Item 1. Financial Statements.
BRAINSTORM CELL THERAPEUTICS
INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
AS OF June 30, 2018
U.S. DOLLARS IN
THOUSANDS
(Except share data
and exercise prices)
(UNAUDITED)
BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
AS OF June 30, 2018
U.S. DOLLARS IN
THOUSANDS
(Except share data
and exercise prices)
(UNAUDITED)
INDEX
BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
(Except share data)
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2 0 1 8
|
|
|
2 0 1 7
|
|
|
|
U.S. $ in thousands
|
|
ASSETS
|
|
Unaudited
|
|
|
Audited
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,262
|
|
|
$
|
2,483
|
|
Short-term deposit (Note 4)
|
|
|
15,177
|
|
|
|
5,273
|
|
Account receivable
|
|
|
964
|
|
|
|
672
|
|
Prepaid expenses and other current assets
|
|
|
1,160
|
|
|
|
1,195
|
|
Total current assets
|
|
|
19,563
|
|
|
|
9,623
|
|
|
|
|
|
|
|
|
|
|
Long-Term Assets:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other long-term assets (Note 5)
|
|
|
861
|
|
|
|
1,408
|
|
Property and Equipment, Net
|
|
|
596
|
|
|
|
392
|
|
Total long-term assets
|
|
|
1,457
|
|
|
|
1,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
21,020
|
|
|
$
|
11,423
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
4,182
|
|
|
$
|
1,424
|
|
Accrued expenses (Note 6)
|
|
|
1,471
|
|
|
|
817
|
|
Deferred grant income (Note 7)
|
|
|
1,885
|
|
|
|
2,625
|
|
Other accounts payable
|
|
|
609
|
|
|
|
677
|
|
Total current liabilities
|
|
|
8,147
|
|
|
|
5,543
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
8,147
|
|
|
$
|
5,543
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
|
Stock capital: (Note 8)
|
|
|
11
|
|
|
|
11
|
|
Common stock of $0.00005 par value - Authorized: 100,000,000 shares at each of June 30, 2018 and December 31, 2017; Issued and outstanding: 20,669,528 and 18,976,169 shares at June 30, 2018 and December 31, 2017, respectively.
|
|
|
|
|
|
|
|
|
Additional paid-in-capital
|
|
|
93,935
|
|
|
|
85,944
|
|
Receipts on account of shares
|
|
|
4,391
|
|
|
|
-
|
|
Accumulated deficit
|
|
|
(85,464
|
)
|
|
|
(80,075
|
)
|
Total stockholders' equity
|
|
|
12,873
|
|
|
|
5,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
21,020
|
|
|
$
|
11,423
|
|
The accompanying notes are an integral
part of the consolidated financial statements.
BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE LOSS (UNAUDITED)
U.S.
dollars in thousands
(Except share data)
|
|
Six months ended
|
|
|
Three months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2 0 1 8
|
|
|
2 0 1 7
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development, net
|
|
$
|
2,458
|
|
|
$
|
1,376
|
|
|
$
|
1,481
|
|
|
$
|
435
|
|
General and administrative
|
|
|
2,936
|
|
|
|
1,469
|
|
|
|
1,606
|
|
|
|
640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(5,394
|
)
|
|
|
(2,845
|
)
|
|
|
(3,087
|
)
|
|
|
(1,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses (income), net
|
|
|
(5
|
)
|
|
|
(20
|
)
|
|
|
4
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,389
|
)
|
|
$
|
(2,825
|
)
|
|
$
|
(3,091
|
)
|
|
$
|
(1,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share from continuing operations
|
|
$
|
(0.28
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding used in computing basic and diluted net loss per share
|
|
|
19,277,518
|
|
|
|
18,713,575
|
|
|
|
19,505,157
|
|
|
|
18,738,496
|
|
The accompanying notes are an integral
part of the consolidated financial statements.
BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM
CONDENSED STATEMENTS OF CHANGES IN EQUITY (AUDITED)
U.S.
dollars in thousands
(Except share data)
|
|
Common Stock
|
|
|
Additional
paid-in
|
|
|
Receipts on
account of
shares
|
|
|
Accumulated
deficit
|
|
|
Total
stockholders'
equity
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2017
|
|
|
18,687,987
|
|
|
$
|
11
|
|
|
$
|
85,014
|
|
|
$
|
-
|
|
|
$
|
(75,123
|
)
|
|
$
|
9,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation related to warrants and stock granted to service providers
|
|
|
4,327
|
|
|
|
(*)
|
|
|
|
62
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62
|
|
Stock-based
compensation related to stock and options granted to directors and employees
|
|
|
107,301
|
|
|
|
(*)
|
|
|
|
554
|
|
|
|
-
|
|
|
|
-
|
|
|
|
554
|
|
Exercise of options
|
|
|
129,887
|
|
|
|
(*)
|
|
|
|
209
|
|
|
|
-
|
|
|
|
-
|
|
|
|
209
|
|
Exercise of warrants
|
|
|
46,667
|
|
|
|
(*)
|
|
|
|
105
|
|
|
|
-
|
|
|
|
-
|
|
|
|
105
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,952
|
)
|
|
|
(4,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017
|
|
|
18,976,169
|
|
|
$
|
11
|
|
|
$
|
85,944
|
|
|
$
|
-
|
|
|
$
|
(80,075
|
)
|
|
$
|
5,880
|
|
* Represents an amount less than $1.
The accompanying notes are
an integral part of the consolidated financial statements.
BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM
CONDENSED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
U.S.
dollars in thousands
(Except share data)
|
|
Common stock
|
|
|
Additional
paid-in
|
|
|
Receipts on account of
shares
|
|
|
Accumulated
deficit
|
|
|
Total
stockholders' equity
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2018
|
|
|
18,976,169
|
|
|
$
|
11
|
|
|
$
|
85,944
|
|
|
$
|
-
|
|
|
$
|
(80,075
|
)
|
|
$
|
5,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Stock-based compensation related to warrants and stock granted to service providers
|
|
|
11,250
|
|
|
|
(*)
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation related to stock and options granted to directors and employees
|
|
|
90,575
|
|
|
|
(*)
|
|
|
|
363
|
|
|
|
-
|
|
|
|
-
|
|
|
|
363
|
|
Exercise of options
|
|
|
33,332
|
|
|
|
(*)
|
|
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25
|
|
Exercise and reissuance of warrants
|
|
|
1,558,202
|
|
|
|
(*)
|
|
|
|
7,603
|
|
|
|
4,391
|
|
|
|
-
|
|
|
|
11,994
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,389
|
)
|
|
|
(5,389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2018
|
|
|
20,669,528
|
|
|
$
|
11
|
|
|
$
|
93,935
|
|
|
$
|
4,391
|
|
|
$
|
(85,464
|
)
|
|
$
|
12,873
|
|
* Represents an amount less than $1.
The accompanying notes are
an integral part of the consolidated financial statements.
BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S.
dollars in thousands
|
|
Six months ended
|
|
|
Three months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,389
|
)
|
|
$
|
(2,825
|
)
|
|
$
|
(3,091
|
)
|
|
$
|
(1,040
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
56
|
|
|
|
34
|
|
|
|
31
|
|
|
|
18
|
|
Stock-based compensation related to options granted to employees and directors
|
|
|
363
|
|
|
|
183
|
|
|
|
136
|
|
|
|
57
|
|
Decrease (Increase) in accounts receivable and prepaid expenses
|
|
|
295
|
|
|
|
(511
|
)
|
|
|
411
|
|
|
|
(587
|
)
|
Increase (decrease) in trade payables
|
|
|
2,758
|
|
|
|
(118
|
)
|
|
|
921
|
|
|
|
(135
|
)
|
Increase (decrease) in deferred grant income
|
|
|
(740
|
)
|
|
|
-
|
|
|
|
683
|
|
|
|
-
|
|
Increase (decrease) in other accounts payable and accrued expenses
|
|
|
586
|
|
|
|
(35
|
)
|
|
|
964
|
|
|
|
57
|
|
Total net cash provided by (used in) operating activities
|
|
$
|
(2,071
|
)
|
|
$
|
(3,272
|
)
|
|
$
|
55
|
|
|
$
|
(1,630
|
)
|
The accompanying notes are an integral
part of the consolidated financial statements.
BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (UNAUDITED)
U.S.
dollars in thousands
|
|
Six months ended
|
|
|
Three months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2 0 1 8
|
|
|
|
2 0 1 7
|
|
|
|
2 0 1 8
|
|
|
|
2 0 1 7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(260
|
)
|
|
|
(32
|
)
|
|
|
(215
|
)
|
|
|
(32
|
)
|
Changes in short-term deposit
|
|
|
(9,904
|
)
|
|
|
8,510
|
|
|
|
(12,818
|
)
|
|
|
6,810
|
|
Investment in lease deposit
|
|
|
(5
|
)
|
|
|
1
|
|
|
|
-
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net cash provided by (used in) investing activities
|
|
$
|
(10,169
|
)
|
|
$
|
8,479
|
|
|
$
|
(13,033
|
)
|
|
$
|
6,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of options
|
|
|
25
|
|
|
|
30
|
|
|
|
-
|
|
|
|
30
|
|
Exercise and reissuance of warrants
|
|
|
11,994
|
|
|
|
-
|
|
|
|
11,994
|
|
|
|
-
|
|
Total net cash provided by financing activities
|
|
$
|
12,019
|
|
|
$
|
30
|
|
|
$
|
11,994
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(221
|
)
|
|
|
5,237
|
|
|
|
(984
|
)
|
|
|
5,180
|
|
Cash and cash equivalents at the beginning of the period
|
|
$
|
2,483
|
|
|
$
|
547
|
|
|
$
|
3,246
|
|
|
$
|
604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
$
|
2,262
|
|
|
$
|
5,784
|
|
|
$
|
2,262
|
|
|
$
|
5,784
|
|
The accompanying notes are an integral
part of the consolidated financial statements.
|
A.
|
Brainstorm Cell Therapeutics Inc. (“The Company”) was incorporated in the State of
Delaware on November 15, 2006, and previously was incorporated in the State of Washington. In October 2004, the Company formed
its wholly-owned subsidiary, Brainstorm Cell Therapeutics Ltd. (“BCT”) in Israel, which currently conducts all of the
research and development activities of the Company. On February 19, 2013, BCT formed its wholly-owned subsidiary, Brainstorm Cell
Therapeutics UK Ltd. in the United Kingdom. Brainstorm UK is currently inactive.
|
The
Company’s Common Stock is publicly traded on the NASDAQ Capital Market under the symbol “BCLI”.
|
B.
|
The Company, through BCT, holds rights to commercialize certain
stem cell technology developed by Ramot of Tel Aviv University Ltd. ("Ramot"), (see Note 3). Using this technology, the
Company has been developing novel adult stem cell therapies for debilitating neurodegenerative disorders such as Amyotrophic Lateral
Sclerosis (ALS, also known as Lou Gehrig Disease), Multiple Sclerosis (MS) and Parkinson’s disease. The Company developed
a proprietary process, called NurOwn, for the propagation of Mesenchymal Stem Cells and their differentiation into neurotrophic
factor secreting cells. These cells are then transplanted at or near the site of damage, offering the hope of more effectively
treating neurodegenerative diseases. The
process is currently autologous, or self-transplanted.
|
|
C.
|
NurOwn is in clinical development for the treatment of ALS. The
Company has completed two single dose clinical trials of NurOwn in Israel, a Phase 1/2 trial with 12 patients and a Phase 2a trial
with additional 12 patients. In July 2016 the Company announced the results of its Phase 2 trial which was conducted in three major
medical centers in the US. This single dose trial included 48 patients randomized in a 3:1 ratio to receive NurOwn or placebo.
In 2017 the Company commenced Phase 3 trial of NurOwn® for the treatment of ALS. Enrollment in this randomized, double-blind,
placebo-controlled, multi-dose clinical trial of NurOwn® for ALS is now ongoing.
|
GOING CONCERN:
To date the Company has not
generated revenues from its activities and has incurred substantial operating losses. Management expects the Company to continue
to generate substantial operating losses and to continue to fund its operations primarily through utilization of its current financial
resources and through additional raises of capital.
Such conditions raise substantial
doubts about the Company's ability to continue as a going concern. Management’s plan includes raising funds from outside
potential investors. However, there is no assurance such funding will be available to the Company or that it will be obtained on
terms favorable to the Company or will provide the Company with sufficient funds to meet its objectives. These financial statements
do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and
classification of liabilities that may be required should the Company be unable to continue as a going concern.
|
NOTE 2 -
|
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
|
|
A.
|
Unaudited Interim Financial Statements
|
The
accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S.
Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required
by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed).
For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2017.
Operating
results for the three months ended June 30, 2018, are not necessarily indicative of the results that may be expected for the year
ended December 31, 2018.
|
B.
|
Significant Accounting Policies
|
The
significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements
are identical to those applied in the preparation of the latest annual financial statements.
|
C.
|
Recent Accounting Standards
|
In
May 2014, the Financial Accounting Standards Board issued a new standard to achieve a consistent application of revenue recognition
within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting
principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in
an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In
addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and
cash flows arising from contracts with customers. The new standard is effective for us beginning in the first quarter of 2018;
early adoption is prohibited. The new standard is required to be applied retrospectively to each prior reporting period presented
or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The adoption
of the standard did not have a material impact on the Company’s consolidated financial statements.
In
February 2016, the FASB issued ASU 2016-02 “Leases” to increase transparency and comparability among organizations
by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.
For operating leases, the ASU requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at
the present value of the lease payments, on its balance sheet. The ASU retains the current accounting for lessors and does not
make significant changes to the recognition, measurement, and presentation of expenses and cash flows by a lessee.
The ASU is effective for the
Company in the first quarter of 2019, with early adoption permitted. The Company continues to evaluate the effect of the adoption
of this ASU and expects the adoption will result in an increase in the assets and liabilities on the consolidated balance sheets
for operating leases and will likely have an insignificant impact on the consolidated statements of earnings.
|
NOTE 2 -
|
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
(Cont.):
|
|
C.
|
Recent Accounting Standards (Cont.):
|
In June 2016, the FASB issued
a new standard requiring measurement and recognition of expected credit losses on certain types of financial instruments. It also
modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased
financial assets with credit deterioration since their origination. This standard is effective for us in the first quarter of 2020;
early adoption is permitted beginning in the first quarter of 2019. It is required to be applied on a modified-retrospective approach
with certain elements being adopted prospectively. The Company does not expect that the adoption of this standard will have a significant
impact on the financial position or results of operations.
In May 2017, the FASB issued
ASU 2017-09 “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting,” which clarifies when a
change to terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires
modification accounting if the vesting condition, fair value or the award classification is not the same both before and after
a change to the terms and conditions of the award. The new guidance is already effective since January 1, 2018. The adoption of
the standard did not have a material impact on the Company’s consolidated financial statements.
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
|
NOTE 3 -
|
RESEARCH AND LICENSE AGREEMENT
|
The
Company entered into a Research and License Agreement with Ramot (as amended and restated, the “License Agreement”).
Pursuant to the remuneration terms of the License Agreement, the Company has agreed to pay Ramot royalties on Net Sales of the
Licensed Product as follows:
|
a)
|
So long as the making, producing, manufacturing, using, marketing,
selling, importing or exporting (collectively, the “Commercialization”) of such Licensed Product is covered by a Valid
Claim or is covered by Orphan Drug Status, the Company shall pay Ramot a royalty of 5% of the Net Sales received by the Company
and resulting from such Commercialization; and
|
|
b)
|
In the event the Commercialization of the Licensed Product is
neither covered by a Valid Claim nor by Orphan Drug status, the Company shall pay Ramot a royalty of 3% of the Net Sales received
by the Company resulting from such Commercialization. This royalty shall be paid from the First Commercial Sale of the Licensed
Product and for a period of fifteen (15) years thereafter.
|
Capitalized terms set forth above which are not defined shall have the meanings attributed to them under the License
Agreement.
|
NOTE 4 -
|
SHORT TERM INVESTMENTS
|
Short term
investments on June 30, 2018 and December 31, 2017 include bank deposits bearing annual interest rates varying from 0.05% to 3%,
with maturities of up to 12 months as of June 30, 2018 and December 31, 2017.
|
NOTE 5 -
|
PREPAID EXPENSES
|
In November 2017 the Company
has contracted with City of Hope's Center for Biomedicine and Genetics ("COH") to produce clinical supplies of NurOwn®
adult stem cells for the Company’s ongoing Phase 3 clinical study. The Company has paid COH $2,665 as advance payment which
was recorded as prepaid expense and is amortized over the term of the agreement. As of June 30, 2018, $1,103 and $827 were recorded
as current and long-term prepaid expenses, respectively, compared to $1,103 and $1,378 that were recorded as current and long-term
prepaid expense, respectively, as of December 31, 2017.
|
NOTE 6 -
|
ACCRUED EXPENSES
|
On July 17, 2018, the Governance,
Nominating and Compensation Committee of the Board of Directors of the Company approved a $500,000 cash bonus payment to Chaim
Lebovits, the Company’s President and Chief Executive Officer, in recognition of his contributions to the Company during
the second quarter of 2018. As of June 30, 2018, the Company recorded the bonus amount as accrued expenses.
|
NOTE 7 -
|
DEFERRED GRANT INCOME
|
In July 2017 the Company received
an award in the amount of $15,912 from CIRM to aid in funding the Company’s Phase 3 study of NurOwn®, for the treatment
of ALS. An aggregate amount of $9,050 and $7,050 related to the project was received through June 30, 2018 and December 31, 2017,
respectively. The award does not bear a royalty payment commitment nor is the award otherwise refundable. $2,740 and $4,425 was
recorded as participation by CIRM in research and development expenses during the 6 month ended in June 30, 2018 and during the
year ended December 31, 2017, respectively.
The
rights of Common Stock are as follows:
Holders of
Common Stock have the right to receive notice to participate and vote in general meetings of the Company, the right to a share
in the excess of assets upon liquidation of the Company and the right to receive dividends, if declared.
The
Common Stock is publicly traded on the NASDAQ Capital Market under the symbol BCLI.
Private
placements and public offerings:
On June 6, 2018, the Company
entered into a Warrant Exercise Agreement (the “Warrant Exercise Agreement”) with certain holders (the “Holders”)
of warrants (the “2015 Warrants”) to purchase Company Common Stock, which 2015 Warrants were originally issued in the
Company’s January 8, 2015 private placement. Pursuant to the Warrant Exercise Agreement, the Holders exercised their 2015
Warrants for a total of 2,458,201 shares of Common Stock (the “Exercised Shares”) at an amended exercise price of $5
per share. The warrant exercises generated gross cash proceeds to the Company of $12,291 ($11,994 net of issuance expenses). In
addition, the Company issued new warrants to the Holders to purchase an aggregate 2,458,201 unregistered shares of Common Stock,
at an exercise price of $9, with an expiration date of December 31, 2020 (the “New Warrants”). Certain Holders of New
Warrants also entered into a Share Cap Agreement with the Company, whereby the Holders agreed to a 6-month delay (from the date
of issuance) in exercisability of any shares at or in excess of 20% limitation on the size of the entire transaction, pursuant
to Nasdaq Listing Rules.
The Warrant Exercise Agreement
also requires that to the extent that a Holder’s exercise of 2015 Warrants would result in such Holder exceeding the Beneficial
Ownership Limitation (as defined in the 2015 Warrants), such excess warrant shares shall be held for the benefit of such Warrant
Holder until such time as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation.
|
NOTE 8 -
|
STOCK CAPITAL (Cont.):
|
The Holders agreed that, subject
to limited exceptions, for the 90 days following the date of the Warrant Exercise Agreement (the “Restricted Period”),
neither the Company nor any Subsidiary will issue, enter into any agreement to issue or announce the issuance or proposed issuance
of any shares of Common Stock, without the prior written consent of all of the Holders of the warrant shares. The Company also
agreed that during the time the New Warrants are unexercised, the Company will not enter into any agreements with any holder of
2015 Warrants with more favorable terms, without the consent of the Holders of a majority of the warrant shares then exercisable
under all outstanding Warrant Exercise Agreements.
The New Warrants have not been
registered under the Securities Act of 1933, as amended (the Securities Act), or state securities laws. The Exercised Shares have
been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-201704). The issuance of the
Exercised Shares and New Warrants was exempt from the registration requirements of the Securities Act pursuant to the exemption
for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation
D promulgated under the Securities Act.
The Company and the Holders
also entered into Leak-Out Agreements (the “Leak-Out Agreement”) pursuant to which neither Holders nor certain of their
affiliates would collectively sell, dispose of or otherwise transfer, directly or indirectly, on any day on which the Nasdaq Capital
Market is open for trading during the Restricted Period (any such date, a “Date of Determination”), shares of the Company’s
Common Stock in an amount more than an aggregate 30% of the trading volume of Common Stock as reported by Bloomberg, LP for the
applicable Date of Determination.
As 899,999 of 2,458,201 shares
to be issued pursuant to exercise of the 2015 Warrants have not been issued as of June 30 2018, the relating proceeds were recorded
as receipts on account of shares.
Since its inception the Company
has raised approximately $59M, net in cash in consideration for issuances of Common Stock and warrants in private placements and
public offerings as well as proceeds from warrants exercises.
Stock
Plans:
As of June
30, 2018, the Company had outstanding awards for stock options under four stockholder approved plans: (i) the 2004 Global Stock
Option Plan and the Israeli Appendix thereto (the “2004 Global Plan”) (ii) the 2005 U.S. Stock Option and Incentive
Plan (the “2005 U.S. Plan,” and together with the 2004 Global Plan, the “Prior Plans”); (iii) the 2014
Global Share Option Plan and the Israeli Appendix thereto (which applies solely to participants who are residents of Israel) (the
“2014 Global Plan”); and (iv) the 2014 Stock Incentive Plan (the “2014 U.S. Plan” and together with the
2014 Global Plan, the “2014 Plans”).
The 2004
Global Plan and 2005 U.S. Plan expired on November 25, 2014 and March 28, 2015, respectively. Grants that were made under the Prior
Plans remain outstanding pursuant to their terms. The 2014 Plans were approved by the stockholders on August 14, 2014 (at which
time the Company ceased to issue awards under each of the 2005 U.S. Plan and 2004 Global Plan) and amended on June 21, 2016. Unless
otherwise stated, option grants prior to August 14, 2014 were made pursuant to the Company’s Prior Plans, and grants issued
on or after August 14, 2014 were made pursuant to the Company’s 2014 Plans, and expire on the tenth anniversary of the grant
date. The 2014 Plans have a shared pool of 2,200,000 shares of Common Stock available for issuance.
|
NOTE 8 -
|
STOCK CAPITAL (Cont.):
|
As of June
30, 2018, 957,709 shares were available for future issuances under the 2014 Plans. The exercise price of the options granted under
the 2014 Plans may not be less than the nominal value of the shares into which such options are exercised. Any options under the
2014 Plans that are canceled or forfeited before expiration become available for future grants. The Governance, Nominating and
Compensation Committee (the “GNC Committee”) of the Board of Directors of the Company administers the Company’s
stock incentive compensation and equity-based plans.
Share-based
compensation to employees and to directors:
Employees:
Pursuant
to a September 28, 2015 employment agreement, as amended, Chaim Lebovits, the Company’s Chief Executive Officer and President
(i) was granted a stock option under the 2014 Global Plan on September 28, 2015 for the purchase of up to 369,619 shares of the
Company’s Common Stock at a per share exercise price of $2.45, which grant is fully vested and exercisable and shall be exercisable
for a period of two years after termination of employment; (ii) received on July 26, 2017, and is entitled to receive on each anniversary
thereafter (provided he remains Chief Executive Officer), a grant of restricted stock under the 2014 Global Plan (or any successor
or other equity plan then maintained by the Company) comprised of a number of shares of Common Stock with a fair market value (determined
based on the price of the Common Stock at the end of normal trading hours on the business day immediately preceding the effective
date according to Nasdaq) equal to 30% of Mr. Lebovits’ Base Salary (31,185 shares on July 26, 2017). Each grant shall vest
as to twenty-five percent (25%) of the award on each of the first, second, third and fourth anniversary of the date of grant, provided
Mr. Lebovits remains continuously employed by the Company from the date of grant through each applicable vesting date. Each grant
shall be subject to accelerated vesting upon a Change of Control (as defined in the Lebovits employment agreement) of the Company.
In the event of Mr. Lebovits’ termination of employment, any portion of a grant that is not yet vested (after taking into
account any accelerated vesting) shall automatically be immediately forfeited to the Company, without the payment of any consideration
to Mr. Lebovits; and (iii) was granted on July 26, 2017 a fully vested and exercisable option (the “Option”) under
the 2014 Global Plan to purchase up to 41,580 shares of Common Stock, which shall remain exercisable until the 2nd anniversary
of the date of grant, regardless of whether Mr. Lebovits remains employed by the Company, with an exercise price per share of $4.81.
The Lebovits
employment agreement contains termination provisions, pursuant to which if the Company terminates the employment agreement or Mr.
Lebovits’ employment without Cause (as defined in the agreement) or if Mr. Lebovits terminates the employment agreement or
his employment thereunder with Good Reason (as defined in the agreement), the Company shall immediately vest such number of equity
or equity based awards that would have vested during the six (6) months following the date of termination of employment, conditional
upon Mr. Lebovits executing a waiver and release in favor of the Company in a form reasonably acceptable to the Company.
Pursuant to his February 28,
2017 employment agreement, Dr. Ralph Kern, Chief Operating Officer and Chief Medical Officer of the Company, received on March
6, 2017, and is entitled to receive on each anniversary thereafter (provided he remains employed by the Company), a grant of restricted
stock under the 2014 U.S. Plan (or any successor or other equity plan then maintained by the Company) comprised of a number of
shares of Common Stock with a fair market value (determined based on the price of the Common Stock at the end of normal trading
hours on the business day immediately preceding March 6, 2017 according to Nasdaq) equal to 30% of Dr. Kern’s Base Salary
(35,885 shares on each of March 6, 2017 and March 6, 2018). Each equity grant shall vest as to twenty-five percent (25%) of the
award on each of the first, second, third and fourth anniversary of the date of grant, provided Dr. Kern remains continuously employed
by the Company from the date of grant through each applicable vesting date. Each equity grant shall be subject to accelerated vesting
upon a Change of Control (as defined in the agreement) of the Company.
|
NOTE 8 -
|
STOCK CAPITAL (Cont.):
|
Share-based
compensation to employees and to directors: (Cont.):
Employees
(Cont.):
In the event of Dr. Kern’s
termination of employment, any portion of an equity grant that is not yet vested (after taking into account any accelerated vesting)
shall automatically be immediately forfeited to the Company, without the payment of any consideration to Dr. Kern.
Pursuant
to the agreement, on March 6, 2017, Dr. Kern also received an option under the 2014 U.S. Plan to purchase up to 47,847 shares of
Common Stock with an exercise price per share of $4.18. The option was fully vested and exercisable and shall remain exercisable
until the 2nd anniversary of the date of grant, regardless of whether Dr. Kern remains employed by the Company. Uri Yablonka, the
Company’s Executive Vice President, Chief Business Officer and director was granted a stock option on June 6, 2014 under
the Company’s Amended and Restated 2004 Global Share Option Plan (the “Global Plan”) for the purchase of 33,333
shares of the Company’s Common Stock, which was fully vested and exercisable upon grant. The exercise price for the grant
is $2.70 per share. In addition, the Company agreed to grant Mr. Yablonka a stock option under the Global Plan (or the applicable
successor option plan) for the purchase of up to 13,333 shares of Common Stock (subject to appropriate adjustment in the case of
stock splits, reverse stock splits and the like) of the Company on the first business day after each annual meeting of stockholders
(or special meeting in lieu thereof) of the Company beginning with the 2014 annual meeting, and provided that Mr. Yablonka remains
an employee of the Company on each such date. The exercise price per share of the Common Stock subject to each additional option
shall be equal to $0.75 (subject to appropriate adjustment in the case of stock splits, reverse stock splits and the like, or changes
to the Israeli Annual Option Award under the Company’s Director Compensation Plan as amended from time to time). Each additional
option vests and becomes exercisable on each monthly anniversary date as to 1/12th the number of shares subject to the option,
over a period of twelve months from the date of grant, such that each additional option will be fully vested and exercisable on
the first anniversary of the date of grant, provided that Mr. Yablonka remains an employee of the Company on each such vesting
date. The Company also granted Mr. Yablonka 5,543 shares of restricted Common Stock on July 13, 2017
On November
20, 2017, the Company granted to Eyal Rubin, the Company’s Chief Financial Officer, 25,000 shares of restricted Common Stock
under 2014 Global Plan, which shall vest as to 100% of the award on April 1, 2018, provided Mr. Rubin remains continuously employed
by BCT from the date of grant through the vesting date. In the event of Mr. Rubin’s termination of employment prior to April
1, 2018, the restricted stock grant shall automatically be immediately forfeited in its entirety to the Company, without the payment
of any consideration to Mr. Rubin. On November 20, 2017 the Company also granted to Mr. Rubin an option to purchase up to 93,686
shares of Common Stock under the 2014 Global Plan, at an exercise price per share equal to $4.30 per share. The Option shall vest
and become exercisable as follows: 25% of the shares underlying the Option shall vest and become exercisable on each of the first,
second, third and fourth anniversary of the date of grant, until fully vested and exercisable on the fourth anniversary of the
date of grant, provided Mr. Rubin remains continuously employed by BCT from the date of grant through each applicable vesting date.
The Option shall have a ten (10) year term and shall be subject to accelerated vesting upon a Change of Control of the Company
or Material Secondary Public Offering of the Company (each as defined in Mr. Rubin’s employment agreement).
|
NOTE 8 -
|
STOCK CAPITAL (Cont.):
|
Share-based
compensation to employees and to directors: (Cont.):
Directors:
From 2005
through 2015, the Company granted its directors options to purchase an aggregate of 402,778 shares of Common Stock at an average
exercise price of $1.34 per share.
The Company’s
Second Amended and Restated Director Compensation Plan was approved in July 9, 2014 and amended on April 29, 2015, February 26,
2017 and July 13, 2017 (as amended, the “Director Compensation Plan”). The Director Compensation Plan governs Company
compensation of eligible non-employee director of the Company, except that certain non-employee directors have individualized compensation
and are not entitled receive annual director awards under the Director Compensation Plan, but are entitled to committee compensation
under the Director Compensation Plan in the event that they qualify for and serve as a member of any committee of the Board. The
Director Compensation Plan also determines the annual awards to be granted to qualified directors for their services in future
periods, which annual awards have had the same terms since 2014, as further detailed in the Director Compensation Plan. During
the 6 months ended June 30, 2018, the following grants were made under the 2014 Plans to eligible directors:
|
-
|
On February 1, 2018 Dr. Anthony J. Polverino received 3,623 shares of restricted stock for his
service as a director.
|
|
-
|
On February 26, 2018 Arturo Araya received 4,152 shares of restricted stock for his service as
a director.
|
|
-
|
On March 26, 2018, Arturo Araya received additional 1,249 shares of restricted stock for his service
as a member of the GNC Committee.
|
|
NOTE 8 -
|
STOCK CAPITAL (Cont.):
|
Share-based
compensation to employees and to directors: (Cont.):
A
summary of the Company's option activity related to options to employees and directors, and related information is as follows:
|
|
For the six months ended
June 30, 2018
|
|
|
|
Amount of
options
|
|
|
Weighted
average
exercise
price
|
|
|
Aggregate intrinsic
value
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
Outstanding at beginning of period
|
|
|
940,954
|
|
|
|
2.4681
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Exercised
|
|
|
(33,332
|
)
|
|
|
0.7500
|
|
|
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Outstanding at end of period
|
|
|
907,622
|
|
|
|
2.5312
|
|
|
|
1,242,396
|
|
Vested and expected-to-vest at end of period
|
|
|
797,824
|
|
|
|
2.3594
|
|
|
|
1,229,120
|
|
The aggregate
intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Company’s
shares on June 30, 2018, multiplied by the number of in-the-money options on those dates) that would have been received by the
option holders had all option holders exercised their options on those dates.
Compensation
expense recorded by the Company in respect of its stock-based employees and directors compensation awards in accordance with ASC
718-10 for the three months ended June 30, 2018 and 2017 amounted to $136 and $57, respectively.
Shares
and warrants to investors and service providers:
The Company
accounts for shares and warrant grants issued to non-employees using the guidance of ASC 505-50, "Equity-Based Payments to
Non-Employees", whereby the fair value of such warrant grants is determined using a Black-Scholes options pricing model at
the earlier of the date at which the non-employee's performance is completed or a performance commitment is reached.
|
NOTE 8 -
|
STOCK CAPITAL (Cont.):
|
On August
17, 2017 the Company issued to Anthony Fiorino, the former CEO of the Company, for consulting services rendered, a grant of 4,327
shares of restricted stock under the 2014 U.S. Plan, which vests in eight equal quarterly installments (starting November 17, 2017)
until fully vested on the second anniversary of the date of grant.
On January 2, 2018, the Company
granted to its legal advisor 11,250 shares of Common Stock for 2017 legal services. The related compensation expense was recorded
as general and administrative expense in 2017.
Total
Stock-Based Compensation Expense
The total stock-based compensation
expense, related to shares, options and warrants granted to employees, directors and service providers was comprised, at each period,
as follows:
|
|
Six months ended
June 30,
|
|
|
|
2 0 1 8
|
|
|
2 0 1 7
|
|
|
|
|
|
Research and development
|
|
|
48
|
|
|
|
75
|
|
General and administrative
|
|
|
315
|
|
|
|
108
|
|
Total stock-based compensation expense
|
|
|
363
|
|
|
|
183
|
|
|
NOTE 9 -
|
SUBSEQUENT EVENTS
|
On July 3, 2018, the Israel
Innovation Authority (“IIA”) payed the Company the final installment of approximately $800 under the 2017 IIA grant.
Total cash on hand, Cash equivalents,
Short Term Deposits and cash commitment to be received from the IIA as of June 30, 2018 totaled approximately $18,200.
In accordance with ASC 855
“Subsequent Events” the Company evaluated subsequent events through the date the condensed consolidated financial statements
were issued. The Company concluded that no other subsequent events have occurred that would require recognition or disclosure in
the condensed consolidated financial statements.
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report contains numerous
statements, descriptions, forecasts and projections, regarding Brainstorm Cell Therapeutics Inc. (together with its consolidated
subsidiaries, the “Company,” “Brainstorm,” “we,” “us” or “our”) and
its potential future business operations and performance, including financial results for the most recent fiscal quarter, statements
regarding the market potential for treatment of neurodegenerative disorders such as ALS, the sufficiency of our existing capital
resources for continuing operations in 2018 and beyond, the safety and clinical effectiveness of our NurOwn® technology, our
clinical trials of NurOwn® and its related clinical development, and our ability to develop collaborations and partnerships
to support our business plan. In some cases you can identify such “forward-looking statements” by the use of words
like “may,” “will,” “should,” “could,” “expects,” “hopes,”
“anticipates,” “believes,” “intends,” “plans,” “projects,” “targets,”
“goals,” “estimates,” “predicts,” “likely,” “potential,” or “continue”
or the negative of any of these terms or similar words. These statements, descriptions, forecasts and projections constitute “forward-looking
statements,” and as such involve known and unknown risks, uncertainties, and other factors that may cause our actual results,
levels of activity, performance and achievements to be materially different from any results, levels of activity, performance and
achievements expressed or implied by any such “forward-looking statements.” These risks and uncertainties include,
but are not limited to our need to raise additional capital, our ability to continue as a going concern, regulatory approval of
our NurOwn® treatment candidate, the success of our product development programs and research, regulatory and personnel issues,
development of a global market for our services, the ability to secure and maintain research institutions to conduct our clinical
trials, the ability to generate significant revenue, the ability of our NurOwn® treatment candidate to achieve broad acceptance
as a treatment option for ALS or other neurodegenerative diseases, our ability to manufacture and commercialize our NurOwn®
treatment candidate, obtaining patents that provide meaningful protection, competition and market developments, our ability to
protect our intellectual property from infringement by third parties, heath reform legislation, demand for our services, currency
exchange rates and product liability claims and litigation, and other factors described under “Risk Factors” in this
report and in our annual report on Form 10-K for the fiscal year ended December 31, 2017. These “forward-looking statements”
are based on certain assumptions that we have made as of the date hereof. To the extent these assumptions are not valid, the associated
“forward-looking statements” and projections will not be correct. Although we believe that the expectations reflected
in these “forward-looking statements” are reasonable, we cannot guarantee any future results, levels of activity, performance
or achievements. It is routine for our internal projections and expectations to change as the year or each quarter in the year
progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our expectations
may change prior to the end of each quarter or the year. Although these expectations may change, we may not inform you if they
do and we undertake no obligation to do so, except as required by applicable securities laws and regulations. We caution investors
that our business and financial performance are subject to substantial risks and uncertainties. In evaluating our business, prospective
investors should carefully consider the information set forth under the caption “Risk Factors” in this report and in
our annual report on Form 10-K for the fiscal year ended December 31, 2017, in addition to the other information set forth herein
and elsewhere in our other public filings with the Securities and Exchange Commission (“SEC”).
Company Overview
Brainstorm Cell Therapeutics Inc. is a biotechnology
company committed to bring innovative central nervous system (“CNS”) adult stem cell therapies to the market to improve
the lives of patients with debilitating neurodegenerative diseases. As a leader in CNS regenerative cellular medicines, Brainstorm
is leveraging NurOwn®, its proprietary autologous mesenchymal stem cell platform technology, a strong and expanded intellectual
property portfolio, as well as manufacturing and commercialization capabilities, to address growing unmet medical needs across
a broad range of neurodegenerative disorders, such as Amyotrophic Lateral Sclerosis (“ALS”, also known as Lou Gehrig’s
disease), Multiple Sclerosis (“MS”), Parkinson’s disease (“PD”) and Autism Spectrum Disorders (“ASD”).
Our wholly-owned Israeli subsidiary, Brainstorm
Cell Therapeutics Ltd. (“Israeli Subsidiary”), holds rights to commercialize NurOwn® technology through a licensing
agreement with Ramot (“Ramot”), the technology transfer company of Tel Aviv University, Israel. We currently employ
26 employees in Israel and 3 in the United States.
In the last 12 months, the Company was awarded
a $16 million non-dilutive grant from the California Institute for Regenerative Medicine (CIRM) to conduct a U.S. Phase 3 ALS study,
launched a 200 participant NurOwn® ALS Phase 3 study that is actively enrolling in 6 leading U.S. centers, and received GMP
approval for NurOwn® manufacturing in Israel.
On June 6, 2018, the Company entered into a
Warrant Exercise Agreement with certain holders of warrants issued in the January 8, 2015 private placement (the “2015
Warrants”). These holders have exercised warrants (for a total of 2,458,201 shares of common stock to be issued) at
an amended exercise price of $5.00 per share, which generated gross cash proceeds of $12,291,005. For each warrant
exercised, BrainStorm has agreed to issue one new warrant to the holders to purchase unregistered shares of common stock at an
exercise price of $9.00 and an expiration date of December 31, 2020. (the “New Warrants”). Certain
holders of New Warrants also entered into a share cap agreement with the Company, whereby the holders agreed to a 6-month delay
(from the date of issuance) in exercisability of any shares at or in excess of the 20% limitation on the size of the entire transaction
contained in Nasdaq Listing Rule 5635(d).The Company has expanded and strengthened its executive management team and attracted
key biotechnology industry leaders to the Company’s Board of Directors. The Company has also formed a Scientific Advisory
Board (SAB) with world leading neuroscientists and experts in the fields of ALS, MS and other neurodegenerative diseases who will
advise the management team on scientific matters such as research, clinical trials and drug development. The SAB is being chaired
by Jerold Chun, M.D., Ph.D., who is an acclaimed neuroscientist and professor at Sanford Burnham Prebys Medical Discovery
Institute and has decades of expertise in degenerative disease research and neuroscience drug development.
The Company has also entered into employment
agreements with Susan Ward Ph.D. and Joseph Petroziello, to serve as Head of Clinical Operations and Vice President of Scientific
and Corporate Communications, respectively. Dr. Ward, who served as Director, Early Clinical Development at Pfizer, has
more than 20 years of operational leadership experience in clinical trials, IND-enabling studies, protocol development and management
of cross-functional teams. Joe Petroziello previously worked at Juno Therapeutics (a Celgene company), where he
served as Senior Director/Head of Scientific Communications & Publications. Both Dr. Ward and Mr. Petroziello will be
based in the U.S., in line with the Company’s strategy to build U.S. infrastructure, in anticipation for a potential launch
of NurOwn® in the future.
The Connell and O’Reilly Cell Manipulation
Core Facility at the Dana Farber Cancer Institute in Boston has been recently contracted to manufacture NurOwn® and placebo
to accelerate the Phase 3 clinical study enrollment and to support manufacturing capacity for additional clinical indications.
Dana Farber has decades of cell therapy manufacturing experience and a proven track record in the manufacture of NurOwn® in
the Company’s Phase 2 U.S. trial.
Our Proprietary Technology
NurOwn® technology is based on an innovative
manufacturing protocol, which induces the differentiation of purified and expanded bone marrow-derived mesenchymal stem cells (“MSC”)
into cells capable of releasing high levels of multiple neurotrophic factors (“MSC-NTF” cells) for neuroprotection
while maintaining the intrinsic immunomodulatory effects of MSC. These factors are known to be critical for the growth, survival
and differentiation of neurons, they include: glial-derived neurotrophic factor (“GDNF”); brain-derived neurotrophic
factor (“BDNF”); vascular endothelial growth factor (“VEGF”); and hepatocyte growth factor (“HGF”),
among others. GDNF is one of the most potent survival factors known for peripheral neurons. VEGF and HGF have been demonstrated
to have important neuro-protective effects in ALS and in other neurodegenerative diseases.
Our approach to the treatment of neurodegenerative
diseases with autologous adult stem cells involves a multi-step process that includes: harvesting of undifferentiated stem cells
from the patient's own bone marrow; processing of cells at the manufacturing site; cryopreservation to enable multiple treatments
from a single bone marrow sample; and intrathecal (“IT”) injection of MSC-NTF cells into the same patient by standard
lumbar puncture. This administration procedure does not require hospitalization and has been shown to be safe and well tolerated
in multiple CNS clinical trials to date. The ongoing U.S. Phase 3 ALS study is evaluating the therapeutic potential of repeated
dosing (every 2 months).
The proprietary technology and manufacturing
processing of NurOwn® (MSC-NTF cells) for clinical use is conducted in full compliance with current Good Manufacturing Practice
(“cGMP”). The NurOwn® proprietary technology is fully licensed to and developed by Brainstorm Cell Therapeutics
Ltd., our wholly-owned subsidiary (the “Israeli Subsidiary”).
The NurOwn® Transplantation Process
|
·
|
Bone marrow aspiration from the patient;
|
|
·
|
MSC Isolation and propagation;
|
|
·
|
MSC Cryopreservation;
|
|
·
|
MSC thawing and differentiation into neurotrophic-factor secreting (MSC-NTF; NurOwn®) cells; and
|
|
·
|
Autologous transplantation into the patient’s cerebrospinal fluid by IT injection (standard lumbar puncture).
|
Differentiation before Transplantation
The ability to induce differentiation of autologous
adult mesenchymal stem cells into MSC-NTF cells
before
transplantation is unique to NurOwn®, making it the
first-of-its-kind for the treatment of neurodegenerative diseases.
The specialized MSC-NTF cells secrete multiple
neurotrophic factors that may lead to:
|
·
|
Protection of existing motor neurons;
|
|
·
|
Promotion of motor neuron repair; and
|
|
·
|
Re-establishment of functional nerve-muscle interactions.
|
Autologous (Self-transplantation)
The NurOwn® approach is autologous, using
the patient’s own bone-marrow derived stem cells for “self-transplantation.” In autologous transplantation, there
is no risk of rejection or introduction of donor antigens and no need for treatment with immunosuppressive agents, which can cause
severe and/or long-term side effects. In addition, the use of adult stem cells is free of ethical controversies associated with
the use of embryonic-derived stem cells in some countries.
The ALS Program
NurOwn® is currently in a Phase 3 late
stage clinical development program for the treatment of ALS. It has been granted Fast Track designation by the U.S. Food and Drug
Administration (“FDA”) for this indication, and has been granted Orphan Status, which provides the potential for an
extended period of exclusivity, in both the U.S. and in Europe. We have completed two early stage Phase 1/2 and Phase 2 open label
clinical trials of NurOwn® in patients with ALS at the Hadassah Medical Center (“Hadassah”) in Jerusalem as well
as a Phase 2 double-blind, placebo-controlled, clinical study at three prestigious U.S. Medical centers, all highly experienced
in the management and investigation of ALS.
Phase 1/2 Open Label Trials
The first two open-label studies were approved
by the Israeli Ministry of Health (“MoH”) and the U.S. study was conducted under an FDA Investigational New Drug (“IND”)
application. The first-in-human study, a Phase 1/2 safety and efficacy study of NurOwn® administered either intramuscularly
or intrathecally in 12 ALS patients, was initiated in June 2011. In the Phase 2 dose-escalating study, 14 ALS patients were administered
NurOwn® by a combined route of intramuscular and intrathecal administration. These studies demonstrated the safety of NurOwn®
by both routes of administration and showed signs of efficacy.
In January 2016, the results of the two completed
Phase 1/2 study and Phase 2 open label studies were published in JAMA Neurology. The publication presented the data showing
indications of clinically meaningful benefit as reflected by a slower rate of disease progression in the period post treatment
on both the ALS Functional Rating Score (“ALSFRS-R”), the industry gold standard and a well-established measure, for
evaluating the functional status of patients with ALS, and Forced Vital Capacity (“FVC”), a measure of pulmonary
function, as well as a positive trend on the rate of decline of muscle volume and on the compound motor axon potential (“CMAPs”).
These were the first published clinical data using autologous mesenchymal stem cells, induced under culture conditions, to produce
NTFs, with the potential to achieve a neuroprotective effect in ALS and modify the course of this disease.
Phase 2 Randomized Trial
The FDA-approved, randomized, double-blind,
placebo controlled multi-center U.S. Phase 2 clinical trial evaluating NurOwn® in ALS patients was conducted at three clinical
sites: (i) the Massachusetts General Hospital (MGH) in Boston, (ii) Massachusetts Memorial Hospital in Worcester, Massachusetts,
and (iii) Mayo Clinic in Rochester, Minnesota. For this study, NurOwn® was manufactured at the Connell and O’Reilly Cell
Manipulation Core Facility at the Dana Farber Cancer Institute in Boston and at the Human Cellular Therapy Lab at the Mayo Clinic.
In this study 48 patients were randomized 3:1 to receive NurOwn® or placebo.
Topline data from this Phase 2 Study were announced
by the Company in July 2016. Further details were presented by investigators Dr. Robert Brown and Dr. James Berry, at the 15th
Annual Meeting of the Northeast ALS Consortium (NEALS) in October 2016 and by Dr. Berry at the 27th International Symposium
on ALS/MND, in Dublin, Ireland, in December 2016. Key findings from the trial were as follows:
|
·
|
The study achieved its primary objective, demonstrating that NurOwn® transplantation was safe
and well tolerated. There were no discontinuations from the trial due to AEs and there were no deaths in the study. The most common
adverse events (of mild or moderate severity), were transient procedure-related AEs such as headache, back pain, pyrexia arthralgia
and injection-site discomfort, which were more commonly seen in the NurOwn-treated participants compared to placebo.
|
|
·
|
NurOwn® also achieved multiple secondary efficacy endpoints, showing evidence of a clinically
meaningful benefit. Notably, response rates in the ALS functional rating scale-revised (48-point ALSFRS-R outcome measure)
were higher in NurOwn®-treated subjects, compared to placebo, at all time points in the study out to 24 weeks.
|
|
·
|
A pre-specified responder analysis examined percentage improvements in the post treatment ALSFRS-R
slope (change/month) compared to pre-treatment slope and showed that a higher proportion of NurOwn® treated participants
achieved a 100% improvement in the post-treatment vs. pre-treatment slope, compared with the placebo group. This analysis also
showed that a higher proportion of the NurOwn® treated participants achieved a 1.5 point per month or greater improvement
in the post-treatment vs. pre-treatment ALSFRS-R slope, compared with the placebo group.
|
|
·
|
The beneficial treatment effects were greater in the rapid progressor subgroup (pretreatment ALSFRS-R
declined by 2 or more points in the three months pre-treatment).
|
|
·
|
As an important confirmation of the biological action of NurOwn®, levels of neurotrophic factors
and inflammatory markers were measured in the cerebral-spinal fluid (“CSF”) samples collected from patients pre- and
two weeks post treatment. In the samples of those patients treated with NurOwn®, statistically significant increases in levels
of neurotrophic factors VEGF, HGF and LIF and a statistically significant reduction in inflammatory markers MCP-1, SDF-1 and CHIT-1
was observed post-transplantation. Furthermore, the observed reduction in inflammatory markers correlated with clinical outcomes. These
results were not seen in placebo treated patients, consistent with the proposed biological mechanism of action of NurOwn® in
ALS.
|
|
·
|
In summary, a higher proportion of NurOwn® treated study participants, particularly those
with more rapid disease progression, experienced a halt in disease progression or improvement in function, as measured by the post-treatment
vs. pre-treatment ALSFRS-R slope change.
These are new and meaningful ALS clinical observations that are being evaluated
in the ongoing Phase 3 study using repeat dosing in ALS rapid progressors.
|
Phase 3 Trial
The Company completed a successful End-of-Phase
2 Meeting with the U.S. FDA and reached a general agreement to proceed to a Phase 3 trial. Importantly, the FDA accepted
the key elements of the Phase 3 program (a multi-dose double-blind, placebo-controlled, multicenter trial protocol) that has been
designed to support a Biologic License Application (“BLA”) for NurOwn® in ALS. The clinical trial is actively
enrolling an enriched patient population based on superior outcomes observed in the Phase-2 pre-specified sub-group of rapid progressors.
The primary clinical efficacy outcome measure is the ALSFRS-R score responder analysis, an outcome that evaluates the proportion
of treated participants who achieve a prespecified level of improvement in the ALSFRS-R post-treatment slope. The Phase 3 trial
expands biomarker evaluations to further understand their potential to predict ALS disease progression, treatment response and
confirm the biology of NurOwn® in a larger study population. The study is being conducted at 6 leading U.S. medical centers,
3 of which participated in the prior Phase 2 study. Patient enrollment commenced in October 2017, at Massachusetts General Hospital
followed by the other 5 study sites, including University of California Irvine Medical Center, University of Massachusetts Medical
Center, Mayo Clinic in Rochester, Minnesota, the California Pacific Medical Center in San Francisco, and Cedar Sinai Medical Center
in Los Angeles. All 6 sites are actively enrolling study participants. Interim safety data are expected in August 2018 and top-line
efficacy data in late 2019 or early 2020. The study is registered at
www.clinicaltrials.gov
(Identifier NCT03280056).
The Company has developed a validated cryopreservation
process for the long-term storage of MSC, that allows multiple doses of autologous NurOwn® to be created from a single
bone marrow harvest procedure in the multi-dose clinical trial and avoid the need for patients to undergo repeated bone marrow
aspiration. A validation study was conducted in 2017 comparing NurOwn® derived from fresh MSC to those derived from cryopreserved
MSC. Company scientists were successful in showing that the MSC can be stored in the vapor phase of liquid nitrogen for prolonged
periods of time, while maintaining their characteristics. Cryopreserved MSC are capable of differentiating into NurOwn®, similar
to the NurOwn® derived from fresh MSC from the same patient/donor, prior to cryopreservation and maintain their key functional
properties including immunomodulation and neurotrophic factor secretion.
The Company has contracted with City of Hope's Center for Biomedicine and Genetics to produce clinical supplies of NurOwn®
adult stem cells for the ongoing Phase 3 clinical study. City of Hope is currently supporting the production of NurOwn®
and placebo for the participants treated in the Phase 3 trial. The Connell and O’Reilly Cell Manipulation Core Facility at
the Dana Farber Cancer Institute in Boston has been also recently contracted to manufacture NurOwn® and placebo for the Phase
3 clinical study participants.
Patient Access Programs
The Company collaborated with the Tel Aviv
Sourasky Medical Center (Ichilov Hospital), and jointly applied by the Israel Hospital Exemption regulatory pathway, which was
adopted by the Ministry of Health (MoH) from the European Union regulation, for NurOwn® treatment of ALS. This pathway will
enable the Company to make NurOwn® potentially accessible for ALS patients in Israel, for a fee. These treatments will
be administered by Advanced Cell Therapies Ltd, a newly formed Israeli company and a wholly owned subsidiary of the Company’s
Israeli Subsidiary.
In January 2018, the Company announced the
receipt of Good Manufacturing Practice (GMP) approval from the Israel MoH for its Israeli contract manufacturing facility. The
GMP certificate confirms the Company's manufacturing site compliance with Israeli GMPs which are recognized as equivalent with
EU standards. This approval advances the Company’s application to the Israel MoH for the treatment of ALS patients under
the Hospital Exemption regulation. The GMP certificate was granted after an inspection of the Company’s contract manufacturing
facilities.
Non-Dilutive Funding
In
July 2017, the Company was awarded a grant in the amount of $15,912,000 from CIRM to aid in funding the Company’s pivotal
Phase 3 study of NurOwn®, for the treatment of ALS. To date, the Company has received $9,050,000 of the CIRM grant: $7,050,000
was received in 2017 and an additional $2 million was received on April 30, 2018. The grant does not bear a royalty payment commitment
nor is the grant otherwise refundable.
In 2017 and 2018, the Company was awarded aggregate grants of approximately
$3.2 million from the Israel Innovation Authority (“IIA”). Year to date the Company has received approximately $1.7
million from IIA, made under the 2018 as well as under previous IIA grants.
Intellectual Property
A key element of the Company’s overall
strategy is to establish a broad portfolio of patents and other methods described below to protect its proprietary technologies
and products. Brainstorm is the sole licensee or assignee of 7 granted patents and 21 patent applications in the United States,
Europe, and Israel, as well as in additional countries worldwide, including countries in the Far East and South America (in calculating
the number of granted patents, each European patent validated in multiple jurisdictions was counted as a single patent).
In January, 2018 the European Patent Office
("EPO") issued a Notice of Intention to Grant a European-wide patent for Patent Application No. 09754337.5 which claims
priority from WO 2009/144718. The allowed claims cover methods of treating ALS using mesenchymal stem cells that secrete neurotrophic
factors, including brain derived neurotrophic factor (BDNF).
On January 30, 2018, the U.S. Patent and Trademark
Office (“USPTO”) granted U.S. patent, No. 9,879,225 which claims priority from this same PCT application. This patent
relates to methods of treating ALS and Parkinson's disease using mesenchymal stem cells that secrete neurotrophic factors, specifically
glial derived neurotrophic factor (GDNF).
On June 19, 2018, the Japanese Patent Office
("JPO") issued a decision to Grant notice to a Japanese patent entitled: 'Methods of Generating Mesenchymal Stem Cells
which Secrete Neurotrophic Factors” (Japanese Patent Application number 2015-526006). The Decision to Grant notice
is the final approval stage and precedes actual granting which is expected shortly. When granted, this patent is expected to provide
protection for MSC-NTF cells (NurOwn®) in Japan until 2033. The allowed claims cover a method of generating cells which secrete
brain derived neurotrophic factor (BDNF), glial derived neurotrophic factor (GDNF), hepatocyte growth factor (HGF) and vascular
endothelial growth factor (VEGF).
Research and Development
In addition to its active clinical program
in ALS, the Company is focusing on further in-depth molecular and functional characterization of NurOwn®. A study profiling
NurOwn®'s unique miRNA signature was published in 2017 in
Stem Cell Research & Therapy
. The publication, entitled
"miRNA profiling of NurOwn®: mesenchymal stem cells secreting neurotrophic factors" shows that NurOwn® MSC-NTF
cells induced to secrete neurotrophic factors have both an enhanced secretion of NTFs as well as a distinct miRNA expression profile
that distinguishes them from their MSC of origin. miRNAs have been shown to play critical roles in neuronal and glial cell biological
processes. These findings may form the basis for the development of sensitive identity release assays for clinical trials, in
vivo cell identification assays, and to elucidate MSC-NTF cells' mechanism of action in ALS and other neurodegenerative diseases.
The Company is also reviewing the potential
clinical development of NurOwn® in other neurodegenerative disorders, such as progressive multiple sclerosis, Parkinson’s
disease, Huntington’s disease and Rett syndrome. Research is currently ongoing to develop additional cell products which
might be suitable for multiple neurodegenerative diseases.
For the Phase 3 study in ALS, the Company has
improved the efficiency of NurOwn® production and improved its stability, allowing manufacturing to take place at centralized
clean room facilities from which it is distributed to the clinical trial sites, where the cells are then administered to patients.
The Company is also engaged in several research initiatives to further improve and scale-up manufacturing capacity and extend the
shelf life of NurOwn®.
Corporate Information
We are incorporated under the laws of the State
of Delaware. Our principal executive offices are located at 1325 Avenue of Americas, 28
th
Floor, New York, NY 10019,
and our telephone number is (201) 488-0460. We maintain an Internet website at
http://www.brainstorm-cell.com
.
The information on our website is not incorporated into this Quarterly Report on Form 10-Q.
Results of Operations
For the period from inception (September 22,
2000) through June 30, 2018, the Company has not earned any revenue from operations. The Company does not expect to earn revenue
from operations until the second half of 2018, if ever. The Company has incurred operating costs and other expenses of approximately
$3,087,000 during the three months ended June 30, 2018 compared to $1,075,000 during the three months through June 30, 2017.
Research and Development Expenses:
Research and development expenses, net for
the three months ended June 30, 2018 and 2017 were $1,481,000 and $435,000, respectively, representing an increase of $1,046,000.
This increase is due to (i) an increase of $2,139,000 in connection with the U.S. Clinical Trial;(ii) an increase of $159,000 for
patents, travel, rent and other activities and (iii) an increase of $66,000 for costs related to payroll and stock-based compensation
expenses. This increase was partially offset by an increase of $1,318,000 in funds received from the Israel Innovation Authority
(“IIA”) and CIRM in 2018, under various awarded grants.
Excluding funds received from IIA and CIRM
under the grants, research and development expenses increased by $2,364,000 from $944,000 in the second quarter of 2017 to $3,308,000
in the second quarter of 2018.
General and Administrative Expenses:
General and administrative expenses for the
three months ended June 30, 2018 and 2017 were $1,606,000 and $640,000, respectively. The increase in general and administrative
expenses of $966,000 is primarily due to (i) an increase of $745,000 in payroll costs and stock-based compensation expenses; (ii)
an increase of $91,000 in PR and stock management cost and (iii) an increase of $130,000 in consultants, rent and other costs.
Other Income and Expenses:
Financial expense for the three months ended
June 30, 2018 was $4,000 as compared to financial income of $35,000 for the three months ended June 30, 2017.
Net Loss:
Net loss for the three months ended on June
30, 2018 was $3,091,000, as compared to a net loss of $1,040,000 for the three months ended June 30, 2017. Net loss per share for
the three months ended June 30, 2018 and 2017 was $0.16 and $0.06, respectively.
The weighted average number of shares of Common
Stock used in computing basic and diluted net loss per share for the three months ended June 30, 2018 was 19,505,157, compared
to 18,738,496 for the three months ended June 30, 2017.
Liquidity and Capital Resources
The Company has financed its operations since
inception primarily through public and private sales of its Common Stock and warrants and the issuance of convertible promissory
notes. At June 30, 2018, the Company had net working capital of $11,416,000 including cash, cash equivalents and short-term bank
deposits amounting to $17,439,000.
Cash, Cash equivalents (including short-term
bank deposits) and cash commitments (including the final installment under the 2017 IIA grant at amount of approximately $800,000)
amounted to approximately $18,200,000.
Net cash provided by operating activities was
$55,000 for the three months ended June 30, 2018. Cash derived from operating activities was primarily attributed to increase in
deferred grant income, decrease in accounts receivables and pre-paid expenses as well as increase in trade payables. Net cash used
in investing activities was $13,033,000 for the three months ended June 30, 2018, representing net increase in short term interest
bearing bank deposits. Net cash provided by financing activities was $11,994,000 for the three months ended June 30, 2018 and is
attributable to the exercise and reissuance of warrants on June 6
th
, 2018.
Our material cash needs for the next 24 months,
assuming we do not expand our clinical trials beyond the current Phase 3 trial in the United States, will include (i) costs of
the clinical trial in the U.S., (ii) employee salaries, (iii) payments to Hadassah for rent and operation of the GMP facilities,
and (iv) fees to our consultants and legal advisors, patents, and fees for facilities to be used in our research and development.
Over the longer term if we are not able to
raise additional capital, we may not be able to continue to function as a going concern and may have to cease operations or the
Company will reduce its costs, including curtailing its current plan to move new indications into clinical testing. We will be
required to raise a substantial amount of capital in the future in order to reach profitability and to complete the commercialization
of our products. Our ability to fund these future capital requirements will depend on many factors, including the following:
|
•
|
our ability to obtain funding from third parties, including any future collaborative partners;
|
|
•
|
the scope, rate of progress and cost of our clinical trials and other research and development programs;
|
|
•
|
the time and costs required to obtain regulatory approvals;
|
|
•
|
the terms and timing of any collaborative, licensing and other arrangements that we may establish;
|
|
•
|
the costs of filing, prosecuting, defending and enforcing patents, patent applications, patent claims, trademarks and other intellectual property rights;
|
|
•
|
the effect of competition and market developments; and
|
|
•
|
future pre-clinical and clinical trial results.
|
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial
condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the U.S. The preparation of these financial statements requires us to make judgments, estimates,
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements as well as the reported revenue and expenses during the reporting periods. We continually
evaluate our judgments, estimates and assumptions. We base our estimates on the terms of underlying agreements, our expected course
of development, historical experience and other factors we believe are reasonable based on the circumstances, the results of which
form our management’s basis for making judgments about the carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There were no significant changes to our critical
accounting policies during the quarter ended June 30, 2018. For information about critical accounting policies, see the discussion
of critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements that
have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition,
revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.