• | refusal to grant export approval for our products; | |
• | criminal prosecution; and |
• | unanticipated expenditures to address or defend such actions. |
Because elements of the CardiAMP Cell Therapy System are already approved or cleared and manufactured for commercial use, we believe regulatory approval risks are primarily those of clinical safety and efficacy in each of the two indications being assessed under separate IDEs.
Regulation of Companion Diagnostics
Companion diagnostics are subject to regulation by the FDA, the EMA and other foreign regulatory authorities as medical devices and require separate regulatory clearance or approval prior to commercial use. While we anticipate that the CardiAMP diagnostic potency assay for each indication will require approval under a PMA submitted to the CDRH prior to commercialization, we are also exploring potential options to develop the CardiAMP potency diagnostic assay as a laboratory-developed test (LDT). We and our third-party collaborators who may develop our companion diagnostics will work cooperatively to generate the data required to commercialize our CardiAMP potency diagnostic assay and will remain in close contact with the CDRH to ensure that any changes in the regulatory requirements are incorporated into the development plans. We further anticipate that regulatory approval of the CardiAMP potency assay for each indication will be a prerequisite to our ability to market the CardiAMP Cell Therapy System. Representatives of CDRH have participated in our meetings with CBER regarding CardiAMP Cell Therapy System to discuss the potential use of the CardiAMP potency assay, and we anticipate that future meetings will include representatives from both CBER and CDRH to ensure that the PMA submissions (for CardiAMP Cell Therapy System and the CardiAMP potency diagnostic assay) are coordinated and subject to parallel review by these respective FDA centers. Accordingly, our objective is to align the development programs such that the CardiAMP potency assay will be developed and approved contemporaneously with CardiAMP.
On July 31, 2014, the FDA issued "Guidance for Industry: In Vitro Companion Diagnostic Devices," to help companies identify the need for companion diagnostics at an earlier stage in the drug development process and to plan for co-development of the drug and companion diagnostic test. The ultimate goal of the guidance is to stimulate early collaborations that will result in faster access to promising new treatments for patients living with serious and life-threatening diseases. According to the draft guidance, for novel products such as CardiAMP, the PMA for a companion diagnostic device should be developed and approved contemporaneously with the biological product. We believe our programs for the development of the CardiAMP potency assay are consistent with the draft guidance as proposed.
To the extent we elect to develop our diagnostic assay as an LDT, FDA may nonetheless regulate the LDT as a medical device. The FDA has historically exercised enforcement discretion in not enforcing the medical device regulations against LDTs and LDT manufacturers. However, on October 3, 2014, the FDA issued two draft guidance documents that set forth the FDA’s proposed risk-based framework for regulating LDTs, which are designed, manufactured, and used within a single laboratory. In January 2017, the FDA announced that it would not issue final guidance on the oversight of LDTs and LDT manufacturers but would seek further public discussion on an appropriate oversight approach and give Congress an opportunity to develop a legislative solution. In 2019, the FDA issued warning letters to genomics labs for illegally marketing genetic tests that claim to predict patients’ responses to specific medications, noting that the FDA has not created a legal “carve- out” for LDTs and retains discretion to take action when appropriate, such as when certain genomic tests raise significant public health concerns. As laboratories and manufacturers develop more complex genetic tests and diagnostic software, the FDA may increase its regulation of LDTs. AnyIf we elect to develop an LDT for our CardiAMP potency assay, any future legislative or administrative rule making or oversight of LDTs and LDT manufacturers if and when finalized, may significantly impact the sales of our products and how customers use our products, and may require us to change our business model in order to maintain compliance with these laws.
In August 2020, as part of the U.S. government’s efforts to combat COVID-19 and consistent with the direction in Executive Orders 13771 and 13924, the Department of Health and Human Services (HHS) announced rescission of guidance and other informal issuances of the FDA regarding premarket review of LDTs absent notice-and-comment rulemaking, stating that, absent notice-and-comment rulemaking, those seeking approval or clearance of, or an emergency use authorization, for an LDT may nonetheless voluntarily submit a premarket approval application, premarket notification or an EUA request, respectively, but are not required to do so. While thisIn November 2021, HHS policy is expected to reduce the regulatory burden on clinical laboratories certified under the Clinical Laboratory Improvement Amendments of 1988 that develop LDTs, it is unclear how this action as well as other legislative and executive actions of the Biden administration and state governments and FDA regulation will impactissued a statement that withdrew the industry, including our business andAugust 2020 policy announcement, stating that of our customers and collaborators. FDA’s position with respect to LDTs in the short term and in general in the long-term may change, especially given the change in FDA leadership under the Biden administration. Congress could also enact legislation restricting LDTs. Any restrictionsHHS does not have a policy on LDTs and IVDs bythat is separate from FDA’s longstanding approach. The FDA also issued a revised version of its COVID-19 test policy that states the FDA HHS,expects newly offered COVID-19 tests, including LDTs, to have an EUA, or traditional marketing authorization such as a granted De Novo or cleared 510(k), prior to clinical use. To date, the FDA has not issued any new guidance on LDTs not related to COVID-19 tests.
Further, in June 2021, Congress or stateintroduced an updated legislation called the Verifying Accurate, Leading-edge IVCT Development Act (VALID Act), which, if enacted, will establish a new risk-based regulatory authorities may increase our compliance costs, delay approval of our products,framework for in vitro clinical tests (IVCTs), which include IVDs, LDTs, collection devices, and decrease the demand for our products.instruments used with such tests, and a technology certification program, among other proposals.
To the extent FDA determines that any LDT product we may develop in the future is subject to additional regulation as a medical device or disagrees with our LDT determination and asserts that such product is considered an in vitro diagnostic device, our ability to market and sell such LDT would be impeded and our business, prospects, results of operations and financial condition may be adversely affected. In addition, FDA could consider our product to be misbranded or adulterated under the Federal Food, Drug, and Cosmetic Act and subject to recall and/or other enforcement action. Such enforcement action may also delay or negatively impact FDA approval of our regulatory submissions. If FDA disagrees without our LDT determination, we would not be able to commercialize our assay until we obtain PMA approval and comply with the applicable quality system requirements.
Coverage and Reimbursement
Sales of our products will depend, in part, on the extent to which our products will be covered by third-party payors, such as government healthcare programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly reducing reimbursements for medical products and services. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our therapeutic candidates or a decision by a third-party payor to not cover our therapeutic candidates could reduce physician usage of our products once approved and have a material adverse effect on our sales, results of operations and financial condition.
Affordable Care Act
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, was enacted, which includes measures that have or will significantly change the way health care is financed by both governmental and private insurers. Among the provisions of the Affordable Care Act of greatest importance to the pharmaceutical industry are the following:
• | The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Effective in 2010, the Affordable Care Act made several changes to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers’ rebate liability by raising the minimum basic Medicaid rebate on most branded prescription drugs and biologic agents from 15.1% of average manufacturer price (AMP) to 23.1% of AMP and adding a new rebate calculation for “line extensions” (i.e., new formulations, such as extended-release formulations) of solid oral dosage forms of branded products, as well as potentially impacting their rebate liability by modifying the statutory definition of AMP. The Affordable Care Act also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid-managed care utilization as of 2010. Per a ruling by the U.S. Supreme Court in 2012, states have the option to expand their Medicaid programs which in turn expands the population eligible for Medicaid drug benefits. The Centers for Medicare & Medicaid Services, or CMS, has proposed to expand Medicaid rebate liability to the territories of the United States as well. In addition, the Affordable Care Act provides for the public availability of retail survey prices and certain weighted average AMPs under the Medicaid program. The implementation of this requirement by the CMS may also provide for the public availability of pharmacy acquisition of cost data, which could negatively impact our sales. |
• | In order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. Effective in 2010, the Affordable Care Act |
• | Effective in 2011, the Affordable Care Act imposed a requirement on |
In order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. Effective in 2010, the Affordable Care Act expanded the types of entities eligible to receive discounted 340B pricing, although, under the current state of the law, with the exception of children’s hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs when used for the orphan indication. In July 2013, the Health Resources and Services Administration (HRSA) issued a final rule allowing the newly eligible entities to access discounted orphan drugs if used for non-orphan indications. While the final rule was vacated by a federal court ruling, HRSA has stated it will continue to allow discounts for orphan drugs when used for any indication other than for orphan indications. In addition, as 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discount to increase.
• | Effective in 2011, the Affordable Care Act imposed |
Effective in 2011, the Affordable Care Act imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee would not apply to sales of certain products approved exclusively for orphan indications.
The Affordable Care Act required pharmaceutical manufacturers to track certain financial arrangements with physicians and teaching hospitals, including any “transfer of value” made or distributed to such entities, as well as any ownership or investment interests held by physicians and their immediate family members. Manufacturers were required to begin tracking this information in 2013 and to report this information to CMS by March 2014.
• | The Affordable Care Act required pharmaceutical manufacturers to track certain financial arrangements with physicians and teaching hospitals, including any “transfer of value” made or distributed to such entities, as well as any ownership or investment interests held by physicians and their immediate family members. Manufacturers were required to begin tracking this information in 2013 and to report this information to CMS by March 2014. |
AsSince the enactment of 2010, a new Patient-Centered Outcomes Research Institute was established pursuant to the Affordable Care Act to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. The research conducted by the Patient-Centered Outcomes Research Institute may affect the market for certain pharmaceutical products.
ThereACA, there have been judicial and Congressional challenges and amendments to certain aspects of the Affordable Care Act,ACA. In June 2021, the United States Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case without specifically ruling on the constitutionality of the ACA. Accordingly, the ACA remains in effect in its current form. It is unclear how future litigation or healthcare measures promulgated by the Biden administration will impact our business, financial condition and results of operations. Complying with recent legislative activity we expect thereany new legislation or changes in healthcare regulation could be additional challenges, amendmentstime-intensive and attempts to repealexpensive, resulting in material adverse effect on our business.
There has been heightened governmental scrutiny recently over the Affordable Care Act. New statemanner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and federal healthcare reform measures could limit the amounts thatproposed and enacted federal and state governmentslegislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. Under the American Rescue Plan Act of 2021, effective January 1, 2024, the statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs will be eliminated. Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a material impact on our business. Further, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at increasing competition for prescription drugs. In response to this executive order, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and potential legislative policies that Congress could pursue to advance these principles. In addition, Congress is considering legislation that, if passed, could have significant impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases. The impact of these regulations and any future healthcare measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a whole is currently unknown. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved.
At the state level, individual states are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including discounts, restrictions on certain product access and marketing cost disclosure and transparency measures. For example, a number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we obtainbegin commercialization after obtaining regulatory approval for them andany of our products. These measures could have other impactsreduce the demand for our products, if approved, or impose additional pricing pressures on consequences which cannot be reasonably predicted at this time.how much we can charge for our products if approved.
Other Healthcare Laws and Compliance Requirements
If we obtain regulatory approval for any of our product candidates, we may be subject to various federal and state laws targeting fraud and abuse in the healthcare industry. These laws may impact, among other things, our proposed sale, marketing and education programs. In addition, we may be subject to patient privacy regulations by both the federal government and the states in which we conduct our business. The laws may affect our ability to operate include:
the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as Medicare and Medicaid programs;
• | the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as Medicare and Medicaid programs; |
federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;
• | federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent; |
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;
• | the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters; |
the federal transparency laws, including the federal Physician Payment Sunshine Act, that requires drug manufacturers to disclose payments and other transfers of value provided to physicians and teaching hospitals and ownership and investment interest held by such physicians and their immediate family members;
HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and
State law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
• | the federal transparency laws, including the federal Physician Payment Sunshine Act, that requires drug manufacturers to disclose information related to payments and other transfers of value provided to covered recipients, including physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such as physician assistants and nurse practitioners, among others) and teaching hospitals, as well as information regarding ownership and investment interest held by such physicians and their immediate family members; |
• | HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and |
• | State law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. |
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our future business activities could be subject to challenge under one or more of such laws. In addition, the Affordable Care Act broadened the reach of the fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-Kickback Statute and certain criminal healthcare fraud statutes. Pursuant to the statutory amendment, a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims laws or the civil monetary penalties statute.
We are also subject to the Foreign Corrupt Practices Act, or FCPA, which prohibits improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business.
Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, and others may be ineffective, and violations of the FCPA and similar state laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, any of which would likely harm our reputation, business, financial condition and results of operations.
If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, exclusion from participation in government healthcare programs, such as Medicare and Medicaid and imprisonment, damages, fines and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.
Government Regulation outside the United States
In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products. Because biologically-sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries.
Whether or not we obtain FDA approval or clearance for a product, we must obtain the requisite approvals or clearances from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the PMA or IND prior to the commencement of human clinical trials. In Europe, for example, a Clinical Trial Authorization, or CTA, must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and the IRB, respectively. Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed.
The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
To obtain regulatory approval of an investigational biological product under European regulatory systems, we must submit a marketing authorization application. The application used to file the PMAs for CardiAMP Cell Therapy System and BLA for allogeneic cells in the United States are similar to that required in Europe, with the exception of, among other things, country-specific document requirements. Europe also provides opportunities for market exclusivity. For example, in Europe, upon receiving marketing authorization, new chemical entities generally receive eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in Europe from referencing the innovator’s data to assess a generic application. During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic product can be marketed until the expiration of the market exclusivity. However, there is no guarantee that a product will be considered by Europe’s regulatory authorities to be a new chemical entity, and products may not qualify for data exclusivity.
The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same indication at any time if:
the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior;
• | the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; |
the applicant consents to a second orphan medicinal product application; or
• | the applicant consents to a second orphan medicinal product application; or |
the applicant cannot supply enough orphan medicinal product.
• | the applicant cannot supply enough orphan medicinal product. |
For other countries outside of Europe, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
In Europe, we expect both CardiAMP and CardiALLO Cell Therapy Systemsour cell therapy systems to be regulated as advanced therapy medicinal products, or ATMPs. To provide for a common framework for the marketing of ATMPs, Regulation (EC) No 1394/2007 of the European Parliament and of the Council on advanced therapy medicinal products, or ATMP Regulation, was adopted in 2007. The ATMP Regulation was designed to ensure a high level of human health protection as well as the free movement of ATMPs in Europe. The cornerstone of the ATMP Regulation is that a marketing authorization must be obtained prior to the marketing of ATMPs. In turn, the marketing authorization can only be granted if, after a scientific assessment of the quality, efficacy and safety profile, it is demonstrated that the benefits outweigh the risks. The application for a marketing authorization must be submitted to the EMA and the final decision is taken by the European Commission. This procedure ensures that these products are assessed by a specialized body (the Committee for Advanced Therapies, or CAT) and that the marketing authorization is valid in all the European Union Member States.
The ATMP Regulation empowered the EMA to make scientific recommendations as to whether a given product should be considered an ATMP (hereinafter “classifications”). Additionally, it provided for a new instrument, the so-called certification procedure, designed as an incentive for small and medium-sized enterprises, or SMEs, that were involved in the first stages of the development of ATMPs but lacked the resources to conduct clinical trials. Specifically, the certification that the quality and preclinical aspects of the development are in conformity with the relevant regulatory requirements was expected to help SMEs attract capital and to facilitate the transfer of research activities to entities with the capacity to market medicinal products.
The ATMP Regulation builds on the procedures, concepts, and requirements designed for chemical-based medicinal products. However, ATMPs present very different characteristics. Additionally, in contrast to chemical-based medicinal products, research in advanced therapies is, for the most part, conducted by academia, non-for-profit organizations, and SMEs, which only have limited financial resources and often lack exposure to the regulatory system that governs medicines.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
The advertising and promotion of our products in the EEA is subject to the provisions of the Medical Devices Directive, Directive 2006/114/EC concerning misleading and comparative advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other national legislation in the EEA countries governing the advertising and promotion of medical devices. The European Commission has submitted a Proposal for a Regulation of the European Parliament and the Council on medical devices, amending Directive 2001/83/EC, Regulation (EC) No 178/2002 and Regulation (EC) No 1223/2009, to replace, inter alia, Directive 93/42/EEC and to amend regulations regarding medical devices in the European Union, which could result in changes in the regulatory requirements for medical devices in Europe. The EU Medical Device Regulation entered into application in May 2021. In Germany, the advertising and promotion of our products can also be subject to restrictions provided by the German Act Against Unfair Competition (Gesetzgegen den unlauteren Wettbewerb) and the law on the advertising of medicines (Heilmittelwerbegesetz), criminal law, and some codices of conduct with regard to medical products and medical devices, among others. These laws may limit or restrict the advertising and promotion of our products to the general public and may impose limitations on our promotional activities with healthcare professionals.
Sales of medical devices are subject to foreign government regulations, which vary substantially from country to country. In order to market our products outside the United States, we must obtain regulatory approvals or CE Certificates of Conformity and comply with extensive safety and quality regulations. The time required to obtain approval by a foreign country or to obtain a CE Certificate of Conformity may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ. In the EEA, we are required to obtain Certificates of Conformity before drawing up an EC Declaration of Conformity and affixing the CE Mark of conformity to our medical devices. Many other countries accept CE Certificates of Conformity or FDA clearance or approval although others, such as Brazil, Canada and Japan require separate regulatory filings.
Japan
It is expected that the CardiAMP Cell Therapy System will be regulated as a medical device system in Japan. Companies interested in offering medical device products in Japan must comply with Japan's Pharmaceuticals and Medical Devices Act (PMD Act). To obtain regulatory approval of a medical device under Japanese regulatory systems, we must submit a marketing authorization application. The application used to file the PMAs for CardiAMP Cell Therapy System in the United States are similar to that required in Japan, with the exception of, among other things, country-specific document requirements. As part of the approval process, medical device manufacturers must: Comply with Ministry of Health Labor and Welfare Ordinance No. 169 related to quality management systems, appoint an in-country representative, and register design and manufacturing facilities, among other requirements
In March 2022, we have made a submission and request for preliminary consultation with the Japanese Pharmaceutical and Medical Device Agency (PMDA) to seek their guidance on the most appropriate pathways for approval of the CardiAMP Cell Therapy System in Japan. In the preliminary consultation we seek PMDA’s opinion regarding the adequacy of existing non-clinical and foreign clinical data to support Japanese registration. We also believe the CardiAMP Cell Therapy System meets criteria for “priority review” (1. Severity of the indication, 2. significant superiority in efficacy and/or safety over the existing devices or therapies) and seek PMDAs guidance.
Employees and Human Capital
As of December 31, 2020,2021, we had 2428 full-time and 57 part-time employees, consisting of clinical development, product development, regulatory, manufacturing, quality, finance, administration, sales, and marketing. We also regularly use independent contractors across the organization to augment our regular staff. None of our employees are covered by collective bargaining agreements and we consider relations with our employees to be good.
We believe that our future success will depend in part on our continued ability to attract, hire and retain qualified personnel. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
Corporate Information
We were originally incorporated as NAM Corporation in Delaware on January 12, 1994. We changed our name to BioCardia, Inc. on October 26, 2016 in connection with a reverse merger transaction (the Merger) in which our wholly owned subsidiary, Icicle Acquisition Corp., merged with and into BioCardia Lifesciences, Inc. (which was named BioCardia, Inc. prior to the Merger), with BioCardia Lifesciences continuing as the surviving company. Following the completion of the reverse merger transaction, we assumed the business and operations of BioCardia Lifesciences and changed our name to BioCardia, Inc.
We operate in only one business segment, which is a clinical-stage regenerative medicinebiotherapeutic company developing novel therapeutics for diseases with large unmet medical needs. See Note 1 to our consolidated financial statements for the year ended December 31, 20202021 included in this Annual Report. Our principal executive offices are located at 125 Shoreway Road, Suite B, San Carlos,320 Soquel Way, Sunnyvale CA 94070.94085. Our telephone number is (650) 226-0120.
Our website address is www.biocardia.com. Information contained in our website is not incorporated by reference into this Annual Report and should not be considered to be a part of this Annual Report. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to the Securities and Exchange Commission, or SEC. The SEC also maintains a website that contains these reports and our other electronic SEC filings.
ITEM 1A. RISK FACTORS
SUMMARY OF RISK FACTORS
Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report and our other filings with the SEC before making an investment decision regarding our common stock.
Risks Related to Our Business, Financial Condition and Capital Requirements
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● | We will require substantial additional financing to achieve our goals, and our failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts. | |
● | We may not be able to access sufficient funds under the purchase agreement we entered into with Lincoln Park Capital Fund, LLC in March 2021 (the LPC Purchase |
Risks Related to Development and Commercialization
● | Our success depends in large part on our ability to obtain approval for, and successfully commercialize, the CardiAMP Cell Therapy System. Because the CardiAMP Cell Therapy System is, to our knowledge, the first cardiac cell-based therapy with an accepted pivotal trial that is to be regulated by the FDA via the premarket approval pathway, the approval process for the CardiAMP Cell Therapy System is uncertain. |
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Risks Relating to Government Regulation, Compliance and Litigation
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● | The requirements to obtain regulatory approval of the FDA and regulators in other jurisdictions can be costly, time-consuming, and unpredictable. If we are unable to obtain timely regulatory approval |
● | Even if we obtain and maintain approval for our therapeutic candidates or products from the FDA, we may never obtain approval for our therapeutic candidates or products outside of the United States, which would limit our market opportunities and adversely affect our business. |
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● | If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our therapeutic candidates or products. |
Risks Related to the Operation of Our Business
● | If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our therapeutic candidates, conduct our clinical trials and commercialize our therapeutic candidates. |
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● | The outbreak of the novel strain of coronavirus, SARS-CoV-2, and its variants, which causes COVID-19, could adversely impact our business, including our preclinical studies and clinical trials. |
Risks Relating to Our Intellectual Property
● | We may not be able to protect our proprietary technology in the marketplace. |
● | The patent protection of biotherapeutics is complex and uncertain. |
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● | Intellectual property disputes could cause us to spend substantial resources and distract our personnel from their normal responsibilities. |
● | Patent reform legislation and recent court decisions could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. |
● | If third parties claim that our therapeutic candidates or other |
● | If we do not obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation, thereby potentially extending the term of our marketing exclusivity of our therapeutic candidates or products, our business may be materially harmed. |
Risks Related to Our Securities
● | The market price and trading volume of our securities may be volatile and may be affected by economic conditions beyond our control. |
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Risks Related to Our Securities
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● | Raising additional funds through debt or equity financing could be dilutive and may cause the market price of our common stock to decline. | |
● | 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. |
● | Future sales and issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall. |
General Risks
● | We are at risk of securities class action litigation. |
RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before investing in our securities. If any of the following risks occur, our business, financial condition, results of operations and prospects could be materially harmed. In that event, market prices of our securities could decline, and you could lose part or all of your investment.
Risks Relating to Our Business, Financial Condition and Capital Requirements
We have a history of operating losses, and we may not be able to achieve or sustain profitability.
We are a clinical-stage regenerative medicine company and we have not yet generated a profit. We have incurred net losses during each of our fiscal years since our inception. Our net loss for the year ended December 31, 20202021 was $15.0$12.6 million and our accumulated deficit totaled $116.1$128.7 million as of December 31, 2020.2021. We do not know whether or when we will become profitable, if ever. We currently expect operating losses and negative cash flows to continue for at least the next several years.
To date, our only approved or cleared products are our Morph universal deflectable guide catheters and Morph AccessPro sheaths, in the United States and Europe; our AVANCE™ steerable introducer and our Morph DNA deflectable guides in the United States only; and our Helix biotherapeutic delivery system, or Helix, in Europe. Our limited commercialization experience and number of approved products makes it difficult to evaluate our current business and predict our future prospects. Our short commercialization experience and limited number of approved products also makes it difficult for us to forecast our future financial performance and growth and such forecasts are limited and subject to a number of uncertainties, including our ability to successfully complete our Phase III pivotal trials in heart failure and chronic myocardial ischemia and obtain FDA approval for, and then successfully commercialize, the CardiAMP Cell Therapy System.
Our ability to generate sufficient revenue to achieve profitability depends on our ability, either alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize our therapeutic candidates. We do not anticipate generating revenues from sales of the CardiAMP Cell Therapy System, the CardiALLO Cell Therapy Systemour cell therapy systems or any other biotherapeutic candidates within the next few years, and we may never generate sales of these products.
We anticipate that our expenses will increase in the future as we continue to incur significant research and development and other expenses related to our ongoing operations, seek regulatory approvals for our therapeutic candidates, scale-up manufacturing capabilities and hire additional personnel to support the development of our therapeutic candidates and commercialization efforts. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. To achieve and maintain profitability, we must successfully develop our therapeutic candidates, obtain regulatory approvals and manufacture, market and sell those products for which we obtain regulatory approvals. If we obtain regulatory approval to market a product candidate, our future revenue will depend upon the size of any markets in which our therapeutic candidates may receive approval, and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party payors and adequate market share for our therapeutic candidates in those markets. We may not succeed in these activities, and we may never generate revenue from product sales that is significant enough to achieve profitability. Our failure to become or remain profitable would depress our market value and could impair our ability to raise capital, expand our business, discover or develop other product candidates or continue our operations. A decline in the value of our company could cause you to lose part or all of your investment.
Our audited consolidated financial statements as of and for the year ended December 31, 2021 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred significant losses since our inception and we expect that we will continue to incur losses as we aim to successfully execute our business plan and will be dependent on additional public or private financings, collaborations or licensing arrangements with strategic partners, or additional credit lines or other debt financing sources to fund continuing operations. Based uponon our current operating plan, we believe that the cash balances, recurring losses since inception and cash equivalents on hand will enable usour existing capital resources to fund our planned operations for a twelve-month period, there is substantial doubt about our ability to continue as a going concern. As noted below, we may need to obtain additional funding from equity or debt financings, which may require us to agree to burdensome covenants, grant security interests in our assets, enter into collaboration and licensing arrangements that require us to relinquish commercial rights, or grant licenses on terms that are not favorable. No assurance can be given at leastthis time as to whether we will be able to achieve our fundraising objectives, regardless of the next 12-month period followingterms. If adequate funds are not available, the dateCompany may be required to reduce operating expenses, delay or reduce the scope of issuanceits product development programs, obtain funds through arrangements with others that may require the Company to relinquish rights to certain of our 2020 financial statements.its technologies or products that the Company would otherwise seek to develop or commercialize itself, or cease operations.
We will require substantial additional financing to achieve our goals, and our failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.
Our operations have consumed substantial amounts of cash since inception. We expect to continue to incur significant expenses and operating losses for the foreseeable future in connection with our planned research, development and product commercialization efforts, including our planned clinical trials for our CardiAMP and CardiALLO Cell Therapy System therapeuticcell therapy candidates. In addition, we will require additional financing to achieve our goals and our failure to do so could adversely affect our commercialization efforts. Other than the purchase agreement we entered into with Lincoln Park Capital Fund, LLC in March 2021 (the LPC Purchase Agreement),Agreement, we do not currently have any agreements or understandings with respect to any potential financing. We anticipate that our expenses will increase substantially if and as we:
continue the research and clinical development of our CardiAMP and CardiALLO Cell Therapy System therapeutic candidates;
• | continue the research and clinical development of our therapeutic candidates; |
initiate and advance our CardiAMP and CardiALLO Cell Therapy System therapeutic candidates in expensive clinical studies, including the ongoing Phase III pivotal trial for our CardiAMP Cell Therapy System therapeutic candidate in heart failure and our approved Phase III pivotal trial for our CardiAMP Cell Therapy System therapeutic candidate in chronic myocardial ischemia;
• | initiate and advance our therapeutic candidates in expensive clinical studies, including the ongoing Phase III pivotal trial for our CardiAMP Cell Therapy System therapeutic candidate in heart failure and our approved Phase III pivotal trial for our CardiAMP Cell Therapy System therapeutic candidate in chronic myocardial ischemia; |
• | seek to identify, assess, acquire, and/or develop other product candidates and technologies; |
seek to identify, assess, acquire, and/or develop other product candidates and technologies;
• | seek regulatory and marketing approvals in multiple jurisdictions for our therapeutic candidates that successfully complete clinical studies; |
seek regulatory and marketing approvals in multiple jurisdictions for our therapeutic candidates that successfully complete clinical studies;
• | build and maintain a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval, or otherwise establish collaborations with third parties for the development and commercialization of our therapeutic candidates; |
build and maintain a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval, or otherwise establish collaborations with third parties for the development and commercialization of our therapeutic candidates;
• | further develop and implement our manufacturing processes and expand our manufacturing capabilities and resources for commercial production; |
further develop and implement our manufacturing processes and expand our manufacturing capabilities and resources for commercial production;
• | seek coverage and reimbursement from third-party payors, including government and private payors for future products; |
seek coverage and reimbursement from third-party payors, including government and private payors for future products;
• | seek to maintain, protect and expand our intellectual property portfolio; and |
seek to maintain, protect and expand our intellectual property portfolio; and
seek to attract and retain skilled personnel.
• | seek to attract and retain skilled personnel. |
We have experienced delays, and if we were to experience any future delays or encounter issues with any of the above, including clinical holds, failed studies, inconclusive or complex results, safety or efficacy issues, or other regulatory challenges that require longer follow-up of existing studies, additional major studies, or additional supportive studies in order to pursue marketing approval, it could further increase the costs associated with the above. Further, the net operating losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.
We may not be able to access sufficient funds under the LPC Purchase Agreement when needed.
Our ability to sell shares to Lincoln Park and obtain funds under the LPC Purchase Agreement is limited by the terms and conditions in the Purchase Agreement, including restrictions on the amounts we may sell to Lincoln Park at any one time, and a limitation on our ability to sell shares to Lincoln Park to the extent that it would cause Lincoln Park to beneficially own more than 9.99% of our outstanding shares of common stock. Additionally, under the Purchase Agreement, we will only be able to sell or issue to Lincoln Park a maximum aggregate number of shares equal to 19.99% of the shares of common stock outstanding on the date of the LPC Purchase Agreement (the Exchange Cap), unless we obtain shareholder approval to issue shares in excess of the Exchange Cap, or the average price of all applicable sales of our common stock to Lincoln Park under the Purchase Agreement is equal to or greater than the base price of $4.2736, such that the Exchange Cap would not apply to issuances and sales of common stock to Lincoln Park under the LPC Purchase Agreement. Therefore, we currently do not, and may not in the future, have access to the full amount otherwise available to us under the LPC Purchase Agreement. In addition, any amounts we sell under the LPC Purchase Agreement may not satisfy all of our funding needs, even if we are able and choose to sell and issue all of our common stock otherwise issuable pursuant to the LPC Purchase Agreement.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
We have incurred substantial losses during our history and do not expect to become profitable in the near future and we may never achieve profitability. None of our pre-Merger tax attributes remain available after the Merger as a result of limitations Section 382 due to lack of business continuity. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. Losses generated after 2017 do not have an expiration date. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited. Our prior equity offerings and other changes in our stock ownership may have resulted in ownership changes. We have not performed an analysis to assess whether an ownership change has occurred. If we have experienced an ownership change at any time since our formation, utilization of our net operating loss carryforwards would be subject to an annual limitation under Section 382 and 383 of the Code. In addition, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which are outside of our control. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S. federal taxable income and tax credits may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. Use of these NOLs will depend on future income in relationship to expiration dates of these carryforwards.
Recent U.S. tax legislation and future changes to applicable U.S. or foreign tax laws and regulations may have a material adverse effect on our business, financial condition and results of operations.
We are subject to income and other taxes in the U.S. Changes in laws and policy relating to taxes or trade may have an adverse effect on our business, financial condition and results of operations. For example, the U.S. government recently enacted significant tax reform, and certain provisions of the new law may adversely affect us. Changes include, but are not limited to, a federal corporate tax rate decrease from 34% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a more generally territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections and will be subject to interpretations and implementing regulations by the Treasury and Internal Revenue Service, any of which could mitigate or increase certain adverse effects of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation. Generally, future changes in applicable U.S. or foreign tax laws and regulations, or their interpretation and application could have an adverse effect on our business, financial conditions and results of operations. Changes with respect to the transition to a territorial tax system are generally expected to have little impact given our lack of foreign operations.
Risks Relating to Development and Commercialization
Our success depends in large part on our ability to obtain approval for, and successfully commercialize, the CardiAMP Cell Therapy System.
The long-term viability of our company is largely dependent on the successful development and commercialization of the CardiAMP Cell Therapy System. We are currently enrolling patients in a Phase III pivotal trial that will be used to support regulatory approval, and we do not have significant long-term data on the CardiAMP Cell Therapy System’s safety and efficacy in either heart failure or chronic myocardial ischemia. While we expect to successfully complete our ongoing Phase III pivotal trial of the CardiAMP Cell Therapy System in heart failure, there can be no guarantee that the study will be completed, that the primary endpoints will be achieved, or that we will receive regulatory approval for the sale and marketing in the United States. A number of companies in similar fields have suffered significant setbacks during clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising preliminary results. Because we are depending heavily on sales of the CardiAMP Cell Therapy System to achieve our revenue goals, failure to successfully complete the study and receive FDA approval, in a timely manner or at all, will harm our financial results and ability to become profitable. Even if we obtain regulatory approval, our ability to successfully market this product will be limited due to a number of factors, including regulatory restrictions in our labeling or requirements to obtain additional post-approval data, if any. In addition, there can be no guarantee that the CardiAMP Cell Therapy System will be accepted by the medical community as a valid alternative to currently available products. If we cannot sell the CardiAMP Cell Therapy System as planned, our financial results will be harmed.
FDA acceptance of a Phase III pivotal trial is not a guarantee of an approval of a product candidate or any permissible claims about the product candidate. Failure to successfully complete our ongoing Phase III trial of CardiAMP in heart failure would significantly impair our financial results. Such a failure could (i) delay or prevent the CardiAMP Cell Therapy System from obtaining regulatory approval, (ii) require us to perform another clinical trial, which will be expensive, may not be successful and will significantly delay our ability to commercialize the CardiAMP Cell Therapy System and (iii) impair our ability to convince hospitals and physicians of the benefits of our CardiAMP Cell Therapy System product. Furthermore, even if we are granted regulatory clearances or approvals, they may include significant limitations on the indicated uses for CardiAMP, which may limit the market for this product.
Because the CardiAMP Cell Therapy System is, to our knowledge, the first cardiac cell-based therapy with an accepted pivotal trial that is to be regulated by the FDA via the premarket approval pathway, the approval process for the CardiAMP Cell Therapy System is uncertain.
Although we have obtained FDA acceptance of Phase III pivotal trials of the CardiAMP Cell Therapy System for the treatment of ischemic systolic heart failure and chronic myocardial ischemia, this does not guarantee any particular outcome from regulatory review. To the best of our knowledge, the CardiAMP Cell Therapy System for the treatment of ischemic systolic heart failure is the first cardiac cell-based therapy with an accepted pivotal trial that is to be regulated by the FDA Center for Biologics Evaluation and Research, or CBER, via the premarket approval, or PMA, pathway requiring a single trial. The CardiAMP Cell Therapy System for the treatment of chronic myocardial ischemia is also to be regulated under the same IDE/PMA pathway. All other cardiac cell-based therapies in clinical trials are believed to be regulated by the same agency, but as biologics which generally require two separate pivotal trials. There is no guarantee that the FDA will grant us regulatory clearance or approval to market the CardiAMP Cell Therapy System on the basis of a single pivotal trial, or that the FDA will continue to allow us to develop the CardiAMP Cell Therapy System via the PMA pathway. Two well-controlled pivotal studies could be necessary to provide FDA assurance of safety or effectiveness. If the FDA approval process does not occur as we anticipate or we are required to conduct more than one pivotal study to obtain approval, we may incur substantial additional costs and delays to obtain approval, if at all, which would have a material adverse impact on our business, financial condition and prospects.
Our CardiAMPautologous and CardiALLO cell therapyallogeneic therapies, delivery systems and other therapeutic candidates are based on novel technology, which makes it difficult to accurately and reliably predict the time and cost of product development and subsequently obtaining regulatory approval. At the moment, no cell-based therapies have been approved in the United States for a cardiac indication.
The success of our business depends on our ability to develop and commercialize our therapeutic candidates, including CardiAMP. We have concentrated our product research and development efforts on our CardiAMP therapeutic candidate, a novel type of cell-based therapy. Our future success depends on the successful development of this therapeutic approach. There can be no assurance that any development problems we experience related to our therapeutic candidates and products, that we have experienced or that we may experience in the future, will not cause significant delays or unanticipated costs, or that such development problems can be solved. For example, in 2020, our efforts to lift a clinical hold on our CardiALLO allogenicallogeneic cell therapy product candidate was not successful when reviewed by the FDA due to issues they identified with respect to our chemistry, manufacturing and controls for the approach we had taken. Each element of an IND submission has technical, regulatory, commercial, and other risks and there is no guarantee we will be successful in advancing our therapeutic programs. Also, we may be unable to maintain and further develop sustainable, reproducible and scalable manufacturing processes, or transfer these processes to collaborators, which may prevent us from completing our clinical studies or commercializing our products on a timely or profitable basis, if at all.
In addition, the clinical study requirements of the FDA, the European Medicines Agency, or EMA, and other regulatory agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty, intended use and market of the potential product candidates. The regulatory approval process for novel product candidates such as our CardiAMP and CardiALLO Cell Therapy SystemsSystem and allogeneic cell therapies may be more expensive and take longer than other, better known or extensively studied pharmaceutical or other product candidates to develop. In addition, adverse developments in clinical trials of cell-based products or therapies conducted by others may cause the FDA or other regulatory bodies to change the requirements for approval of any of our therapeutic candidates. At the moment, no other cell-based therapies have been approved in the United States for a cardiac indication, which makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our therapeutic candidates in either the United States or elsewhere.
Regulatory requirements governing cell-based therapy products have changed frequently and may continue to change in the future. For example, the FDA established the Office of Cellular, Tissue and Gene Therapies within CBER to consolidate the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. These regulatory authorities and advisory groups and the new requirements or guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with the FDA and other regulatory authorities, and our products could be reviewed by the FDA’s advisory committee. We also must comply with applicable requirements, and if we fail to do so, we may be required to delay or discontinue development of our product candidates.
We have encountered, and may in the future encounter, substantial delays in our clinical studies.
We have encountered, and may in the future encounter, substantial delays in our clinical studies. We cannot guarantee that any preclinical testing or clinical trials will be conducted as planned or completed on schedule, if at all. As a result, we may not achieve our expected clinical milestones. A failure can occur at any stage of testing. Events that may prevent successful or timely commencement, enrollment or completion of clinical development include:
delays in raising, or inability to raise, sufficient capital to fund the planned trials;
• | delays in raising, or inability to raise, sufficient capital to fund the planned trials; |
delays in reaching a consensus with regulatory agencies on trial design;
changes in trial design;
inability to identify, recruit and train suitable clinical investigators;
inability to add new clinical trial sites;
delays in reaching agreement on acceptable terms for the performance of the trials with prospective clinical research organizations, or CROs, and clinical trial sites;
delays in obtaining required Institutional Review Board, or IRB, approval at each clinical trial site;
delays in recruiting suitable clinical sites and patients (i.e., subjects) to participate in clinical trials;
imposition of a clinical hold by regulatory agencies for any reason, including negative clinical results, safety concerns or as a result of an inspection of manufacturing or clinical operations or trial sites;
failure by us, CROs or other third parties to adhere to clinical trial requirements;
failure to perform in accordance with the FDA’s current Good Clinical Practices, or GCP, or applicable regulatory guidelines in other countries;
delays in the testing, validation, manufacturing and delivery to the clinical sites;
delays caused by patients not completing participation in a trial or not returning for post-treatment follow-up;
delays caused by clinical trial sites not completing a trial;
failure to demonstrate adequate efficacy;
occurrence of serious adverse events in clinical trials that are associated with the therapeutic candidates or products that are viewed to outweigh its potential benefits;
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; or
disagreements between us and the FDA or other regulatory agencies interpreting the data from our clinical trials.
• | delays in reaching a consensus with regulatory agencies on trial design; |
• | changes in trial design; |
• | inability to identify, recruit and train suitable clinical investigators; |
• | inability to add new clinical trial sites; |
• | delays in reaching agreement on acceptable terms for the performance of the trials with prospective clinical research organizations, or CROs, and clinical trial sites; |
• | delays in obtaining required Institutional Review Board, or IRB, approval at each clinical trial site; |
• | delays in recruiting suitable clinical sites and patients (i.e., subjects) to participate in clinical trials; |
• | imposition of a clinical hold by regulatory agencies for any reason, including negative clinical results, safety concerns or as a result of an inspection of manufacturing or clinical operations or trial sites; |
• | failure by us, CROs or other third parties to adhere to clinical trial requirements; |
• | failure to perform in accordance with the FDA’s current Good Clinical Practices, or GCP, or applicable regulatory guidelines in other countries; |
• | delays in the testing, validation, manufacturing and delivery to the clinical sites; |
• | delays caused by patients not completing participation in a trial or not returning for post-treatment follow-up; |
• | delays caused by clinical trial sites not completing a trial; |
• | failure to demonstrate adequate efficacy; |
• | occurrence of serious adverse events in clinical trials that are associated with the therapeutic candidates or products that are viewed to outweigh its potential benefits; |
• | changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; or |
• | disagreements between us and the FDA or other regulatory agencies interpreting the data from our clinical trials. |
Delays, including those caused by the above factors, can be costly and could negatively affect our ability to complete clinical trials for our therapeutic candidates. If we are not able to successfully complete clinical trials or are not able to do so in a timely and cost-effective manner, we will not be able to obtain regulatory approval and/or will not be able to commercialize our therapeutic candidates or products, which would have an adverse effect on our business. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our therapeutic candidates or products or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our therapeutic candidates or products and may harm our business and results of operations.
We may find it difficult to enroll patients in our clinical trials, which could delay or prevent development of our therapeutic candidates.
Identifying and qualifying patients to participate in clinical trials of our therapeutic candidates is critical to our success. The timing of our clinical trials depends on the speed at which we can recruit patients to participate in testing our therapeutic candidates as well as completion of required follow-up periods. In general, if patients are unwilling to participate in our cell-based therapy trials because of negative publicity from adverse events in the biotechnology or cell-based industries or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting patients, conducting trials and obtaining regulatory approval for our therapeutic candidates may be delayed. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our therapeutic candidates or termination of the clinical trials altogether.
Patient enrollment and completion of clinical trials are affected by factors including:
• | size of the patient population; | |
• | severity of the disease under investigation; | |
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• | design of the trial protocol; | |
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• | eligibility criteria for the particular trial; | |
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• | perceived risks and benefits of the product candidate being tested; | |
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• | proximity and availability of clinical trial sites for prospective patients; | |
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• | availability of competing therapies and clinical trials; | |
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• | efforts to facilitate timely enrollment in clinical trials; | |
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• | patient referral practices of physicians; | |
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• | ability to monitor patients adequately during and after treatment; and | |
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• | the degree of treatment effect in event-driven trials. |
Once enrolled, patients may choose to discontinue their participation at any time during the trial, for any reason. Participants also may be terminated from the study at the initiative of the investigator, for example if they experience serious adverse clinical events or do not follow the study directions. If we are unable to maintain an adequate number of patients in our clinical trials, we may be required to delay or terminate an ongoing clinical trial, which would have an adverse effect on our business.
We depend on our license and distribution agreement with Biomet Biologics, LLC, and if we fail to comply with our obligations under this agreement, or if our rights under this agreement are otherwise reduced or terminated, we could lose intellectual property rights that are important to our business.
In October 2012, we entered into a license and distribution agreement with Biomet Biologics, LLC under which we obtained an exclusive, nontransferable, worldwide distribution right, patent license and trademark license to Biomet Biologic, LLC’s point of care cell processing platform. Under the terms of the agreement, we are obligated to pay Biomet Biologics, LLC a royalty based on the price of the disposables in the CardiAMP cell processing platform. A breach or termination of this agreement would materially adversely affect the clinical development or commercialization strategy of our CardiAMP therapeutic candidate as currently planned. A reduction or elimination of our rights under this agreement may result in our having to negotiate new or reinstated arrangements on less favorable terms, or our not having sufficient intellectual property rights to operate our business as currently planned. The occurrence of such events could materially harm our business and financial condition.
We rely on third parties to conduct some or all aspects of our product manufacturing, diagnostic protocol development, research, and preclinical and clinical testing, and these third parties may not perform satisfactorily.
We do not currently, and do not expect to in the future, independently conduct all aspects of our product manufacturing, anticipated companion diagnostic testing, protocol development, research and monitoring and management of our ongoing preclinical and clinical programs. We currently rely, and expect to continue to rely, on third parties with respect to these items, and control only certain aspects of their activities.
Any of these third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, our commercialization activities or our therapeutic candidate or companion diagnostic development activities may be delayed or suspended. Our reliance on these third parties for research and development activities, including the conduct of any IDE and IND-enabling studies, reduces our control over these activities but does not relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientific standards and any applicable trial protocols. For example, for therapeutic candidates that we develop and commercialize on our own, we will remain responsible for ensuring that each of our IDE and IND-enabling studies and clinical trials are conducted in accordance with the trial plan and protocols.
If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated study plans and protocols, we may be delayed in completing, or unable to complete, the preclinical studies and clinical trials required to support future IDE and IND submissions and approval of our therapeutic candidates.
Reliance on third-party manufacturers entails exposure to risks to which we would not be subject if we manufactured the therapeutic candidates or companion diagnostic ourselves, including:
we may be unable to negotiate manufacturing agreements with third parties under commercially reasonable terms;
• | we may be unable to negotiate manufacturing agreements with third parties under commercially reasonable terms; |
reduced control over the manufacturing process for our therapeutic candidates and companion diagnostic as a result of using third-party manufacturers for many aspects of manufacturing activities;
• | reduced control over the manufacturing process for our therapeutic candidates and companion diagnostic as a result of using third-party manufacturers for many aspects of manufacturing activities; |
termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that may be costly or damaging to us or result in delays in the development or commercialization of our therapeutic candidates or companion diagnostic; and
• | termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that may be costly or damaging to us or result in delays in the development or commercialization of our therapeutic candidates or companion diagnostic; and |
disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier.
• | disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier. |
Any of these events could lead to delays in the development of our therapeutic candidates, including delays in our clinical trials, or failure to obtain regulatory approval for our therapeutic candidates, or it could impact our ability to successfully commercialize our current therapeutic candidates, companion diagnostic or any future products. Some of these events could be the basis for FDA or other regulatory action, including injunction, recall, seizure or total or partial suspension of production.
We rely on third parties to conduct, supervise and monitor our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.
We rely on CROs and clinical trial sites to ensure our clinical trials are conducted properly and on time. While we will have agreements governing their activities, we will have limited influence over their actual performance. We will control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs are required to comply with the FDA’s GCPs for conducting, recording and reporting the results of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA, the Competent Authorities of the Member States of the EEA, and comparable foreign regulatory authorities, enforce these GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA, the EMA, or other foreign regulatory authorities may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCPs. In addition, our future clinical trials will require a sufficient number of test subjects to evaluate the safety and effectiveness of our therapeutic candidates. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat such clinical trials, which would delay the regulatory approval process.
Our CROs are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities that could harm our competitive position. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our therapeutic candidates. If any such event were to occur, our financial results and the commercial prospects for our therapeutic candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.
If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. Further, switching or adding additional CROs involves additional costs and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which could materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
We may also rely on other third parties to store and distribute our products for the clinical trials that we conduct. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our therapeutic candidates or commercialization of our products, if approved, producing additional losses and depriving us of potential product revenue.
We depend on third-party vendors to manufacture some of our components and sub-assemblies, which could make us vulnerable to supply shortages and price fluctuations that could harm our business.
We currently manufacture some of our components and sub-assemblies internally and rely on third-party vendors for other components and sub-assemblies used in our products and therapeutic candidates. Our reliance on third-party vendors subjects us to a number of risks that could impact our ability to manufacture our products and therapeutic candidates and harm our business, including:
interruption of supply resulting from modifications to, or discontinuation of, a supplier’s operations;
• | interruption of supply resulting from modifications to, or discontinuation of, a supplier’s operations; |
delays in product shipments resulting from uncorrected defects, reliability issues or a supplier’s failure to consistently produce quality components;
• | delays in product shipments resulting from uncorrected defects, reliability issues or a supplier’s failure to consistently produce quality components; |
price fluctuations due to a lack of long-term supply arrangements with our suppliers for key components;
• | price fluctuations due to a lack of long-term supply arrangements with our suppliers for key components; |
inability to obtain adequate supply in a timely manner or on commercially reasonable terms;
• | inability to obtain adequate supply in a timely manner or on commercially reasonable terms; |
difficulty identifying and qualifying alternative suppliers for components in a timely manner;
• | difficulty identifying and qualifying alternative suppliers for components in a timely manner; |
inability of the manufacturer or supplier to comply with Quality System Regulations, or QSRs, enforced by the FDA and state regulatory authorities;
• | inability of the manufacturer or supplier to comply with Quality System Regulations, or QSRs, enforced by the FDA and state regulatory authorities; |
inability to control the quality of products manufactured by third parties;
• | inability to control the quality of products manufactured by third parties; |
production delays related to the evaluation and testing of products from alternative suppliers and corresponding regulatory qualifications; and
• | production delays related to the evaluation and testing of products from alternative suppliers and corresponding regulatory qualifications; and |
delays in delivery by our suppliers due to changes in demand from us or their other customers.
• | delays in delivery by our suppliers due to changes in demand from us or their other customers. |
Any significant delay or interruption in the supply of components or sub-assemblies, or our inability to obtain substitute components, sub-assemblies or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and harm our business.
Our future commercial success depends upon attaining significant market acceptance of our therapeutic candidates, if approved, among physicians, patients and healthcare payors.
Even when product development is successful and regulatory approval has been obtained, our ability to generate significant revenue depends on the acceptance of our products by physicians, payors and patients. Many potential market participants have limited knowledge of, or experience with, cell-based products and therapies, so gaining market acceptance and overcoming any safety or efficacy concerns may be more challenging than for more traditional therapies. Our efforts to educate the medical community and third-party payors on the benefits of our therapeutic candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by conventional therapies marketed by our competitors. We cannot assure you that our products will achieve the expected market acceptance and revenue if and when they obtain the requisite regulatory approvals. Alternatively, even if we obtain regulatory approval, that approval may be for indications or patient populations that are not as broad as intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. The market acceptance of each of our therapeutic candidates will depend on a number of factors, including:
• | the efficacy and safety of the therapeutic candidate, as demonstrated in clinical trials; |
• | the clinical indications for which the product is approved, and the label approved by regulatory authorities for use with the product, including any warnings that may be required on the label; |
• | acceptance by physicians and patients of the product as a safe and effective treatment; |
• | the cost, safety and efficacy of treatment in relation to alternative treatments; |
• | the continued projected growth of markets for our various indications; |
• | relative convenience and ease of administration; |
the clinical indications for which the product is approved, and the label approved by regulatory authorities for use with the product, including any warnings that may be required on the label;
• | the prevalence and severity of adverse side effects; and |
acceptance by physicians and patients of the product as a safe and effective treatment;
the cost, safety and efficacy of treatment in relation to alternative treatments;
the continued projected growth of markets for our various indications;
relative convenience and ease of administration;
the prevalence and severity of adverse side effects; and
the effectiveness of our sales and marketing efforts.
• | the effectiveness of our sales and marketing efforts. |
Market acceptance is critical to our ability to generate significant revenue. Any therapeutic candidate, if approved and commercialized, may be accepted in only limited capacities or not at all. If any approved products are not accepted by the market to the extent that we expect, we may not be able to generate significant revenue and our business would suffer.
Our ability to compete is highly dependent on demonstrating the benefits of CardiAMP to physicians, hospitals and patients.
In order to generate sales, we must be able to clearly demonstrate that CardiAMP is both a more effective treatment system and less costly than alternative products and treatments offered by our competitors. If we are unable to convince physicians that CardiAMP leads to significant improvement in functional capacity, improved quality of life and reduced hospitalization, our business will suffer.
We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully, than we do.
Our industry is highly competitive and subject to rapid change. The industry continues to expand and evolve as an increasing number of competitors and potential competitors enter the market. Astra Zeneca,market, including AstraZeneca, Bayer, Blue Rock Therapeutics, Bristol-Myers Squibb, Caladrius Biosciences, Capricor Therapeutics, Celixr, Cesca Therapeutics,Celixir, Celyad, Daichii Sankyo, Fuji Film, Mesoblast, Moderna, Sana Biotechnology, Takeda Pharmaceuticals, Tenaya Therapeutics, Terumo, Vericel Corp, and Uniqure,uniQure, among others. Many of our competitors, potentially including the aforementioned, have significantly greater development, financial, manufacturing, marketing, technical and human resources than we do. Large pharmaceutical and medical device companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and in manufacturing pharmaceutical and medical device products. Recent and potential future merger and acquisition activity in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. Established companies may also invest heavily to accelerate discovery and development of novel products that could make our therapeutic candidates obsolete. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or FDA approval or discovering, developing and commercializing our therapeutic candidates or competitors to our therapeutic candidates before we do. Specialized, smaller or early-stage companies may also prove to be significant competitors, particularly those with a focus and expertise in the stem cell industry and/or those with collaboration arrangements and other third-party payors. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. If we are not able to compete effectively against potential competitors, our business will not grow, and our financial condition and results of operations will suffer.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our therapeutic candidates, if approved, we may be unable to generate any revenues.
We currently have a limited organization for the sales, marketing and distribution of products and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any products that may be approved, including the CardiAMP and CardiALLO Cell Therapy SystemsSystem and our Neurokinin-1 Receptor Positive allogeneic therapies, we must build our sales, distribution, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We have limited prior experience in the marketing, sale or distribution of approved products and there are significant risks involved in building and managing a sales organization, including our ability to hire, retain, and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of our therapeutic candidates.
Our strategy is to obtain FDA approval and market the CardiAMP Cell Therapy System for potential heart failure and chronic myocardial ischemia indications using a dedicated direct sales model focused on selected cardiologists and interventional cardiologists. We may in the future, choose to align ourselves with collaborators as part of our commercialization strategy, particularly outside of the United States, and our future collaboration partners, if any, may not dedicate sufficient resources to the commercialization of our therapeutic candidates or companion diagnostic or may otherwise fail in their commercialization due to factors beyond our control. If we are unable to establish effective collaborations to enable the sale of our therapeutic candidates and companion diagnostic to healthcare professionals and in geographical regions, including the United States, that will not be covered by our own marketing and sales force, or if our potential future collaboration partners do not successfully commercialize our therapeutic candidates or companion diagnostic, our ability to generate revenues from product sales, including sales of the CardiAMP and CardiALLO Cell Therapy SystemsSystem and other therapies, will be adversely affected.
Building an internal sales force involves many challenges, including:
• | recruiting and retaining talented people; | |
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• | training employees that we recruit; | |
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• | setting the appropriate system of incentives; | |
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• | managing additional headcount; and | |
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• | integrating a new business unit into an existing corporate architecture. |
If we are unable to build our own sales force or negotiate a strategic partnership for the commercialization of our autologous or allogeneic cell therapies in the United States, we may be forced to delay the potential commercialization of these therapies or reduce the scope of our sales and marketing. To fund commercialization activities, we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we do not have sufficient funds, we will not be able to bring our therapies to market or generate product revenue.
If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate sufficient product revenue and may not become profitable. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third-party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.
In addition, there are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time-consuming and could delay any launch. If the commercial launch of a therapeutic candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
We have limited experience manufacturing our therapeutic candidates or products in commercial quantities, which could harm our business.
Because we have only limited experience in manufacturing therapeutic candidates or products in commercial quantities, we may encounter production delays or shortfalls. Such production delays or shortfalls may be caused by many factors, including the following:
we intend to significantly expand our manufacturing capacity, and our production processes may have to change to accommodate this growth;
• | we intend to significantly expand our manufacturing capacity, and our production processes may have to change to accommodate this growth; |
key components and sub-assemblies of our products and therapeutic candidates are currently provided by a single supplier or limited number of suppliers, and we do not maintain large inventory levels of these components and sub-assemblies; if we experience a shortage in any of these components or sub-assemblies, we will need to identify and qualify new supply sources, which could increase our expenses and result in manufacturing delays;
• | key components and sub-assemblies of our products and therapeutic candidates are currently provided by a single supplier or limited number of suppliers, and we do not maintain large inventory levels of these components and sub-assemblies; if we experience a shortage in any of these components or sub-assemblies, we will need to identify and qualify new supply sources, which could increase our expenses and result in manufacturing delays; |
• | we may experience a delay in completing validation and verification testing for new controlled-environment rooms at our manufacturing facilities; |
we may experience a delay in completing validation and verification testing for new controlled-environment rooms at our manufacturing facilities;
• | we have limited experience in complying with FDA’s QSRs, which applies to the manufacture of our products and therapeutic candidates; and |
we have limited experience in complying with FDA’s QSRs, which applies to the manufacture of our products and therapeutic candidates; and
to increase our manufacturing output significantly, we will have to attract and retain qualified employees, who are in short supply, for our manufacturing operations.
• | to increase our manufacturing output significantly, we will have to attract and retain qualified employees, who are in short supply, for our manufacturing operations. |
If we fail to obtain and sustain an adequate level of reimbursement for our products by third-party payors, sales and profitability would be adversely affected.
Our ability to commercialize any therapeutic candidates or products successfully will depend, in part, on the extent to which coverage and reimbursement for our therapeutic candidates or products and related treatments will be available from government healthcare programs, private health insurers, managed care plans, and other organizations. Additionally, even if there is a commercially viable market, if the level of third-party reimbursement is below our expectations, our revenue and profitability could be materially and adversely affected.
Third-party payors, such as government programs, including Medicare in the United States, or private healthcare insurers, carefully review and increasingly question the coverage of, and challenge the prices charged for medical products and services, and many third-party payors limit coverage of or reimbursement for newly approved therapies or products. Reimbursement rates and coverage from private health insurance companies vary depending on the company, the insurance plan and other factors. As a result, the coverage determination process will require us to provide scientific and clinical support for the use of our therapeutic candidates to each private health insurance company separately, with no assurance that adequate coverage and reimbursement will be obtained.
A current trend in the U.S. healthcare industry as well as in other countries around the world is toward cost containment, including a number of legislative and regulatory changes to the health care system that could impact our ability to sell our approved therapies or products profitably. In particular, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 revised the payment methodology for many products under Medicare in the United States, which has resulted in lower rates of reimbursement. In 2010, the Affordable Care Act was enacted. This expansion in the government’s role in the U.S. healthcare industry may further lower rates of reimbursement.
Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2027 unless additional Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our products, if approved, and accordingly, on our financial operations.
In 2017, the European Union released new regulations to ensure patient safety with the use of pharmaceuticals, medical devices and in-vitro diagnostics that will go into effect over a three-year period from 2020 to 2022. The new regulations replace predecessor directives and emphasize a global convergence of regulations. Marketing authorization timelines will become more protracted and the costs of operating in Europe will increase. A significantly more costly path to regulatory compliance is anticipated. Adjusting to the new Medical Device Regulation may prove to be costly and disruptive to our business.
Large public and private payors, managed care organizations, group purchasing organizations and similar organizations are exerting increasing influence on decisions regarding the use of, and reimbursement levels for, particular treatments. In particular, third-party payors may limit the covered indications. Cost-control initiatives could decrease the price we might establish, which could result in revenue and profitability being lower than anticipated.
There may be significant delays in obtaining coverage and reimbursement for newly approved therapies or products, and coverage may be more limited than the purposes for which the therapy or product is approved by the FDA or other regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a therapy or product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution expenses. Interim reimbursement levels, if applicable, may also be insufficient to cover our and any partner’s costs and may not be made permanent. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved therapies or products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize therapies or products and our overall financial condition.
Furthermore, reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must be obtained on a country-by-country basis. In many countries, therapies or products cannot be commercially launched until reimbursement is approved and the negotiation process in some countries can exceed 12 months. In addition, pricing and reimbursement decisions in certain countries can be affected by decisions taken in other countries, which can lead to mandatory price reductions and/or additional reimbursement restrictions across a number of other countries, which may thereby adversely affect our sales and profitability. In the event that countries impose prices which are not sufficient to allow us to generate a profit, this would adversely affect sales and profitability.
We work with outside scientists and their institutions in developing therapeutic candidates and products. These scientists may have other commitments or conflicts of interest, which could limit our access to their expertise.
We work with scientific advisors and collaborators at academic research institutions in connection with our development programs. These scientific advisors serve as our link to the specific pools of trial participants we are targeting in that these advisors may:
• | identify individuals as potential candidates for study; |
• | obtain their consent to participate in our research; |
obtain their consent to participate in our research;
• | perform medical examinations and gather medical histories; |
perform medical examinations and gather medical histories;
• | conduct the initial analysis of suitability of the individuals to participate in our research based on the foregoing; and |
conduct the initial analysis of suitability of the individuals to participate in our research based on the foregoing; and
collect data and biological samples from trial participants periodically in accordance with our study protocols.
• | collect data and biological samples from trial participants periodically in accordance with our study protocols. |
These scientists and collaborators are not our employees, rather they serve as either independent contractors or the primary investigators under research collaboration agreements that we have with their sponsoring academic or research institution. Such scientists and collaborators may have other commitments that would limit their availability to us. Although our scientific advisors generally agree not to do competing work, if an actual or potential conflict of interest between their work for us and their work for another entity arises, we may lose their services. It is also possible that some of our valuable proprietary knowledge may become publicly known through these scientific advisors if they breach their confidentiality agreements with us, which would cause competitive harm to our business.
If the market opportunities for our therapeutic candidates or products are smaller than we believe they are, our revenues may be adversely affected, and our business may suffer.
It is very difficult to estimate the future commercial potential of the CardiAMP Cell Therapy System, the CardiALLO Cell Therapy System, Neurokinin-1 Receptor Positive allogeneic therapies and our commercialized products due to factors such as safety and efficacy compared to other available treatments, changing standards of care, third-party payor reimbursement standards, patient and physician preferences, and the availability of competitive alternatives that may emerge. We believe that approximately 70% of the NYHA Class II and Class III ischemic systolic heart failure patients in the United States will be eligible for CardiAMP due to a sufficient CardiAMP potency assay score. However, if considerably less than approximately 70% of NYHA Class II and Class III ischemic heart failure patients are eligible for CardiAMP due to an insufficient CardiAMP potency assay score, it would significantly and negatively impact our business, financial condition and results of operations.
Risks Relating to Government Regulation, Compliance and Litigation
Even if we obtain regulatory approval for a product candidate, including our CardiAMP and CardiALLO Cell Therapy SystemsSystem, Neurokinin-1 Receptor Positive allogeneic therapy and other therapeutic candidates, these products or therapies, along with our other regulated products, will be subject to ongoing regulatory scrutiny.
Even if we obtain regulatory approval or clearance in a jurisdiction, regulatory authorities may still impose significant restrictions on the indicated uses or marketing of our therapeutic candidates or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. For example, once a product receives regulatory approval or clearance for sale, we are obligated to monitor and report adverse events and any failure of a product to meet the specifications in the applicable regulatory approval or clearance. We must also submit new or supplemental applications and obtain FDA approval or clearance for certain changes to the approved or cleared product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.
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 QSRs and adherence to commitments made in the applicable regulatory approval. If we or a regulatory agency discovers previously unknown problems with a product such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, 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.
If we fail to comply with applicable regulatory requirements following approval of any of our therapeutic candidates, a regulatory agency may impose the following:
• | restrictions on the marketing or manufacturing of our products, withdrawal of our products from the market, or voluntary or mandatory product recalls; |
• | costly regulatory inspections; |
• | fines, warning letters, or holds on clinical trials; |
• | refusal by the FDA to approve pending applications or supplements to approved applications filed by us or our collaborators, or suspension or revocation of applicable regulatory approvals; |
• | product seizure or detention, or refusal to permit the import or export of products; and |
costly regulatory inspections;
fines, warning letters, or holds on clinical trials;
refusal by the FDA to approve pending applications or supplements to approved applications filed by us or our collaborators, or suspension or revocation of applicable regulatory approvals;
product seizure or detention, or refusal to permit the import or export of products; and
injunctions or the imposition of civil or criminal penalties by FDA or other regulatory bodies.
• | injunctions or the imposition of civil or criminal penalties by FDA or other regulatory bodies. |
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our therapeutic candidates and generate revenues.
We may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory agencies.
We have not obtained regulatory approval for either our CardiAMP or CardiALLO Cell Therapy SystemsSystem, Neurokinin-1 Receptor Positive allogeneic therapies or other therapeutic candidates. We must conduct extensive testing of our therapeutic candidates to demonstrate their safety and efficacy, including human clinical trials and, if applicable, preclinical animal testing, before we can obtain regulatory approval to market and sell them. Conducting such testing is a lengthy, time-consuming, and expensive process and there is a high rate of failure. Our current and completed preclinical and clinical results for our therapeutic candidates are not necessarily predictive of the results of our ongoing or future clinical trials. Promising results in preclinical studies of a therapeutic candidate may not be predictive of similar results in humans during clinical trials, and successful results from early human clinical trials of a therapeutic candidate may not be replicated in later and larger human clinical trials or in clinical trials for different indications. If the results of our ongoing or future clinical trials are negative or inconclusive with respect to the efficacy of our therapeutic candidates or if we or they do not meet the clinical endpoints with statistical significance or if there are safety concerns or adverse events associated with our therapeutic candidates, we may be prevented or delayed in obtaining marketing approval for our therapeutic candidates.
If we fail to obtain and maintain necessary regulatory clearances or approvals for our therapeutic candidates or products, or if clearances or approvals for our therapeutic candidates or products in additional indications are delayed or not issued, our commercial operations would be harmed.
We are required to timely file various reports with the FDA, require that we report to the regulatory authorities if our therapeutic candidates or products may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. If these reports are not filed timely, regulators may impose sanctions and sales may suffer, and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business.
If we initiate a correction or removal to reduce a risk to health posed, we would be required to submit a publicly available Correction and Removal report to the FDA and in many cases, similar reports to other regulatory agencies. This report could be classified by the FDA as a product recall which could lead to increased scrutiny by the FDA, other international regulatory agencies and our customers regarding the quality and safety of our therapeutic candidates or products. Furthermore, the submission of these reports has been and could be used by competitors against us in competitive situations and cause customers to delay purchase decisions or cancel orders and would harm our reputation.
The FDA and the Federal Trade Commission, or FTC, also regulate the advertising and promotion of our therapeutic candidates or products to ensure that the claims we make are consistent with our regulatory approvals, that there are adequate and reasonable data to substantiate the claims and that our promotional labeling and advertising is neither false nor misleading in any respect. If the FDA or FTC determines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may be subject to enforcement actions, including warning letters, and we may be required to revise our promotional claims and make other corrections or restitutions.
The FDA and state authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA or state agencies, which may include any of the following sanctions:
• | adverse publicity, warning letters, fines, injunctions, consent decrees and civil penalties; | |
• | repair, replacement, refunds, recall or seizure of our products; | |
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| refusing our requests for premarket approval of new products, new intended uses or modifications to existing products; |
• | withdrawing premarket approvals that have already been granted; and | |
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• | criminal prosecution. |
If any of these events were to occur, our business and financial condition would be harmed.
Serious adverse events or other safety risks could require us to abandon development and preclude, delay or limit approval of our therapeutic candidates or products or limit the scope of any approved indication or market acceptance.
Participants in clinical trials of our investigational cell-based therapies and products may experience adverse reactions or other undesirable side effects. While some of these can be anticipated, others may be unexpected. We cannot predict the frequency, duration, or severity of adverse reactions or undesirable side effects that may occur during clinical investigation. If any of our therapeutic candidates or products, prior to or after any approval for commercial sale, cause adverse events or are associated with other safety risks, a number of potentially significant negative consequences could result, including:
regulatory authorities may suspend (e.g., through a clinical hold) or terminate clinical trials;
• | regulatory authorities may suspend (e.g., through a clinical hold) or terminate clinical trials; |
regulatory authorities may deny regulatory approval of our therapeutic candidates or products;
• | regulatory authorities may deny regulatory approval of our therapeutic candidates or products; |
regulatory authorities may restrict the indications or patient populations for which a therapeutic candidate or products is approved;
• | regulatory authorities may restrict the indications or patient populations for which a therapeutic candidate or products is approved; |
regulatory authorities may require certain labeling statements, such as warnings or contraindications or limitations on the indications for use, and/or impose restrictions on distribution in the form of a Risk Evaluation and Mitigation Strategy, or REMS, in connection with approval, if any;
• | regulatory authorities may require certain labeling statements, such as warnings or contraindications or limitations on the indications for use, and/or impose restrictions on distribution in the form of a Risk Evaluation and Mitigation Strategy, or REMS, in connection with approval, if any; |
regulatory authorities may withdraw their approval, require more onerous labeling statements or impose a more restrictive REMS than any therapeutic candidate or product that is approved;
• | regulatory authorities may withdraw their approval, require more onerous labeling statements or impose a more restrictive REMS than any therapeutic candidate or product that is approved; |
we may be required to change the way the therapy or therapeutic candidate or product is administered or conduct additional clinical trials;
• | we may be required to change the way the therapy or therapeutic candidate or product is administered or conduct additional clinical trials; |
patient recruitment into our clinical trials may suffer;
• | patient recruitment into our clinical trials may suffer; |
we could be required to provide compensation to subjects for their injuries, e.g., if we are sued and found to be liable or if required by the laws of the relevant jurisdiction or by the policies of the clinical site; or
• | we could be required to provide compensation to subjects for their injuries, e.g., if we are sued and found to be liable or if required by the laws of the relevant jurisdiction or by the policies of the clinical site; or |
our reputation may suffer.
• | our reputation may suffer. |
There can be no assurance that adverse events associated with our therapeutic candidates or products will not be observed, even where no prior adverse events have occurred. We may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to participants or if preliminary data demonstrate that our therapeutic candidates or products are unlikely to receive regulatory approval or are unlikely to be successfully commercialized. Regulatory agencies, IRBs or data safety monitoring boards may at any time recommend the temporary or permanent discontinuation of our clinical trials or request that we cease using investigators in the clinical trials if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements, or that they present an unacceptable safety risk to participants. If we elect or are forced to suspend or terminate a clinical trial for any reason this would have an adverse effect on our business.
Our therapeutic candidates are intended to treat patients who are extremely ill, and patient deaths that occur in our clinical trials could negatively impact our business even if they are not shown to be related to our therapeutic candidates.
Generally, patients remain at high risk following their treatment with our CardiAMPautologous and CardiALLOallogeneic therapeutic candidates. As a result, it is likely that we will observe severe adverse outcomes during our clinical trials for these therapeutic candidates, including patient death. If a significant number of study subject deaths were to occur, regardless of whether such deaths are attributable to our therapeutic candidates, our ability to obtain regulatory approval for the applicable therapeutic candidate may be adversely impacted and our business could be materially harmed.
If we or our suppliers fail to comply with the FDA’s QSRs, our manufacturing operations could be delayed or shut down and product sales could suffer.
Our manufacturing processes and those of our third-party suppliers are required to comply with the FDA’s QSRs, which covers the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and shipping. We are also subject to similar state requirements and licenses. In addition, we must engage in extensive record keeping and reporting and must make available our manufacturing facilities and records for periodic unannounced inspections by governmental agencies, including the FDA, state authorities and comparable agencies in other countries. If we fail a Quality System inspection, our operations could be disrupted and our manufacturing interrupted. Failure to take adequate corrective action in response to an adverse Quality System inspection could result in, among other things, a shut-down of our manufacturing operations, significant fines, suspension of marketing clearances and approvals, seizures or recalls, operating restrictions and criminal prosecutions, any of which would cause our business to suffer. Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with applicable regulatory requirements, which may result in manufacturing delays and cause our revenues to decline.
We have registered with the FDA as a medical device manufacturer and have obtained a manufacturing license from the California Department of Health Services, or CDHS. The FDA has broad post-market and regulatory enforcement powers. We are subject to unannounced inspections by the FDA and the Food and Drug Branch of CDHS to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of our suppliers. If the FDA or CDHS inspect our facility and discover compliance problems, we may have to shut down our facility and cease manufacturing until we can take the appropriate remedial steps to correct the audit findings. Taking corrective action may be expensive, time consuming and a distraction for management and if we experience a shutdown or delay at our manufacturing facility, we may be unable to produce our products, which may have an adverse impact on our business.
The requirements to obtain regulatory approval of the FDA and regulators in other jurisdictions can be costly, time-consuming, and unpredictable. If we are unable to obtain timely regulatory approval for our therapeutic candidates, our business may be substantially harmed.
The regulatory approval process is expensive, and the time and resources required to obtain approval from the FDA or other regulatory authorities in other jurisdictions to sell any therapeutic candidate or product is uncertain and approval may take years. Whether regulatory approval will be granted is unpredictable and depends upon numerous factors, including the discretion of the regulatory authorities. For example, governing legislation, approval policies, regulations, regulatory policies, or the type and amount of preclinical and clinical data necessary to gain approval may change during the course of a therapeutic candidate’s clinical development and may vary among jurisdictions. It is possible that none of our existing or future therapeutic candidates will ever obtain regulatory approval, even if we expend substantial time and resources seeking such approval.
Further, regulatory requirements governing cell-based therapy products in particular have changed frequently and may continue to change in the future. For example, in November 2014, Japan’s parliament enacted new legislation to promote the safe and accelerated development of treatments using stem cells. The new Pharmaceuticals, Medical Devices and Other Therapeutic Products Act, or PMD Act, establishes a framework for expedited approval in Japan for regenerative medical products. As this is a new regulation, it is not clear yet what impact it will have on the operation of our business. Any regulatory review committees and advisory groups and any contemplated new guidelines may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our therapeutic candidates or products or lead to significant post-approval limitations or restrictions. As we advance our therapeutic candidates or products, we will be required to consult with these regulatory and advisory groups and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of our therapeutic candidates or products. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a therapeutic candidate or product to market could decrease our ability to generate sufficient revenue to maintain our business.
Our therapeutic candidates could fail to receive regulatory approval for many reasons, including the following:
• | we may be unable to successfully complete our ongoing and future clinical trials of therapeutic candidates; |
we may be unable to successfully complete our ongoing and future clinical trials of therapeutic candidates;
• | we may be unable to demonstrate to the satisfaction of the FDA or other regulatory authorities that a therapeutic candidate is safe, pure, and potent for any or all of a therapeutic candidate’s proposed indications; |
• | we may be unable to demonstrate that a therapeutic candidate’s benefits outweigh the risk associated with the therapeutic candidate; |
• | the FDA or other regulatory authorities may disagree with the design or implementation of our clinical trials; |
• | the results of clinical trials may not meet the level of statistical significance required by the FDA or other regulatory authorities for approval; |
• | the FDA or other regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; |
• | a decision by the FDA, other regulatory authorities or us to suspend or terminate a clinical trial at any time; |
we may be unable to demonstrate to the satisfaction of the FDA or other regulatory authorities that a therapeutic candidate is safe, pure, and potent for any or all of a therapeutic candidate’s proposed indications;
• | the data collected from clinical trials of our therapeutic candidates may be inconclusive or may not be sufficient to obtain regulatory approval in the United States or elsewhere; |
we may be unable to demonstrate that a therapeutic candidate’s benefits outweigh the risk associated with the therapeutic candidate;
• | the inability to obtain sufficient quantities of the therapeutic candidates for use in clinical trials; |
the FDA or other regulatory authorities may disagree with the design or implementation of our clinical trials;
• | our third-party manufacturers of supplies needed for manufacturing therapeutic candidates may fail to satisfy FDA or other regulatory requirements and may not pass inspections that may be required by FDA or other regulatory authorities; |
the results of clinical trials may not meet the level of statistical significance required by the FDA or other regulatory authorities for approval;
• | the failure to comply with applicable regulatory requirements following approval of any of our therapeutic candidates may result in the refusal by the FDA or similar foreign regulatory agency to approve a pending PMA or BLA, or supplement to a PMA or BLA submitted by us for other indications or new therapeutic candidates or products; and |
the FDA or other regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
a decision by the FDA, other regulatory authorities or us to suspend or terminate a clinical trial at any time;
the data collected from clinical trials of our therapeutic candidates may be inconclusive or may not be sufficient to obtain regulatory approval in the United States or elsewhere;
the inability to obtain sufficient quantities of the therapeutic candidates for use in clinical trials;
our third-party manufacturers of supplies needed for manufacturing therapeutic candidates may fail to satisfy FDA or other regulatory requirements and may not pass inspections that may be required by FDA or other regulatory authorities;
the failure to comply with applicable regulatory requirements following approval of any of our therapeutic candidates may result in the refusal by the FDA or similar foreign regulatory agency to approve a pending PMA or BLA, or supplement to a PMA or BLA submitted by us for other indications or new therapeutic candidates or products; and
the approval policies or regulations of the FDA or other regulatory authorities outside of the United States may significantly change in a manner rendering our clinical data insufficient for approval.
• | the approval policies or regulations of the FDA or other regulatory authorities outside of the United States may significantly change in a manner rendering our clinical data insufficient for approval. |
We may gain regulatory approval for any of our therapeutic candidates in some but not all of the territories available and any future approvals may be for some but not all of the target indications, limiting their commercial potential. Regulatory requirements and timing of product approvals vary from country to country and some jurisdictions may require additional testing beyond what is required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries or by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. In addition, regulatory approval does not specify pricing or reimbursement which may not match our expectations based on the results of our clinical data.
Even if we obtain and maintain approval for our therapeutic candidates or products from the FDA, we may never obtain approval for our therapeutic candidates or products outside of the United States, which would limit our market opportunities and adversely affect our business.
Approval in the United States by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. Sales of our therapeutic candidates or products, if approved, outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval.
Even if the FDA grants marketing approval, comparable regulatory authorities of foreign countries must also approve the manufacturing and marketing in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials. In many countries outside the United States, a therapeutic candidate or product must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that we intend to charge, if approved, is also subject to approval. While we may decide to submit a request to the EMA for approval of our therapeutic candidates, including CardiAMP, as Advanced Therapeutic Medicinal Products, or ATMPs, in Europe, obtaining such approval is a lengthy and expensive process and the EMA has its own procedures for approval. Even if a therapeutic candidate or product is approved, the FDA or the EMA, as the case may be, may limit the indications for which it may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming clinical trials or reporting as conditions of approval. Regulatory authorities in countries outside of the United States and Europe also have requirements for approval of therapeutic candidates or products with which we must comply prior to marketing in those countries. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction in certain countries. Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries and regulatory approval in one country does not ensure approval in any other country, while a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. Also, regulatory approval may be withdrawn. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our therapeutic candidates or products will be harmed and our business will be adversely affected.
We may face competition from biosimilars due to changes in the regulatory environment.
We may face competition for the CardiALLO Cell Therapy System andallogeneic Neurokinin-1 Receptor Positive therapies from biosimilars due to the changing regulatory environment. In the United States, the Biologics Price Competition and Innovation Act of 2009 created an abbreviated approval pathway for biological products that are demonstrated to be “highly similar,” or biosimilar to, or “interchangeable” with an FDA-approved innovator (original) biological product. This new pathway could allow competitors to reference data from innovator biological products already approved after 12 years from the time of approval. In Europe, a competitor may reference data from biological products already approved but will not be able to get on the market until 10 years after the time of approval. This 10-year period will be extended to 11 years if, during the first eight of those 10 years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existing therapies. In addition, companies may be developing biosimilars in other countries that could compete with CardiALLO or our allogeneic Neurokinin-1 Receptor Positive therapies, if approved. Additionally, the FDA may approve our competitors’ products through a PMA pathway, similar to CardiAMP. If competitors are able to obtain marketing approval for biosimilars referencing CardiALLO,Neurokinin-1 Receptor Positive allogeneic cell therapy, if approved, it may become subject to competition from such biosimilars with the attendant competitive pressure and consequences.
We are subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act.
Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse will be applicable to our business. Healthcare fraud and abuse regulations are complex and can be subject to varying interpretations as to whether or not a statute has been violated. The laws that may affect our ability to operate include:
the federal Anti-Kickback Statute which prohibits, among other things, the knowing and willful payment of remuneration to induce or reward patient referrals or the generation of business involving any item or service which may be payable by the federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients);
• | the federal Anti-Kickback Statute which prohibits, among other things, the knowing and willful payment of remuneration to induce or reward patient referrals or the generation of business involving any item or service which may be payable by the federal health care programs (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients); |
the federal False Claims Act which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment for government funds (e.g., payment from Medicare or Medicaid) or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim for government funds;
• | the federal False Claims Act which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment for government funds (e.g., payment from Medicare or Medicaid) or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim for government funds; |
HIPAA, as amended by HITECH, and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HIPAA imposes civil and criminal liability for the wrongful access or disclosure of protected health information;
• | HIPAA, as amended by HITECH, and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HIPAA imposes civil and criminal liability for the wrongful access or disclosure of protected health information; |
the federal Physician Payments Sunshine Act, created under Section 6002 of the Patient Protection and Affordable Care Act, as amended, the ACA, requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, those physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members;
• | the federal Physician Payments Sunshine Act, created under Section 6002 of the Patient Protection and Affordable Care Act, as amended, the ACA, requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, those physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members; |
the federal Food, Drug and Cosmetic Act which prohibits, among other things, the adulteration or misbranding of drugs and devices;
• | the federal Food, Drug and Cosmetic Act which prohibits, among other things, the adulteration or misbranding of drugs and devices; |
the U.S. Foreign Corrupt Practices Act which prohibits corrupt payments, gifts or transfers of value to non-U.S. officials; and
• | the U.S. Foreign Corrupt Practices Act which prohibits corrupt payments, gifts or transfers of value to non-U.S. officials; and |
non-U.S. and U.S. state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.
• | non-U.S. and U.S. state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers. |
The federal fraud and abuse laws have been interpreted to apply to arrangements between medical device and pharmaceutical manufacturers and a variety of health care professional. Although the federal Anti-Kickback Statute has several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, all elements of the potentially applicable exemption or safe harbor must be met in order for the arrangement to be protected, and prosecutors have interpreted the federal healthcare fraud statutes to attack a wide range of conduct by medical device and pharmaceutical companies. In addition, most states have statutes or regulations similar to the federal anti-kickback and federal false claims laws, which apply to items and services covered by Medicaid and other state programs, or, in several states, apply regardless of the payor. Administrative, civil and criminal sanctions may be imposed under these federal and state laws.
Further, the ACA, among other things, amended the intent standard under the Anti-Kickback Statute such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACA makes clear that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the federal False Claims Act. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, results of operations and financial condition.
Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could harm our ability to operate our business and our results of operations. In addition, the clearance or approval and commercialization of any of our products outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
A failure to adequately protect private health information could result in severe harm to our reputation and subject us to significant liabilities, each of which could have a material adverse effect on our business.
Throughout the clinical trial process, we may obtain the private health information of our trial subjects. There are a number of state, federal and international laws protecting the privacy and security of health information and personal data. As part of the American Recovery and Reinvestment Act of 2009, or ARRA, Congress amended the privacy and security provisions of HIPAA. HIPAA imposes limitations on the use and disclosure of an individual’s healthcare information by healthcare providers conducting certain electronic transactions, healthcare clearinghouses, and health insurance plans, collectively referred to as covered entities. The HIPAA amendments also impose compliance obligations and corresponding penalties for non-compliance on certain individuals and entities that provide services to or perform certain functions on behalf of healthcare providers and other covered entities involving the use or disclosure of individually identifiable health information, collectively referred to as business associates. ARRA also made significant increases in the penalties for improper use or disclosure of an individual’s health information under HIPAA and extended enforcement authority to state attorneys general. The amendments also create notification requirements to federal regulators, and in some cases local and national media, for individuals whose health information has been inappropriately accessed or disclosed. Notification is not required under HIPAA if the health information that is improperly used or disclosed is deemed secured in accordance with certain encryption or other standards developed by the U.S. Department of Health and Human Services, or HHS. Most states have laws requiring notification of affected individuals and state regulators in the event of a breach of personal information, which is a broader class of information than the health information protected by HIPAA. Many state laws impose significant data security requirements, such as encryption or mandatory contractual terms to ensure ongoing protection of personal information. Activities outside of the United States implicate local and national data protection standards, impose additional compliance requirements and generate additional risks of enforcement for noncompliance. The European Union’s Data Protection Directive, Canada’s Personal Information Protection and Electronic Documents Act and other data protection, privacy and similar national, state/provincial and local laws may also restrict the access, use and disclosure of patient health information abroad. We may be required to expend significant capital and other resources to ensure ongoing compliance with applicable privacy and data security laws, to protect against security breaches and hackers or to alleviate problems caused by such breaches.
A recall of any of our commercialized products, or the discovery of serious safety issues, could have a significant negative impact on us.
The FDA and other relevant regulatory agencies have the authority to require or request the recall in the event of material deficiencies or defects in design or manufacture or in the event an unacceptable risk to health. Manufacturers may, under their own initiative, also initiate a recall. A government-mandated or voluntary recall could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls would divert managerial and financial resources and have an adverse effect on our reputation, financial condition and operating results.
Further, under the FDA’s reporting regulations, we are required to report to the FDA any event that reasonably suggests that our products may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction of the same or similar product marketed by us were to recur, would likely cause or contribute to death or serious injury. The FDA also requires reporting of serious, life-threatening, unexpected and other adverse experiences and the submission of periodic safety reports and other information. Malfunctions or other adverse event reports may result in a voluntary or involuntary recall and other adverse actions, which could divert managerial and financial resources, impair our ability to manufacture in a cost-effective and timely manner and have an adverse effect on our reputation, financial condition and operating results. Similar reporting requirements exist in Europe and other jurisdictions.
Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer notifications, or regulatory agency action, which could include inspection, mandatory recall or other enforcement action. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results. For example, in 2014 we notified the FDA that we were going to initiate a voluntary recall of our Morph AccessPro product based on a manufacturing observation, which was completed to the FDA’s satisfaction in the same year, and in 2017 we updated our instructions for use for the Helix™ and Morph catheter products to provide guidance on known potential risks. There can be no guarantee that we will not experience similar product recalls or changes in the future with these products or our other products or therapeutic candidates, if approved.
Modifications to our products may require reclassifications, new regulatory approvals or clearances, or may require us to cease marketing or recall the modified products until new CE marking is obtained.
Currently there are eight Morph product family model numbers that have been approved for commercial use in the United States via a 510(k) clearance. A modification to these products could lead to a reclassification and could result in further requirements (including additional clinical trials) to maintain each respective clearance or approval. If we fail to comply with such further requirements, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.
The use, misuse or off-label use of our products or therapies, if approved, may result in injuries that lead to product liability suits, which could be costly to our business.
We are not permitted to make claims about the use of our marketed products and will not be permitted to make claims about the use of our therapeutic candidates, if approved, outside of their approved indications. Further, we are not and will not be able to proactively discuss or provide information on off-label uses of such products, with very specific and limited exceptions. However, we cannot prevent a physician from using our products or therapeutic candidates, if approved, for off-label applications. Off-label use of our products or therapies, if approved, is more likely to result in complications that have serious consequences. Product liability claims are especially prevalent in our industry and could harm our reputation, divert management’s attention from our core business, be expensive to defend and may result in sizable damage awards against us. Although we maintain product liability insurance, the amount or breadth of our coverage may not be adequate for the claims that may be made against us. In addition, failure to follow FDA rules and guidelines relating to promotion and advertising can result in, among other things, the FDA’s refusal to approve a product or therapeutic candidate, the suspension or withdrawal of an approved product or therapy from the market, product recalls, fines, disgorgement of money, operating restrictions, injunctions or criminal prosecutions.
Our employees, principal investigators, consultants and collaboration partners may engage in misconduct or other improper activities, including noncompliance with laws and regulatory standards and requirements and insider trading.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of activity relating to pricing, discounting, marketing and promotion, sales commissions, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation, or a breach of insider trading laws. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
Price controls may be imposed in foreign markets, which may adversely affect our future profitability.
In some countries, particularly European Union member states, Japan, Australia and Canada, the pricing of therapies and products is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a therapy or product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or our partners may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our therapeutic candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of our therapies or products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business, revenues or profitability could be adversely affected.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our therapeutic candidates or products.
We face an inherent risk of product liability as a result of the human clinical use of our therapeutic candidates and products and will face an even greater risk if we continue to commercialize our therapeutic candidates and products. For example, we may be sued if any therapy or product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of inherent dangers, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
decreased demand, even if such products or therapies are approved;
• | decreased demand, even if such products or therapies are approved; |
injury to our reputation;
• | injury to our reputation; |
withdrawal of clinical trial participants;
• | withdrawal of clinical trial participants; |
costs to defend the related litigations;
• | costs to defend the related litigations; |
a diversion of management’s time and our resources;
• | a diversion of management’s time and our resources; |
substantial monetary awards to trial participants or patients;
• | substantial monetary awards to trial participants or patients; |
recalls, withdrawals, or labeling, marketing or promotional restrictions;
• | recalls, withdrawals, or labeling, marketing or promotional restrictions; |
increased cost of liability insurance;
• | increased cost of liability insurance; |
loss of revenue;
• | loss of revenue; |
the inability to receive regulatory approvals or commercialize our approved products or therapies; and
• | the inability to receive regulatory approvals or commercialize our approved products or therapies; and |
a decline in our share price.
• | a decline in our share price. |
Although we maintain product liability insurance with coverage that we believe is consistent with industry norms for companies at our stage of development, the amount or breadth of our coverage may not be adequate for the claims that may be made against us. Failure to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products or therapies we develop. Additionally, our insurance policies have various exclusions, and we may be subject to a product liability claim for which we have no coverage or reduced coverage. Any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
Risks Related to the Operation of Our Business
If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our therapeutic candidates, conduct our clinical trials and commercialize our therapeutic candidates.
We are highly dependent on the members of our executive team, the loss of whose services may adversely impact the achievement of our objectives. Any of our executive officers could leave our employment at any time, as all of our employees are “at will” employees. Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success.
Recruiting and retaining qualified scientific, clinical, manufacturing, sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
We will need to expand our organization and we may experience difficulties in managing this growth, which could disrupt our operations.
As we mature and expand our research and development and other pre-commercialization activities, we expect to expand our existing full-time employee base and to hire more consultants and contractors. In addition, we currently plan to commercialize the CardiAMP Cell Therapy System, if approved, using an internal sales force to selected cardiologists, interventional cardiologists and third-party payors in the United States. 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.
Our business and operations would suffer in the event of system failures.
Despite the implementation of security measures, our internal computer systems and those of our current and any future CROs and other contractors, consultants and potential collaborators are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. For example, our systems have been impacted by computer viruses in the past, and while we have not experienced any material system failure, accident or security breach that has resulted in lasting impacts to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties for manufacturing our therapeutic candidates and conducting clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our therapeutic candidates could be delayed.
Any cybersecurity breaches or our actual or perceived failure to comply with such legal obligations by us, or by our third-party service providers or partners, could harm our business.
We collect, store, process and use our customers’ personally identifiable information and other data, and we rely on third parties that are not directly under our control to do so as well. While we take measures intended to protect the security, integrity and confidentiality of the personal information and other sensitive information we collect, store or transmit, we cannot guarantee that inadvertent or unauthorized use or disclosure will not occur, or that third parties will not, gain unauthorized access to this information. There have been a number of recent reported incidents where third parties have used software to access the personal data of their partners’ customers for marketing and other purposes.
If we or our third-party service providers were to experience a breach, disruption or failure of systems compromising our customers’ data, or if one of our third-party service providers or partners were to access our customers’ personal data without our authorization, our brand and reputation could be adversely affected, use of our products could decrease and we could be exposed to a risk of loss, litigation and regulatory proceedings. In addition, a breach could require expending significant additional resources related to the security of information systems and disrupt our operations.
The use of data by our business and our business associates is highly regulated in all our operating countries. Privacy and information-security laws and regulations change, and compliance with them may result in cost increases due to, among other things, systems changes and the development of new processes. If we or those with whom we share information fail to comply with laws and regulations, such as the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA), our reputation could be damaged, possibly resulting in lost business, and we could be subjected to additional legal risk or financial losses as a result of non-compliance. Complying with such laws may also require us to modify our data processing practices and policies and incur substantial expenditures.
Interruptions in supply or inventory loss may adversely affect our operating results and financial condition.
Our therapeutic candidates and products are manufactured and distributed using technically complex processes requiring specialized facilities, highly specific raw materials and other production constraints. The complexity of these processes, as well as strict company and government standards for manufacture and storage, subjects us to production risks. While batches released for use in clinical trials or for commercialization undergo sample testing, some defects may only be identified following release. In addition, process deviations or unanticipated effects of approved process changes may result in these intermediate products not complying with stability requirements or specifications. The investigation and remediation of any identified problems can cause production delays, substantial expense, lost sales and delays of new product or therapy launches. Any supply interruption or the loss thereof could hinder our ability to timely distribute our approved products and satisfy demand. Any unforeseen storage failure or loss in supply could delay our clinical trials and, if our therapeutic candidates are approved, result in a loss of our market share and negatively affect our revenues and operations.
We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. A majority of our management operates in our principal executive offices located in San Carlos,Sunnyvale, California and we currently manufacture our Helix™ and Morph products at this facility and use it for storage of our clinical trial materials and biobanking. If our San CarlosSunnyvale offices were affected by a natural or man-made disaster, particularly those that are characteristic of the region, such as wildfires and earthquakes, or other business interruption, our ability to manage our domestic and foreign operations could be impaired, which could materially and adversely affect our results of operations and financial condition. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business. The ultimate impact of any such events on us, our significant suppliers and our general infrastructure is unknown.
The outbreakOur business, financial condition, results of the novel strain of coronavirus,SARS-CoV-2, and its variants,which causesCOVID-19,could adversely impact our business,operations, including our preclinical studies and clinical trials.trials, could continue to be harmed by the effect of the COVID-19 pandemic and other viral pandemics.
PublicWe are subject to risks related to public health crises such as pandemics or similar outbreaks could adversely impact our business. In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019 (COVID-19), surfaced in Wuhan, China. Since then,the global pandemic associated with the COVID-19 has spread to multiple countries, including the United States. In response to the spread of COVID-19, we have taken steps to comply with government guidelines to protect workers, resulting in many employees continuing their work outside of our offices.
pandemic. As a result of the COVID-19 outbreak, or similar pandemics, we have experienced and may in the futurecontinue to experience disruptions that could severely impact our business, preclinical studies and clinical trials, including:
delays or difficulties in enrolling patients in our clinical trials;
• | Fewer individuals undertaking voluntary treatment, including participation in clinical trials, whether due to contracting COVID-19, self-isolating or quarantining to lower the risk of contracting COVID-19 or being unable to access care as a result of healthcare providers tending to COVID-19 patients, resulting in delays or difficulties in enrolling patients in our clinical trials; |
delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;
• | delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff; |
delays or disruptions in non-clinical experiments due to unforeseen circumstances at contract research organizations and vendors along their supply chain;
• | delays or disruptions in non-clinical experiments due to unforeseen circumstances at contract research organizations and vendors along their supply chain; |
• | increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19, being forced to quarantine, or not accepting home health visits; |
increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19, being forced to quarantine, or not accepting home health visits;
• | diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; |
• | interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures (particularly any procedures that may be deemed non-essential), which may impact the integrity of subject data and clinical study endpoints; |
• | interruption or delays in the operations of the FDA and comparable foreign regulatory agencies, which may impact approval timelines; |
• | interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems; and |
• | limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families, the desire of employees to avoid contact with large groups of people, an increased reliance on working from home or mass transit disruptions. |
diversionNumerous state and local jurisdictions have imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of healthcare resources away fromCOVID-19. Multiple times in 2021, the conductgovernor of clinical trials, includingCalifornia, where our facilities are located, issued a “shelter-in-place” order restricting non-essential activities, travel and business operations for an indefinite period of time, subject to certain exceptions for necessary activities. Such orders and restrictions, have resulted in slowdowns and delays, travel restrictions and cancellation of events, among other effects, thereby negatively impacting our operations. Such orders or restrictions may continue or be re-instated, thereby causing additional negative impact on our operations. In addition, the diversionspread of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
interruption of key clinical trial activities,more contagious or deadly variants, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employersthe Delta and others or interruption of clinical trial subject visits and study procedures (particularly any procedures that may be deemed non-essential), which may impact the integrity of subject data and clinical study endpoints;
interruption or delays in the operations of the FDA and comparable foreign regulatory agencies, which may impact approval timelines;
interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems; and
limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families, the desire of employees to avoid contact with large groups of people, an increased reliance on working from home or mass transit disruptions.
These and other factors arising fromOmicron variants, could cause the COVID-19 pandemic could worsen in countries that are already afflicted with COVID-19, could continue to spread to additional countries,last longer or could return to countries where the pandemic has been partially contained, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results.be more severe than expected.
In addition, the trading prices for our common stockwidespread pandemic has resulted in, and other biopharmaceutical companies have been highly volatile as amay continue to result in, significant disruption of the COVID-19 epidemic.global financial markets. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. The COVID-19 outbreak continues to rapidly evolve. The extent to which the outbreakCOVID-19 pandemic or other viral pandemics may impact our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such asconfidence. In addition, a recession, further market correction or depression resulting from the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and actions to contain the outbreak or treat its impact, such as social distancing and quarantines or lock-downs in the United States and other countries,COVID-19 could materially affect our business closures or business disruptions and the effectivenessvalue of actions taken in the United Statesour notes and other countries to contain and treat the disease.our common stock.
We previously identified a material weakness in our internal control over financial reporting at December 31, 2019 and we may identify additional material weaknesses or otherwise fail to maintain an effective system of internal control in the future. If we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
We previously identified a material weakness in internal control over financial reporting as of September 30, 2019. The material weakness resulted from a lack of sufficient technical resources to appropriately perform effective and timely review of the accounting for and disclosure of complex non-routine transactions, including the adoption of new accounting standards. This material weakness was remediated as of December 31, 2020.
We have implemented measures designed to improve our internal control over financial reporting and remediate the material weakness, including the following:
we enhanced our control processes for identifying and reviewing non-routine transactions, including formalized reviews of these transactions by senior accounting management and more robust documentation of the related conclusions and required accounting; and
• | we enhanced our control processes for identifying and reviewing non-routine transactions, including formalized reviews of these transactions by senior accounting management and more robust documentation of the related conclusions and required accounting; and |
we have engaged external consultants to provide expertise and assistance sufficient to evaluate, resolve and document the accounting for complex non-routine transactions.
• | we have engaged external consultants to provide expertise and assistance sufficient to evaluate, resolve and document the accounting for complex non-routine transactions. |
We cannot provide assurance that the measures we have taken to date, and are continuing to implement, will be sufficient to prevent future material weakness from occurring. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on internal control over financial reporting.
If we identify other material weaknesses in our internal control over financial reporting in the future, if we are unable to comply with the requirements of Section 404 in a timely manner, or if we are unable to assert that our internal control over financial reporting is effective, we may be unable to report our financial results accurately on a timely basis, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
Risks Relating to Our Intellectual Property
We may not be able to protect our proprietary technology in the marketplace.
Our success will depend, in part, on our ability to obtain patents, protect our trade secrets and operate without infringing on the proprietary rights of others. We rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property of our therapeutic candidates and products. Patents might not be issued or granted with respect to our patent applications that are currently pending, and issued or granted patents might later be found to be invalid or unenforceable, be interpreted in a manner that does not adequately protect our current therapeutic candidates or products or any future therapeutic candidates or products, or fail to otherwise provide us with any competitive advantage. As such, we do not know the degree of future protection that we will have on our therapeutic candidates or products and technology, if any, and a failure to obtain adequate intellectual property protection with respect to our therapeutic candidates or products could have a material adverse impact on our business.
Filing, prosecuting and defending patents throughout the world would be prohibitively expensive, so our policy is to patent technology in jurisdictions with significant or otherwise relevant commercial opportunities or activities. However, patent protection may not be available for some of the therapeutic candidates or products we are developing. If we must spend significant time and money protecting or enforcing our patents, designing around patents held by others or licensing, potentially for large fees, patents or other proprietary rights held by others, our business, results of operations and financial condition may be harmed.
The patent protection of biotherapeutics is complex and uncertain.
The scope and extent of patent protection for our therapeutic candidates and products are particularly uncertain. To date, our principal therapeutic candidates have been based on specific subpopulations of known and naturally occurring adult stem cells. We anticipate that the therapeutic candidates or products we develop in the future will continue to include or be based on the same or other naturally occurring stem cells or derivatives or products thereof. Although we have sought and expect to continue to seek patent protection for our therapeutic candidates and products, their methods of use, methods of manufacture, and methods of delivery, any or all of them may not be subject to effective patent protection. Publication of information related to our therapeutic candidates and products by us or others may prevent us from obtaining or enforcing patents relating to these products and therapeutic candidates. Furthermore, others may independently develop similar therapeutic candidates or products, may duplicate our therapeutic candidates or products, or may design around our patent rights. In addition, any of our issued patents may be declared invalid. If we fail to adequately protect our intellectual property, we may face competition from companies who attempt to create a generic therapeutic candidate or product to compete with our therapeutic candidates or products.
Filing, prosecuting and defending patents on therapeutic candidates or products in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own therapeutic candidates or products and further, may export otherwise infringing therapeutic candidates or products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These therapeutic candidates or products may compete with our current or future therapeutic candidates or products, if any, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing therapeutic candidates or products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We maintain certain of our proprietary know-how and technological advances as trade secrets, especially where we do not believe patent protection is appropriate or obtainable, including, but not exclusively, with respect to certain aspects of the manufacturing of our therapeutic candidates or products. However, trade secrets are difficult to protect. We take a number of measures to protect our trade secrets including, limiting disclosure, physical security and confidentiality and non-disclosure agreements. We enter into confidentiality agreements with our employees, consultants, outside scientific collaborators, contract manufacturing partners, sponsored researchers and other advisors and third parties to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. Failure to obtain or maintain trade secret protection, or failure to adequately protect our intellectual property could enable competitors to develop generic products or use our proprietary information to develop other therapeutic candidates or products that compete with our therapeutic candidates or products or cause additional, material adverse effects upon our business, results of operations and financial condition.
We may be forced to litigate to enforce or defend our intellectual property rights, and/or the intellectual property rights of our licensors.
We may be forced to litigate to enforce or defend our intellectual property rights against infringement by competitors, and to protect our trade secrets against unauthorized use. In so doing, we may place our intellectual property at risk of being invalidated, unenforceable, or limited or narrowed in scope and may no longer be used to prevent the manufacture and sale of competitive product. Further, an adverse result in any litigation or other proceedings before government agencies such as the United States Patent and Trademark Office, or the USPTO, may place pending applications at risk of non-issuance. Further, interference proceedings, derivation proceedings, entitlement proceedings, ex parte reexamination, inter partes reexamination, inter partes review, post-grant review, and opposition proceedings provoked by third parties or brought by the USPTO or any foreign patent authority may be used to challenge inventorship, ownership, claim scope, or validity of our patent applications. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential and proprietary information could be compromised by disclosure during this type of litigation.
Intellectual property disputes could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and/or management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our shares. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of litigation proceedings more effectively than we can because of their greater financial resources and personnel. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to conduct our clinical trials, continue our internal research programs, in-license needed technology or enter into strategic collaborations that would help us bring our therapeutic candidates to market. As a result, uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
Patent reform legislation and recent court decisions could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law, including provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The USPTO has and continues to develop and implement regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act. The full effect of these changes is currently unclear as the USPTO has not yet adopted all pertinent final rules and regulations, the courts have yet to address these provisions and the applicability of the Leahy-Smith Act and new regulations on specific patents, including our patents discussed herein, have not been determined and would need to be reviewed.
Accordingly, it is not yet clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. As a result, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents, all of which could have a material adverse effect on our business and financial condition.
On June 13, 2013, the U.S. Supreme Court decision in Association for Molecular Pathology v. Myriad Genetics, Inc., held that isolated DNA sequences are not patentable because they constitute a product of nature. The Supreme Court did not address stem cells in particular, and as a result, it is not yet clear what, if any, impact this Supreme Court decision or future decisions will have on the operation of our business.
If third parties claim that our therapeutic candidates or other products infringe upon their intellectual property, commercialization of our therapeutic candidates or products and our operating profits could be adversely affected.
There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biopharmaceutical industry. We may, from time to time, be notified of claims that we are infringing upon patents, trademarks, copyrights, or other intellectual property rights owned by third parties, and we cannot provide assurances that other companies will not, in the future, pursue such infringement claims against us or any third-party proprietary technologies we have licensed. Any such claims could also be expensive and time consuming to defend and divert management’s attention and resources and could delay or prevent us from commercializing our therapeutic candidates or products. Our competitive position could suffer as a result. Although we have reviewed certain third-party patents and patent filings that we believe may be relevant to our therapeutic candidates or products, we have not conducted a freedom-to-operate search or analysis for our therapeutic candidates or products, and we may not be aware of patents or pending or future patent applications that, if issued, would block us from commercializing our therapeutic candidates or products. Thus, we cannot guarantee that our therapeutic candidates or products, or our commercialization thereof, do not and will not infringe any third-party’s intellectual property.
From time to time, we have reviewed the claims of specific patents owned by third parties. While we have concluded that no claims of any of these patents would be infringed by our products, that all relevant claims would expire before our products would be commercialized, or both, we cannot guarantee that the patent owners would not disagree and conclude that our products would infringe these claims.
If we do not obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation, thereby potentially extending the term of our marketing exclusivity of our therapeutic candidates or products, our business may be materially harmed.
Depending on the timing, duration and specifics of FDA marketing approval of our therapeutic candidates or products, if any, one of the U.S. patents covering each of such approved therapeutic candidate or product or the use thereof may be eligible for up to five years of patent term restoration under the Hatch-Waxman Act. The Hatch-Waxman Act allows a maximum of one patent to be extended per FDA approved product. Patent term extension also may be available in certain foreign countries upon regulatory approval of our therapeutic candidates, including by the EMA in the European Union or the Pharmaceutical and Medical Devices Agency in Japan. Nevertheless, we may not be granted patent term extension either in the United States or in any foreign country because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the term of extension, as well as the scope of patent protection during any such extension, afforded by the governmental authority could be less than we request. In addition, if a patent we wish to extend is owned by another party and licensed to us, we may need to obtain approval and cooperation from our licensor to request the extension.
If we are unable to obtain patent term extension or restoration, or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our therapeutic candidates or products will be shortened and our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
Because we rely on third parties for manufacturing, and because we collaborate with various organizations and academic institutions on the advancement of our clinical trials, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. For example, any academic institution that we may collaborate with in the future will usually expect to be granted rights to publish data arising out of such collaboration, provided that we are notified in advance and given the opportunity to delay publication for a limited time period in order for us to secure patent protection of intellectual property rights arising from the collaboration, in addition to the opportunity to remove confidential or trade secret information from any such publication. In the future we may also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.
Risks Related to Our Securities
An active trading market may not develop for our securities or what the market price of our securities will be and as a result it may be difficult for you to sell your shares of our securities.
Although our common stock and warrants to purchase common stock are listed on the Nasdaq Capital Market under the symbols “BCDA” and “BCDAW,” respectively, an active trading market for our common stock or warrants may never develop or be sustained. You may not be able to sell your shares quickly or at the market price if trading in shares of our securities is not active. Further, an inactive market may also impair our ability to raise capital by selling shares of our securities and may impair our ability to enter into strategic partnerships or acquire companies or products by using shares of our securities as consideration, which could have a material adverse effect on our business, financial condition, and results of operations.
The market price and trading volume of our securities may be volatile and may be affected by economic conditions beyond our control.
The market price of our securities is likely to be volatile. Some specific factors that could negatively affect the price of our securities or result in fluctuations in its price and trading volume include:
results of clinical trials of our therapeutic candidates;
• | results of clinical trials of our therapeutic candidates; |
results of clinical trials of our competitors’ products;
• | results of clinical trials of our competitors’ products; |
regulatory actions with respect to our therapeutic candidates or products or our competitors’ products;
• | regulatory actions with respect to our therapeutic candidates or products or our competitors’ products; |
actual or anticipated fluctuations in our quarterly operating results or those of our competitors;
• | actual or anticipated fluctuations in our quarterly operating results or those of our competitors; |
publication of research reports by securities analysts about us or our competitors in the industry;
• | publication of research reports by securities analysts about us or our competitors in the industry; |
our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
• | our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; |
issuances by us of debt or equity securities;
• | issuances by us of debt or equity securities; |
litigation involving our company, including stockholder litigation, investigations or audits by regulators into the operations of our company, or proceedings initiated by our competitors or clients;
• | litigation involving our company, including stockholder litigation, investigations or audits by regulators into the operations of our company, or proceedings initiated by our competitors or clients; |
strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
• | strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; |
the passage of legislation or other regulatory developments affecting us or our industry, fluctuations in the valuation of companies perceived by investors to be comparable to us;
• | the passage of legislation or other regulatory developments affecting us or our industry, fluctuations in the valuation of companies perceived by investors to be comparable to us; |
trading volume of our common stock and warrants;
• | trading volume of our common stock and warrants; |
• | sales or perceived potential sales of our common stock and/or warrants by us, our directors, senior management or our stockholders in the future; |
sales or perceived potential sales of our common stock and/or warrants by us, our directors, senior management or our stockholders in the future;
• | short selling or other market manipulation activities; |
short selling or other market manipulation activities;
• | announcement or expectation of additional financing efforts; |
announcement or expectation of additional financing efforts;
• | terrorist acts, acts of war or periods of widespread civil unrest; |
terrorist acts, acts of war or periods of widespread civil unrest;
• | natural disasters and other calamities; |
natural disasters and other calamities;
• | changes in market conditions for biopharmaceutical stocks; and |
changes in market conditions for biopharmaceutical stocks; and
conditions in the U.S. financial markets or changes in general economic conditions.
• | conditions in the U.S. financial markets or changes in general economic conditions. |
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, the price and trading volume of our securities could decline.
The trading market for our securities will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our securities would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, the price of our securities would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our securities to decline.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
As of December 31, 2020,2021, our executive officers, directors, 5% stockholders and their affiliates beneficially owned approximately 34.9%34.2% of our voting stock. Therefore, these stockholders will have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders, acting together, may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders.
As a smaller reporting company, we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operations and financial prospects.
Currently, we are a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act. As a “smaller reporting company,” we are able to provide simplified executive compensation disclosures in our filings and have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects.
Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management’s assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditors provide an attestation of our management’s assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period.
We may be exposed to additional risks as a result of our reverse merger transaction.
We may be exposed to additional risks as a result of our “reverse merger” transaction and rules and regulations relating to shell companies or former shell companies. There has been increased focus in recent years by government agencies on transactions such as the reverse merger transaction, and we may be subject to increased scrutiny and/or restrictions by the SEC and other government agencies and holders of our securities as a result of the completion of that transaction. This may make it more difficult for us to obtain coverage from securities analysts of major brokerage firms. The occurrence of any such event could cause our business or stock price to suffer.
Our annual and quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.
We expect our operating results to be subject to annual and quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
• | variations in the level of expenses related to our therapeutic candidates, products or future development programs; |
• | if any of our therapeutic candidates receives regulatory approval, the level of underlying demand for these therapeutic candidates and wholesalers’ buying patterns; |
• | addition or termination of clinical trials or funding support; |
• | our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements; |
• | any intellectual property infringement lawsuit in which we may become involved; |
• | regulatory developments affecting our therapeutic candidates or products or those of our competitors; |
• | the timing and cost of, and level of investment in, research and development activities relating to our therapeutic candidates, which may change from time to time; |
• | our ability to attract, hire and retain qualified personnel; |
• | expenditures that we will or may incur to acquire or develop additional therapeutic candidates and technologies; |
• | future accounting pronouncements or changes in our accounting policies; |
if any of our therapeutic candidates receives regulatory approval, the level of underlying demand for these therapeutic candidates and wholesalers’ buying patterns;
• | the timing and success or failure of clinical studies for our therapeutic candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners; |
addition or termination of clinical trials or funding support;
• | the risk/benefit profile, cost and reimbursement policies with respect to our therapeutic candidates, if approved, and existing and potential future therapies or biologics that compete with our products or therapeutic candidates; and |
our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements;
any intellectual property infringement lawsuit in which we may become involved;
regulatory developments affecting our therapeutic candidates or products or those of our competitors;
the timing and cost of, and level of investment in, research and development activities relating to our therapeutic candidates, which may change from time to time;
our ability to attract, hire and retain qualified personnel;
expenditures that we will or may incur to acquire or develop additional therapeutic candidates and technologies;
future accounting pronouncements or changes in our accounting policies;
the timing and success or failure of clinical studies for our therapeutic candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners;
the risk/benefit profile, cost and reimbursement policies with respect to our therapeutic candidates, if approved, and existing and potential future therapies or biologics that compete with our products or therapeutic candidates; and
the changing and volatile U.S., European and global economic environments.
• | the changing and volatile U.S., European and global economic environments. |
If our annual or quarterly operating results fall below the expectations of investors or securities analysts, the price of our securities could decline substantially. Furthermore, any annual or quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that annual and quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
Raising additional funds through debt or equity financing could be dilutive and may cause the market price of our common stock to decline.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, including through the LPC Purchase Agreement with Lincoln Park, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic collaborations or partnerships, or marketing, distribution or licensing arrangements with third parties, we may be required to limit valuable rights to our intellectual property, technologies, therapeutic candidates or future revenue streams, or grant licenses or other rights on terms that are not favorable to us. Furthermore, any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our therapeutic candidates.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.
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 March 29, 2021, we entered into the LPC Purchase Agreement, pursuant to which Lincoln Park committed to purchase up to $20 million of shares our common stock (the Purchase Shares). Shares of our common stock may be sold pursuant to the LPC Purchase Agreement by us to Lincoln Park at our discretion from time to time over a 36-month period, subject to certain limitations and conditions. The purchase price for shares that we may sell to Lincoln Park under the LPC 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.
In consideration for entering into the LPC Purchase Agreement, we agreed to issue 75,000 shares of our common stock (the Initial Commitment Shares) to Lincoln Park as an initial commitment fee. In addition, we agreed to issue to Lincoln Park up to an additional 50,000 shares of our common stock (the “Additional Commitment Shares” and together with the Initial Commitment Shares, the “Commitment Shares”) as an additional commitment fee based on a pro-rata percentage of the Purchase Shares issued to Lincoln Park under the Purchase Agreement. The Company will not receive any cash proceeds from the issuance of the Commitment Shares.
In connection with entering into the LPC Purchase Agreement, on March 29, 2021, we sold to Lincoln Park, as an initial purchase under the LPC Purchase Agreement, 373,832 shares of common stock, at a per share price of $5.35 per share, for aggregate consideration of $2,000,000, and issued to Lincoln Park an aggregate of 80,000 Commitment Shares (which includes 5,000 Commitment Shares issued on a pro rata basis in respect of the initial purchase of $2,000,000 of Purchase Shares by Lincoln Park).
We have the right to control the timing and amount of any sales of additional shares to Lincoln Park in our sole discretion, subject to certain limits on the amount of shares that can be sold on a given date and other conditions and limitations set forth in the LPC Purchase Agreement. Additional sales of shares 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 additional shares of our common stock that may be sold pursuant to the LPC Purchase Agreement and Lincoln Park may resell all, some or none of the shares is has or may purchase from us. Additional 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, which could have a materially adverse effect on our business and operations.
Future sales and issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell our common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell our common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock.
General Risks
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations may also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. We do not currently carry biological or hazardous waste insurance coverage.
Although we maintain workers’ compensation insurance to cover us for costs and expenses, we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities.
We are at risk of securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal executive office is located at 125 Shoreway Road, Suite B, San Carlos,320 Soquel Way, Sunnyvale, CA 9407094085 in a facility we lease encompassing 13,7189,369 square feet of office, lab, and manufacturing space. The lease for this facility expires in December 2021.January 2027. We believe that our existing facilities are adequate for our current needs. If we determine that additional or new facilities are needed in the future, we believe that sufficient options would be available to us on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
We have threeThe Company may be subject to various claims, complaints, and legal actions that arise from time to time in the normal course of business. Management does not believe that the Company is party to any current pending legal proceedings. There can be no assurance that existing or future legal proceedings (the (Litigation) currently pendingarising in Federal Court in San Francisco. All three proceedings relate to matters we raised inthe ordinary course of business or otherwise will not have a letter to Ms. Surbhi Sarna, nVision Medical Corporation (nVision), a company Ms. Sarna founded, and Boston Scientific Corporation (Boston Scientific), which acquired nVision, based on BioCardia’s discovery in January 2019 that Ms. Sarna had assigned to nVision a patent and patent applications she had filed while a BioCardia employee. BioCardia made various claims, including that the patent and patent application rightfully belonged to BioCardia pursuant to Ms. Sarna’s invention assignment agreement, and that the proceeds from the sale of nVision to Boston Scientific rightfully belonged to BioCardia because they were the direct result of Ms. Sarna’s breach of her obligation to assign to BioCardia the patent and patent applications and the use of misappropriated BioCardia trade secrets.
On September 6, 2019, Boston Scientific, Boston Scientific Scimed Inc, (Boston Scimed) and Fortis Advisors LLC (Fortis Advisors, and together with Boston Scientific and Boston Scimed) (Boston Scientific Parties) filed the first legal proceeding, a complaint captioned Boston Scientific Corporation, et al. v. BioCardia, Inc., Case no. 3:19-05645-VC (the “BSC Action”), seeking declarations that the claims made in BioCardia’s correspondence were without basis. On October 31, 2019, BioCardia filed a counterclaim against the Boston Scientific Parties and Ms. Sarna for breach of contract, misappropriation of trade secrets and correction of inventorshipmaterial adverse effect on the patent assigned to nVision by Ms. Sarna. BioCardia sought impositionCompany’s business, financial position, results of constructive trusts both on the patent naming Ms. Sarna as an inventor and the proceeds received from the sale of nVision to Boston Scientific, as well as damages, including unjust enrichment damages measured by the proceeds received from the sale of nVision to Boston Scientific.
On April 9, 2020, we entered into a Litigation Funding Agreement with BSLF, L.L.C., an entity owned and controlled by Andrew Blank, a member of our board of directors, to fund the Litigation.
On April 23, 2020, BioCardia filed a complaint (the second proceeding) captioned BioCardia, Inc. v. nVision Medical Corporation, Case no. 3:20-02829-VC (the “nVision Action”) arising out of the same transaction as BioCardia’s counterclaims in the BSC Action. On April 29, 2020 Judge Vincent Chhabria, the Judge who is presiding over the BSC Action, determined at BioCardia’s request that the nVision Action is “related to” the BSC Action and accordingly reassigned the nVision Action to himself. On May 22, 2020, BioCardia filed an amended complaint in the nVision Action in which it added as defendants the institutional investors who funded nVision.
On July 16, 2020 and again on July 23, 2020, combined hearings were held on various motions to dismiss filed by the counter defendants in the BSC Action and the defendants in the nVision Action. As a result of those hearings, BioCardia was given leave to file Second Amended Counterclaims in the BSC Action and a Second Amended Complaint in the nVision Action. BioCardia did so on August 20, 2020.
The counter defendants in the BSC Action and the defendants in the nVision Action filed a total of eight motions on September 24, 2020 against BioCardia seeking dismissal of both Actions. BioCardia filed oppositions on October 26, 2020. One of the motions to dismiss raised the possibility that BioCardia’s wholly owned subsidiary, BioCardia Lifesciences, Inc. (itself formerly named BioCardia, Inc.), actually owns the counterclaims asserted in the BSC Action and the claims asserted in the nVision Action. As a result, on October 23, 2020, BioCardia moved that BioCardia Lifesciences, Inc. be added as an additional counterclaimant in the BSC Action and as an additional plaintiff in the nVision Action. Although BioCardia believed both motions should have been granted, in case they were denied, BioCardia filed a third proceeding captioned BioCardia Lifesciences, Inc. v. Surbhi Sarna, et al., No. 4:20-cv-07510-KAW (BioCardia Lifesciences Action) asserting the same claims against the same parties who are adverse to BioCardia in the BSC Action and the nVision Action.
On December 17, 2020, a hearing was held on the various motions. During that hearing BioCardia dismissed the BSC Action and the nVision Action without prejudice in favor of proceeding with the BioCardia Lifesciences Action when it appeared that the Court was not likely to grant BioCardia’s motion to add BioCardia Lifesciences as an additional counterclaimant in the Boston Scientific Action and as an additional plaintiff in the nVision Action. The Court subsequently determined that the dismissals without prejudice were not effective against those parties who had answered superseded versions of BioCardia’s counterclaims and complaint, namely Boston Scientific, Boston Scimed, nVision and Fortis Advisors. The Court determined the dismissal was effective as to the other adverse parties. The Court has pending motions on what basis to dismiss Boston Scientific, Boston Scimed, nVision and Fortis Advisors, and whether such dismissal should be withoperations, or without prejudice. The Court indicated that if it decided to dismiss with prejudice, the effect of that dismissal on the claims asserted in the BioCardia Lifesciences Action would be decided by motion practice in that case.
Ms. Sarna and EXXclaim, one of the institutional shareholders of nVision and a defendant named in the nVision Action, moved for sanctions against both BioCardia and its lawyers principally on the ground that the counterclaims in the Boston Scientific Action and the claims in the nVision Action had been pursued by the wrong entity: BioCardia, Inc. rather than BioCardia Lifesciences, Inc.
On March 12, 2021, the Company agreed to settle the Litigation, which is pending final documentation and dismissal. The Company expects the settlement will not result in any material benefit or liability to the Company.cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for our Common Stock
Our common stock trades on the Nasdaq Capital Market under the symbol “BCDA.”
Holders
As of December 31, 2020,2021, there were 199185 holders of record of our common stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of our common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.
Dividend Policy
We have never declared or paid any cash dividend on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any determination to declare or pay dividends in the future will be at the discretion of our board of directors and will depend on a number of factors, including our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
Sales of Unregistered Securities
Except as previously reported by the Company on its current reports on Form 8-K, we did not sell any securities during the period covered by this Annual Report that were not registered under the Securities Act.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this item is incorporated by reference to Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of Part III of this Annual Report on Form 10-K.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains certain forward-looking statements that involve risk and uncertainties. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the Section entitled “Risk Factors” in Item 1A, and other documents we file with the Securities and Exchange Commission. Historical results are not necessarily indicative of future results.
Special Note Regarding Smaller Reporting Company Status
As a result of having been a “smaller reporting company” (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended), we are allowed and have elected to omit certain information, including three years of year-to-year comparisons, and tabular disclosure of contractual obligations, from this Management’s Discussion and Analysis of Financial Condition and Results of Operations; however, we have provided all information for the periods presented that we believe to be appropriate and necessary.
Overview
We are a clinical-stage regenerative medicine company focused on developing novelcellular and cell-derived therapeutics for cardiovascular and pulmonary diseases with large unmet medical needs. We are committed to applying our expertise in the fields of autologous and allogeneic cell-based therapies to improve the lives of patients with cardiovascular and pulmonary conditions.
Our CardiAMP cell therapy platform provides an autologous bone marrow derived cell therapy (using a patient’s own cells) for the treatment of two clinical indications: heart failure that develops after a heart attack (BCDA-01) and chronic myocardial ischemia (BCDA-02). Our allogeneic mesenchymal stem cell therapy platform, derived from donor cells and intended to be provided “off the shelf,” is also being advanced for two indications, heart failure (BCDA-03) and for the pulmonary indication of acute respiratory distress that has developed from COVID-19 (BCDA-04).
Our Helix™ Biotherapeutic Delivery System platform, or “Helix”Helix, delivers therapeutics into the heart muscle with a helical needle from within the heart. It enables local delivery of cell, gene and gene-basedprotein-based therapies, including our own cell therapies to treat cardiac indications. The Helix system is CE marked in Europe and under investigational use in the United States. We selectively partner with firms developing other cell, gene and protein therapies utilizing the Helix and other biotherapeutic delivery systems that we have developed.
Our AVANCE™ product offering for transseptal cardiac procedures has begun early commercialization activities in the United States through commission-only 1099 sales representatives.
To date, we have devoted substantially all of our resources to research and development efforts relating to our therapeutic candidates and biotherapeutic delivery systems, including conducting clinical trials, developing manufacturing and sales capabilities, in-licensing related intellectual property, providing general and administrative support for these operations and protecting our intellectual property. We have also generated modest revenues from sales of our approved products. We have funded our operations primarily through the sales of equity and convertible debt securities, and certain government and private grants.
CardiAMP Cell Therapy System for Heart Failure and Chronic Myocardial Ischemia
The Company’s lead platform, CardiAMP cell therapy, is an autologous cell therapy being advanced for two indications in pivotal clinical trials: heart failure and chronic myocardial ischemia.
The CardiAMP Heart Failure Trial is a Phase III, multi-center, randomized, double-blinded, sham-controlled study of up to 260 patients at 40 centers nationwide, which includes a 10-patient roll-in cohort. The Phase III pivotal trial is designed to provide the primary support for the safety and efficacy of the CardiAMP Cell Therapy System for heart failure which develops after a patient has a heart attack (BCDA-01). The trial is active at 2426 clinical sites and 91110 patients have been enrolled to date. Thedate, with 7 additional control patients having crossed over to receive therapy.
In January 2022, the U.S. Food and Drug Administration (FDA) granted Breakthrough Device Designation for the CardiAMP Cell Therapy System for the treatment of heart failure. This Breakthrough Device Program is designed to expedite FDA approval of certain novel devices or device-led combination products (i.e., products that combine drugs, devices or biological products) that have the potential to provide more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions. It is believed that the CardiAMP Cell Therapy System is the first cardiac cell therapy to receive an FDA Breakthrough designation.
In February 2022, the independent DSMBData Safety Monitoring Board (DSMB) completed a prespecified data review, on December 17, 2020, including all data for the 86 patients enrolled and 60 randomized patients that had reached their one-year follow-up at that date. The DSMB performed a risk-benefit assessment. Following the review, the DSMB indicated that it had no significant safety concerns and recommended in writing that the study continue as planned. designed. Also in February 2022, Health Canada, the country’s health services agency, sent BioCardia a No Objection Letter, allowing the CardiAMP Heart Failure Trial to expand into Canada. Four world-class Canadian clinical sites are currently working through the activation process to begin enrolling patients in the near future.
Enrollment in the CardiAMP Heart Failure Trial remains our primary focus. We expect enrollment to improve in the months ahead due to:
● | reduced impact of COVID-19; |
Enrollment remains our primary focus and challenge. To complete the heart failure trial enrollment requires our active centers to randomize an additional seven patients each on average. Our clinical centers appear to be coming out of COVID-19 with renewed energy and interest in the trial. Enrollment is expected to be enhanced in the months ahead by reductions in COVID-19 cases over time, the recent successful CardiAMP Heart Failure DSMB review, the recent CardiAMP Heart Failure positive results published in the peer reviewed International Journal of Cardiology, the addition of new high-enrolling clinical sites to the trial, obtaining FDA authorization to subsequently provide therapy for patients in the control arm of the trial that otherwise would not receive it, enhanced outreach to sites and increased clinical marketing activities. Starting the parallel CardiAMP Chronic Myocardial Ischemia trial is also anticipated to enhance enrollment in the CardiAMP Heart Failure trail.
● | FDA’s January 2022 grant of the Breakthrough Device Designation for the CardiAMP Cell Therapy; |
● | Health Canada’s February 2022 issuance of a No Objection Letter, allowing expansion of the study to Canadian sites; |
● | CMS’s March 2022 issuance of procedure code C9782, which applies to both of our CardiAMP Cell Therapy clinical trials; |
● | our active efforts to include patients whose insurance does not cover the study; |
● | our previously obtained FDA authorization to provide therapy for patients in the control arm of the trial that otherwise would not receive therapy after the two-year follow-up, and |
● | enhanced outreach to sites and increased clinical marketing activities. |
The CardiAMP Chronic Myocardial Ischemia Trial is a Phase III, multi-center, randomized, double-blinded, controlled study of up to 343 patients at up to 40 clinical sites. The Phase III pivotal trial is designed to provide the primary support for the safety and efficacy of the CardiAMP Cell Therapy System for the indication of chronic myocardial ischemia (BCDA-02). This therapeutic approach uses many of the same novel aspects as the CardiAMP Heart Failure Trial and is expected to leverage our experience and investment in the heart failure trial. The trial has been activated and we are working towards initialone patient enrollment in the first quarter of 2021.
We are continuing to assess the evolving impact of COVID-19 on the CardiAMP trials, including recent spikes and new emerging variants. Some of our clinical centers stopped performing elective procedures during the initial outbreak and advised that they would not be performing elective procedures until restrictions on elective procedures were lifted. Many centers also delayed patient follow-up visits out of concern for patient exposure to COVID-19. In alignment with recent FDA guidance on clinical trials, “FDA Guidance on Conduct of Clinical Trials of Medical Products during COVID-19 Pandemic Guidance for Industry, Investigators, and Institutional Review Boards,” the Company has taken steps to address unavoidable protocol deviations due to COVID-19 illness and/or COVID-19 control measures.been treated.
The Department of Health & Human Services Centers for Medicare & Medicaid Services, or CMS, has designated that both CardiAMP pivotal trials qualify for Medicare national coverage. CoveredThe covered costs under Medicare include patient screening, the CardiAMP Cell Therapy System and procedure, and clinical follow-up at one and two years after the procedure. Private insurance plans covering 50 million insured Americans follow thisthe CMS reimbursement policy and are similarly anticipated to cover these costs. This coverage significantly reduces our cost of conducting these pivotal trials. In March of 2022, the United States Center for Medicare and Medicaid Services (CMS) issued a new reimbursement code (designated C9782) for the CardiAMP Cell Therapy procedures. The code is for a blinded procedure for NYHA class II or III heart failure, or Canadian Cardiovascular Society class III or IV chronic refractory angina; transcatheter intramyocardial transplantation of autologous bone marrow cells or placebo control, autologous bone marrow harvesting and preparation for transplantation, left heart catheterization including ventriculography, all laboratory service and all imaging with or without guidance, performed in approved IDE study. This new CMS code is available to submitting hospitals performing the CardiAMP cell therapy procedure on April 1, 2022, enabling clear reimbursement for the study procedure for both the treatment and control arms of both pivotal cell therapy trials.
Allogeneic Cell Therapy for Cardiac and Pulmonary Disease (BCDA-03 and BCDA-04)
Our second therapeutic platform is our investigational culture expanded bone marrow derived allogeneic, Neurokinin-1 Receptor Positive mesenchymal stem cells (NK1R+ MSC). This “off the shelf” mesenchymal cell therapy is being advanced for cardiac and pulmonary disease.
We are actively working to secure FDA acceptance of an Investigational New Drug (IND)IND application for a Phase I/II trial using the CardiALLO Cell Therapy System to deliver these allogeneic cells for the treatment of ischemic systolic heart failure (BCDA-03)failure. We have completed the manufacturing validation runs and stability testing for the Chemistry Manufacturing and Controls section of the IND and have initiated the preclinical pharmacology toxicology animal testing. Should the results be in line with our previous results, we expect to submit the IND application promptly thereafter.
In March 2022, the Company submitted an Investigational New Drug (IND) for a Phase I/II trial for the use of this allogeneic cell therapy for ARDS caused by COVID-19 (BCDA-04). The FDA requires a 30-day waiting period after the submission of an IND application before clinical trials may begin. We are working to receive FDA acceptance of the IND and begin the trial in 2021.
The Company also intends to submit an IND for the use of its allogeneic cell therapy for Acute Respiratory Distress Syndrome (ARDS) caused by COVID-19 (BCDA-04). Based on clinical reports on COVID-19, respiratory failure complicated by ARDS is a leading cause of death for COVID-19 patients. ARDS is a type of respiratory failure characterized by rapid onset of widespread inflammation in the lungs. BCDA-04 is on a similar timeline with BCDA-03 and we are working towards FDA acceptance of the IND in 2021. 2022.
Recent Developments
Partner Agreement for Catheter Biotherapeutic Delivery Product CandidatesCOVID-19 Update
On February 17, 2021,As a result of the Company entered into an agreement with a leading international pharmaceutical companyCOVID-19 pandemic, we have experienced significant disruption to the Company’s business and in delays in the Company’s development programs and regulatory and commercialization timelines, including adversely impacting operations at certain clinical sites involved in our ongoing clinical studies. The COVID-19 pandemic could continue to adversely affect our business, results of operations, financial condition and/or liquidity in the future. These adverse impacts could include delayed or slowed enrollment of our, or our collaborators’, planned or ongoing clinical trials, delayed or cancelled clinical site initiations, delayed regulatory review for regulatory approvals, delayed commercialization of one or more of our product candidates, if approved, and workforce shortages. Our production capabilities, or those of our partners or suppliers, and our supply chains could also be adversely impacted.
Additionally, while the potential continuing economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the Helix™ Biotherapeutic Delivery System inimpact of COVID-19 on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s liquidity and ability to raise the capital to complete its preclinical testing. Underand clinical studies on a timely basis, or at all. In addition, a recession, market correction or depression resulting from the terms ofCOVID-19 pandemic or the agreement,response to it, could materially affect our business and the Company received a $500,000 up-front payment, a portion of which is creditable for BioCardia biotherapeutic delivery systems, support and training. The agreement includes a one-year option to negotiate a non-exclusive worldwide license for therapeutic delivery of certain cell types for cardiac indications.
Purchase Agreement with Lincoln Park
On March 29, 2021, we and Lincoln Park Capital Fund, LLC, (Lincoln Park) entered into a purchase agreement (the LPC Purchase Agreement) pursuant to which Lincoln Park purchased $2 million of sharesvalue of our common stock (373,832 shares) at a purchase price of $5.35 per share. Under the LPC Purchase Agreement, we have the right to sell to Lincoln Park shares of common stock having an aggregate value of up to $20 million, including the initial $2 million purchase, subject to certain significant limitations of the amount and timing of any such sales due to the terms and conditions set forth in the LPC Purchase Agreement. stock.
In consideration for entering into the LPC Purchase Agreement, we agreed to issue an aggregate of 75,000 shares of common stock as a commitment fee. We also agreed to issue to Lincoln Park up to an aggregate of 50,000 additional shares of common stock as a further commitment fee based on a pro-rata percentage of the $20 million of common stock issued to Lincoln Park under the Purchase Agreement. On March 29, 2021, we issued 80,000 shares of common stock as commitment shares (which includes 5,000 commitment shares issued on a pro rata basis in respect of the initial purchase by Lincoln Park of $2 million of shares). We will not receive any cash proceeds from the issuance of any of the foregoing commitment shares.
The net proceeds under the LPC Purchase Agreement to us will depend on the frequency and prices at which shares of common stock are sold to Lincoln Park. Actual sales of shares of common stock to Lincoln Park under the LPC Purchase Agreement (beyond the initial purchase of $2 million of shares) and the amount of such net proceeds will depend on a variety of factors, including market conditions, the trading price of the common stock and determination by us as to other available and appropriate sources of funding for us. We expect to use the proceeds from this agreement for general corporate purposes and working capital.
Litigation Settlement
On March 12, 2021, we agreed to settle, pending final documentation and dismissal, the legal proceedings and any and all claims, counterclaims, actions and/or proceedings relating to or arising from the case captioned Boston Scientific Corp., et al., v. BioCardia Inc., Case No. 3:19-05645-VC, U.S.D.C., N. D. Cal. We expect the settlement will not resultAs described in any material benefit or liabilityNote 16 of our notes to the Company.consolidated financial statements, in March 2022 we entered into agreements with our litigation service providers and the Funder to terminate the Funding Agreement and conclude all remaining matters thereunder. Under the terms of these agreements, litigation and corporate counsel have agreed to provide credits and refunds of legal fees totaling $688,000 and to provide up to $300,000 in future discounts on legal services. The Company will remit these future discounts, as received, to the Funder on a quarterly basis. The settlement resulted in $195,000 of legal expense, which is included in selling, general and administrative expenses during the fiscal year ended December 31, 2021. BioCardia retains all rights to any nontangible assets obtained in the confidential litigation settlement. See Note 17Notes 16 and 18 of our notes to the consolidated financial statements for additional information.
Financial Overview
Revenue
We currently have a portfolio of enabling and delivery products, from which we have generated modest revenue. Net product revenues include commercial sales of our Morph vascular access system in the US and EU and collaboration agreement revenues include revenue from partnering agreements with corporate and academic institutions. Under these partnering agreements, we provide our Helix biotherapeutic delivery system and customer training and support for use in preclinical and clinical studies.
Cost of Goods Sold
Cost of goods sold includes the costs of raw materials and components, manufacturing personnel and facility costs and other indirect and overhead costs associated with manufacturing our commercial enabling and delivery products, which generate net product revenue.
Research and Development Expenses
Our research and development expenses consist primarily of:
salaries and related overhead expenses, which include share-based compensation and benefits for personnel in research and development functions;
• | salaries and related overhead expenses, which include share-based compensation and benefits for personnel in research and development functions; |
fees paid to consultants and contract research organizations, or CROs, including in connection with our preclinical studies and clinical trials and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial management and statistical compilation and analysis;
• | fees paid to consultants and contract research organizations, or CROs, including in connection with our preclinical studies and clinical trials and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial management and statistical compilation and analysis; |
costs related to acquiring and manufacturing clinical trial materials;
• | costs related to acquiring and manufacturing clinical trial materials; |
costs related to compliance with regulatory requirements; and
• | costs related to compliance with regulatory requirements; and |
payments related to licensed products and technologies.
• | payments related to licensed products and technologies. |
We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress of completion of specific tasks using information and data provided to us by our vendors and clinical sites. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and the services are received.
We plan to increase our research and development expenses for the foreseeable future as we continue the pivotal CardiAMP Heart Failure Trial, advance the pivotal CardiAMP Chronic Myocardial Ischemia Trial, and further develop our autologous and allogeneic cell therapy candidates. We typically use our employee and infrastructure resources across multiple research and development programs, and accordingly, we have not historically allocated resources specifically to our individual programs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and related costs for employees in executive, finance and administration, sales, corporate development and administrative support functions, including share-based compensation expenses and benefits. Other selling, general and administrative expenses include sales commissions, rent, accounting and legal services, obtaining and maintaining patents, the cost of consultants, occupancy costs, insurance premiums and information systems costs.
Other Income (Expense)
Other income and expense consist primarily of interest income we earn on our cash, cash equivalents and investments, changes in fair value of redemptive features embedded in convertible notes, loss on extinguishment of convertible notes, gain on extinguishment of Paycheck Protection Program note payable, and interest charges we incurred in periods during 2020 and 2019 when we had debt outstanding.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various judgements that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not clear from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We define our critical accounting policies as those that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. The following discussion addresses what we believe to be the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.
Research and Development—Clinical Trial Accruals
As part of the process of preparing our financial statements, we are required to estimate our expenses resulting from our obligations under contracts with vendors and consultants and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts. Our clinical trial accrual is dependent upon the timely and accurate reporting of expenses of our CROs and other third-party vendors.
Our objective is to reflect the appropriate clinical trial expenses in our financial statements by matching those expenses with the period in which services and efforts are expended. We account for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. We determine accrual estimates through discussion with applicable personnel and outside service providers as to the progress or state of completion of clinical trials, or the services completed. During the course of a clinical trial, we adjust the rate of clinical trial expense recognition if actual results differ from the estimates. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known at that time. Although we do not expect that our estimates will be materially different from amounts actually incurred, our understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in our reporting amounts that are too high or too low for any particular period. Through December 31, 2020,2021, there had been no material adjustments to our prior period estimates of accrued expenses for clinical trials. However, due to the nature of estimates, we cannot provide assurance that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials.
Share-Based Compensation
We measure and recognize share-based compensation expense for equity awards to employees, directors and consultants based on fair value at the grant date. We use the Black-Scholes-Merton option-pricing model, or BSM, to calculate the fair value of stock options, which includes subjective assumptions such as the risk-free interest rate, the expected volatility in the value of the Company’s common stock, and the expected term of the option. Restricted stock units (RSUs) are measured based on the fair market values of the underlying stock on the dates of grant. Share-based compensation expense recognized in the statements of operations is based on awards at the time of grant and is reduced for actual forfeitures at the time that the forfeitures occur. Compensation cost for employee share-based awards will be recognized over the vesting period of the applicable award on a straight-line basis.
Results of Operations
The table set forth below summarizes our results of operations for the years ended December 31, 20202021 and 20192020 (in thousands). The results of operations from 20192020 compared to 20182019 and related discussion can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019,2020, filed with the SEC on April 9, 2020,March 30, 2021, and such results and related discussion are incorporated herein by reference.
Years ended December 31, | Years ended | |||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Revenue: | ||||||||||||||||
Net product revenue | $ | 13 | $ | 182 | $ | 1 | $ | 13 | ||||||||
Collaboration agreement revenue | 132 | 528 | 1,014 | 132 | ||||||||||||
Total revenue | 145 | 710 | 1,015 | 145 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of goods sold | 4 | 358 | — | 4 | ||||||||||||
Research and development | 9,809 | 8,562 | 8,558 | 9,809 | ||||||||||||
Selling, general and administrative | 5,861 | 6,003 | 5,087 | 5,861 | ||||||||||||
Total costs and expenses | 15,674 | 14,923 | 13,645 | 15,674 | ||||||||||||
Operating loss | (15,529 | ) | (14,213 | ) | (12,630 | ) | (15,529 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest income | 21 | 87 | 9 | 21 | ||||||||||||
Gain on extinguishment of Paycheck Protection Program note payable | 509 | — | — | 509 | ||||||||||||
Gain on change in fair value of redemption feature embedded in convertible notes | — | 52 | ||||||||||||||
Interest expense | (3 | ) | (112 | ) | — | (3 | ) | |||||||||
Loss on extinguishment of convertible notes | — | (521 | ) | |||||||||||||
Other expense | (2 | ) | (2 | ) | (2 | ) | (2 | ) | ||||||||
| Total other income (expense) | 525 | (496 | ) | |||||||||||||
Total other income, net | 7 | 525 | ||||||||||||||
Net loss | $ | (15,004 | ) | $ | (14,709 | ) | $ | (12,623 | ) | $ | (15,004 | ) | ||||
Revenue. Revenue for the year ended December 31, 20202021 totaled $145,000$1,015,000 compared to $710,000$145,000 for the year ended December 31, 2019.2020. The $565,000 decrease$870,000 increase was primarily due to lower revenue generating partnership activities in 2020 coupledincreased collaboration activity with reduced volumescorporate partners and completion of commercial catheter sales as we transition our commercial offerings to a limited launch of the Morph AVANCE™contract. The amount and Morph DNA product families. We expect collaboration agreement revenues to increase in 2021 depending on progress in these existing collaborative programs and the initiation of new partnership relationships. Net product revenue is expected to be modest in 2021 and will be subject to customer demand, the availability of production resources for our new Morph product family members, and the timing of FDA clearance for market release of different modelscollaboration revenues largely depends on our partners activities and sizesmay be inconsistent and create significant quarter-to-quarter variation.
Research and Development Expenses. Research and development expenses decreased by $1,251,000 during the year.
Cost of Goods Sold. Cost of goods sold foryear ended December 31, 2021 compared to the year ended December 31, 2020, totaled $4,000 compared to $358,000 for the year ended December 31, 2019, decreasing by $354,000 primarily due to the decrease in net product revenue. We expect costlower stock compensation expense following a repricing of goods sold to increase modestly in 2021 relative to sales, depending on the timing and demand for our new Morph product family members and the associate production costs which will vary depending on volume.
Research and Development Expenses. Research and development expenses were approximately $9.8 million for the year ended December 31, 2020 compared to approximately $8.6 million for the year ended December 31, 2019, representing an increase of $1.2 million or 14%. Research and development in both periods focused on advancing our pivotal CardiAMP Heart Failure Trial and Chronic Myocardial Ischemia trials and development of our Neurokinin-1 Receptor Positive allogeneic cell therapies for cardiovascular and respiratory diseases. The $1.2 million increasestock options in 2020, compared to 2019 was primarily due to cost of additional personnel and supporting systems to enhance enrollment and monitoring in our pivotal trials, accelerate development activities, and strengthen supporting functions. We expect research and development expenses to increase moderatelycoupled with reduced clinical service provider costs as we continue enrolling in our pivotal trials, advance regulatory approvals for our therapies, and improve our cell processing, manufacturing capabilities and delivery platforms. staff more work with internal personnel.
Selling, General and Administrative Expenses.Selling, general and administrative expenses were approximately $5.9 milliondecreased by $774,000 during the year end December 31, 2020 compared to approximately $6.0 million for the year ended December 31, 2019. The $142,000 decrease in 20202021 compared to 2019, wasthe year ended December 31, 2020, primarily due to additional stock-basedlower compensation expense related to the modificationfollowing a repricing of certain stock option awards in 2019 that did not recuroptions in 2020, partially offset by higher corporate expenses, including business insurance premiums and additional franchise taxes due related to prior financings. We expect selling, general and administrative expenses to decrease modestly in 2021 relative to 2020.coupled with reduced professional service fees.
Other Income (Expense). In 2020, Other income (expense) consisted primarily of interest expense and the gain on extinguishment associated with the Paycheck Protection Program loan obtained on May 1, 2020 and forgiven on November 7, 2020. In 2019,Other income (expense) consisted primarily of amounts recognized in relation to the accounting for the convertible notes, including a gain on change in fair value of the embedded redemption feature of $52,000, interest expense associated with the accretion of the debt discount of $104,000, and a loss upon extinguishment of $521,000. Interest income of $21,000 and $87,000 was earned on cash and cash equivalents for the years ended December 31, 2020 and 2019, respectively.
Liquidity and Capital Resources
We have incurred net losses each year since our inception and as of December 31, 2020,2021, we had an accumulated deficit of approximately $116.1$128.7 million. We anticipate that we will continue to incur net losses for at least the next several years.
We have funded our operations principally through the sales of equity and convertible debt securities as well as the cash acquired through the Merger. As of December 31, 2020,2021, we had cash and cash equivalents of approximately $21.4$12.9 million.
The following table shows a summary of our cash flows for the periods indicated (in thousands):
Years ended December 31, | Years ended | |||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Net cash provided by (used in): | ||||||||||||||||
Operating activities | $ | (12,357 | ) | $ | (9,445 | ) | $ | (10,366 | ) | $ | (12,357 | ) | ||||
Investing activities | (32 | ) | (146 | ) | (116 | ) | (32 | ) | ||||||||
Financing activities | 28,211 | 9,818 | 1,947 | 28,211 | ||||||||||||
Net increase in cash and cash equivalents | $ | 15,822 | $ | 227 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | $ | (8,535 | ) | $ | 15,822 | |||||||||||
Cash Flows from Operating Activities. Cash usedThe decrease in overall spending for operating activities forof approximately $2.0 million through the year ended December 31, 2021 compared to the year ended December 31, 2020 totaled approximately $12.4 million, which is the sum of (i) our net loss of $15.0 million, adjusted for non-cash income and expenses totaling $3.0 million (share-based compensation, gain on extinguishment of the Paycheck Protection Program note payable, reduction in the carrying amount of right-of-use assets and depreciation), and (ii) changes in operating assets and liabilities of approximately $367,000. Cash used in operating activities for the year ended December 31, 2019 totaled approximately $9.4 million, which is the sum of (i) our net loss of $14.7 million, adjusted for non-cash income and expenses totaling $3.9 million (share-based compensation, loss on extinguishment of convertible notes, reduction in the carrying amount of right-of-use assets and depreciation), and (ii) changes in operating assets and liabilities of approximately $1.4 million.
The increase in cash used for operating activities of $2.9 million in 2020 compared to 2019 related primarily to increased spending tothe timing of advance our allogeneic pivotal trials and therapeutic development programspayments from collaboration partners coupled with decreases in advance payments from a customer and legal fees paid that have not yet been reimbursed by a related party under the Litigation Funding Agreement discussed in the notes to the financial statements. We expect net cash used in operating activities to remain relatively consistent in 2021. third parties for professional fees.
Cash Flows from Investing Activities. Net cash used in investing activities of $32,000$116,000 and $146,000$32,000 during the years ended December 31, 2020,2021 and 2019,2020, respectively consists of purchases of property and equipment, primarily lab equipment and related infrastructure.equipment.
Cash Flows from Financing Activities. Net cash provided by financing activities of $1.9 million during the year ended December 31, 2021 consisted of gross proceeds from the sale of common stock in March 2021 less issuance costs. Net cash provided by financing activities during the year ended December 31, 2020 consisted of proceeds from sales of common stock totaling approximately $27.9 million (net of issuance costs) and proceeds from the Paycheck Protection note payable totaling $506,000, partially offset by tax withholding-related payments on the settlement of restricted unit awards. Net cash provided by financing activities during
Lincoln Park Capital Stock Purchase Agreement
In March 2021, we and Lincoln Park Capital Fund, LLC (Lincoln Park) entered into a purchase agreement (the Purchase Agreement) and a registration rights agreement (the Registration Rights Agreement), pursuant to which we have the year ended December 31, 2019 totaled approximately $9.8right to sell to Lincoln Park shares of our common stock having an aggregate value of up to $20 million, subject to certain limitations and consistedconditions set forth in the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, at the time we signed the Purchase Agreement, we sold 373,832 shares of our common stock at a price of $5.35 per share pursuant to the Purchase Agreement for gross proceeds from the saleof $2 million (and issued 80,000 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of our common stock, which consisted of 75,000 shares for Lincoln Park’s initial commitment and related warrants5,000 shares issued on a pro rata basis in respect of Lincoln Park’s initial purchase of 373,832 shares). Thereafter, as often as every business day from and after one business day following the date of the Initial Purchase and over the 36-month term of the Purchase Agreement, we have the right, from time to time, at our sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 100,000 shares of common stock, with such amount increasing as the closing sale price of the common stock increases; provided Lincoln Park’s obligation under any single such purchase will not exceed $2 million, unless we and Lincoln Park mutually agree to increase the maximum amount of such single purchase (each, a Regular Purchase). If we direct Lincoln Park to purchase the maximum number of shares of common stock it then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, we may direct Lincoln Park in an Accelerated Purchase to purchase an additional amount of common stock that may not exceed the lesser of (i) 300% of the number of shares purchased pursuant to the corresponding Regular Purchase or (ii) 30% of the total number of shares of our common stock traded during a specified period on the applicable purchase date as set forth in the Purchase Agreement. Under certain circumstances and in accordance with the Purchase Agreement, we may direct Lincoln Park to purchase shares in multiple Accelerated Purchases on the same trading day. We expect to use the proceeds from convertible loans payable.this agreement for general corporate purposes and working capital. As of December 31, 2021, the Company had not made any sales of common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase.
Future Funding Requirements
To date, we have generated modest revenue from sales of our approved products. We do not know when, or if, we will generate any revenue from our development stage biotherapeutic programs. We do not expect to generate any revenue from sales of our CardiAMP, CardiALLO or Neurokinin-1 Receptor Positiveautologous and allogeneic therapeuticcell therapy candidates unless and until we obtain regulatory approval. At the same time, we expect our expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our therapeutic candidates. In addition, subject to obtaining regulatory approval for any of our therapeutic candidates and companion diagnostic, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need additional funding in connection with our continuing operations.
As discussed in the notes to the financial statements, we raised approximately $17.6 million in December 2020 from the sale of common stock under registered direct offerings, and approximately $10.3 million in May 2020 from a public offering of common stock, net of fees, discounts and offering expenses. In April 2019, we raised approximately $8.8 million from a public offering of common stock and warrants, net of underwriting discounts, commissions and offering expenses. We use our sources of capital primarily for clinical development, pursuing regulatory approval and commercialization of our product candidates, including advancing our partnering programs with corporate and academic institutions.
In March 2021, we entered into the LPC Purchase Agreement with Lincoln Park. Pursuant to the terms of the LPC Purchase Agreement, Lincoln Park agreed to purchase from us up to $20.0 million of our common stock (subject to certain limitations) from time to time during the term of the LPC Purchase Agreement. Pursuant to the terms of the LPC Purchase Agreement, at the time we signed the LPC Purchase Agreement, we sold 373,832 shares of our common stock at a price of $5.35 per share pursuant to the LPC Purchase Agreement for gross proceeds of $2 million (and issued 80,000 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of our common stock, which consisted of 75,000 shares for Lincoln Park’s initial commitment and 5,000 shares issued on a pro rata basis in respect of Lincoln Park’s initial purchase of 373,832 shares). We may sell up to an additional $18 million of shares of our common stock from time to time at various prices pursuant to the terms of the LPC Purchase Agreement. See Note 19 of our notes to the consolidated financial statements for additional information.
Based upon our current operating plan, we believe that the cash and cash equivalents of $21.4$12.9 million as of December 31, 20202021 are not sufficient to fund our operations for at leastplanned expenditures and meet our obligations beyond the next 12 monthsfourth quarter of 2022. In order to continue development of our therapeutic candidates beyond the fourth quarter of 2022, we plan to raise additional capital, potentially including non-dilutive collaboration and licensing arrangements, debt or equity financing, or a combination from the date of issuance of these financial statements.sources. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our therapeutic candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development of our therapeutic candidates.
Our future capital requirements will depend on many factors, including:
the progress, costs, results and timing of our CardiAMP and CardiALLO autologous and Neurokinin-1 Receptor Positive allogeneic clinical trials and related development programs;
• | the progress, costs, results and timing of our autologous CardiAMP Cell Therapy System and allogeneic Neurokinin-1 Receptor Positive clinical trials and related development programs; |
FDA acceptance of our CardiAMP and CardiALLO allogeneic and Neurokinin-1 Receptor Positive allogeneic therapies for heart failure and for other potential indications;
• | FDA acceptance of our autologous CardiAMP Cell Therapy System and allogeneic Neurokinin-1 Receptor Positive therapies for heart failure and for other potential indications; |
the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;
• | the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals; |
the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities;
• | the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities; |
the number and characteristics of product candidates that we pursue, including our product candidates in preclinical development;
• | the number and characteristics of product candidates that we pursue, including our product candidates in preclinical development; |
the ability of our product candidates to progress through clinical development successfully;
• | the ability of our product candidates to progress through clinical development successfully; |
our need to expand our research and development activities;
• | our need to expand our research and development activities; |
the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies;
• | the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies; |
our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
• | our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights; |
• | the general and administrative expenses related to being a public company; |
the general and administrative expenses related to being a public company;
• | our need and ability to hire additional management and scientific, medical and sales personnel; |
our need and ability to hire additional management and scientific, medical and sales personnel;
• | the effect of competing technological and market developments; |
the effect of competing technological and market developments; and
• | our need to implement additional internal systems and infrastructure, including financial and reporting systems; and |
our need to implement additional internal systems and infrastructure, including financial and reporting systems.
• | the cost of the impact from the COVID-19 pandemic. |
Until such time that we can generate meaningful revenue from the sales of approved therapies and products, if ever, we expect to finance our operating activities through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements, and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, products, or therapeutic candidates or to grant licenses on terms that may not be favorable to us.
Our consolidated financial statements as of December 31, 2021 have been prepared on the basis that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. Due to the factors described above, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued. Our ability to continue as a going concern will depend in a large part, on our ability to raise additional capital. If adequate funds are not available, we may be required to reduce operating expenses, delay or reduce the scope of our product development programs, obtain funds through arrangements with others that may require us to relinquish rights to certain of our technologies or products that we would otherwise seek to develop or commercialize ourselves, or cease operations. While we believe in the viability of our strategy to raise additional funds, there can be no assurances that we will be able to obtain additional capital on acceptable terms and in the amounts necessary to fully fund our operating needs.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we are unable to continue as a going concern, we may be forced to liquidate assets. In such a scenario, the values received for assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.
Recent Accounting Pronouncements
See Note 2 of our notes to the consolidated financial statements for information regarding recent accounting pronouncements that are of significance or potential significance to us.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2020,2021, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates or credit conditions.
We believe that the interest rate risk related to our accounts receivable is not significant. We manage the risk associated with these accounts through periodic reviews of the carrying value for non-collectability and establishment of appropriate allowances.
We operate primarily in the United States and are not exposed to foreign exchange risk with respect to recognized assets and liabilities. We do not enter into hedging transactions and do not purchase derivative instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | |
| |
| 68 |
Consolidated Balance Sheets | 70 |
Consolidated Statements of Operations | 71 |
Consolidated Statements of Stockholders’ Equity | 72 |
Consolidated Statements of Cash Flows | 73 |
Notes to Consolidated Financial Statements | 74 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
BioCardia, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheetsheets of BioCardia, Inc. and Subsidiary (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity, and cash flows for the yearyears in the two-year period ended December 31, 2020,2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of itstheir operations and itstheir cash flows for each of the yearyears in the two-year period ended December 31, 2020,2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred net losses and negative cashflows from operations since its inception and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditaudits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our auditaudits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our auditaudits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit providesaudits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Share-based compensation
As discussed in Note 11 to the consolidated financial statements, on January 29, 2020, the Company repriced certain previously granted and still outstanding vested and unvested stock option awards.
Auditing management’s recording of compensation under the modification involved significant judgment given the requirements of the applicable accounting literature.
To evaluate the appropriateness and accuracy of the recording of compensation by management, we examined the closing price on the date of repricing and the closing price of the Company’s common stock for the preceding period, as determined by the Company’s Board of Directors and approved by shareholders. We also reviewed the underlying accounting codifications for this accounting treatment applied by management. In addition, we evaluated the Company’s disclosure in
relation to this matter included in Note 11 to the financial statements.
Accrued research and development expenses – clinical costs
The Company recorded research and development expenses of $9.8$8.6 million for the year ended December 31, 2020.2021. As described in Note 2, research and development costs are expensed as incurred. Research and development costs include fees paid to contract research organizations that conduct certain research and development activities on the Company’s behalf and contract manufacturing organizations in connection with the production of materials for clinical trials.
Auditing the Company’s research and development expenses for contract research organizations and contract manufacturing organizations and related accruals was challenging due to the complex nature of evaluating the completeness and accuracy of the expenses and accruals. Research and development expenses are recognized as the services are being performed by the vendors, which requires management to accurately monitor the activity at the vendors to determine the extent of unbilled services performed during the reporting period.
We obtained an understanding and evaluated the design over the Company's process used to determine the completeness and accuracy of the research and development expenses and related accruals for contract research organizations and contract manufacturing organizations, including management’s controls to accurately monitor the activity at the vendors.
To test the completeness and accuracy of the contract research organization and contract manufacturing organization expenses and related accruals, our audit procedures included, among others, testing a sample of research and development expenses recorded during the period and evaluating the timing, amount and project coding of the expense recognition, and testing a sample of cash disbursements after period end to assess the completeness of the expense recognition.
/s/PKF San Diego, LLP
PKF San Diego, LLP
(formerly PKF, LLP)
We have served as the Company’s auditor since 2020.
San Diego, California
March 29, 2021 2022
BIOCARDIA, INC. | |||||||||||
Consolidated Balance Sheets | |||||||||||
(In thousands, except share and per share amounts) |
December 31, | December 31, | |||||||
| 2021 | 2020 | ||||||
| Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 12,872 | $ | 21,407 | ||||
Accounts receivable, net of allowance for doubtful accounts of $22 and $16 as of December 31, 2021 and 2020 | 147 | 232 | ||||||
Prepaid expenses and other current assets | 462 | 401 | ||||||
Other receivable due from related party | 0 | 618 | ||||||
Total current assets | 13,481 | 22,658 | ||||||
Property and equipment, net | 182 | 145 | ||||||
Operating lease right-of-use asset, net | 1,883 | 567 | ||||||
Other assets | 172 | 54 | ||||||
Total assets | $ | 15,718 | $ | 23,424 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 507 | $ | 746 | ||||
Accrued expenses and other current liabilities | 2,121 | 2,205 | ||||||
Deferred revenue | 847 | 683 | ||||||
Operating lease liability - current | 237 | 614 | ||||||
Total current liabilities | 3,712 | 4,248 | ||||||
Operating lease liability - noncurrent | 1,631 | 0 | ||||||
Total liabilities | 5,343 | 4,248 | ||||||
Commitments and contingencies (Notes 1,2,5 and 14) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value, 25,000,000 shares authorized as of December 31, 2021 and December 31, 2020; no shares issued and outstanding as of December 31, 2021 and 2020 | 0 | 0 | ||||||
Common stock, $0.001 par value, 100,000,000 shares authorized as of December 31, 2021 and 2020; 16,871,265 and 16,297,381 shares issued and outstanding as of December 31, 2021 and 2020, respectively | 17 | 16 | ||||||
Additional paid-in capital | 139,055 | 135,234 | ||||||
Accumulated deficit | (128,697 | ) | (116,074 | ) | ||||
Total stockholders’ equity | 10,375 | 19,176 | ||||||
Total liabilities and stockholders’ equity | $ | 15,718 | $ | 23,424 | ||||
See accompanying notes to consolidated financial statements. |
BIOCARDIA, INC. | |||||||||
Consolidated Statements of Operations | |||||||||
(In thousands, except share and per share amounts) |
Years ended December 31, | ||||||||
2021 | 2020 | |||||||
Revenue: | ||||||||
Net product revenue | $ | 1 | $ | 13 | ||||
Collaboration agreement revenue | 1,014 | 132 | ||||||
Total revenue | 1,015 | 145 | ||||||
Costs and expenses: | ||||||||
Cost of goods sold | 0 | 4 | ||||||
Research and development | 8,558 | 9,809 | ||||||
Selling, general and administrative | 5,087 | 5,861 | ||||||
Total costs and expenses | 13,645 | 15,674 | ||||||
Operating loss | (12,630 | ) | (15,529 | ) | ||||
Other income (expense): | ||||||||
Interest income | 9 | 21 | ||||||
Gain on extinguishment of Paycheck Protection Program note payable | 0 | 509 | ||||||
Interest expense | 0 | (3 | ) | |||||
Other expense | (2 | ) | (2 | ) | ||||
Total other income, net | 7 | 525 | ||||||
Net loss | $ | (12,623 | ) | $ | (15,004 | ) | ||
Net loss per share, basic and diluted | $ | (0.75 | ) | $ | (1.48 | ) | ||
Weighted-average shares used in computing net loss per share, basic and diluted | 16,917,664 | 10,118,682 | ||||||
See accompanying notes to consolidated financial statements. |
BIOCARDIA, INC. | |||||||||||||||||
Consolidated Statements of Stockholders’ Equity | |||||||||||||||||
For the Years Ended December 31, 2021 and 2020 | |||||||||||||||||
(In thousands, except share data) |
Common stock | Additional | Accumulated | ||||||||||||||||||
Shares | Cost | paid-in capital | deficit | Total | ||||||||||||||||
Balance at December 31, 2019 | 6,825,183 | $ | 7 | $ | 103,433 | $ | (101,070 | ) | $ | 2,370 | ||||||||||
Sale of common stock on June 19, 2020, net of issuance costs of $1,227 | 5,476,190 | 5 | 10,268 | 0 | 10,273 | |||||||||||||||
Sale of common stock on December 16, 2020, net of issuance costs of $673 | 1,789,474 | 2 | 7,825 | 0 | 7,827 | |||||||||||||||
Sale of common stock on December 18, 2020, net of issuance costs of $735 | 2,038,836 | 2 | 9,763 | 0 | 9,765 | |||||||||||||||
Restricted stock units vested and issued | 26,172 | — | — | — | — | |||||||||||||||
Restricted stock units issued to settle management bonus obligations | 71,624 | — | 232 | — | 232 | |||||||||||||||
Common stock grants to former directors to settle board compensation obligations | 29,625 | 0 | 148 | 0 | 148 | |||||||||||||||
Restricted stock units issued to settle board compensation obligations | 39,807 | — | 613 | — | 613 | |||||||||||||||
Exercise of common stock warrants | 470 | 0 | 0 | 0 | 0 | |||||||||||||||
Share-based compensation | — | — | 2,952 | — | 2,952 | |||||||||||||||
Net loss | — | — | — | (15,004 | ) | (15,004 | ) | |||||||||||||
Balance at December 31, 2020 | 16,297,381 | $ | 16 | $ | 135,234 | $ | (116,074 | ) | $ | 19,176 | ||||||||||
Restricted stock units vested and issued | 40,100 | — | — | — | — | |||||||||||||||
Sale of common stock, net of issuance costs of $59 | 453,832 | 1 | 1,941 | 0 | 1,942 | |||||||||||||||
Restricted stock units issued to settle management bonus obligations | 78,372 | — | 214 | — | 214 | |||||||||||||||
Exercise of common stock options | 1,580 | — | 5 | — | 5 | |||||||||||||||
Share-based compensation | — | — | 1,661 | — | 1,661 | |||||||||||||||
Net loss | — | — | — | (12,623 | ) | (12,623 | ) | |||||||||||||
Balance at December 31, 2021 | 16,871,265 | $ | 17 | $ | 139,055 | $ | (128,697 | ) | $ | 10,375 | ||||||||||
See accompanying notes to consolidated financial statements. |
BIOCARDIA, INC. | ||||||||||
Consolidated Statements of Cash Flows | ||||||||||
(in thousands) |
Years ended December 31, | ||||||||
2021 | 2020 | |||||||
Operating activities: | ||||||||
Net loss | $ | (12,623 | ) | $ | (15,004 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 60 | 68 | ||||||
Non-cash interest expense on convertible stockholder notes | 0 | 3 | ||||||
Gain on extinguishment of Paycheck Protection Program note payable | 0 | (509 | ) | |||||
Share-based compensation | 1,661 | 2,952 | ||||||
Loss on disposal of property and equipment | 19 | 0 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 85 | (85 | ) | |||||
Inventory | 0 | 4 | ||||||
Prepaid expenses and other current assets | (179 | ) | 241 | |||||
Other receivable due from related party | 618 | (618 | ) | |||||
Accounts payable | (239 | ) | (168 | ) | ||||
Accrued liabilities and other current liabilities | 130 | 797 | ||||||
Deferred revenue | 164 | (8 | ) | |||||
Operating lease liability - current | (618 | ) | 86 | |||||
Operating lease liability - noncurrent | (24 | ) | (614 | ) | ||||
Right-of-use assets | 580 | 498 | ||||||
Net cash used in operating activities | (10,366 | ) | (12,357 | ) | ||||
Investing activities: | ||||||||
Purchase of property and equipment | (116 | ) | (32 | ) | ||||
Net cash used in investing activities | (116 | ) | (32 | ) | ||||
Financing activities: | ||||||||
Proceeds from sale of common stock June 19, 2020 | 0 | 11,500 | ||||||
Proceeds from sale of common stock Dec 16, 2020 | 0 | 8,500 | ||||||
Proceeds from sale of common stock Dec 18, 2020 | 0 | 10,500 | ||||||
Proceeds from sales of common stock | 2,001 | 0 | ||||||
Issuance costs of sale of common stock | (59 | ) | (2,635 | ) | ||||
Proceeds from Paycheck Protection Program note payable | 0 | 506 | ||||||
Tax withholding payments on settlement of restricted stock unit awards | 0 | (160 | ) | |||||
Proceeds from exercise of common stock options | 5 | 0 | ||||||
Net cash provided by financing activities | 1,947 | 28,211 | ||||||
Net change in cash and cash equivalents | (8,535 | ) | 15,822 | |||||
Cash and cash equivalents at beginning of year | 21,407 | 5,585 | ||||||
Cash and cash equivalents at end of year | $ | 12,872 | $ | 21,407 | ||||
Supplemental disclosure for noncash investing and financing activities: | ||||||||
Restricted stock units issued to settle management bonus obligations | $ | 393 | $ | 391 | ||||
Restricted stock units issued to settle board compensation obligations | 0 | 613 | ||||||
Common stock grants to former directors to settle board compensation obligations | 0 | 148 | ||||||
Right-of-use asset obtained in exchange for lease obligation | 1,896 | 0 | ||||||
See accompanying notes to consolidated financial statements. |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
BioCardia, Inc.:
Opinion on theNotes to Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of BioCardia, Inc. and itssubsidiary (the Company) as of December 31, 2019, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred net losses and negative cash flows from operations since its inception and had an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide a reasonable basis for our opinion.
We served as the Company’s auditor from 2012 to 2020
San Francisco, CaliforniaApril 8, 2020
BIOCARDIA, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
December 31, | ||||||||
| 2020 | 2019 | ||||||
| Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 21,407 | $ | 5,585 | ||||
Accounts receivable, net of allowance for doubtful accounts of $16 and $2 at | ||||||||
December 31, 2020 and 2019, respectively | 232 | 147 | ||||||
Inventory | — | 4 | ||||||
Prepaid expenses and other current assets | 401 | 642 | ||||||
Other receivable due from related party | 618 | — | ||||||
| Total current assets | 22,658 | 6,378 | ||||||
Property and equipment, net | 145 | 181 | ||||||
Operating lease right-of-use asset, net | 567 | 1,065 | ||||||
Other assets | 54 | 54 | ||||||
| Total assets | $ | 23,424 | $ | 7,678 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 746 | $ | 914 | ||||
Accrued expenses and other current liabilities | 2,205 | 2,561 | ||||||
Deferred revenue | 683 | — | ||||||
Operating lease liability - current | 614 | 528 | ||||||
| Total current liabilities | 4,248 | 4,003 | ||||||
Operating lease liability - noncurrent | — | 614 | ||||||
Deferred revenue | — | 691 | ||||||
| Total liabilities | 4,248 | 5,308 | ||||||
Commitments and contingencies (Note 15) | ||||||||
Stockholders’ equity: | ||||||||
| Preferred stock, $0.001 par value, 25,000,000 shares authorized as of December 31, 2020 and 2019, respectively; no shares issued and outstanding as of December 31, 2020 and 2019 | — | — | ||||||
Common stock, $0.001 par value, 100,000,000 shares authorized as of December 31, 2020 and 2019, respectively; 16,297,381 and 6,825,183 shares issued and outstanding as of December 31, 2020 and 2019, respectively | 16 | 7 | ||||||
Additional paid-in capital | 135,234 | 103,433 | ||||||
Accumulated deficit | (116,074 | ) | (101,070 | ) | ||||
| Total stockholders’ equity | 19,176 | 2,370 | ||||||
| Total liabilities and stockholders’ equity | $ | 23,424 | $ | 7,678 | ||||
See accompanying notes to consolidated financial statements.
BIOCARDIA, INC.
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Revenue: | ||||||||
Net product revenue | $ | 13 | $ | 182 | ||||
Collaboration agreement revenue | 132 | 528 | ||||||
| Total revenue | 145 | 710 | ||||||
Costs and expenses: | ||||||||
Cost of goods sold | 4 | 358 | ||||||
Research and development | 9,809 | 8,562 | ||||||
Selling, general and administrative | 5,861 | 6,003 | ||||||
| Total costs and expenses | 15,674 | 14,923 | ||||||
| Operating loss | (15,529 | ) | (14,213 | ) | ||||
Other income (expense): | ||||||||
Interest income | 21 | 87 | ||||||
Gain on extinguishment of Paycheck Protection Program note payable | 509 | — | ||||||
Gain on change in fair value of redemption feature embedded in convertible notes | — | 52 | ||||||
Interest expense | (3 | ) | (112 | ) | ||||
Loss on extinguishment of convertible notes | — | (521 | ) | |||||
Other expense | (2 | ) | (2 | ) | ||||
| Total other income (expense) | 525 | (496 | ) | |||||
Net loss | $ | (15,004 | ) | $ | (14,709 | ) | ||
Net loss per share, basic and diluted | $ | (1.48 | ) | $ | (2.61 | ) | ||
Weighted-average shares used in computing net loss per share, basic and diluted | 10,118,682 | 5,644,328 | ||||||
See accompanying notes to consolidated financial statements.
BIOCARDIA, INC.
Consolidated Statements of Stockholders’ Equity
For the Years Ended December 31, 2020 and 2019
(In thousands, except share data)
Common stock | Additional | Accumulated | ||||||||||||||||||
Shares | Cost | paid-in capital | deficit | Total | ||||||||||||||||
Balance at December 31, 2018 | 4,845,697 | $ | 5 | $ | 90,148 | $ | (86,361 | ) | $ | 3,792 | ||||||||||
Reverse stock split fractional share true up | (494 | ) | — | — | — | — | ||||||||||||||
Restricted stock units vested and issued | 27,426 | — | — | — | — | |||||||||||||||
Issuance of sale of stock and warrants, net of issuance costs of $1,259 | 1,741,667 | 2 | 9,194 | — | 9,196 | |||||||||||||||
Issuance of stock and warrants from conversion of convertible notes | 210,887 | — | 1,204 | — | 1,204 | |||||||||||||||
Issuance of restricted stock units in lieu of 2018 cash bonus | — | — | 165 | — | 165 | |||||||||||||||
Share-based compensation | — | — | 2,722 | — | 2,722 | |||||||||||||||
Net loss | — | — | — | (14,709 | ) | (14,709 | ) | |||||||||||||
Balance at December 31, 2019 | 6,825,183 | $ | 7 | $ | 103,433 | $ | (101,070 | ) | $ | 2,370 | ||||||||||
Sale of common stock on June 19, 2020, net of issuance costs of $1,227 | 5,476,190 | 5 | 10,268 | — | 10,273 | |||||||||||||||
Sale of common stock on December 16, 2020, net of issuance costs of $673 | 1,789,474 | 2 | 7,825 | — | 7,827 | |||||||||||||||
Sale of common stock on December 18, 2020, net of issuance costs of $735 | 2,038,836 | 2 | 9,763 | — | 9,765 | |||||||||||||||
Restricted stock units vested and issued | 26,172 | — | — | — | — | |||||||||||||||
Restricted stock units issued to settle management bonus obligations | 71,624 | — | 232 | — | 232 | |||||||||||||||
Common stock grants to former directors to settle board compensation obligations | 29,625 | — | 148 | — | 148 | |||||||||||||||
Restricted stock units issued to settle board compensation obligations | 39,807 | — | 613 | — | 613 | |||||||||||||||
Exercise of common stock warrants | 470 | — | — | — | — | |||||||||||||||
Share-based compensation | — | — | 2,952 | — | 2,952 | |||||||||||||||
Net loss | — | — | — | (15,004 | ) | (15,004 | ) | |||||||||||||
Balance at December 31, 2020 | 16,297,381 | $ | 16 | $ | 135,234 | $ | (116,074 | ) | $ | 19,176 | ||||||||||
See accompanying notes to consolidated financial statements.
BIOCARDIA, INC.
Consolidated Statements of Cash Flows
(in thousands)
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Operating activities: | ||||||||
Net loss | $ | (15,004 | ) | $ | (14,709 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 68 | 111 | ||||||
Reduction in the carrying amount of right-of-use assets | 498 | 440 | ||||||
Non-cash interest expense on convertible stockholder notes | 3 | 112 | ||||||
Gain on change in fair value of redemption feature embedded in convertible notes | — | (52 | ) | |||||
Loss on extinguishment of convertible notes | — | 521 | ||||||
Gain on extinguishment of Paycheck Protection Program note payable | (509 | ) | — | |||||
Share-based compensation | 2,952 | 2,722 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (85 | ) | 127 | |||||
Inventory | 4 | 137 | ||||||
Prepaid expenses and other current assets | 241 | (198 | ) | |||||
Other receivable due from related party | (618 | ) | — | |||||
Accounts payable | (168 | ) | 171 | |||||
Accrued liabilities excluding accrued interest on convertible note | 797 | 922 | ||||||
Deferred revenue | (8 | ) | 691 | |||||
Operating lease liability - current | 86 | 88 | ||||||
Operating lease liability - noncurrent | (614 | ) | (528 | ) | ||||
Net cash used in operating activities | (12,357 | ) | (9,445 | ) | ||||
Investing activities: | ||||||||
Purchase of property and equipment | (32 | ) | (146 | ) | ||||
Net cash used in investing activities | (32 | ) | (146 | ) | ||||
Financing activities: | ||||||||
Proceeds from sale of common stock and warrants | — | 10,452 | ||||||
Issuance costs from sales of common stock and warrants | — | (1,259 | ) | |||||
Proceeds from sale of common stock June 19, 2020 | 11,500 | — | ||||||
Proceeds from sale of common stock Dec 16, 2020 | 8,500 | — | ||||||
Proceeds from sale of common stock Dec 18, 2020 | 10,500 | — | ||||||
Issuance costs from sales of common stock | (2,635 | ) | — | |||||
Proceeds from Paycheck Protection Program note payable | 506 | — | ||||||
Tax withholding payments on settlement of restricted stock unit awards | (160 | ) | — | |||||
Proceeds from convertible notes payable | — | 625 | ||||||
Net cash provided by financing activities | 28,211 | 9,818 | ||||||
Net change in cash and cash equivalents | 15,822 | 227 | ||||||
Cash and cash equivalents at beginning of year | 5,585 | 5,358 | ||||||
Cash and cash equivalents at end of year | $ | 21,407 | $ | 5,585 | ||||
Supplemental disclosure for noncash investing and financing activities: | ||||||||
Restricted stock units issued to settle management bonus obligations | $ | 391 | $ | - | ||||
Common stock grants to former directors to settle board compensation obligations | $ | 148 | $ | - | ||||
Restricted stock units issued to settle board compensation obligations | $ | 613 | $ | - | ||||
Conversion of interest payable to stock and warrants | $ | — | $ | 633 | ||||
Issuance of restricted stock units in lieu of 2018 cash bonus | $ | — | $ | 165 | ||||
Right-of-use asset obtained in exchange for lease obligation | $ | — | $ | 1,505 | ||||
Cashless exercise of warrant | $ | — | $ | — | ||||
See accompanying notes to consolidated financial statements.
| Summary of Business |
(a) | Organization and Description of Business |
BioCardia, Inc. (BioCardia(we, us, our, BioCardia or the Company), is a clinical-stage regenerative medicine company focused on developing novelcellular and cell-derived therapeutics for the treatment of cardiovascular and respiratorypulmonary diseases with significant unmet medical needs. The Company’s lead therapeutic candidate iscandidates are based on the CardiAMP®CardiAMP Cell Therapy System, a platform which provides an autologous bone marrow derived cell therapy using a patient’s own cells for treatment in two clinical indications: ischemic heart failure that develops after a heart attack and refractory angina resulting from chronic myocardial ischemia. The Company’s second therapeutic platform is thean investigational culture expanded bone marrow derived allogeneic “off the shelf” Neurokinin-1Neurokinin-1 Receptor Positive mesenchymal stem cellscell therapy for the treatment of cardiac and pulmonary disease. To date, the Company haswe have devoted substantially all itsour resources to research and development efforts relating to itsour therapeutic candidates and biotherapeutic delivery systems including conducting clinical trials, developing manufacturing and sales capabilities, in-licensing related intellectual property, providing general and administrative support for these operations and protecting itsour intellectual property.
BioCardia also has three enabling device product lines: (1)(1) the CardiAMP cell processing system; (2)(2) the Helix biotherapeutic delivery system, or Helix; and (3)(3) the Morph vascular access product line, or Morph. The Company manages itsWe manage our operations as a single segment for the purposes of assessing performance and making operating decisions.
The ongoing novel coronavirus (COVID-19) pandemic has resulted in travel restrictions, quarantines, “stay-at-home” and “shelter-in-place” orders and extended shutdown of certain businesses around the world. While the impact of the COVID-19 pandemic did not have a material adverse effect on our financial position or results of operations for the twelve months ended December 31,2021, these governmental actions and similar actions that may be enacted in the future, and the widespread economic disruption arising from the pandemic, have the potential to materially impact our business and influence our business decisions. The extent and duration of the pandemic is unknown, and the future effects on our business are uncertain and difficult to predict. The Company is continuing to monitor the events and circumstances surrounding the COVID-19 pandemic, which may require adjustments to the Company’s estimates and assumptions in the future.
| Significant Accounting Policies |
(a) | Basis of Presentation and Consolidation |
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary.subsidiary, BioCardia Lifesciences, Inc. All material intercompany accounts and transactions have been eliminated during the consolidation process.
(b) | Liquidity– Going Concern |
The Company has incurred net losses and negative cash flows from operations since itsour inception and had an accumulated deficit of $116.1$128.7 million as of December 31, 2020. 2021. Management expects operating losses and negative cash flows to continue through at least the next several years.
Cash The Company expects to incur increasing costs as it advances its trials and development activities. Therefore, absent additional funding, management believes cash and cash equivalents totaled $21.4of $12.9 million on as of December 31, 2021 which management believes isare not sufficient to fund the Company’s planned expenditures and meet its obligations for at least 12 months followingbeyond the filingfourth quarter of 2022. These factors raise substantial doubt about the Company’s ability to continue as a going concern beyond one year from the date these financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this Form 10-K.uncertainty.
The Company’s ability to continue as a going concern and to continue further development of its therapeutic candidates beyond the fourth quarter of 2022, will require the Company to raise additional capital. The Company plans to raise additional capital, potentially including debt and equity arrangements, to finance its future operations. While management believes this plan to raise additional funds will alleviate the conditions that raise substantial doubt, these plans are not entirely within its control and cannot be assessed as being probable of occurring. If adequate funds are not available, the Company may be required to reduce operating expenses, delay or reduce the scope of its product development programs, obtain funds through arrangements with others that may require the Company to relinquish rights to certain of its technologies or products that the Company would otherwise seek to develop or commercialize itself, or cease operations.
(c) | Use of Estimates |
The preparation of the financial statements in accordance with U.S. GAAP requires Company management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Significant items subject to such estimates and assumptions include share-based compensation, the useful lives of property and equipment, right-of-use assets and related liabilities, incremental borrowing rate, allowances for doubtful accounts and sales returns; inventory valuation, derivative instruments,returns, clinical accruals share-based compensation and the assumptions used for revenue recognition. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ materially from those estimates.
(d) | Cash Equivalents |
The Company classifies all highly liquid investments with an original maturity date of 90 days or less at the date of purchase as cash equivalents. The Company maintains its cash and cash equivalents with reputable financial institutions.
(e) | Concentration of Credit Risk |
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company maintains its cash at reputable U.S. financial institutions, which at times, exceed federally insured limits of $250,000$250,000 per customer. On December 31, 2020, 2021, the Company’s cash was held by one financial institution and the amount on deposit was in excess of FDIC insurance limits. The Company has not recognized any losses from credit risks on such accounts since inception. The Company believes it is not exposed to significant credit risk on cash and cash equivalents.
(f) | Accounts Receivable and Allowance for Doubtful Accounts |
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company considers the creditworthiness of its customers but does not require collateral in advance of a sale. The Company evaluates collectability and maintains an allowance for doubtful accounts for estimated losses inherent in its accounts’ receivable portfolio when necessary. The estimate is based on the Company’s historical write-off experience, customer creditworthiness, facts, and circumstances specific to outstanding balances and payment terms. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts was $16,000$22,000 and $2,000$16,000 as of December 31, 2020 2021 and 2019,2020, respectively.
(g) |
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Inventory is stated at the lower of cost or net realizable value. Cost is determined using the average-cost method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company analyzes its inventory levels quarterly and writes down inventory that has become obsolete or has a cost basis in excess of its expected net realizable value or inventory quantities in excess of expected requirements. Excess requirements are determined based on comparison of existing inventories to forecasted sales, with consideration given to inventory shelf life. Expired inventory is disposed of and the related costs are recognized in cost of goods sold.
| Property and Equipment, Net |
Property and equipment, net, are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, as described in the table below. Maintenance and repairs are expensed as incurred. When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in the accompanying consolidated statements of operations.
Asset | Estimated useful lives (in years) | ||||
Computer equipment and software | 3 | ||||
Laboratory and manufacturing equipment | 3 | ||||
Furniture and fixtures | 3 | ||||
Leasehold improvements | 5 years or lease term, if shorter | ||||
| Right-of-Use Assets |
Operating lease right-of-use asset and liabilities - The Company will determine if an arrangement is a lease at the inception of the arrangement. All leases are assessed for classification as an operating lease or finance lease. The Company will recognize a lease liability and a right-of-use (ROU) asset for all leases, including operating leases, with a term greater than 12 months. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.
The Company’s lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. Variable lease payments are expensed as incurred and are not included the computation of the lease liability. The lease liability discount rate is generally the Company’s incremental borrowing rate unless the lessor’s rate implicit in the lease is readily determinable, in which case the lessor’s implicit rate is used.
The Company's ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement and lease incentives provided by the lessor, if any. The Company reduces a ROU asset, and the periodic reduction is the difference between the straight-line total lease cost for the period (including reduction of initial direct costs) and the periodic accretion of the lease liability using the effective interest method.
The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise any such options. Operating lease cost for lease payments is recognized on a straight-line basis over the lease term.
The Company’s lease contracts often include lease and non-lease components. The Company has elected the practical expedient offered by the standard to not separate lease from non-lease components and accounts for them as a single lease component.
The Company has elected not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. Lease cost for short-term leases is recognized on a straight-line basis over the lease term.
| Long-lived Assets |
Impairment assessment of long-lived assets - The carrying value of long-lived assets, including property and equipment and operating lease right-of-use assets, is reviewed for impairment whenever events or changes in circumstances indicate that the asset may not be recoverable. An impairment loss is recognized when the total of estimated future undiscounted cash flows, expected to result from the use of the asset and its eventual disposition, are less than its carrying amount. Impairment, if any, would be assessed using discounted cash flows or other appropriate measures of fair value. Through December 31, 2020,2021, there have been no0 such impairment losses.
| Clinical Trial Accruals |
As part of the process of preparing its consolidated financial statements, the Company is required to estimate its expenses resulting from its obligations under contracts with vendors and consultants and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiation and may result in payment flows that do not match the periods over which materials or services are provided by the vendor under the contracts. The Company’s objective is to reflect the clinical trial expenses in its consolidated financial statements by matching those expenses with the period in which the services and efforts are expended. The Company accounts for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. The Company makes estimates of its accrued expenses as of each balance sheet date in its consolidated financial statements based on the facts and circumstances known at that time. Although, the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services relative to the actual status and timing of services performed may vary and may result in reported amounts that differ from the actual amounts incurred.
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The Company accounts for its derivative instruments as either assets or liabilities on the consolidated balance sheets and measures them at fair value. Derivatives are adjusted to fair value through other (expense) income, net, in the consolidated statements of operations. Derivatives settled in cash or with another financial instrument are reflected in the consolidated statements of cash flows in the same section as the related items.
| Revenue Recognition |
Net product revenue – BioCardia currently has a portfolio of enabling and delivery products. Revenue from product sales is recognized generally upon shipment to the end customer, which is when control of the product is deemed to be transferred. Product sale transactions are evidenced by customer purchase orders, customer contracts, invoices and/or related shipping documents.
Collaboration agreement revenue – Collaboration agreement revenue is income from agreements under partnering programs with corporate and academic institutions, wherein the Company provides biotherapeutic delivery systems and customer training and support for their use in clinical trials and studies. These programs provide additional clinical data, intellectual property rights and opportunities to participate in the development of combination products for the treatment of cardiac disease.
In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract.
The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. This evaluation is subjective and requires the Company to make judgments about the promised goods and services and whether those goods and services are separable from other aspects of the contract. Further, determining the stand-alone selling price for performance obligations requires significant judgment, and when an observable price of a promised good or service is not readily available, the Company considers relevant assumptions to estimate the stand-alone selling price, including, as applicable, market conditions, development timelines, probabilities of technical and regulatory success, reimbursement rates for personnel costs, forecasted revenues, potential limitations to the selling price of the product and discount rates.
The Company applies judgment in determining whether a combined performance obligation is satisfied at a point in time or over time, and, if over time, concluding upon the appropriate method of measuring progress to be applied for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, as estimates related to the measure of progress change, related revenue recognition is adjusted accordingly. Changes in the Company’s estimated measure of progress are accounted for prospectively as a change in accounting estimate. The Company recognizes collaboration revenue by measuring the progress toward complete satisfaction of the performance obligation using an input measure. The Company will re-evaluate the estimate of expected costs to satisfy the performance obligation each reporting period and make adjustments for any significant changes.
Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months, it will be classified in current liabilities. The Company receives payments from its customers as established in each contract. Upfront payments and fees are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. The Company does not assess whether a contract with a customer has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. On Deferred revenue totaled $847,000 and $683,000 as of December 31, 2020, deferred revenue totaled $683,000, consisting of future service revenues of approximately $183,000 2021 and future license fee revenues of $500,000, to be recognized at a point in time before July 2021.2020, respectively.
Multiple contracts with the same customer - When two or more contracts are entered into with the same customer at or near the same time, the Company evaluates the contracts to determine whether the contracts should be accounted for as a single arrangement. Contracts are combined and accounted for as a single arrangement if one or more of the following criteria are met: (i) the contracts are negotiated as a package with a single commercial objective; (ii) the amount of consideration to be paid in one contract depends on the price or performance of the other contract; or (iii) the goods or services promised in the contracts (or some goods or services promised in each of the contracts) are a single performance obligation.
Contract costs - The Company recognizes as an asset the incremental costs of obtaining a contract with a customer if the costs are expected to be recovered. The Company has elected a practical expedient wherein it recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that it otherwise would have recognized is one year or less. To date, the Company has not incurred any material incremental costs of obtaining a contract with a customer.
Contract modifications - Contract modifications, defined as changes in the scope or price (or both) of a contract that are approved by the parties to the contract, such as a contract amendment, exist when the parties to a contract approve a modification that either creates new or changes existing enforceable rights and obligations of the parties to the contract. Depending on facts and circumstances, the Company accounts for a contract modification as one of the following: (i) a separate contract; (ii) a termination of the existing contract and a creation of a new contract; or (iii) a combination of the preceding treatments. A contract modification is accounted for as a separate contract if the scope of the contract increases because of the addition of promised goods or services that are distinct and the price of the contract increases by an amount of consideration that reflects the Company’s stand-alone selling prices of the additional promised goods or services. When a contract modification is not considered a separate contract and the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification, the Company accounts for the contract modification as a termination of the existing contract and a creation of a new contract. When a contract modification is not considered a separate contract and the remaining goods or services are not distinct, the Company accounts for the contract modification as an add-on to the existing contract and as an adjustment to revenue on a cumulative catch-up basis.
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Costs incurred for the shipping of products to customers totaled approximately $0 and $6,000 for the years ended December 31, 2020 and 2019, respectively, and are included in cost of goods sold in the accompanying consolidated statements of operations.
| Product Warranties |
The Company provides a standard warranty of serviceability on all its products for the duration of the product’s shelf life, which is two years for Helix and Morph products currently. Estimated future warranty costs, if any, are accrued and charged to costs of goods sold in the period that the related revenue is recognized. Historical data and trends of product reliability and costs of repairing or replacing defective products are considered. Due to the low historical warranty claims experience, a general warranty accrual has not been required or recorded as of December 31, 2020 2021 and 2019.2020.
| Research and Development |
The Company’s research and development costs are expensed as incurred. Research and development expense include the costs of basic research activities as well as other research, engineering, and technical effort required to develop new products or services or make significant improvement to an existing product or manufacturing process. Research and development costs also include pre-approval regulatory and clinical trial expenses and support costs for collaborative partnering programs wherein the Company provides biotherapeutic delivery systems and customer training and support for their use in clinical trials and studies. The Company’s research and development costs consist primarily of:
Salaries, benefits and other personnel-related expenses, including share-based compensation;
Fees paid for services provided by clinical research organizations, research institutions, consultants and other outside service providers;
Costs to acquire and manufacture materials used in research and development activities and clinical trials;
Laboratory consumables and supplies;
Facility-related expenses allocated to research and development activities;
Fees to collaborators to license technology; and
Depreciation expense for equipment used for research and development and clinical purposes.
• | Salaries, benefits and other personnel-related expenses, including share-based compensation; |
• | Fees paid for services provided by clinical research organizations, research institutions, consultants and other outside service providers; |
• | Costs to acquire and manufacture materials used in research and development activities and clinical trials; |
• | Laboratory consumables and supplies; |
• | Facility-related expenses allocated to research and development activities; |
• | Fees to collaborators to license technology; and |
• | Depreciation expense for equipment used for research and development and clinical purposes. |
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Cost of goods sold includes the costs of raw materials and components, manufacturing personnel and facility costs and other indirect and overhead costs associated with manufacturing the commercial enabling and delivery products, which generate net product revenue.
| Share-Based Compensation |
The Company measures and recognizes share-based compensation expense for equity awards to employees, directors and consultants based on fair value at the grant date. The Company uses the Black-Scholes-Merton (BSM) option pricing model to calculate fair value of its stock option grants. The compensation cost for restricted stock awards is based on the closing price of the Company’s common stock on the date of grant. Share-based compensation expense recognized in the consolidated statements of operations is based on the period the services are performed and recognized as compensation expense on a straight-line basis over the requisite service period. The Company accounts for forfeitures as they occur.
Measurement of nonemployee awards - The measurement of equity-classified nonemployee awards is fixed at the grant date, and the Company may use the expected term to measure nonemployee options or elect to use the contractual term as the expected term, on an award-by-award basis. This differs from the guidance in Accounting Standards Codification (ASC) 505-50505-50 that requires the use of the contractual term. Forfeitures of nonemployee awards will be recognized as they occur.
The BSM option pricing model requires the input of subjective assumptions, including the risk-free interest rate, the expected volatility in the value of the Company’s common stock, and the expected term of the option. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, the share-based compensation expense could be materially different in the future. These assumptions are estimated as follows:
Risk-free Interest Rate
The risk-free interest rate assumption is based on the zero-couponzero-coupon U.S. Treasury instruments appropriate for the expected term of the stock option grants.
Expected Volatility
The Company has limited historical data of its own to utilize in determining expected volatility. As such the Company based the volatility assumption on a combined weighted average of the Company’s own historical data and that of a selected peer group. The peer group was developed based on companies in the biotechnology and medical device industries whose shares are publicly traded.
Expected Term
The expected term represents the period of time that options are expected to be outstanding. As the Company does not have sufficient historical experience for determining the expected term of the stock options awards granted, the expected life is determined using the simplified method, which is an average of the contractual terms of the option and its ordinary vesting period.
| Income Taxes |
The Company accounts for income taxes based on the asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets, liabilities, operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
In evaluating the ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, forecasts of future taxable income, and ongoing tax planning. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance, which would reduce the provision for income taxes. Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made.
The Company recognizes and measures benefits for uncertain tax positions using a two-steptwo-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates its uncertain tax positions quarterly. Evaluations are based upon a number of factors, including the technical merits of the tax position, changes in facts or circumstances, changes in tax law, interactions with tax authorities during the course of audits, and effective settlement of audit issues. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense in the consolidated statements of operations and accrued interest and penalties within accrued liabilities in the consolidated balance sheets. No such interest and penalties have been recorded to date.
| Fair Value of Financial Instruments |
The Company applies fair value accounting for all financial assets and liabilities and nonfinancial assets and liabilities that are required to be recognized or disclosed at fair value in the consolidated financial statements. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments complexity.
The Company’s financial assets and liabilities consist principally of cash and cash equivalents, accounts receivable, and accounts payable. The fair value of the Company’s cash equivalents is determined based on quoted prices in active markets for identical assets. Cash in the Company’s operating bank accounts represents the difference between cash in the money market accounts and total cash and cash equivalents reported on the consolidated balance sheets. The recorded values of the Company’s accounts receivable and accounts payable approximate their current fair values due to the relatively short-term nature of these accounts.
| Net Loss per Share |
Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding.outstanding and fully vested restricted stock units. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. Common stock equivalents are comprised of unvested restricted stock units, warrants to purchase common stock and options outstanding under the stock option plans. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding since the effects of potentially dilutive securities are antidilutive due to the net loss position.
| Recent Accounting Pronouncements |
In October 2020,Recent accounting pronouncements issued by the Financial Accounting Standards Board, (FASB) issued Accounting Standards Update (ASU) 2020-10—Codification Improvements. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The amendments in this update do not change U.S. GAAP and, therefore, are not expected to result in a significant change in practice. Section A was removed from the final update of ASU 2020-10. Section B of this update contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Section C of this update contains Codification improvements that vary in nature. Management does not expect that adoption of this guidance will have a significant impact on the Company’s financial statements.
In March 2020, the Securities and Exchange Commission (SEC) adopted amendments to change the definitions of accelerated filer and large accelerated filer to provide relief to smaller reporting companies. The amendments in SEC Release No. 34-88365 to Rule 12b-2 of the Securities Exchange Act of 1934 provide that smaller reporting companies with up to $700 million in public float and less than $100 million in annual revenues in their most recently completed fiscal year are excluded from the definitions and as such are now designated as non-accelerated filers, in addition to all entities with less than $75 million in public float. Management does not expect that adoption of this guidance will have a significant impact on the Company’s financial statements.
In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions for intra period allocations, recognizing deferred taxes for investments and calculating income taxes in interim periods. This ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. Management does not expect that adoption of this guidance will have a significant impact on the Company’s financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, an amendment which modifies the measurement and recognition of credit losses for most financial assets and certain other instruments. The amendment updates the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. The amendment also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. For smaller reporting companies the guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. Management does not expect that adoption of this guidance will have a significant impact on the Company’s financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, and the American Institute of Certified Public Accountants did not or are not believed by management to have a material impact on the Company’s financial statement presentation or disclosures.
| Fair Value Measurements |
The fair value of financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The Company follows a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:
Level 1 – quoted prices in active markets for identical assets and liabilities
Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
The following table sets forth the fair value of the financial assets measured on a recurring basis as of December 31, 2020 and 2019 and indicates the fair value hierarchy utilized to determine such fair value (in thousands).
As of December 31, 2021 | ||||||||||||||||||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Money market funds | $ | 20,662 | $ | - | $ | - | $ | 20,662 | $ | 12,917 | $ | 0 | $ | 0 | $ | 12,917 | ||||||||||||||||
Cash in checking accounts | - | - | - | 745 | ||||||||||||||||||||||||||||
Total cash and cash equivalents | $ | 20,662 | $ | — | $ | — | $ | 21,407 | ||||||||||||||||||||||||
Cash in checking account | 0 | 0 | 0 | (45 | ) | |||||||||||||||||||||||||||
Total cash and cash equivalent | $ | 12,917 | $ | 0 | $ | 0 | $ | 12,872 | ||||||||||||||||||||||||
As of December 31, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Money market funds | $ | 4,637 | $ | - | $ | - | $ | 4,637 | ||||||||
Cash in checking accounts | - | - | - | 948 | ||||||||||||
Total cash and cash equivalents | $ | 4,637 | $ | — | $ | — | $ | 5,585 | ||||||||
As of December 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Money market funds | $ | 20,662 | $ | 0 | $ | 0 | $ | 20,662 | ||||||||
Cash in checking account | 0 | 0 | 0 | 745 | ||||||||||||
Total cash and cash equivalent | $ | 20,662 | $ | 0 | $ | 0 | $ | 21,407 | ||||||||
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Inventories are stated at the lower of cost orProperty and equipment, net realizable value using the average cost method. Inventories consistconsisted of the following (in thousands):
December 31, | ||||||||
2020 | 2019 | |||||||
Raw materials | $ | — | $ | — | ||||
Work in process | — | — | ||||||
Finished goods | — | 4 | ||||||
Total | $ | — | $ | 4 | ||||
Write downs for excess or expired inventory are based on management’s estimates of forecasted usage of inventories and are included in cost of goods sold. A significant change in the timing or level of demand for certain products as compared to forecasted amounts may result in recording additional write downs for excess or expired inventory in the future. Charges to cost of goods sold for inventory write-downs, reserve adjustments, scrap, shrinkage and expired inventories totaled approximately $2,000 and $36,000 for the years ended December 31, 2020, and 2019, respectively.
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Property and equipment, net consist of the following (in thousands):
December 31, | December 31, | December 31, | ||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Computer equipment and software | $ | 159 | $ | 132 | $ | 133 | $ | 159 | ||||||||
Laboratory and manufacturing equipment | 550 | 550 | 460 | 550 | ||||||||||||
Furniture and fixtures | 59 | 55 | 26 | 59 | ||||||||||||
Leasehold improvements | 332 | 332 | 26 | 332 | ||||||||||||
Construction in progress | 70 | 69 | 74 | 70 | ||||||||||||
Property and equipment, gross | 1,170 | 1,138 | 719 | 1,170 | ||||||||||||
Less accumulated depreciation | (1,025 | ) | (957 | ) | (537 | ) | (1,025 | ) | ||||||||
Property and equipment, net | $ | 145 | $ | 181 | $ | 182 | $ | 145 | ||||||||
Depreciation expense totaled approximately $68,000$60,000 and $111,000$68,000 for the years ended December 31, 2020 2021 and 2019,2020, respectively. All of the Company’s property and equipment is located in the United States.
| Operating Lease Right-of-Use Assets, Net |
The Company determines if an arrangement is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company’s operating lease which expires in December 2021, is related to a property lease for its laboratory and corporate offices.offices expired in December 2021, and the Company entered into a new lease which expires in January 2027, with an option for the Company to extend a further 36 months after expiration. BioCardia’s lease agreement does not contain any material residual guarantees or material restrictive covenants, nor does it contain an additional lease extension.covenants.
ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s lease does not provide an implicit rate. The Company used an adjusted historical incremental borrowing rate, based on the information available at the approximate lease commencement date, to determine the present value of lease payments. The net lease asset was adjusted for deferred rent, lease incentives, and prepaid rent. Variable rent expense is made up of expenses for common area maintenance and shared utilities and were not included in the determination of the present value of lease payments. The Company has no finance leases.
The components of lease expense for the year ended December 31, 2020 2021 and 2019,2020, respectively, was as follows (in thousands, except years and percentages):
December 31, | ||||||||
2020 | 2019 | |||||||
Straight-line rent expense recognized for operating lease | $ | 601 | $ | 601 | ||||
Variable rent expense recognized for operating lease | 395 | 264 | ||||||
Total rent expense | $ | 996 | $ | 865 | ||||
Weighted average remaining lease term (in years) | 1.0 | 2.0 | ||||||
Weighted average discount rate | 12.05 | % | 12.05 | % | ||||
December 31, | December 31, | |||||||
2021 | 2020 | |||||||
Straight-line rent expense recognized for operating lease | $ | 623 | $ | 601 | ||||
Variable rent expense recognized for operating lease | 322 | 395 | ||||||
Total rent expense | $ | 945 | $ | 996 | ||||
Weighted average remaining lease term (in years) | 5.1 | 1.0 | ||||||
Weighted average discount rate | 10.74 | % | 12.05 | % | ||||
Supplemental cash flow information related to the operating lease was as follows (in thousands):
December 31, | December 31, | December 31, | ||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Cash paid for amounts included in the measurement of lease liabilities | $ | 630 | $ | 612 | $ | 686 | $ | 630 | ||||||||
Cash lease expense (imputed interest expense component of net income) | $ | 103 | $ | 161 | 43 | 103 | ||||||||||
Total rent expense | $ | 729 | $ | 733 | ||||||||||||
Future minimum lease payments under the operating lease as of December 31, 2020 2021 are as follows (in thousands):
For the years ending December 31, | ||||||||
2021 | $ | 649 | ||||||
2022 | — | $ | 424 | |||||
2023 | — | 471 | ||||||
2024 | 485 | |||||||
2025 | 499 | |||||||
2026 | 514 | |||||||
Thereafter | — | 43 | ||||||
Total undiscounted lease payments | 649 | 2,436 | ||||||
Less imputed interest | 35 | 568 | ||||||
Total operating lease liabilities | $ | 614 | $ | 1,868 | ||||
| Collaborative Agreements |
The Company has entered into various collaborations related to clinical development. These agreements allow partners to utilize the Company’s enabling biotherapeutic delivery systems, including training and support during clinical and preclinical delivery of biotherapeutics. Under the terms of these agreements, the Company typically receives a use fee and payments for the systems and services provided. The Company gains access to certain data generated by its partners for use in its own product development efforts and also receives nonexclusive patent rights to any partner discovered BioCardia technology improvement inventions. Revenue from collaborative agreements is recognized in the Consolidated Statements of Operations in the line “Collaboration agreement revenue.”
| Accrued Expenses and Other Current Liabilities |
Accrued expenses and other current liabilities consisted of the following (in thousands):
December 31, | December 31, | December 31, | ||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Accrued expenses | $ | 87 | $ | 10 | $ | 240 | $ | 87 | ||||||||
Accrued salaries and employee benefits | 961 | 652 | 861 | 961 | ||||||||||||
Accrued director compensation | — | 648 | ||||||||||||||
Accrued clinical trial costs | 452 | 519 | 334 | 452 | ||||||||||||
Grant liability | 615 | 630 | 590 | 615 | ||||||||||||
Customer deposits | 90 | 102 | 96 | 90 | ||||||||||||
Total | $ | 2,205 | $ | 2,561 | $ | 2,121 | $ | 2,205 | ||||||||
| Note payable under Paycheck Protection Program |
On May 1, 2020, BioCardia Lifesciences, Inc. (the Borrower), a wholly owned subsidiary of BioCardia, Inc. (the Company), entered into a promissory note (the Note) with Silicon Valley Bank (the Lender) evidencing an unsecured loan in the aggregate principal amount of $506,413 pursuant to the Paycheck Protection Program (the PPP) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) administered by the U.S. Small Business Administration.. All the funds under the Note were disbursed to the Borrower on May 1, 2020.
In accordance with the requirements of the CARES Act, the Borrower used the proceeds from the Note in accordance with the requirements of the PPP to cover certain qualified expenses, including payroll costs, rent and utility costs. Interest accrued on the Note at the rate of 1.00% per annum. The Borrower may apply for forgiveness of amount due under the Note, in an amount equal to the sum of qualified expenses under the PPP, which include payroll costs, rent obligations, and covered utility payments incurred during the eight weeks following disbursement under the Note. On June 5, 2020, the Paycheck Protection Flexibility Act extended the period for qualifying expenses from eight weeks to an optional twenty-four-week period.
Subject to any forgiveness under the PPP, the Note would have matured two years following the date of issuance of the Note and include a period for the first six months during which time required payments of interest and principal would be deferred. On October 7, 2020, the Company applied for forgiveness of the note payable with the Lender. That application for forgiveness of $506,000 and related interest payable of $3,000 was approved in its entirety on November 2, 2020. Accordingly, $509,000 is presented as a gain on extinguishment of Paycheck Protection Program note payable in the accompanying consolidated statementsstatement of operations for the year ended December 31, 2020.
| Stockholders’Equity |
$10.5 Million Registered Direct Offering - On December 15, 2020, the Company entered into a securities purchase agreement with certain institutional investors (the December 15 Purchase Agreement) for the sale of an aggregate of 2,038,836 shares (the December 15 Shares) of the Company’s common stock, $0.001 par value per share (the Common Stock), at a price to the public of $5.15 per share (the December 15 Registered Offering) share for gross proceeds of approximately $10.5 million before deducting the fees of A.G.P./Alliance Global Partners, which acted as placement agent, and related offering expenses. The Company paid the placement agent a cash fee equal to 7.0% of the gross proceeds generated from the sale of the December 15 Shares. On December 18, 2020, BioCardia concluded the Purchase Agreement with the purchasers of the December 15 Shares. The Company intends to use the net proceeds for working capital and general corporate purposes, which include, but are not limited to, completing enrollment in the ongoing CardiAMP Cell Therapy pivotal trial for the treatment of heart failure, the funding of clinical development and pursuing regulatory approval for BioCardia’s product candidates. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $9.8 million. The December 15 Offering was made pursuant to a Registration Statement on Form S-3,S-3, which was filed by the Company with the Securities and Exchange Commission on October 9, 2020, and declared effective on October 20, 2020, as supplemented by a prospectus supplement dated December 15, 2020.
$8.5 Million Registered Direct Offering - On December 14, 2020, the Company entered into a securities purchase agreement with certain institutional investors (the December 14 Purchase Agreement) for the sale of an aggregate of 1,789,474 shares (the December 14 Shares) of the Company’s common stock, $0.001 par value per share (the Common Stock), at a price to the public of $4.75 per share (the December 14 Registered Offering) for gross proceeds of approximately $8.5 million before deducting the fees of A.G.P./Alliance Global Partners, which acted as placement agent, and related offering expenses. The Company paid the placement agent a cash fee equal to 7.0% of the gross proceeds generated from the sale of the December 14 Shares and reimbursed the Placement Agent for certain of its expenses in an amount not to exceed $40,000. On December 16, 2020, BioCardia concluded the Purchase Agreement with the purchasers of the December 14 Shares. The Company intends to use the net proceeds for working capital and general corporate purposes, which include, but are not limited to, completing enrollment in the ongoing CardiAMP Cell Therapy pivotal trial for the treatment of heart failure, the funding of clinical development and pursuing regulatory approval for BioCardia’s product candidates. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $7.8 million. The December 14 Offering was made pursuant to a Registration Statement on Form S-3,S-3, which was filed by the Company with the Securities and Exchange Commission on October 9, 2020, and declared effective on October 20, 2020, as supplemented by a prospectus supplement dated December 14, 2020.
2020 Public Offering on Form S-1S-1 Registration Statement - In May 2020, the Company submitted a Form S-1S-1 Registration Statement (S-1)(S-1) to the SEC, which was subsequently amended. On June 17, 2020, the Company entered into an underwriting agreement with A.G.P./Alliance Global Partners, as representative of the several underwriters named therein, relating to a firm commitment underwritten public offering pursuant to the S-1,S-1, of 4,762,000 shares of common stock, par value of $0.001 per share. The offering price to the public was $2.10 per share. The underwriters were granted a 45-day45-day option to purchase up to 714,190 additional shares of common stock to cover over-allotments. Such option was exercised in full on June 18, 2020. The closing of the offering occurred on June 19, 2020. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $10.3 million.
On June 8, 2020, the Company issued 29,625 shares of common stock to two former Board members to settle in lieu of cash their accrued board compensation liability of approximately $148,000.
Public Offering on Form S-1 Registration Statement Lincoln Park Capital stock purchase agreement -- In April 2019, On March 29, 2021, the Company submittedand Lincoln Park Capital Fund, LLC (Lincoln Park) entered into a Form S-1purchase agreement (the Purchase Agreement) and a registration rights agreement (the Registration Statement (S-1)Rights Agreement), pursuant to the SEC, which was subsequently amended. On August 2, 2019, the Company entered into an underwriting agreement with Maxim Group LLC, as representativehas the right to sell to Lincoln Park shares of the several underwriters named therein, relatingCompany’s common stock having an aggregate value of up to a firm commitment underwritten public offering pursuant$20 million, subject to certain limitations and conditions set forth in the S-1, of 1,666,667 units consisting of one sharePurchase Agreement (the Offering). As consideration for entering into the Purchase Agreement, the Company agreed to issue to Lincoln Park 75,000 shares of common stock par valueas commitment shares. In addition, the Company agreed to issue to Lincoln Park up to an aggregate of $0.001 per share, and a warrant to purchase one share50,000 additional shares of common stock. The offering pricestock as a further commitment fee based on a pro-rata percentage of the $20 million of common stock issued to Lincoln Park under the Purchase Agreement.
Pursuant to the public was $6.00 per unit. The warrants, which are equity classified, are immediately exercisable forPurchase Agreement, Lincoln Park purchased 373,832 shares of common stock, at a price of $6.30$5.35 per share, for a total gross purchase price of $2 million (the Initial Purchase) and expire five yearsthe Company issued 80,000 shares of common stock as commitment shares, which included 5,000 commitment shares issued on a pro rata basis for the initial $2 million purchase. Thereafter, as often as every business day from and after 1 business day following the date of issuance. In addition, the underwriters were granted 11,958 warrants exercisableInitial Purchase and over the 36-month term of the Purchase Agreement the Company has the right, from time to time, at a per warrant exercise price of $6.60 as part of their compensation. The underwriters were granted a 45-day optionits sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 250,000 additional100,000 shares of common stock, and/or 250,000 additional warrants to cover over-allotments, if any. Thewith such amount increasing as the closing price of the offering occurred on August 6, 2019. After deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, BioCardia realized net proceeds of approximately $8.8 million. On September 4, 2019, the underwriters exercised the over-allotment and purchased 75,000 shares of common stock and 250,000 warrants for net proceeds of approximately $420,000, after deducting underwriting discounts of approximately $32,000.
Up List to Nasdaq - On August 2, 2019, the Company’s common stock and warrants to purchase common stock began trading on the Nasdaq Capital Market. Previously, the common stock was quoted onincreases; provided Lincoln Park’s obligation under any single such purchase will not exceed $2 million, unless the OTCQB Marketplace (OTCQB) underCompany and Lincoln Park mutually agree to increase the symbol, “BCDA.” “BCDA” and “BCDAW” aremaximum amount of such single purchase (each, a Regular Purchase). If the trading symbols for the Company’s common stock and warrantsCompany directs Lincoln Park to purchase common stock, respectively, on the Nasdaq Capital Market.
Convertible Note Financing - On July 5, 2019, BioCardia entered into a note purchase agreement pursuant to which the Company issued on such date $625,000 in aggregate principal amount of convertible promissory notes to accredited investors, a portion of which were certain of the Company’s officers and directors and a principal stockholder (or their respective affiliates). The notes accrued 14.0% simple interest and mature six months from the issue date, on January 5, 2020. If at any time prior to the maturity date, the Company closes a public stock offering for the purpose of raising capital in which the Company’s common stock is listed or quoted on the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market, the outstanding principal and interest would automatically convert into the securities offered in the financing at a unit price equal to a 50% discount to the qualified financing price. The convertible notes conversion features were determined to be an embedded derivative requiring bifurcation and separate accounting at estimated fair value. The fair value of the derivative was treated as a discount on the notes, which is subject to accretion over the term of the note. The change in fair value of the derivative liability was approximately $52,000. The loss on extinguishment of the convertible notes approximated $521,000. Interest expense on the notes for the year ended December 31, 2019 totaled $112,000 and included $104,000 of accretion of the discount.
Upon the closing of the Company’s public offering of units on August 6, 2019 the unpaid principal and interest on the convertible notes totaling approximately $633,000, converted into 210,887 units, each unit consisting of one share of common stock and a warrant to purchase one share of common stock, at a conversion price of $3.00 per unit. Holders of the convertible notes had the option of converting the notes into units of one share of common stock and a warrant at a unit price of $8.00 prior to the automatic conversion in the Company’s public offering. The warrants have the same terms, including exercise price and expiration date, as the warrants issued in the public offering.
Reverse Stock Split - On June 6, 2019, the Company effected a 1-for-9 reverse stock split of the Company’s common stock. Neither the par value nor the authorized number of shares was adjusted as a result of the reverse stock split. All issued and outstanding common stock, warrants, stock options, restricted stock units and per share amounts contained in the accompanying consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.
Sales of Unregistered Common Stock and Warrants - On December 24, 2018, the Company entered into a Securities Purchase Agreement with entities affiliated with BioCardia’s existing investors (the “Investors”), relating to an offering and sale of an aggregate of 592,592 shares (as adjusted) of the Company’s common stock at a purchase price of $6.75 per share (as adjusted), and warrants to purchase up to one-half of themaximum number of shares of common stock soldit then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park in an Investor, upAccelerated Purchase to purchase an aggregate for all Investors of 296,296 shares (as adjusted)additional amount of common stock for aggregate net proceedsthat may not exceed the lesser of $3.8 million net of $200,000 expenses. The warrants are exercisable immediately for cash and, because six months have passed, are also exercisable on a cashless basis until an effective registration statement has been filed registering the resale(i) 300% of the number of shares issuable upon exercisepurchased pursuant to the corresponding Regular Purchase in multiple Accelerated Purchases on the same trading day or (ii) 30% of the warrants. Astotal number of December 31, 2020, no effective registration statement had been filed. Warrants can be settledshares of the Company’s common stock traded during a specified period on the applicable purchase date as set forth in unregistered shares. The warrants have an exercise price of $6.75 per sharethe Purchase Agreement. Under certain circumstances and will expire on December 24, 2023. The issued warrants are stand-alone financial instruments and were equity classified in additional paid-in capital in accordance with U.S. GAAP.the Purchase Agreement, the Company may direct Lincoln Park to purchase shares in multiple Accelerated Purchases on the same trading day.
The Company controls the timing and amount of any sales of its common stock to Lincoln Park. There is no upper limit on the price per share that Lincoln Park must pay for its common stock under the Purchase Agreement. In no event may the Company issue or sell to Lincoln Park under the Purchase Agreement shares of the Company’s common stock in excess of 3,266,177 shares (including the commitment shares), which represents 19.99% of the shares of our common stock outstanding immediately prior to the execution of the Purchase Agreement (the Exchange Cap), unless (i) the Company obtains stockholder approval to issue shares of its common stock in excess of the Exchange Cap or (ii) the average price of all applicable sales of the Company’s common stock to Lincoln Park under the Purchase Agreement equals or exceeds $4.2736 per share. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the purchase agreement if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.
The Purchase Agreement does not limit the Company’s ability to raise capital from other sources at the Company’s sole discretion, except that during the 36 months after the date of the Purchase Agreement (subject to certain exceptions) the Company may not enter into any agreement to effect the issuance of its common stock or common stock equivalents in any “equity line of credit” or other similar continuous offering in which the Company may offer, issue or sell common stock or common stock equivalents at a future determined price, other than in connection with common stock issued pursuant to an “at-the-market offering” by the Company exclusively through a registered broker-dealer acting as agent of the Company pursuant to a written agreement between the Company and the registered broker-dealer. The Company has the right to terminate the Purchase Agreement at any time, at no cost to the Company.
As of December 31, 2021, the Company had not sold any common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase.
Warrants – Set forth below is a table of activity of warrants for common stock and the related weighted average exercise price per warrant.
Number of | Weighted | |||||||
Common Stock | Average | |||||||
Warrants | Exercise Price | |||||||
Balance, December 31, 2019 | 2,435,807 | $ | 6.36 | |||||
Warrants for common stock sold | — | — | ||||||
Warrants for common stock exercised | (11,083 | ) | 6.60 | |||||
Balance, December 31, 2020 | 2,424,724 | $ | 6.36 | |||||
On December 24, 2020, a warrant holder exercised 11,083 warrants for common stock using cashless exercise provisions, resulting in the issuance of 470 shares of common stock.
Number of | Weighted | |||||||
Common Stock | Average | |||||||
Warrants | Exercise Price | |||||||
Balance, December 31, 2020 | 2,424,724 | $ | 6.36 | |||||
Warrants for common stock sold | 0 | 0 | ||||||
Warrants for common stock exercised | 0 | 0 | ||||||
Balance, December 31, 2021 | 2,424,724 | $ | 6.36 | |||||
| Share-Based Compensation |
BioCardia Lifesciences adopted, and the BioCardia Lifesciences shareholders approved, the 2002 Stock Plan in 2002 (the “2002“2002 Plan”), and the Company assumed the 2002 Plan in the Merger. The Company has not granted or does not intend to grant any additional awards under the 2002 Plan following the Merger. In 2016, BioCardia Lifesciences adopted, and the BioCardia Lifesciences shareholders approved, the 2016 Equity Incentive Plan (the “2016“2016 Plan”), and the Company assumed the 2016 Plan in the Merger. BioCardia has granted awards, including incentive stock options and non-qualified stock options, under the 2016 Plan following the Merger. Under the 2002 Plan and the 2016 Plan, the number of shares, terms, and vesting periods are determined by the Company’s board of directors or a committee thereof on an option-by-option basis. Options generally vest ratably over service periods of four years and expire ten years from the date of grant. The per share exercise price shall be no less than the fair market value on the date of grant. Compensation cost for employee share-based awards is based on the grant-date fair value and is recognized over the vesting period of the applicable award on a straight-line basis. The number of shares reserved for issuance or transfer pursuant to awards under the 2016 Plan will be increased by (i) the number of shares represented by awards outstanding under 2016 Plan that are returned to the plan because they are either forfeited or lapse unexercised or that are repurchased for the original purchase price thereof, (ii) if approved by the Administrator of the 2016 Plan, an annual increase on the first day of each fiscal year equal to the lessor of (A) 4% of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year; (B) 268,997 shares (1,000,000 shares effective January 1, 2021). As of December 31, 2020, 160,0202021, 133,330 shares have been authorized and available for awards under the 2016 Plan.
The Company recognizes in the consolidated statements of operations the grant-date fair value of stock options and other equity-based compensation. Share-based compensation expense for the years ended December 31, 2020 2021 and 20192020 was recorded as follows (in thousands):
Years ended December 31, | Years ended | |||||||||||||||
2020 | 2019 | December 31, | ||||||||||||||
Cost of goods sold | $ | - | $ | 191 | ||||||||||||
2021 | 2020 | |||||||||||||||
Research and development | 1,369 | 1,115 | $ | 795 | $ | 1,369 | ||||||||||
Selling, general and administrative | 1,583 | 1,416 | 866 | 1,583 | ||||||||||||
Total stock-based compensation | $ | 2,952 | $ | 2,722 | ||||||||||||
Total share-based compensation | $ | 1,661 | $ | 2,952 | ||||||||||||
On January 29, 2020 (the(the “repricing date”), the Company’s Board of Directors repriced certain previously granted and still outstanding vested and unvested stock option awards held by employees, executives, and certain service providers of the Company; as a result, the exercise price was lowered to $5.32 per share. No other terms of the repriced stock options were modified, and the repriced stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates. As a result of the repricing, 515,036 vested and unvested stock options outstanding with original exercise prices ranging from $10.05 to $97.21, were repriced.
The repricing on January 29, 2020 resulted in incremental stock-based compensation expense of $569,000, of which $412,000 related to vested employee stock option awards and was expensed on the repricing date, and $157,000 related to unvested stock option awards and is being amortized on a straight-line basis over the approximately three year remaining weighted average vesting period of those awards.
The following table summarizes activity under the Company’s stock option plans, including the 2002 Plan and the 2016 Plan and related information (in thousands, except share and per share amounts and term):
Options outstanding | Options outstanding | |||||||||||||||||||||||||||||||
Number of shares | Weighted average exercise price | Weighted average remaining contractual term (years) | Aggregate intrinsic value | Number of shares | Weighted average exercise price | Weighted average remaining contractual term (years) | Aggregate intrinsic value | |||||||||||||||||||||||||
Balance, December 31, 2019 | 821,464 | $ | 18.99 | 7.6 | $ | - | ||||||||||||||||||||||||||
Balance, December 31, 2020 | 1,114,306 | $ | 5.89 | 7.5 | $ | 177.1 | ||||||||||||||||||||||||||
Stock options granted | 342,232 | 3.10 | 772,435 | 3.56 | ||||||||||||||||||||||||||||
Stock options exercised | — | — | (1,580 | ) | 2.49 | |||||||||||||||||||||||||||
Stock options cancelled | (49,390 | ) | 12.79 | |||||||||||||||||||||||||||||
Balance, December 31, 2020 | 1,114,306 | $ | 5.89 | 7.5 | $ | 177.1 | ||||||||||||||||||||||||||
Options exercisable December 31, 2020 | 615,470 | $ | 7.51 | 6.3 | $ | 15.6 | ||||||||||||||||||||||||||
Stock options forfeited | (235,350 | ) | 4.49 | |||||||||||||||||||||||||||||
Stock options expired | (125 | ) | 5.32 | |||||||||||||||||||||||||||||
Balance, December 31, 2021 | 1,649,686 | $ | 5.00 | 7.6 | $ | — | ||||||||||||||||||||||||||
Exercisable, December 31, 2021 | 762,867 | $ | 6.62 | 6.0 | $ | — | ||||||||||||||||||||||||||
Options vested and expected to vest | 1,114,306 | $ | 5.89 | 7.5 | $ | 177.1 | 1,649,686 | $ | 5.00 | 7.6 | $ | — | ||||||||||||||||||||
The aggregate intrinsic value represents the difference between the total pre-tax value (i.e., the difference between the Company’s stock price and the exercise price) of stock options outstanding as of December 31, 2020, 2021, based on the Company’s common stock closing price of $3.46$1.94 per share, which would have been received by the option holders had all their in-the-money options been exercised as of that date.
The total intrinsic value of options exercised duringwas $3,000 and zero in the years ended December 31, 2020 2021 and 2019 was zero in both years.2020, respectively. The weighted average grant-date BSM fair value of options granted during the years ended December 31, 2020 2021 and 20192020 was $1.73$3.10 and $3.87$1.73 per share, respectively.
Employee, Director and Non-employee Share-Based Compensation
During the years ended December 31, 2020 2021 and 2019,2020, the Company granted stock options to certain employees, non-employee directors and non-employees to purchase 342,232772,435 and 254,785342,232 shares of common stock, respectively. The fair value of each option grant was estimated on the date of the grant using the BSM option pricing model with the following assumptions:
Years ended | ||||||||||||||||||||||
Years ended December 31, | December 31, | |||||||||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||||||||
Risk-free interest rate | 0.4 | - | 1.6% | 1.40 | - | 2.14% | 0.6 | - | 1.6% |
| 0.4 | - | 1.6% |
| ||||||||
Volatility | 107 | - | 112% | 74 | - | 94% | 110 | - | 120% |
| 107 | - | 112% |
| ||||||||
Dividend yield |
| None |
| None | None | None | ||||||||||||||||
Expected term (in years) | 6.25 | - | 10.0 | 6.25 | - | 10.0 | 6.25 | - | 10.0 | 6.25 | - | 10.0 | ||||||||||
Unrecognized share-based compensation for employees, non-employee directors and non-employee options granted through December 31, 2020 2021 is approximately $2.1$2.5 million to be recognized over a remaining weighted average service period of 2.22.8 years.
Share-Based Compensation (RSUs)
During the years ended December 31, 2020 2021 and 2019,2020, respectively, the Company granted to certain members of management 113,976112,583 and 34,713113,976 restricted stock units, or RSUs in lieu of paying bonuses. The fair value of each RSU is estimated on the closing market price of the Company’s common stock on the grant date.
During the year ended December 31, 2020, the Company granted 122,977 RSUs to board members to settle $613,000 of board compensation earned from April 2018 to March 30, 2020. The associated compensation expense was recognized when earned. During the year ended December 31, 2020, the Company granted 69,321 RSUs to board members and recognized approximately $190,000 in stock compensation expense for board service from April 1, 2020 to December 31, 2020. The RSUs were granted on a quarterly basis and were calculated based on $92,500 divided by the greater of $4 or the closing share price of the Company’s common stock on the last trading day of the fiscal quarter. These RSUs represent a contingent right to receive one share of common stock, but for which delivery of the stock will occur on the earlier of the two-yeartwo-year anniversary of the grant, the board member’s separation from the Company, a change in control as defined by the 2016 Equity Incentive Plan or the board member’s death.
The following table summarizes the activity for RSUs during the yearyears ended December 31, 2021 and 2020:
Weighted | ||||||||
average | ||||||||
grant date | ||||||||
Number of | fair values | |||||||
shares | per share | |||||||
Balance, December 31, 2019 | 36,981 | $ | 10.56 | |||||
RSUs granted | 381,094 | 3.93 | ||||||
RSUs vested and settled | (137,603 | ) | 5.48 | |||||
RSUs forfeited | (56,161 | ) | 3.75 | |||||
Balance, December 31, 2020 | 224,311 | $ | 4.12 | |||||
Weighted | ||||||||
average | ||||||||
grant date | ||||||||
Number of | fair value | |||||||
shares | per share | |||||||
Balance, December 31, 2020 | 224,311 | $ | 4.12 | |||||
RSUs granted | 131,375 | 3.61 | ||||||
RSUs released | (118,472 | ) | 3.73 | |||||
RSUs forfeited | (36,943 | ) | 3.49 | |||||
Balance, December 31, 2021 | 200,271 | $ | 4.13 | |||||
RSUs vested and settled are converted into the Company’s common stock on a one-for-oneone-for-one basis. RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. Of the 224,311200,271 RSUs outstanding on December 31, 2020, 216,1112021, 194,803 RSUs are vested and have not been settled and 8,2005,468 have not yet vested. The related compensation expense, which is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted, is recognized ratably over the period during which the vesting restrictions lapse. Unrecognized share-based compensation for RSUs granted through December 31, 2020 2021 was approximately $37,000$61,000 to be recognized over a remaining weighted average service period of 2.30.4 years.
| Concentrations |
MostThree customers accounted for approximately 67%, 13% and 13% of the Company’s customers are locatedtotal revenues in the United States.2021. Two customers accounted for approximately 70% and 16% of total revenues in 2020. Two Four customers accounted for approximately 43%24%, 14%, 12% and 25%12% of total revenues in 2019. accounts receivable on December 31, 2021. Three customers accounted for approximately 22%, 18% and 11% of accounts receivable on December 31, 2020. One customer accounted for 15% of accounts receivable on December 31, 2019.
| Net Loss per Share |
The following table sets forth the computation of the basic and diluted net loss per share for the years ended December 31, 2020 2021 and 20192020 (in thousands, except share and per share data):
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Numerator: | ||||||||
Net loss | $ | (15,004 | ) | $ | (14,709 | ) | ||
Denominator: | ||||||||
Weighted average shares used to compute net loss per share, basic and diluted | 10,118,682 | 5,644,328 | ||||||
Net loss per share, basic and diluted | $ | (1.48 | ) | $ | (2.61 | ) | ||
Years ended December 31, | ||||||||
2021 | 2020 | |||||||
Net loss | $ | (12,623 | ) | $ | (15,004 | ) | ||
Weighted average shares used to compute net loss per share, basic and diluted | 16,917,664 | 10,118,682 | ||||||
Net loss per share, basic and diluted | $ | (0.75 | ) | $ | (1.48 | ) | ||
The following weighted-average outstanding common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:
At December 31, | December 31, | |||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Stock options to purchase common stock | 1,114,306 | 821,464 | 1,649,686 | 1,114,306 | ||||||||||||
Unvested restricted stock units | 8,200 | 36,981 | 5,468 | 8,200 | ||||||||||||
Common stock warrants | 2,424,724 | 2,435,808 | 2,424,724 | 2,424,724 | ||||||||||||
Total | 3,547,230 | 3,294,253 | 4,079,878 | 3,547,230 | ||||||||||||
| Income Taxes |
The Company’s provision for income taxes for the years ended December 31, 2020 2021 and 20192020 was $0 for both years.
The provision for income taxes differs from the amount which would result by applying the federal statutory income tax rate to pre-tax loss for the years ended December 31, 2020 2021 and 2019.2020. The reconciliation of the provision computed at the federal statutory rate to the Company’s provision (benefit) for income taxes was as follows (in thousands):
Years ended December 31, | Years ended December 31, | |||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Tax at federal statutory rate | $ | (3,151 | ) | $ | (3,089 | ) | $ | (2,651 | ) | $ | (3,151 | ) | ||||
State, net of federal benefit | (449 | ) | (414 | ) | 0 | (449 | ) | |||||||||
Research and development credit | (276 | ) | (225 | ) | (279 | ) | (276 | ) | ||||||||
Share-based compensation | 649 | 446 | 264 | 649 | ||||||||||||
PPP Note forgiveness | (107 | ) | - | 0 | (107 | ) | ||||||||||
Other | 2 | 5 | 2 | 2 | ||||||||||||
Change in valuation allowance | 3,332 | 3,277 | 2,664 | 3,332 | ||||||||||||
Total provision for income taxes | $ | — | $ | - | $ | 0 | $ | 0 | ||||||||
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes as well as net operating loss and tax credit carryforwards, net of any adjustment for unrecognized tax benefits. The components of the net deferred income tax assets as of December 31, 2020 2021 and 20192020 were as follows (in thousands):
Years ended December 31, | Years ended December 31, | |||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Accrued compensation | $ | 225 | $ | 148 | $ | 191 | $ | 225 | ||||||||
Inventory adjustments | 335 | 297 | 15 | 335 | ||||||||||||
Depreciation and amortization | 90 | 98 | 24 | 90 | ||||||||||||
Share-based compensation | 686 | 744 | 595 | 686 | ||||||||||||
Net operating loss and tax credit carryforwards | 26,931 | 23,809 | 30,277 | 26,931 | ||||||||||||
Other | 173 | 11 | 2 | 173 | ||||||||||||
Gross Deferred Tax Asset | 28,440 | 25,107 | 31,104 | 28,440 | ||||||||||||
Valuation Allowance | (28,440 | ) | (25,107 | ) | (31,104 | ) | (28,440 | ) | ||||||||
Net deferred tax asset | $ | - | $ | - | $ | 0 | $ | 0 | ||||||||
The Company hashad approximately $91.5$106.1 million and $62.7$62.4 million of federal and state net operating loss (NOL) carryforwards, respectively, as of December 31, 2020. 2021. For tax reporting purposes, operating loss carryforwards are available to offset future taxable income; such carryforwards expire in varying amounts beginning in 2022 and 2028 for federal and state purposes, respectively, with 2021,2020,2019, and 2018 federal NOLs having no expiration date. Under current federal and California law, the amounts of and benefits from net operating losses carried forward may be impaired or limited in certain circumstances. Events which may cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-yearthree-year period.
Generally, utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by section 382, which discusses limitations on NOL carryforwards and certain built-in losses following ownership changes, and section 383, which discusses, special limitations on certain excess credits, etc., of the Internal Revenue Code (IRC) of 1986, as amended and similar state provisions. Accordingly, the Company’s ability to utilize net operating loss carryforwards and tax credit carryforwards may be limited, potentially significantly, as the result of such an “ownership change.” The Company has not yet performed a comprehensive study to determine if it has undergone any ownership changes. If the Company is able to potentially utilize its net operating loss carryforwards and tax credit carryforwards, it will perform a comprehensive section 382 and 383 study to determine what, if any, limitation on its ability to utilize its NOLs exists.
As of December 31, 2020,2021, the Company hashad federal and state research and development credits of approximately $2.8$3.1 million and $2.1$2.3 million available to offset future federal and state income taxes, respectively. The federal tax credit carryforward expires beginning in 2028. The state credit carryforwards have no expiration.
The Company does not believe that these assets are realizable on a more likely than not basis; therefore, the net deferred tax assets have been fully offset by a valuation allowance. The Company did not have deferred tax liabilities as of December 31, 2020 2021 or 2019.2020. The net increase in the total valuation allowance for the year ending ended December 31, 2020 is $3.32021 was $2.7 million, primarily from the net operating losses generated. The net increase in the total valuation allowance for the year ending ended December 31, 2019 is $3.22020 was $3.3 million, primarily from the net operating losses generated. No liability related to uncertain tax positions is reported in the financial statements.
The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in thousands):
Years ended December 31, | Years ended December 31, | |||||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Balance, beginning of year | $ | 1,046 | $ | 891 | $ | 1,235 | $ | 1,046 | ||||||||
Additions based on tax positions related to the current year | 189 | 155 | 158 | 189 | ||||||||||||
Reductions for tax positions related to prior years | (25 | ) | 0 | |||||||||||||
Balance, end of year | $ | 1,235 | $ | 1,046 | $ | 1,368 | $ | 1,235 | ||||||||
Recognition of approximately $895,000$991,000 and $753,000$895,000 of unrecognized tax benefits would impact the effective rate at December 31, 2020 2021 and 20192020 respectively, if recognized. Increases in 2020 and 20192021 relate to increased research and development activity.
On May 1, 2020, the Company received loan proceeds in the amount of approximately $506,413 under the Paycheck Protection Program. The PPP, established as part of the CARES Act, provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.
The Consolidated Appropriations Act, 2021, P.L. 116-260, enacted on Dec. 27, 2020, resolved the issue of whether taxpayers can take deductions for expenses paid with forgiven PPP loans. The act clarified that gross income does not include any amount that would otherwise arise from the forgiveness of a PPP loan. It also clarified that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven and that the tax basis and other attributes of the borrower's assets will not be reduced as a result of the loan forgiveness.
The Company applied for and received a PPP loan for $506,413 during 2020. The Company was approved for forgiveness on the entire loan balance and related interest payable of $3,000 on November 2, 2020.
The Company is subject to U.S. federal, California, Colorado, Florida and North Carolina income taxes. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company was incorporated in 2002 and is subject to U.S. federal, state, and local tax examinations by tax authorities for all prior years.
| Contingencies and |
Contingencies - The Company may be subject to various claims, complaints, and legal actions that arise from time to time in the normal course of business. Management is not aware of any current legal or administrative proceedings that are likely to have an adverse effect on the Company’s business, financial position, results of operations, or cash flows.
Uncertainties - The results for the year ended December 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period or for any other future year, particularly in light of the novel coronavirus pandemic, or COVID-19, and its impact on domestic and global economies. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and social distancing guidelines, causing some businesses to suspend operations and/or experience a reduction in demand for many products from direct or ultimate customers. Accordingly, businesses have adjusted, reduced or suspended operating activities and are continuing to adapt to these changing actions and guidelines.
Beginning March 17, 2020, substantially all of the Company’s workforce began working from home. On April 6, 2020, manufacturing operations resumed at the Company’s facilities, with a number of other staff continuing to work from home. While the direct effects of the stay-at-home orders and BioCardia’s work-from-home policies have been largely mitigated during the year ended December 31, 2020, the overall impact of the pandemic resulted in disruption to the Company’s business and in delays in the Company’s development programs and regulatory and commercialization timelines. The overall magnitude of the continuing impact will depend, in part, on the length and severity of changing restrictions and other limitations on BioCardia’s ability to conduct the Company’s business. BioCardia’s future research and development expenses and general and administrative expenses may vary significantly if the Company experiences an increased impact from COVID-19 on the costs and timing associated with the conduct of BioCardia’s clinical trials and other related business activities.
As the outbreak continues to mutate and spread, it may affect the Company’s operations and those of third parties on which the Company relies, including causing disruptions in the supply of the Company’s product candidates and the conduct of current and planned preclinical and clinical studies. BioCardia may need to limit operations and may experience limitations in employee resources. There are risks that the COVID-19 outbreak may be more difficult to contain if the outbreak reaches a larger population or broader geography, in which case the risks described herein could be elevated significantly. The extent to which the coronavirus impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.
Additionally, while the potential economic impact brought by, and the duration of, a coronavirus pandemic is difficult to assess or predict, the impact of the coronavirus on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s short-term and long-term liquidity, and the Company’s ability to complete its preclinical and clinical studies on a timely basis, or at all. The Company was successful in raising additional funding in 2020 (See Note 10). However, the ultimate impact of coronavirus is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, financing, preclinical and clinical trial activities or the global economy as a whole. However, these effects could have a material, adverse impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which BioCardia relies.
| Grant Funding |
In June 2016, the Company entered into a grant agreement with Maryland Technology Development Corporation (TEDCO). TEDCO was created by the Maryland State Legislature in 1998 to facilitate the transfer and commercialization of technology from Maryland’s research universities and federal labs into the marketplace. TEDCO administers the Maryland Stem Cell Research Fund to promote State funded stem cell research and cures through financial assistance to public and private entities operating within the State. Under the agreement, TEDCO has agreed to provide the Company an amount not to exceed $750,000 to be used solely to finance the costs to conduct the research project entitled “Heart Failure Trial” over a period of three years. This agreement has been extended for another year to June 2021.December 31, 2022.
As of December 31, 2020, 2021, the Company has received approximately $750,000 under the grant which is accounted for as a reduction to research and development expenses as the related qualifying costs are incurred. Approximately $135,000$160,000 of the qualifying costs had been incurred as of December 31, 2020. 2021. The remaining $615,000$590,000 was recorded as grant liability on the consolidated balance sheet at December 31, 2020. 2021. The amount is recorded as a liability as the amounts are refundable, should a default by the Company, as defined in the agreement, occur prior to incurring the qualifying costs.
| Related Party Transactions |
Litigation Funding Agreement
On April 9, 2020, BioCardia, Inc.the Company entered into a Litigation Funding Agreement (the Funding Agreement) with BSLF, L.L.C. (the Funder), an entity owned and controlled by Andrew Blank, Chair of BioCardia’s board of directors, for the purpose of funding the Company’s currently pending legal proceedings and any and all claims, actions and/or proceedings relating to or arising from the case captioned Boston Scientific Corp., et al., v. BioCardia Inc., Case No.3:19-05645-VC,19-05645-VC, U.S.D.C., N. D. Cal (the Litigation). BioCardia seekssought imposition of constructive trusts both on the patents naming Ms. Surbhi Sarna as an inventor and the proceeds received from the sale of nVision to Boston Scientific, as well as damages, including unjust enrichment damages measured by the proceeds received from the sale of nVision to Boston Scientific.
Under the terms of the Funding Agreement, the Funder agreed to fund the legal fees and costs incurred by the Company in connection with the Litigation on and after March 1, 2020 on a non-recourse basis. The Company agreed to repay the Funder from any proceeds arising from the Litigation (the Litigation Proceeds), (i) any taxes paid by or imposed upon Funder (other than taxes imposed upon Funder as a consequence of Funder’s income) with respect to the claims, the litigation proceeds or as a consequence of any settlement in connection with the Litigation, if any, plus (ii) an amount, without reduction, set-off or counterclaim, equal to the amount actually paid by the Funder pursuant to the Funding Agreement (the Actual Funding Amount) plus (iii) the greater of:
(a) 50% of the remaining Litigation Proceeds, up to three times the Actual Funding Amount;Amount; or
(b) 30% of the remaining Litigation Proceeds.
Although the Company is required under the terms of the Funding Agreement to consult with the Funder regarding any settlement in connection with the Litigation and to allow Funder to participate in any real-time settlement negotiations, the Company has the sole and exclusive right to settle on whatever terms it deems acceptable.
The Funding Agreement may be terminated by Funder upon ten days’ written noticeOn April 12, 2021, all parties to the Company. Funder is obligated to fund only the fees and costs incurredLitigation entered into a confidential settlement agreement. All claims in the Litigation through the end of the month in which the termination notice was served. BioCardia may terminate the agreement upon ten days’ written notice to Funder from and after a failure by Funder to fulfill its obligations under the Funding Agreement if such failure or material breach is continuing at the end of such ten-day period. Under the terms of the agreement, the total due from the related party as of December 31, 2020 is approximately $618,000.
On March 12, 2021, the Company agreed to settle the Litigation, which is pending final documentation and dismissal.have been dismissed. The Company expects the settlement will did not result in any material benefit or liability to the Company.
OPKO
BioCardia, Inc. and OPKO Health, Inc. (OPKO) previouslyIn March 2022, the Company entered into a consulting agreement dated August 19, 2016, betweensettlement agreements with its litigation service providers and the CompanyFunder to terminate the Funding Agreement and OPKOconclude on all remaining matters thereunder (the Consulting Agreement)Litigation Funding Settlement). The chairman and chief executive officer of OPKO is a beneficial owner of more than 5% of the outstanding shares of the Company’s common stock.
Pursuant toUnder the terms of the Consulting Agreement, OPKO wasconfidential agreements, litigation and corporate counsel have agreed to provide advisory servicescredits and refunds of legal fees totaling $688,000, which offset the amounts owed to the Company by the Funder under the Funding Agreement, and to provide up to $300,000 in supportfuture discounts on legal services. The Company will remit the discounts, as received, to the Funder on a quarterly basis. As result of strategic transactions, financingsthe settlement, accounts payable was reduced by $523,000, the $562,000 other receivable due from the related party was eliminated, and a $156,000 related party payable was included in accrued expenses and other matterscurrent liabilities as agreed between the parties from time to time. Also,of December 31, 2021. This settlement resulted in August 2016, the Company granted OPKO a ten-year option to purchase 46,553 sharesadditional legal expense of common stock, with a 4-year vesting period and an exercise price of $16.20 per share, to OPKO as consideration for consulting services to be provided under the Consulting Agreement. The term of the Consulting Agreement was initially for four years and was to have been automatically renewed for successive one-year periods.
Effective August 29, 2019, the Company and OPKO mutually agreed to terminate the Consulting Agreement without penalty or payment of any kind as the services under the Consulting Agreement were no longer necessary. In connection with the termination of the Consulting Agreement, OPKO’s option grant was amended such that it$195,000, which is unaffected by the termination of the Consulting Agreement and will continue to vest and remain outstanding for the remainder of its ten-year term unless earlier exercised. As a result of this modification of the option grant, all future unrecognized stock-based compensation expense was remeasured and recognized in August 2019. BioCardia recorded $225,000 expense (of which $167,000 pertains to the option modification) in share-based compensation expense related to the OPKO stock optionincluded in selling, general and administrative expenseexpenses during the year ended December 31, 2019.2021.
Convertible Note Financing
On July 5, 2019, BioCardia entered into a note purchase agreement pursuant to which the Company issued on such date $625,000 in aggregate principal amount of convertible promissory notes to accredited investors, a portion of which were certain of the Company’s officers and directors and a principal stockholder (or their respective affiliates). See note 10 above.
| Employee Benefit Plans |
The Company’s U.S. employees are eligible to participate in a retirement and savings plan that qualifies under Section 401(k)401(k) of the IRC. Participating employees may contribute up to 75% of their pretax salary, but not more than statutory limits. The Company made matching contributions of $26,000$30,000 and $25,000$26,000 during the years ended December 31, 2020 2021 and 2019,2020, respectively.
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On February 17, 2021, the Company entered into an agreement with a leading international pharmaceutical company to assess the Helix™ Biotherapeutic Delivery System in preclinical testing. Under the terms of the agreement, the Company received a $500,000 up-front payment, a portion of which is creditable for BioCardia biotherapeutic delivery systems, support and training. The agreement includes a one-year option to negotiate a non-exclusive worldwide license for therapeutic delivery of certain cell types for cardiac indications.
On March 29, 2021, the Company and Lincoln Park Capital Fund, LLC, (Lincoln Park) entered into a purchase agreement pursuant to which Lincoln Park purchased $2 million of shares of the Company’s common stock (373,832 shares) at a purchase price of $5.35 per share. Under the purchase agreement, the Company has the right to sell to Lincoln Park shares of common stock having an aggregate value of up to $20 million, including the initial $2 million purchase, subject to certain significant limitations of the amount and timing of any such sales due to the terms and conditions set forth in the purchase agreement.
In consideration for entering into the purchase agreement with Lincoln Park, the Company agreed to issue an aggregate of 75,000 shares of common stock as a commitment fee. In addition, the Company agreed to issue to Lincoln Park up to an aggregate of 50,000 additional shares of common stock as a further commitment fee based on a pro-rata percentage of the $20 million of common stock issued to Lincoln Park under the Purchase Agreement as Purchase Shares (as such term is defined in the purchase agreement with Lincoln Park). On March 29, 2021, the Company issued 80,000 shares of common stock as commitment shares (which includes 5,000 commitment shares issued on a pro rata basis in respect of the initial purchase by Lincoln Park of $2 million of shares). The Company will not receive any cash proceeds from the issuance of any of the foregoing commitment shares.
The net proceeds under the purchase agreement to the Company will depend on the frequency and prices at which shares of common stock are sold to Lincoln Park. Actual sales of shares of common stock to Lincoln Park under the purchase agreement and the amount of such net proceeds will depend on a variety of factors, including market conditions, the trading price of the common stock and determination by the Company as to other available and appropriate sources of funding for the Company. The Company expects to use the proceeds from this agreement for general corporate purposes and working capital.
(18) | Subsequent Events |
In March 2022 the Company entered into the Litigation Funding Settlement (see Note 16). The Company remitted the $156,000 related party payable to the Funder on March 17, 2022.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
As previously reported on our Current Report on Form 8-K, filed on November 13, 2020, the Audit Committee (the Audit Committee) of the Company approved the dismissal of KPMG LLP (KPMG), which was then serving as the Company’s independent registered public accounting firm. KPMG was dismissed on November 9, 2020 as the Company’s independent registered public accounting firm, effective upon completion of their review of the Company’s unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2020. On November 9, 2020, the Audit Committee approved the appointment of PKF, LLP as the Company’s new independent registered public accounting firm, effective November 11, 2020. Effective December 1, 2020, PKF, LLP changed its name to PKF San Diego, LLP.
During the two fiscal years ended December 31, 20192021 and 2018 and the subsequent interim period through November 9, 2020, there were no: (1) disagreements with KPMGPKF San Diego, LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to their satisfaction, would have caused them to make reference in connection with their opinion to the subject matter of the disagreement, or (2) reportable events, except that KPMG LLP advised BioCardia, Inc. of the following material weakness: a lack of sufficient technical resources to appropriately perform effective and timely review of the accounting for and disclosure of complex non-routine transactions, including the adoption of new accounting standards.events.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as our controls are designed to do, and management necessarily was required to apply its judgment in evaluating the risk related to controls and procedures.
In connection with the preparation of this Annual Report on Form 10-K, as of December 31, 2020,2021, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2020,2021, our disclosure controls and procedures were, in design and operation, effective.
Changes in Internal Control over Financial Reporting
Other than those noted below under the section titled “Previously Identified Material Weaknesses in Internal Control Over Financial Reporting,” thereThere were no changes to our internal control over financial reporting identified in connection with the evaluation required by rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP.
Management assessed our internal control over financial reporting as of December 31, 2020.2021. Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.
Based on this assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 20202021 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S. GAAP. We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.
Previously Identified Material Weaknesses in Internal Control Over Financial Reporting
We previously identified a material weakness in internal control over financial reporting as of September 30, 2019 and for the year ended December 31, 2019. The material weakness resulted from a lack of sufficient technical resources to appropriately perform effective and timely review of the accounting for and disclosure of complex non-routine transactions, including the adoption of new accounting standards. This material weakness was remediated as of December 31, 2020.
We have implemented measures designed to improve our internal control over financial reporting and remediate the material weakness, including the following:
we enhanced our control processes for identifying and reviewing non-routine transactions, including formalized reviews of these transactions by senior accounting management and more robust documentation of the related conclusions and required accounting; and
we have engaged external consultants to provide expertise and assistance sufficient to evaluate, resolve and document the accounting for complex non-routine transactions.
Inherent Limitations on Effectiveness of Controls
Our management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
ITEM 9B. OTHER INFORMATION
None.
ITEM9C.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to our Proxy Statement for our 20212022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2020.2021.
We have adopted a Code of Business Conduct and Ethics that applies to all our (1) officers, (2) employees (including our principal executive officer, principal financial officer, principal accounting officer or controller and other employees who perform financial or accounting functions), and (3) agents and representatives, including our independent directors and consultants, who are not employees of ours, with regard to their BioCardia-related activities. Our code of business conduct and ethics is available on our website at www.biocardia.com under the heading “Corporate Governance” under the section titled “Investors”. We will post on this section of our website any amendment to our code of business conduct and ethics, as well as any waivers of our code of business conduct and ethics, that are required to be disclosed by the rules of the SEC.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to our Proxy Statement for our 20212022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2020.2021.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to our Proxy Statement for our 20212022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2020.2021.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to our Proxy Statement for our 20212022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2020.2021.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to our Proxy Statement for our 20212022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2020.2021.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Documents filed as part of this report are as follows:
1. | Consolidated Financial Statements: |
Our Consolidated Financial Statements are listed in the “Index to Financial Statements” of BioCardia, Inc. in Part II, Item 8 of this Annual Report on Form 10-K.
2. | Financial Statement Schedules |
All financial statement schedules have been omitted because they are not required, not applicable, or the required information is included in the financial statements or notes thereto included in this Annual Report on Form 10-K.
3. | Exhibits |
The documents listed in the Exhibit Index of this Annual Report on Form 10-K are incorporated by reference or are filed with this report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
EXHIBIT INDEX
101.INS* | Inline XBRL Instance Document. |
101.SCH* | Inline XBRL Taxonomy Extension Schema. |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase. |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase. |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase. |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
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† | Confidential treatment has been granted with respect to certain portions of this Exhibit. |
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(1) | Previously filed as Exhibit 2.1 to the Current Report on Form 8-K filed by us on August 25, 2016. |
(2) | Previously filed as Exhibit 2.2 to the Current Report on Form 8-K filed by us on October 27, 2016. |
(3) | Previously filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q filed by us on August 14, 2019. |
(4) | Previously filed as Exhibit 3.2 to the Current Report on Form 8-K filed by us on April 11, 2017. |
(5) | Previously filed as Exhibit 4.1 to the Current Report on Form 8-K filed by us on October 27, 2016. |
(6) | Previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed by us on October 27, 2016. |
(7) | Previously filed as Exhibit 4.3 to the registration statement on Form S-8 filed by us on February 8, 2017. |
(8) | Previously filed as Exhibit 4.7 to the registration statement on Form S-8 filed by us on February 8, 2017. |
(9) | Previously filed as Exhibit 4.8 to the registration statement on Form S-8 filed by us on February 8, 2017. |
(10) | Previously filed as Exhibit 4.1 to the Current Report on Form 8-K filed by us on December 27, 2018. |
(11) | Previously filed as Exhibit 4.1 to the Current Report on Form 8-K filed by us on August 7, 2019. |
(12) | Previously filed as Exhibit 4.10 to Amendment No. 3 to the registration statement on Form S-1 filed by us on July 23, 2019. |
(13) | Previously filed as Exhibit 4.10 to the Annual Report on Form 10-K filed by us on April 9, 2020. |
(14) | Previously filed as Exhibit 4.1 to the Current Report on Form 8-K filed by us on May 15, 2020. |
(15) | Previously filed as Exhibit 10.2 to the Current Report on Form 8-K filed by us on March 29, 2021. |
(16) | Previously filed as Exhibit 10.4 to the Current Report on Form 8-K filed by us on October 27, 2016. |
(17) | Previously filed as Exhibit 10.2 to the Annual Report on Form 10-K filed by us on March 30, 2017. |
(18) | Previously filed as Exhibit |
(19) | Previously filed as Exhibit |
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(20) | Previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed by us on April 14, 2020. |
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(22) | Previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed by us on March 29, 2021. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BIOCARDIA INC. | |||
By: | /s/ Peter Altman, Ph.D. | ||
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President and Chief Executive Officer | |||
Date: March 29, 20212022
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter Altman and David McClung, and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, on behalf of the registrant on the dates and the capacities indicated.
Signature | Title | Date | ||
/s/ Peter Altman, Ph.D. | President and Chief Executive Officer and Director | March 29, | ||
(Peter Altman, Ph.D.) | (Principal Executive Officer) | |||
/s/ David McClung | Chief Financial Officer | March 29, | ||
(David McClung) | (Principal Financial and Accounting Officer) | |||
/s/ Andrew Blank | Chairman of the Board | March 29, | ||
(Andrew Blank) | ||||
/s/ Jim Allen | Director | March 29, | ||
(Jim Allen) | ||||
/s/ Richard Krasno, Ph.D. | Director | March 29, | ||
(Richard Krasno, Ph.D.) | ||||
/s/ Krisztina Zsebo, Ph.D. | Director | March 29, | ||
(Krisztina Zsebo, Ph.D.) | ||||
/s/ Jay M. Moyes | Director | March 29, | ||
(Jay M. Moyes) | ||||
/s/ Simon H. Stertzer, M.D. | Director | March 29, | ||
(Simon H. Stertzer, M.D.) | ||||