly universally, i.e., as an allogeneic cell therapy, without matching between donors and recipients. MSCs’
universality, along with the ability to manufacture and store these cells long-term, present a unique opportunity to produce an
"off-the-shelf" cellular drug ready for treatment of diseases in both acute and chronic settings.
The current source of MSCs for therapeutic
applications are isolated from cord blood and adult sources such as bone marrow and adipose (fat) tissue. However, once isolated
from the source, the MSCs present in these sources do not propagate well in cell culture. Rather, the cells undergo replicative
senescence, or “aging,” within only a few passages (i.e., after a limited number of population doublings of cells through
cell division). Accordingly, the number of doses of MSCs that can be generated from each donor is limited, and the process using
adult MSC sources is consequently high-touch, and therefore riskier.
We believe we have succeeded at creating
a differentiated MSC product by producing the cells in culture from a pluripotent stem cell source. Our cell culture process permits
us to manufacture large scale quantities of MSC from a renewable stem cell source, potentially eliminating the sourcing issues
attendant with relying on adult sources of these cells. The stem-cell-sourced manufacturing process is scalable for global commercialization
of MSC therapies, and should prove to be less costly (particularly at commercial scale) when compared to the adult-sourced, and
cord blood-sourced, MSC products in development by other companies.
In our preliminary testing of our stem cell-derived
MSCs in animal models of autoimmune disease, we have noted another differentiating feature of our cells, relative to other MSCs.
The MSCs generated using our proprietary manufacturing approach seem to be more potent with respect to suppressing autoimmune responses
in certain diseases models when compared to the equivalent dose of bone marrow MSCs. This potency was dependent on the number of
passages in culture our MSCs had been through, with the earlier passage MSCs retaining the greatest potency. This correlates with
reports in the scientific literature which suggest that adult MSCs lose potency as they are propagated in culture, and reports
indicating that MSC from young adult donors are more potent than MSC from elderly donors. Being derived from embryonic stem cells,
the early-passage MSCs we are testing for potential therapeutic uses seem to represent the earliest and most potent stage of biological
development for MSCs, a stage that cannot be obtained from adult sources.
We have initiated a number of pre-clinical
studies designed to assess the therapeutic value of our MSC’s in a number of disease indications, including: lupus, uveitis,
sepsis, osteoarthritis and multiple sclerosis, among others. Some of our studies are being carried out in small animal models of
disease, such as genetic or induced models. Others are being carried out on larger animals under an approved Investigational New
Animal Drug, or INAD, application in place with the U.S. FDA.
Our goal is to conduct preclinical proof-of-concept
studies in relevant veterinarian patients and laboratory animal models of disease, and based on those results, advance certain
of these MSC discovery programs into IND-enabling pre-clinical studies and perhaps file IND applications, as circumstances dictate.
We will evaluate opportunities for strategic partnering relationships, out-licensing or other commercial transactions with large
pharmaceutical and biotech companies at various stages in these preclinical programs with an eye towards mitigating our overall
cost of these programs.
Principal Executive
Office
Our
executive offices are located at 33 Locke Drive, Marlborough, MA 01752. Our website is located at www.advancedcell.com, and our
telephone number is 508-756-1212. Information found on, or accessible through, our website is not a part of, and is not incorporated
into, this prospectus, and you should not consider it part of this prospectus or part of any prospectus supplement. Our website
address is included in this document as an inactive textual reference only.
RISK FACTORS
An investment in our company involves a
high degree of risk. In addition to the other information included in this prospectus, you should carefully consider the following
risk factors described in this prospectus and the risk factors that may be described in any applicable prospectus supplement and
the documents incorporated by reference in this prospectus. You should also consider the risks, uncertainties and assumptions discussed
under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K, as revised or supplemented
by our most recent Quarterly Report on Form 10-Q, each of which are on file with the SEC and are incorporated herein by reference,
and which may be amended, supplemented or superseded from time to time by other reports we file with the SEC in the future. You
should consider these matters in conjunction with the other information included or incorporated by reference in this prospectus.
The risks and uncertainties described in this prospectus, any applicable prospectus supplement and the documents incorporated by
reference herein are not the only ones facing us. Additional risks and uncertainties that we do not presently know about or that
we currently believe are not material may also adversely affect our business. Our business, results of operations or financial
condition could be seriously harmed, and the trading price of our common stock may decline due to any of these or other risks.
This prospectus contains statements that
constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements
appear in a number of places in this prospectus and include statements regarding the intent, belief or current expectations of
our management, directors or officers primarily with respect to our future operating performance. Prospective purchasers of our
securities are cautioned that these forward-looking statements are not guarantees of future performance and involve risks and uncertainties.
Actual results may differ materially from those in the forward-looking statements due to various factors. The accompanying
information contained in this prospectus, including the information set forth below, identifies important factors that could cause
these differences. See “Special Note Regarding Forward-Looking Statements” on page 35.
Risks
Relating to the Purchase Agreement with Lincoln Park
The
sale or issuance of our common stock to Lincoln Park may cause dilution and the sale of the shares of common stock acquired by
Lincoln Park, or the perception that such sales may occur, could cause the price of our common stock to fall.
On
June 27, 2014, we entered into the Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park has committed to purchase
up to $30,000,000 of our common stock. Concurrently with the execution of the Purchase Agreement on June 27, 2014, we issued 10,600,707
shares of our common stock to Lincoln Park as a fee for its commitment to purchase additional shares of our common stock under
the Purchase Agreement. The additional purchase shares that may be sold pursuant to the Purchase Agreement may be sold by us to
Lincoln Park at our discretion from time to time over a 36-month period commencing after the SEC declared effective the registration
statement that this prospectus forms a part.
The
purchase price for the shares that we may sell to Lincoln Park under the Purchase Agreement will fluctuate based on the price of
our common stock. Depending on market liquidity at the time, sales of such shares may cause the trading price of our common stock
to fall.
We
generally have the right to control the timing and amount of any sales of our shares to Lincoln Park, except that, pursuant to
the terms of our agreements with Lincoln Park, we would be unable to sell shares to Lincoln Park if and when the closing sale price
of our common stock is below $0.03 per share, subject to adjustment as set forth in the Purchase Agreement. Additional sales of
our common stock, if any, to Lincoln Park will depend upon market conditions and other factors to be determined by us. Therefore,
Lincoln Park may ultimately purchase all, some or none of the shares of our common stock that may be sold pursuant to the Purchase
Agreement and, after it has acquired shares, Lincoln Park may sell all, some or none of those shares. Sales to Lincoln Park by
us could result in substantial dilution to the interests of other holders of our common stock. Additionally, the sale of a substantial
number of shares of our common stock to Lincoln Park, or the anticipation of such sales, could make it more difficult for us to
sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
We
may require additional financing to sustain our operations and without it we may not be able to continue operations.
As
of
March 31, 2014
, we have an accumulated deficit of $
322,605,844
and
a stockholders’ deficit of $
20,677,558
. We incurred net losses of $31,022,248,
$34,584,115, and $55,192,803 for the years ended December 31, 2013, 2012, and 2011, respectively, respectively and a net loss of
$
8,689,774
for the
three
months ended
March 31, 2014
. We do not currently have sufficient financial resources to fund our
operations or those of our subsidiaries. Therefore, we need additional funds to continue these operations.
As
of
June 27, 2014
, we may direct Lincoln Park to purchase up to
$
30,000,000
worth of shares of our common stock under the Purchase Agreement
over an approximately
36
-month period generally in amounts up to
3,500,000
shares
of our common stock on any such business day, provided that in no event shall Lincoln Park purchase more than $1,000,000
worth of our common stock on any single business day, plus an additional “accelerated amount” under certain
circumstances. However, Lincoln Park shall not purchase any shares of our common stock on any business day that the closing
sale price of our common stock is less than $0.03 per share, subject to adjustment as set forth in the Purchase Agreement.
Assuming a purchase price of $0.08 per share (the closing sales price of the common stock on July 21, 2014) and the purchase by
Lincoln Park of
250,000,000
shares included in this prospectus under the
Purchase
Agreement
, proceeds to us would only be $17,500,000.
The
extent we rely on Lincoln Park as a source of funding will depend on a number of factors including, the prevailing market price
of our common stock and the extent to which we are able to secure working capital from other sources. If obtaining sufficient funding
from Lincoln Park were to prove unavailable or prohibitively dilutive, we will need to secure another source of funding in order
to satisfy our working capital needs. Even if we sell all $
30,000,000
under the
Purchase
Agreement
to Lincoln Park, we may still need additional capital to fully implement our business,
operating and development plans. Should the financing we require to sustain our working capital needs be unavailable or prohibitively
expensive when we require it, the consequences could be a material adverse effect on our business, operating results, financial
condition and prospects.
Risks Relating to the
Company’s Early Stage of Development and Capital Resources
Our
primary source of liquidity is this financing arrangement with Lincoln Park, and changes in our share price directly affect our
ability to fund our operations.
We currently rely on our share purchase
arrangement with Lincoln Park to fund our ongoing operations. Pursuant to the Purchase Agreement with Lincoln Park, the purchase
price of such common stock sold to Lincoln Park is based on the prevailing market price of our common stock immediately preceding
the time of sales; we control the timing and amount of any future sales, if any, of common stock. There are no upper limits to
the price Lincoln Park may pay to purchase our common stock. The purchase price in most cases is directly derived from the prevailing
market price of our common stock on OTCBB. Though the purchase price cannot be less than $0.03, subject to adjustment as set forth
in the Purchase Agreement, this arrangement means that our prevailing share price directly affects the number of shares we need
to issue to Lincoln Park at any given time to fund short-term operations. The number of shares issuable under our Certificate of
Incorporation and the number of shares to be registered under this prospectus to register the shares sold to Lincoln Park are both
limited, and a share price that falls and stays too low would make it difficult or impossible to fund our operations through sales
of shares to Lincoln Park due to these limitations.
Our
business is at an early stage of development and we may not develop therapeutic products that can be commercialized.
Our most advanced product candidates are
in Phase I/II clinical trials and we don’t have any products that are currently in the marketplace. Our potential therapeutic
products will require extensive preclinical and clinical testing prior to regulatory approval in the United States and other countries
and may additionally require post-authorization outcome studies. We may not be able to obtain regulatory approvals in some cases
(see the subsection entitled “Regulatory Risks” below), or commence or continue clinical trials for some of our products,
or commercialize any products.
Any of our therapeutic and product candidates may prove to
have undesirable and unintended side effects or other characteristics that could cause adverse effects on patient safety, efficacy
or cost-effectiveness that could prevent or limit their therapeutic use, commercialization or acceptance in the medical community.
Any product using any of our technologies may fail to provide the intended therapeutic benefits, or even achieve therapeutic benefits
equal to or better than the standard of treatment at the time of testing or production, or may not be safe for use in humans. In
addition, we will need to determine whether any of our potential products can be manufactured in commercial quantities or at an
acceptable cost, with or without third-party support. Our efforts may not result in a product that can be or will be marketed successfully.
Physicians may not prescribe our products, and patients or third party payors may not accept or reimburse for use of our products.
For these reasons we may not be able to generate product revenues.
We
have never generated any revenue from product sales and may never be profitable.
We have limited clinical testing, regulatory,
manufacturing, marketing, distribution and sales experience capabilities, which may limit our ability to generate revenues. Due
to the early stage of our therapeutic products, including regenerative medical therapies and stem cell therapy-based programs,
we have not yet invested significantly in regulatory, manufacturing, marketing, distribution or product sales resources. We cannot
assure you that we will be able to invest or develop any of these resources successfully or as expediently as necessary, alone
or with strategic partners. We do not anticipate generating revenues from product sales for the foreseeable future, if ever. Our
ability to generate future revenues from product sales depends heavily on our success in:
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completing research and preclinical and clinical development of our therapeutic candidates;
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seeking and obtaining regulatory and marketing approvals for therapeutic candidates for which we complete clinical studies;
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developing a sustainable, scalable, reproducible, and transferable manufacturing process for our therapeutic candidates;
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establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality) products and services to support clinical development and the market demand for our therapeutic candidates, if approved;
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launching and commercializing therapeutic candidates for which we obtain regulatory and marketing approval, either by collaborating with a partner or, if launched independently, by establishing a sales force, marketing and distribution infrastructure;
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obtaining market acceptance of our therapeutic candidates as a viable treatment option;
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adequately addressing any competing technological and market developments;
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implementing additional internal systems and infrastructure, as needed;
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identifying and validating new therapeutic candidates;
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negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;
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maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and
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attracting, hiring and retaining qualified personnel.
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Even if one or more of the therapeutic candidates
that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any
approved product candidate, including costs related to additional clinical studies, and such costs may exceed our estimates. Even
if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain
additional funding to continue operations. The inability to do so will inhibit or harm our ability to generate revenues or operate
profitably.
We
have a history of operating losses and we may not achieve future revenues or operating profits
.
We have generated modest revenue to date
from our operations. Historically we have had net operating losses each year since our inception. We have limited current potential
sources of income from licensing fees and we do not generate significant revenue from any other source. Additionally, even if we
are able to commercialize our technologies or any products or services related to our technologies if approved, it is not certain
that they will result in revenue or profitability.
We
have a limited operating history on which investors may evaluate our operations and prospects for profitable operations.
If we continue to suffer losses as we have
in the past, investors may not receive any return on their investment and may perhaps lose their entire investment. Our prospects
must be considered speculative in light of the risks, expenses and difficulties frequently encountered by companies in their early
stages of development, particularly in light of the uncertainties relating to the new, competitive and rapidly evolving markets
in which we anticipate we will operate. A substantial risk is involved in investing in us because, as an early stage company, we
have fewer resources than an established company, our management may be more likely to make mistakes at such an early stage, and
we may be more vulnerable operationally and financially to any mistakes that may be made, as well as to external factors beyond
our control. We also have no experience bringing therapeutics candidates through the regulatory approval process to commercialization,
and we operate with little budgetary margin for error. To attempt to address these risks, we must, among other things, further
develop our technologies, products and services, successfully implement our research, development, marketing and commercialization
strategies, respond to competitive developments and attract, retain and motivate qualified personnel. Any failure to achieve any
of the forgoing would result in an inability to achieve profitability.
We
will need to expand our organization and we may experience difficulties in managing this growth, which could disrupt our operations
.
As of June 30, 2014, we had 33 full-time
employees. As we mature and undertake the activities required to further develop and commercialize our therapeutic candidates,
we may expand our full-time employee base and hire more consultants and contractors. Our management may need to divert a disproportionate
amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities.
We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure,
operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our
expected growth could require significant capital expenditures and may divert financial resources from other projects, such as
the development of additional product candidates. If our management is unable to effectively manage our growth, our expenses may
increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement
our business strategy. Our future financial performance and our ability to commercialize product candidates and compete effectively
will depend, in part, on our ability to effectively manage any future growth.
Risks
Relating to Technology
We
are dependent on new and unproven technologies.
Our risks as an early stage company are
compounded by our heavy dependence on unproven technologies. If these technologies do not produce satisfactory results in the clinical
trial setting and/or are unable to gain regulatory approval, our business may be harmed. We have not shown an ability to bring
any therapeutic candidate through the regulatory process to marketing approval. Given the unproven nature of our technology and
potential product candidates, the FDA or other regulatory agency may require additional clinical data or manufacturing practices
than that required of other conventional therapies. Additionally some of our technologies and potential revenue sources involve
ethically sensitive and controversial issues which could become the subject of legislation or regulations materially restricting
our development programs, future sales and marketing and other operations and, therefore, harm our financial condition and operating
results.
We
may not be able to commercially develop our technologies and proposed product lines, which, in turn, would significantly harm our
ability to earn revenues and result in a loss of investment.
Our ability to commercially develop our
technologies may be limited in part by a number of factors including, but not limited to, general economic conditions, the success
of our research and pre-clinical and field testing, the availability of collaborative partners willing and able finance our work
in pursuing applications of cell therapy technologies, and technological or other developments in the biomedical field which may
render out technologies obsolete or competitively unattractive. We may not pursue one or more commercialization strategies at all
if we cannot locate a collaborative partner or entity willing to fund research and development or if we cannot agree to acceptable
terms governing a potential development or marketing collaboration. Our decisions regarding the ultimate products and/or services
we pursue could have a significant adverse effect on our ability to earn revenue if we misinterpret trends, underestimate development
costs and/or pursue wrong products or services. Any of these factors either alone or in concert could materially harm our ability
to earn revenues or could result in a loss of any investment in us.
We
face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are
more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize
our product candidates.
We are engaged in activities in the biotechnology
field, which is characterized by extensive research efforts and rapid technological progress. If we fail to anticipate or respond
adequately to technological developments, our ability to operate profitably could suffer. Many of our competitors have substantially
greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing
organizations. Competition may increase further as a result of advances in the commercial applicability of technologies and greater
availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on
an exclusive basis, products that are more effective or less costly than any product candidate that we may develop, or achieve
earlier patent protection, regulatory approval, product commercialization and market penetration than us. Additionally, technologies
developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful
in marketing our product candidates against competitors. We cannot assure you that research and discoveries by other biotechnology,
agricultural, pharmaceutical or other companies will not render our technologies or potential products or services uneconomical
or result in products superior to those we develop or that any technologies, products or services we develop will be preferred
to any existing or newly-developed technologies, products or services.
Risks
Related to Intellectual Property
Certain
aspects of our business are dependent upon maintaining licenses with respect to key technology; if we are unable to obtain or protect
intellectual property rights related to our product candidates, we may not be able to compete effectively in our markets.
Several of the patents we utilize are licensed
to us by third parties. These licenses are subject to termination under certain circumstances (including, for example, our failure
to make minimum royalty payments or to timely achieve spending, development and commercialization benchmarks). The loss of any
of such licenses, or the conversion of such licenses to non-exclusive licenses, could harm our operations and/or enhance the prospects
of our competitors. Certain of these licenses also contain restrictions, such as limitations on our ability to grant sublicenses
that could materially interfere with our ability to generate revenue through the licensing or sale to third parties of important
and valuable technologies that we have, for strategic reasons, elected not to pursue directly. The possibility exists that in the
future we will require further licenses to complete and/or commercialize our proposed products. We cannot assure you that we will
be able to acquire any such licenses on a commercially viable basis.
Certain
parts of our technology are not protectable by patent.
Certain parts of our know-how and technology
are not patentable. To protect our proprietary position in such know-how and technology, we require all employees, consultants,
advisors and collaborators to enter into confidentiality and invention ownership agreements with us. We cannot assure you, however,
that these agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the
event of any unauthorized use or disclosure. Further, in the absence of patent protection, competitors who independently develop
substantially equivalent technology may harm our business.
Patent
litigation presents an ongoing threat to our business with respect to both outcomes and costs.
We have previously been involved in
patent interference litigation, and it is possible that further litigation or patent office proceedings (such as oppositions, observations
and/or reexaminations) over one or more of our own patent filings could arise. We could incur substantial litigation costs or costs
associated with patent office proceedings in defending ourselves against suits or other actions brought against us or in suits
in which we may assert our patents against others. If the outcome of any such litigation or patent office proceeding is unfavorable,
our business could be materially adversely affected. The expiration of patents on which we rely for protection of key products
could diminish our competitive advantage and adversely affect its business and prospects. Our competitors may independently develop
proprietary technologies and processes that design around the coverage our patents.
Without additional capital, we may not have
the resources to adequately defend or pursue such litigation or patent office proceedings. Furthermore, because of the substantial
amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential
information could be compromised by disclosure during this type of litigation. There could also be public announcements of the
results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results
to be negative, it could have an adverse effect on the price of our common stock.
We
may not be able to protect our proprietary technology, which could harm our ability to operate profitably.
The biotechnology and pharmaceutical industries place considerable
importance on obtaining patent and trade secret protection for new technologies, products and processes. Our success will depend,
to a substantial degree, on our ability to obtain and enforce patent protection for our products, preserve any trade secrets and
operate without infringing the proprietary rights of others. We cannot assure you that:
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we will succeed in obtaining any patents in a timely manner or at all, or that the breadth or degree of protection of any such patents will protect our interests, or that such patents would even be enforceable;
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the use of our technology will not infringe on the proprietary rights of others;
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patent applications relating to our potential products or technologies will result in the issuance of any patents or that, if issued, such patents will afford adequate protection to us or not be challenged invalidated or infringed;
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if issued, patents might not be declared as unenforceable or invalid by operation of law;
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patents will not issue to other parties, which may be infringed by our potential products or technologies; and
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we will continue to have the financial resources necessary to prosecute our existing patent applications, pay maintenance fees on patents and patent applications, or file patent applications on new inventions.
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We are aware of certain patents that have
been granted to others and certain patent applications that have been filed by others with respect to iPS cells and embryonic stem
cells, and other stem cell technologies. The fields in which we operate have been characterized by significant efforts by competitors
to establish dominant or blocking patent rights to gain a competitive advantage, and by considerable differences of opinion as
to the value and legal legitimacy of competitors’ purported patent rights and the technologies they actually utilize in their
businesses.
Patents
obtained by other persons may result in infringement claims against us that are costly to defend and which may limit our ability
to use the disputed technologies and prevent us from pursuing research and development or commercialization of potential products.
A number of other pharmaceutical, biotechnology
and other companies, universities and research institutions have potentially relevant to or required in the manufacturing, storage,
sale or use of our expected products. In the case of pending patent application, we cannot predict which, if any, of such applications
will issue as patents or the claims that might be allowed. We are aware that a number of companies have filed patent applications,
which in some cases have resulted in issued patents, relating to the generation, formulation and uses of various stem cells, as
well as RPE cells, photoreceptor progenitor cells, and mesenchymal stem cells.
If third party patents or patent applications
contain claims infringed by us or any strategic partner or other licensee of our products, such as for the manufacturing, storage,
sale or use of our expected products, and such patent claims are ultimately determined to be valid and enforceable against us or
our licensees, there can be no assurance that we would be able to obtain licenses to these patents at a reasonable cost, if at
all, or be able to develop or obtain alternative technology. If we are unable to obtain such licenses at a reasonable cost, we
may not be able to develop some products commercially. We may be required to defend ourselves in court against allegations of infringement
of third party patents. Patent litigation is very expensive and could consume substantial resources and create significant uncertainties.
An adverse outcome in such a suit could subject us to significant liabilities to third parties, require disputed rights to be licensed
from third parties, or require us or our licensees to cease using such technology.
Changes in U.S. patent law and in
patent law in other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our
products.
As is the case with other biotechnology
companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in
the biotechnology industry involve both technological and legal complexity, and is therefore obtaining and enforcing biotechnology
patents is costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently
implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings and rulings from the European Patent Office
Board of Appeals have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent
owners in certain situations, including potentially relating to the patentability of cells and tissues generated from hESC lines.
In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has
created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal
courts, and the USPTO, and equivalents bodies in other major markets, the laws and regulations governing patents could change in
unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might
obtain in the future.
We
may not be able to adequately defend against piracy of intellectual property in foreign jurisdictions.
Considerable research in the areas of stem
cells, cell therapeutics and regenerative medicine is being performed in countries outside of the United States, and a number of
potential competitors are located in these countries. The laws protecting intellectual property in some of those countries may
not provide adequate protection to prevent our competitors from misappropriating our intellectual property. Several of these potential
competitors may be further along in the process of product development and also operate large, company-funded research and development
programs. As a result, our competitors may develop more competitive or affordable products, or achieve earlier patent protection
or product commercialization than we are able to achieve. Competitive products may render any products or product candidates that
we develop obsolete.
Regulatory
Risks
We cannot market our product candidates
until we receive regulatory approval; even if we complete the necessary preclinical and clinical studies, we cannot predict when
or if we will obtain regulatory approval to commercialize a product candidate or the approval may be for a more narrow indication
than we expect.
Development of our products is subject to
extensive regulation by governmental authorities in the United States and other countries. The process of obtaining regulatory
approval is lengthy, expensive and uncertain. In the United States, the FDA imposes substantial requirements on the introduction
of biological products and many medical devices through lengthy and detailed laboratory and clinical testing procedures, sampling
activities and other costly and time-consuming procedures. Satisfaction of these requirements typically takes several years and
the time required to do so may vary substantially based upon the type and complexity of the biological product or medical device.
Product candidates that we believe should
be classified as medical devices for purposes of the FDA regulatory pathway may be determined by the FDA to be biologic products
subject to the satisfaction of significantly more stringent requirements for FDA approval. Any difficulties that we encounter in
obtaining regulatory approval may have a substantial adverse impact on our business and cause our stock price to significantly
decline.
If we fail to obtain regulatory approval
of any of our product candidates for at least one indication, we will not be permitted to market our product candidates and may
be forced to cease our operations. Even if our product candidates demonstrate safety and efficacy in clinical studies, the regulatory
agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval at all.
Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions
on any approved indications. In addition, we may experience delays or rejections based upon additional government regulation from
future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical
studies and the review process. Regulatory agencies also may approve a treatment candidate for fewer or more limited indications
than requested or may grant approval subject to the performance of post-marketing studies. In addition, regulatory agencies may
not approve the labeling claims that are necessary or desirable for the successful commercialization of our treatment candidates.
Even
if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny.
Even if we obtain regulatory approval in
a jurisdiction, the regulatory authority may still impose significant restrictions on the indicated uses or marketing of our product
candidates, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. Conditions
of approval, such as limiting the category of patients who can use the product, may significantly impact our ability to commercialize
the product and may make it difficult or impossible for us to market a product profitably. In addition, product manufacturers and
their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory
authorities for compliance with good manufacturing practices, or GMP, and adherence to commitments made to the FDA in the approval
process. If we or a regulatory agency discovers previously unknown problems with a product such as adverse events of unanticipated
severity or frequency, problems with the facility where the product is manufactured or manufacturing issues, a regulatory agency
may impose restrictions relative to that product or the manufacturing facility, including requiring recall or withdrawal of the
product from the market or suspension of manufacturing.
FDA approval of our products may also entail
ongoing requirements for post-marketing studies, or limit how or to whom wecan sell its products. Even if we obtain regulatory
approval, labeling, promotional and manufacturing activities are subject to continual scrutiny by the FDA, state regulatory agencies
and, in some circumstances, the Federal Trade Commission. In addition, FDA enforcement policy prohibits the marketing of approved
products for unapproved, or off-label, uses. These regulations and the FDA’s and other third-party payers interpretation
of them could materially increase our expenses, impair its ability to effectively market its products, and limit our revenue.
Any government investigation of alleged
violations of law could require us to expend significant time and resources in response and could generate negative publicity.
In addition, if our product candidates are approved by the FDA or other regulatory authorities for the treatment of any indications,
regulatory labeling may specify that our product candidates may be used in conjunction with other therapies. The occurrence of
any of these events or penalties may inhibit our ability to commercialize our product candidates and generate revenues.
Once
obtained, regulatory approvals may be withdrawn and can be expensive to maintain.
Regulatory approval may be withdrawn for
a number of reasons, including the later discovery of previously unknown problems with the product. Regulatory approval may also
require costly post-marketing follow-up studies, and failure of our product candidates to demonstrate sufficient efficacy and safety
in these studies may result in either withdrawal of marketing approval or severe limitations on permitted product usage. In addition,
numerous additional regulatory requirements relating to, among other things, the labeling, packaging, adverse event reporting,
storage, advertising, promotion and record-keeping will also apply. Furthermore, regulatory agencies subject a marketed product,
its manufacturer and the manufacturer’s facilities to continual review and periodic inspections. Compliance with these regulatory
requirements is time-consuming and requires the expenditure of substantial resources.
If any of our product candidates is approved,
we will be required to report certain adverse events involving our products to the FDA, to provide updated safety and efficacy
information and to comply with requirements concerning the advertisement and promotional labeling of our products. As a result,
even if we obtain necessary regulatory approvals to market our product candidates for any indication, any adverse results, circumstances
or events that are subsequently discovered could require that we cease marketing the product for that indication or expend additional
money, time and effort to ensure full compliance, which could have an adverse effect on our business or results of operations.
If
our products do not comply with applicable laws and regulations our business will be harmed.
Any failure by us or by any third parties
that may manufacture or market our products, to comply with the law, including statutes and regulations administered by the FDA
or other U.S. or foreign regulatory authorities, could result in, among other things, warning letters, fines and other civil penalties,
suspension of regulatory approvals and the resulting requirement that we suspend sales of our products, refusal to approve pending
applications or supplements to approved applications, export or import restrictions, interruption of production, operating restrictions,
closure of the facilities used by us or third parties to manufacture our product candidates, injunctions or criminal prosecution.
Any of the foregoing actions could have an adverse effect on our business.
The
commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients,
third-party payors and others in the medical community, and our products may not be accepted in the marketplace
.
If we are successful in obtaining regulatory
approval for any of our product candidates, the degree of market acceptance of those products will depend on many factors, including:
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our ability to provide acceptable evidence of, and the perception of patients and the healthcare community, including third
party payors, of, the potential advantages of our product candidates relative to existing treatment methods;
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the incidence and severity of
any adverse side effects of our product candidates;
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the availability and efficacy
of alternative treatments;
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the labeling requirements imposed by the FDA and foreign regulatory agencies on our products and related marketing materials,
including the scope of approved indications and any safety warnings;
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our ability to obtain sufficient third party insurance coverage or reimbursement for our product candidates;
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the inclusion of our products on insurance company coverage policies;
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the willingness and ability of patients and the healthcare community to adopt new technologies;
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public opinion and acceptance of stem cell therapy in general, including media coverage and activism by religious, social or
political groups;
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the procedure time associated with the use of our product candidates, including time between and frequency of dosage;
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our ability to manufacture or obtain from third party manufacturers sufficient quantities of our product candidates with acceptable
quality and at an acceptable cost to meet demand; and
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internal or external marketing and distribution support for our products.
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We cannot predict or guarantee that physicians,
patients, healthcare insurers, third party payors or health maintenance organizations, or the healthcare community in general,
will accept or utilize any of our product candidates. Failure to achieve market acceptance would limit our ability to generate
revenue and would have a material adverse effect on our business. In addition, if any of our product candidates achieve market
acceptance, we may not be able to maintain that market acceptance over time if competing products or technologies are introduced
that are received more favorably or are more cost-effective.
Restrictions on the use of human embryonic
stem cells, the ethical, legal and social implications of stem cell research, and negative public opinion about stem cell therapy
may damage public perception of our therapeutic candidates and could prevent us from developing or gaining acceptance for commercially
viable products.
Some of our most important programs involve
the use of stem cells that are derived from human embryos. The use of human embryonic stem cells gives rise to ethical, legal and
social issues regarding the appropriate derivation of these cells. In the event that our research related to human embryonic stem
cells becomes the subject of adverse commentary or publicity or increased scrutiny by governmental or regulatory organizations,
our business could be harmed or otherwise substantially impaired, and the market price for our common stock could be significantly
harmed. Some political and religious groups have voiced opposition to our technology and practices. We use stem cells derived from
human embryos that have been created for
in vitro
fertilization procedures but are no longer desired or suitable for that
use and are donated with appropriate informed consent for research use. Many research institutions, including some of our scientific
collaborators, have adopted policies regarding the ethical use of human embryonic tissue. These policies may have the effect of
limiting the scope of research conducted using human embryonic stem cells, thereby impairing our ability to conduct research in
this field.
Governmental
regulations and laws could change.
There can be no assurance that our operations
will not be restricted by any future legislative or administrative efforts by politicians or groups opposed to the development
of human embryonic stem cell technology or nuclear transfer technology. Additionally, the scope of the Dickey–Wicker Amendment,
a 16 year-old ban on U.S. federal funding for activity related to the harm or destruction of an embryo, was recently under review
by the federal courts and while it was determined not to preclude funding of human embryonic stem cell research by the federal
government, there can be no assurance that it will not be challenged again or the language modified by Congress so as to restrict
government funding of human embryonic stem cell research. Judicial review of this or other U.S. federal or state laws, the occurrence
and results of which are difficult to predict with any certainty, could result in a more restrictive interpretation of those laws
than is previously the case, and may limit or require us to terminate certain of our research and therapeutic programs.
Because
we or our collaborators must obtain regulatory approval to market our products in the United States and other countries, we cannot
predict whether or when we will be permitted to commercialize our products.
Federal, state and local governments in
the United States and governments in other countries have significant regulations in place that govern many of our activities.
We are or may become subject to various federal, state and local laws, regulations and recommendations relating to safe working
conditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially
hazardous substances used in connection with our research and development work. The preclinical testing and clinical trials of
the products that we or our collaborators develop are subject to extensive government regulation that may prevent us from creating
commercially viable products from our discoveries. In addition, the sale by us or our collaborators of any commercially viable
product will be subject to government regulation from several standpoints, including manufacturing, advertising and promoting,
selling and marketing, labeling and distributing.
If, and to the extent that, we are unable
to comply with these regulations, our ability to earn revenues will be materially and negatively impacted. The regulatory process,
particularly in the biotechnology field, is uncertain, can take many years and requires the expenditure of substantial resources.
Biological drugs and non-biological drugs are rigorously regulated. In particular, proposed human pharmaceutical therapeutic product
candidates are subject to rigorous preclinical and clinical testing and other requirements by the FDA in the United States and
similar health authorities in other countries in order to demonstrate safety and efficacy. We may never obtain regulatory approval
to market our proposed products.
Our
products may not receive FDA approval, which would prevent us from commercially marketing our products and producing revenues.
The FDA and comparable government agencies
in foreign countries impose substantial regulations on the manufacture and marketing of pharmaceutical products through lengthy
and detailed laboratory, pre-clinical and clinical testing procedures, sampling activities and other costly and time-consuming
procedures. Satisfaction of these regulations typically takes several years or more and varies substantially based upon the type,
complexity and novelty of the proposed product. We cannot assure you that FDA approvals for any products developed by us will be
granted on a timely basis, if at all. Any such delay in obtaining, or failure to obtain, such approvals could have a material adverse
effect on the marketing of our products and our ability to generate product revenue.
We
may not be able to obtain required approvals in countries other than the United States.
The requirements governing the conduct of
clinical trials and cell culturing as well as the marketing approval process for our product candidates outside the United States
vary widely from country to country. Foreign approvals may take longer to obtain than FDA approvals and can require, among other
things, additional testing and different clinical trial designs. Foreign regulatory approval processes generally include all of
the risks associated with the FDA approval processes. Some foreign regulatory agencies also must approve prices of the products.
Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory
approval in one country may negatively impact the regulatory process in others. We may not be able to file for regulatory approvals
and may not receive necessary approvals to market our product candidates in any foreign country. If we fail to comply with these
regulatory requirements or fail to obtain and maintain required approvals in any foreign country, we will not be able to sell our
product candidates in that country and our ability to generate revenue will be adversely affected.
The
United States federal government maintains certain rights in technology that we develop using federal government grant money and
we may lose the revenues from such technology if we do not commercialize and utilize the technology pursuant to established federal
government guidelines.
Certain of our and our licensors’
research have been or are being funded in part by U.S. federal government grants. In connection with certain grants, the federal
government retains rights in the technology developed with the grant. These rights could restrict our ability to fully capitalize
upon the value of this research.
Financial
Risks
We
may not be able to raise the required capital to conduct our operations and develop and commercialize our products.
We require substantial additional capital
resources in order to conduct our operations and develop and commercialize our products and run our facilities. We will need significant
additional funds, a collaborative partner, or both, to finance the research and development activities of our therapies and potential
products. Accordingly, we are continuing to pursue additional sources of financing. Our future capital requirements will depend
upon many factors, including:
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the continued progress and
cost of our research and development programs;
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the progression, timing and results
of our pre-clinical studies and clinical trials;
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the time and costs involved in obtaining regulatory clearance;
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the costs in preparing, filing, prosecuting, maintaining and enforcing patent claims;
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the costs of developing sales, marketing and distribution channels and our ability to sell the therapies/products if developed;
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the costs involved in establishing manufacturing capabilities for commercial quantities of our proposed products;
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competing technological and market developments;
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market acceptance of our proposed products;
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costs associated with defending any litigation or regulatory investigations, including SEC investigations, investor litigation,
or litigation regarding potential infringement by us of third-party intellectual property rights;
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the costs for recruiting and retaining employees and consultants; and
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the costs for educating and training physicians about our proposed therapies/products.
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Additional financing through strategic
collaborations, public or private equity financings or other financing sources may not be available on acceptable terms, or at
all. Additional equity financing could result in significant dilution to our shareholders. Further, if additional funds are obtained
through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of our technologies,
product candidates or products that we would otherwise seek to develop and commercialize on our own. If sufficient capital is not
available, we may be required to delay, reduce the scope of or eliminate one or more of our programs or potential products, any
of which could have an adverse effect on our financial condition or business prospects.
Risks
Related to Third Party Reliance
We
depend on third parties to assist us in the conduct of our preclinical studies and clinical trials, and any failure of those parties
to fulfill their obligations could result in costs and delays and prevent us from obtaining regulatory approval or successfully
commercializing our product candidates on a timely basis, if at all.
We
engage consultants and contract research organizations to help design, and to assist us in conducting, our preclinical studies
and clinical trials and to collect and analyze data from those studies and trials. The consultants and contract research organizations
we engage interact with clinical investigators to enroll patients in our clinical trials. As a result, we depend on these consultants
and contract research organizations to perform the studies and trials in accordance with the investigational plan and protocol
for each product candidate and in compliance with regulations and standards, commonly referred to as “good clinical practice,”
for conducting, recording and reporting results of clinical trials to assure that the data and results are credible and accurate
and the trial participants are adequately protected, as required by the FDA and foreign regulatory agencies. We may face delays
in our regulatory approval process if these parties do not perform their obligations in a timely or competent fashion or if we
are forced to change service providers.
We
depend on our collaborators to help us develop and test our proposed products, and our ability to develop and commercialize products
may be impaired or delayed if collaborations are unsuccessful.
Our
strategy for the development, clinical testing and commercialization of our proposed products requires that we enter into collaborations
with corporate partners, licensors, licensees and others. We are dependent upon the subsequent success of these other parties in
performing their respective responsibilities and the continued cooperation of our partners. Under agreements with collaborators,
we may rely significantly on such collaborators to, among other things:
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design and conduct advanced clinical trials in the event that we reach clinical trials;
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fund research and development activities with us;
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pay us royalties or fees upon the achievement of milestones; and
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market with us any commercial products that result from our collaborations.
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Our collaborators may not cooperate with
us or perform their obligations under our agreements with them. We cannot control the amount and timing of our collaborators’
resources that will be devoted to supporting our research and development activities related to or any diligence obligations on
the part of these collaborators under our collaborative agreements with them. Our collaborators may choose to pursue existing or
alternative technologies in preference to those being developed in collaboration with us. The development and commercialization
of potential products will be delayed if collaborators fail to conduct these activities in a timely manner, or at all. In addition,
our collaborators could terminate their agreements with us and we may not receive any development or milestone payments. If we
do not achieve milestones set forth in the agreements, or if our collaborators breach or terminate their collaborative agreements
with us, our business may be materially harmed.
Our
reliance on the activities of our non-employee consultants, research institutions, and scientific contractors, whose activities
are not wholly within our control, may lead to delays in development of our proposed products
.
We
rely extensively upon and have relationships with scientific consultants at academic and other institutions, some of whom conduct
research at our request, and other consultants with expertise in clinical development strategy or other matters. These consultants
are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their
availability to us. We have limited control over the activities of these consultants and, except as otherwise required by our collaboration
and consulting agreements to the extent they exist, can expect only limited amounts of their time to be dedicated to our activities.
These research facilities may have commitments to other commercial and non-commercial entities. We have limited control over the
operations of these laboratories and can expect only limited amounts of time to be dedicated to our research goals.
Preclinical & Clinical
Product Development Risks
We
have
limited experience in conducting and managing preclinical development activities, clinical trials and the
application process necessary to obtain regulatory approvals.
Our
limited experience in conducting and managing preclinical development activities, 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.
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 product candidates, or might be significantly delayed in doing so, which will
materially harm our business.
Our
ability to generate revenues from any of our product candidates will depend on a number of factors, including our ability to successfully
complete clinical trials, obtain necessary regulatory approvals and implement our commercialization strategy. In addition, even
if we are successful in obtaining necessary regulatory approvals and bringing one or more product candidates to market, we will
be subject to the risk that the marketplace will not accept those products. 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.
Because
of the numerous risks and uncertainties associated with our product development and commercialization efforts, we are unable to
predict the extent of our future losses or when or if we will become profitable.
Our
failure to successfully commercialize our product candidates or to become and remain profitable could depress the market price
of our common stock and impair our ability to raise capital, expand our business, diversify our product offerings and continue
our operations.
None of the products that we are currently
developing has been approved for marketing by the FDA or any similar regulatory authority in any foreign country, and may never
be so approved. Our approach of using cell-based therapy for the treatment of retinal diseases such as Startgardt’s disease
and dry AMD is risky and unproven and no products using this approach have received regulatory approval in the United States or
Europe.
We believe that no other company has yet
been successful in its efforts to obtain regulatory approval in the United States or Europe of a cell-based therapy product for
the treatment of retinal disease or degeneration in humans. Cell-based therapy 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 by regulators or commercial use. 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 significantly delayed, or if we do not complete our clinical trials while achieving sufficiently satisfactory
results, we will not receive regulatory approval for or be able to commercialize our product candidates.
Our lead product candidates, our therapeutic
Retinal programs for Startgardt’s disease and Dry AMD, have been in Phase I Clinical Trials and have not yet received market
approval from the FDA or any similar foreign regulatory authority for any indication.
We
cannot market any product candidate until regulatory agencies grant approval or licensure. In order to obtain regulatory approval
for the sale of any product candidate, we must, among other requirements, provide the FDA and similar foreign regulatory authorities
with preclinical and clinical data that demonstrate to the satisfaction of regulatory authorities that our product candidates are
safe and effective for each indication under the applicable standards relating to such product candidate. The preclinical studies
and clinical trials of any product candidates must comply with the regulations of the FDA and other governmental authorities in
the United States and similar agencies in other countries. Our therapeutic Retinal programs may never receive market approval from
the FDA or any similar foreign regulatory authority.
In addition, we may experience numerous
unforeseen events during, or even if approved for clinical trials, as a result of, the clinical trial process that could delay
or prevent regulatory approval and/or commercialization of our product candidates, including the following
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The FDA or similar foreign regulatory authorities may find that our product candidates are not sufficiently safe or effective or may find our cell culturing processes or facilities unsatisfactory;
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Officials at 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 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 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 FDA or other regulatory authorities or obtaining institutional review board approvals or government approvals to conduct or continue clinical trials at current or 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 product candidates 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;
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We may be unable to manufacture or obtain from third party manufacturers sufficient quantities of our product candidates for use in clinical trials; and
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Our product candidates may be deemed unsafe or ineffective, or may be perceived as being unsafe or ineffective, by healthcare providers for a particular indication.
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Any failure or delay in obtaining regulatory
approval will negatively affect our financial results and harm our business.
Risks
Related to Competition
The
market for therapeutic stem cell products is highly competitive.
We
expect that our most significant competitors will be fully integrated pharmaceutical companies and more established biotechnology
companies. These companies are developing stem cell-based products and they have significantly greater capital resources in research
and development, manufacturing, testing, obtaining regulatory approvals and marketing capabilities. Many of these potential competitors
are further along in the process of product development and also operate large, company-funded research and development programs.
As a result, our competitors may develop more competitive or affordable products, or achieve earlier patent recognition and filings.
The
biotechnology industries are characterized by rapidly evolving technology and intense competition. Our competitors include major
multinational pharmaceutical companies, specialty biotechnology companies and chemical and medical products companies operating
in the fields of regenerative medicine, cell therapy, tissue engineering and tissue regeneration.
Many
of these companies are well-established and possess technical, research and development, financial and sales and marketing resources
significantly greater than ours. In addition, certain smaller biotech companies have formed strategic collaborations, partnerships
and other types of joint ventures with larger, well established industry competitors that afford these companies’ potential
research and development and commercialization advantages. Academic institutions, governmental agencies and other public and private
research organizations are also conducting and financing research activities which may produce products directly competitive to
those we are developing. Moreover, many of these competitors may be able to obtain patent protection, obtain FDA and other regulatory
approvals and begin commercial sales of their products before we do.
In
the general area of cell-based therapies (including both allogeneic and autologous cell therapies), we compete with a variety of
companies, most of whom are specialty biotechnology companies, such as, Genzyme Corporation, StemCells, Inc., Inc., Viacell, Inc.,
Biotime, Inc., ISCO, MG Biotherapeutics, Pfizer, GlaxoSmithKline, Novartis, Roche, Cell Cure Neurosciences Ltd., Celgene, Baxter
Healthcare, Mesoblast, Osiris Therapeutics and Cytori.
Each
of these companies is well-established and have substantial technical and financial resources compared to us. However, as cell-based
products are only just emerging as medical therapies, many of our direct competitors are smaller biotechnology and specialty medical
products companies. These smaller companies may become significant competitors through rapid evolution of new technologies. Any
of these companies could substantially strengthen their competitive position through strategic alliances or collaborative arrangements
with large pharmaceutical or biotechnology companies.
Our
competition includes both public and private organizations and collaborations among academic institutions and large pharmaceutical
companies, most of which have significantly greater experience and financial resources than we do.
Private
and public academic and research institutions also compete with us in the research and development of therapeutic products based
on human embryonic and adult stem cell technologies. In the past several years, the pharmaceutical industry has selectively entered
into collaborations with both public and private organizations to explore the possibilities that stem cell therapies may present
for substantive breakthroughs in the fight against disease.
The
biotechnology and pharmaceutical industries are characterized by intense competition. We compete against numerous companies, both
domestic and foreign, many of which have substantially greater experience and financial and other resources than we have. Several
such enterprises have initiated cell therapy research programs and/or efforts to treat the same diseases targeted by us.
Companies
such as Pfizer, Genzyme Corporation, GlaxoSmithKline, Novartis, Roche, Cell Cure Neurosciences Ltd., Mesoblast, Cytori, StemCells, Inc.
and Viacell, Inc., as well as others, many of which have substantially greater resources and experience in our fields than
we do, are well situated to effectively compete with us. Any of the world’s largest pharmaceutical companies represents a
significant actual or potential competitor with vastly greater resources than ours. These companies hold licenses to genetic selection
technologies and other technologies that are competitive with our technologies. These and other competitive enterprises have devoted,
and will continue to devote, substantial resources to the development of technologies and products in competition with us.
Many
of our competitors have significantly greater experience than we have in the development, pre-clinical testing and human clinical
trials of biotechnology and pharmaceutical products, in obtaining FDA and other regulatory approvals of such products and in manufacturing
and marketing such products.
Accordingly
our competitors may succeed in obtaining FDA approval for products more rapidly or effectively than we can. Our competitors may
also be the first to discover and obtain a valid patent to a particular stem cell technology which may effectively block all others
from doing so. It will be important for us or our collaborators to be the first to discover any stem cell technology that we are
seeking to discover. Failure to be the first could prevent us from commercializing all of our research and development affected
by that discovery. Additionally, if we commence commercial sales of any products, we will also be competing with respect to manufacturing
efficiency and sales and marketing capabilities: areas in which we have no experience.
General Risks Relating
to Our Business
We
are subject to litigation that will be costly to defend or pursue and uncertain in its outcome.
Our
business may bring us into conflict with our licensees, licensors or others with whom we have contractual or other business relationships,
or with our competitors or others whose interests differ from ours. If we are unable to resolve those conflicts on terms that are
satisfactory to all parties, we may become involved in litigation brought by or against us. That litigation is likely to be expensive
and may require a significant amount of management’s time and attention, at the expense of other aspects of our business.
The outcome of litigation is always uncertain, and in some cases could include judgments against us that require us to pay damages,
enjoin us from certain activities or otherwise affect our legal or contractual rights, which could have a significant adverse effect
on our business.
A
significant adverse determination in any claim against us could adversely affect our operating results or financial condition.
The amount we may be required to pay, in cash or in stock, in connection with any Claim may prove to exceed our estimated reserves
and, in the case of payment in the form of stock, may prove to be highly dilutive to our stockholders. Should any judgment or settlement
occur that exceeds our estimate, or a new claim arise, or if we become aware of additional information that requires us to adjust
our estimation of potential exposure, we may need to adjust our overall reserve and, depending on the amount, such adjustment could
be material and adversely affect our operating results or financial condition.
Form
4 filing delays by our Chief Executive Officer have given rise to an investigation by the Securities and Exchange Commission into
the delays and our Section 16 compliance procedures, and this investigation may result in penalties and/or sanctions against us.
As
previously disclosed by us, in April 2013, it was determined that Gary Rabin, our Chief Executive Officer, failed to report 27
transactions in which Mr. Rabin sold shares of our common stock that took place between February 7, 2011 and January 10, 2013.
Mr. Rabin filed a Form 4 under Section 16 of the Exchange Act on April 15, 2013 reporting the previously unreported sale transactions
and correcting the total number of shares of our common stock that Mr. Rabin owned as of the date of filing of the Form 4. Our
board of directors initiated an investigation into this matter upon becoming aware of it. We have been advised by the SEC that
it is investigating this matter, and we have received requests from the SEC requesting additional information relating to such
transactions and our procedures regarding Section 16 filings. We have cooperated with their investigation and supplied information
to the SEC in response to its information requests. If the SEC determines that these or other transactions or the failure to report
transactions was a violation of the securities laws, such violations could be imputed to us and the SEC could seek to impose remedies
against us. We do not know what the outcome of the SEC’s investigation may be, and we are unable to estimate the probability
of liability or the amount of any penalties that might arise, which may be material to our financial condition. Any action by the
SEC could require us to expend significant financial and managerial resources and could also result in further volatility in the
market price of our common shares. Nothing set forth in the foregoing statement constitutes an express or implied admission by
us of any liability under the Securities Act, the Exchange Act or otherwise.
We
may not be able to obtain third-party patient reimbursement or favorable product pricing, which would reduce our ability to operate
profitably.
Our
ability to successfully commercialize some of our proposed products in the human therapeutic field may depend on a significant
degree on patient reimbursement of the costs of such products and related treatments at acceptable levels from government authorities,
private health insurers and other organizations, such as health maintenance organizations. We cannot assure you that reimbursement
in the United States or foreign countries will be available for any products we may develop or, if available, will not be decreased
in the future, or that reimbursement amounts will not reduce the demand for, or the price of, our products with a consequent harm
to our business. We cannot predict what additional regulation or legislation relating to the health care industry or third-party
coverage and reimbursement may be enacted in the future or what effect such regulation or legislation may have on our business.
If additional regulations are overly onerous or expensive, or if health care related legislation makes our business more expensive
or burdensome than originally anticipated, we may be forced to significantly downsize our business plans or completely abandon
our business model.
Our
products are likely to be expensive to manufacture, and they may not be profitable if we are unable to control the costs to manufacture
them.
Our
products are likely to be significantly more expensive to manufacture than most other drugs currently on the market today. Our
present manufacturing processes produce modest quantities of product intended for use in our ongoing research activities, and we
have not developed processes, procedures and capability to produce commercial volumes of product. We hope to substantially reduce
manufacturing costs through process improvements, development of new science, increases in manufacturing scale and outsourcing
to experienced manufacturers. If we are not able to make these or other improvements, and depending on the pricing of the product,
our profit margins may be significantly less than that of most drugs on the market today. In addition, we may not be able to charge
a high enough price for any cell therapy product we develop, even if they are safe and effective, to make a profit. If we are unable
to realize significant profits from our potential product candidates, our business would be materially harmed.
Our
current source of revenues depends on the stability and performance of our sub-licensees.
Our
ability to collect royalties on product sales from our sub-licensees will depend on the financial and operational success of the
companies operating under a sublicense. Revenues from those licensees will depend upon the financial and operational success of
those third parties. We cannot assure you that these licensees will be successful in obtaining requisite financing or in developing
and successfully marketing their products. These licensees may experience unanticipated obstacles including regulatory hurdles,
and scientific or technical challenges, which could have the effect of reducing their ability to generate revenues and pay us royalties.
We
depend on key personnel for our continued operations and future success, and a loss of certain key personnel could significantly
hinder our ability to move forward with our business plan.
Because
of the specialized nature of our business, we are highly dependent on our ability to identify, hire, train and retain highly qualified
scientific and technical personnel for the research and development activities we conduct or sponsor. The loss of one or more certain
key executive officers, or scientific officers, would be significantly detrimental to us. In addition, recruiting and retaining
qualified scientific personnel to perform research and development work is critical to our success. Our anticipated growth and
expansion into areas and activities requiring additional expertise, such as clinical testing, regulatory compliance, manufacturing
and marketing, will require the addition of new management personnel and the development of additional expertise by existing management
personnel. There is intense competition for qualified personnel in the areas of our present and planned activities, and there can
be no assurance that we will be able to continue to attract and retain the qualified personnel necessary for the development of
our business. The failure to attract and retain such personnel or to develop such expertise would adversely affect our business.
Our
insurance policies may be inadequate and potentially expose us to unrecoverable risks.
Any
significant insurance claims would have a material adverse effect on our business, financial condition and results of operations.
Insurance availability, coverage terms and pricing continue to vary with market conditions. We endeavor to obtain appropriate insurance
coverage for insurable risks that we identify, however, we may fail to correctly anticipate or quantify insurable risks, we may
not be able to obtain appropriate insurance coverage and insurers may not respond as we intend to cover insurable events that may
occur. We have observed rapidly changing conditions in the insurance markets relating to nearly all areas of traditional corporate
insurance. Such conditions have resulted in higher premium costs, higher policy deductibles, and lower coverage limits. For some
risks, we may not have or maintain insurance coverage because of cost or availability.
We
have limited product liability insurance, which may leave us vulnerable to future claims we will be unable to satisfy.
The
testing, manufacturing, marketing and sale of human therapeutic products entail an inherent risk of product liability claims, and
we cannot assure you that substantial product liability claims will not be asserted against us. We have limited product liability
insurance. In the event we are forced to expend significant funds on defending product liability actions, and in the event those
funds come from operating capital, we will be required to reduce our business activities, which could lead to significant losses. We
cannot assure you that adequate insurance coverage will be available in the future on acceptable terms, if at all, or that, if
available, we will be able to maintain any such insurance at sufficient levels of coverage or that any such insurance will provide
adequate protection against potential liabilities. Whether or not a product liability insurance policy is maintained in the future,
any product liability claim could harm our business or financial condition.
Risks Relating to Our
Common Stock
Stock
prices for biotechnology companies have historically tended to be very volatile.
Stock
prices and trading volumes for many biotechnology companies fluctuate widely for a number of reasons, including but not limited
to the following factors (some of which may be unrelated to their businesses or results of operations):
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clinical trial results;
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the amount of cash resources and ability to obtain additional funding;
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announcements of research activities, business developments, technological innovations or new products by companies or their competitors;
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entering into or terminating strategic relationships;
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changes in government regulation;
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disputes concerning patents or proprietary rights;
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changes in revenues or expense levels;
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public concern regarding the safety, efficacy or other aspects of the products or methodologies being developed,
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reports by securities analysts;
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activities of various interest groups or organizations;
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media coverage; and
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status of the investment markets.
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This
market volatility, as well as general domestic or international economic, market and political conditions, could materially and
adversely affect the market price of our common stock and the return on your investment.
A
significant number of shares of our common stock have become available for sale and their sale could depress the price of our common
stock.
Substantially
all of our common stock is freely tradable in the equity markets.
We
may also sell a substantial number of additional shares of our common stock in connection with a private placement or public offering
of shares of our common stock (or other series or class of capital stock to be designated in the future). The terms of any such
transactions would likely require us to register the resale of any shares of capital stock issued or issuable in the transaction.
Sales
of a substantial number of shares of our common stock under any of the circumstances described above could adversely affect the
market price for our common stock and make it more difficult for you to sell shares of our common stock at times and prices that
you feel are appropriate.
We
do not intend to pay cash dividends on our common stock in the foreseeable future.
Any
payment of cash dividends will depend upon our financial condition, results of operations, capital requirements and other factors
and will be at the discretion of our board of directors. We do not anticipate paying cash dividends on our common stock in the
foreseeable future. Furthermore, we may incur additional indebtedness that may severely restrict or prohibit the payment of dividends.
Our
common stock is subject to “penny stock” regulations and restrictions on initial and secondary broker-dealer sales
.
The
SEC has adopted regulations which generally define “penny stock” to be any listed, trading equity security that has
a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Penny
stocks are subject to certain additional oversight and regulatory requirements. Brokers and dealers affecting transactions in our
common stock in many circumstances must obtain the written consent of a customer prior to purchasing our common stock, must obtain
information from the customer and must provide disclosures to the customer. These requirements may restrict the ability of broker-dealers
to sell our common stock and may affect your ability to sell your shares of our common stock in the secondary market.
As
an issuer of “penny stock,” the protection provided by the federal securities laws relating to forward looking statements
does not apply to us.
Although
federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under
the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit
of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a
material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary
to make the statements not misleading. Such an action could hurt our financial condition.