Item 1. Business
Item 1.
Business.
OVERVIEW
We are a biotechnology company developing bioengineered organ implants
based on our novel technology. Our technology is comprised of a proprietary biocompatible scaffold, which is the foundation of our Cellframe TM
technology, that is seeded with the patient’s own mesenchymal stromal cells to form our Cellspan TM
implant, combining the clinically proven principles of tissue engineering, cell biology and materials science. Our platform technology
is being developed to treat life-threatening conditions of the esophagus, bronchus and trachea. By focusing on these underserved patients,
we hope to dramatically improve the treatment paradigm for these patients.
We believe our technology may provide surgeons a new paradigm to address
life-threatening conditions of the esophagus, bronchus, and trachea due to congenital abnormalities, diseases, infections and traumas.
Our novel technology harnesses the body’s response and modulates it toward the healing process to regenerate tissue and restore
the continuity and integrity of the organ. We are pursuing our Cellspan Esophageal Implant (CEI) technology as our first product candidate
to address both esophageal disease and pediatric esophageal atresia, and we are also developing our technology’s applications to
address conditions of the bronchus and trachea.
In collaboration with world-class institutions, such as Mayo Clinic
and Connecticut Children’s Medical Center, we are advancing our technology. Our product development program is based on the greatest
medical unmet needs, analysis of existing surgical options and physician validation.
In October 2019, we filed an Investigational New Drug (IND) application
with the U.S. Food and Drug Administration (FDA) to treat patients with esophageal disease, absent of cancer, in adults that would require
a short segment esophageal implant following clinically indicated short segment resection of the thoracic esophagus with our CEI product
candidate. In November 2019, we received notice from the FDA placing our IND on clinical hold and providing a preliminary list of clinical
hold and non-clinical hold questions. In December 2019, we received the formal letter with clinical hold and non-clinical hold questions
and submitted our response to the clinical hold questions on February 18, 2020. On March 19, 2020, the FDA notified us that the IND for
our CEI product candidate had been removed from clinical hold and that we could proceed with our study. This FDA approval enables us to
start our transition to a clinical-stage biotechnology company, and start clinical planning, engaging with a clinical research organization
and site readiness in advance of starting the clinical trial for our CEI product candidate. On May 7, 2020, we submitted responses to
certain non-clinical hold questions and finalized a majority of the remaining non-clinical hold responses in the third quarter of 2020,
and submitted the remaining responses in the fourth quarter of 2020, except as it relates to our clinical trial details that we will submit
once a clinical research organization is selected. The ongoing COVID-19 pandemic could continue to adversely impact our business, including
planned clinical trials, as discussed elsewhere in this document.
We believe that receiving regulatory approval to treat pediatric esophageal
atresia with our CEI may provide a shorter time to a commercial product and the greater overall potential value in the U.S. market. In
addition to providing a novel solution for a great medical need, approval of our pediatric esophageal atresia product candidate may result
in receipt of a priority review voucher, which if achieved, could potentially provide significant value and non-dilutive funding to Biostage
in the future. We have continued to advance our CEI pediatric esophagus program and plan to file a protocol amendment with the FDA to
update our CEI esophageal disease clinical program after the initial adult patients are treated in the esophageal disease trial, subject
to FDA approval.
We have also
formed a subsidiary in Hong Kong, Harvard Apparatus Regenerative Technology Limited, as we continue to assess the market and regulatory
approval pathway in China as to our implant products. We are not certain at this time as to which market, including U.S. or China for
example, may provide the most viable initial pathway for regulatory approval to a commercial product. This will depend on a number of
factors, including the approval and development processes, related costs, ability to raise capital and the terms and conditions thereof,
as well as the ongoing impact of the COVID-19 pandemic, among other factors. Any development and capital raising efforts in China may
include a joint venture in relation to our Hong Kong subsidiary, and would also involve a number of commercial variables, including rights
and obligations pertaining to licensing, development and financing, among others. Our failure to receive or obtain such clearances or
approvals on a timely basis or at all, whether that be in the U.S., China or otherwise, would have an adverse effect on our results of
operations.
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Our Technology Platform: How It Works
Our Cellspan process begins with the collection of an adipose (fat)
tissue biopsy from the patient followed by the use of standard tissue culture techniques to isolate and expand the patient’s own
(autologous) mesenchymal (multipotent) stromal cells, or MSC. The cells are seeded onto a proprietary biocompatible, synthetic scaffold,
produced to mimic the dimensions of the organ to be regenerated, and incubated in a proprietary bioreactor. The scaffold is electrospun
from polyurethane to form a non-woven, hollow tube. The specific microstructures of the Cellspan implants are designed to allow the cultured
cells to attach to and cover the scaffold fibers.
We have conducted large-animal studies to investigate the use of the
Cellspan implants for the reconstitution of the continuity and integrity of tubular shape organs, such as the esophagus and the large
airways, following a full circumferential resection of a clinically relevant segment, just as would occur in a clinical setting. We announced
favorable preliminary preclinical results of large-animal studies for the esophagus, bronchus and trachea in November 2015. Based on the
results of those studies, we chose the esophagus to be the initial focus for our organ regeneration technology.
Illustration
of intersection of Cellspan esophageal implant and native
esophagus
at time of implant and proposed mechanism of action
In May 2016, we reported an update of results from additional, confirmatory
pre-clinical large-animal studies. We disclosed that the studies had demonstrated in a predictive large-animal model the ability of our
Cellspan implant to successfully stimulate the regeneration of a section of esophagus that had been surgically removed. CEIs, consisting
of a proprietary biocompatible synthetic scaffold seeded with the recipient animal’s own mesenchymal stromal cells, were surgically
implanted in place of the esophagus section that had been removed. After the surgical full circumferential resection of a portion of the
thoracic esophagus, the Cellspan implant stimulated the reconstitution of full esophageal structural integrity and continuity.
Illustration
of esophageal reconstitution over Cellspan esophageal
implant following
time of implant and proposed mechanism of action
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Study animals were returned to a solid diet three weeks after the implantation
surgery. The scaffold portions of the Cellspan implants, which are intended to be in place only temporarily, were retrieved approximately
three weeks post-surgery via the animal’s mouth in a non-surgical endoscopic procedure. Within 2.5 to 3 months, a complete inner
epithelium layer and other specialized esophagus tissue layers were regenerated. Two animals in the study were kept in life for almost
two years to evaluate the long-term viability of the newly regenerated tubular conduit and were then sacrificed for histological data.
Prior to their sacrifice, these animals demonstrated normal weight gain, appeared healthy and free of any significant side effects and
received no specialized care.
Platform Technology in Life-threatening Orphan Indications
In November 2016, we were granted Orphan Drug Designation for our CEI
by the FDA to restore the structure and function of the esophagus subsequent to esophageal damage due to cancer, injury or congenital
abnormalities. Orphan Drug Designation provides a seven-year marketing exclusivity period against competition in the U.S. from the date
of a product’s approval for marketing. This exclusivity would be in addition to any exclusivity we may obtain from our patents.
Additionally, orphan designation provides certain incentives, including tax credits and a waiver of the Biologics License Application
(BLA) fee. We also plan to apply for Orphan Drug Designation for our CEI in Europe. Orphan Drug Designation in Europe provides market
exclusivity in Europe for ten years from the date of the product’s approval for marketing.
We have advanced the development of our technology, specifically a
CEI, in a series of preclinical studies, including large-animal studies with collaborators. In order to seek approval for the initiation
of clinical trials for our CEIs in humans, Good Laboratory Practice (GLP) studies to support the safety of the CEI are required to submit
an IND application with the FDA. We have now performed GLP studies to demonstrate that our technology, personnel, systems, processes and
practices are sufficient for advancing into human clinical trials. We have conducted a number of IND-enabling GLP studies demonstrating
safety and feasibility of the Cellspan implant. During 2018 we also performed additional non-GLP studies for the pediatric esophageal
atresia program to optimize that product candidate. Some of the results from these studies were included in the IND for our CEI that we
filed with the FDA in October 2019.
First-In-Human Use of Esophageal Implant Product
Candidate
On August 7, 2017, we announced the use of our CEI product candidate
in a patient at a major U.S. hospital via an FDA-approved single-use expanded access application. The surgery took place at Mayo Clinic,
but we were not allowed to identify the institution publicly at that time. The patient was a 75-year-old male with a life-threatening
cancerous mass in his chest that spanned his heart, a lung and his esophagus. The surgery was performed in May 2017 to remove the tumor,
repair the heart, part of one lung, and a section of the esophagus. The CEI was interpositioned into the gap in the esophagus created
by the removal of the tumor. The patient’s surgeon informed us at that time that the surgery was a success and the patient was later
discharged from the hospital. In February 2018 the surgeon informed us that the patient had died after living approximately eight months
after surgery. The surgeon stated that the cause of death was a stroke, and that the stroke was unrelated to the esophageal implant. The
surgeon also informed us that a preliminary autopsy had shown that the esophageal implant resulted in a regenerated esophageal tube in
the patient, except for a very small (approximately 5mm) hole outside the implant zone on the lateral wall that was right up against a
synthetic graft inserted as part of the patient’s heart repair on the vena cava in that same surgery. The synthetic graft on the
pericardium was not related to our esophageal implant product and may have acted as an irritant to esophageal tissue where it contacted
the esophageal implant. The surgeon also informed us that the esophageal regeneration in this patient was consistent with the regeneration
previously observed in our large-animal studies. In January 2019, the surgeon presented the case study publicly at a major U.S. medical
conference, including histological data supporting his earlier statements regarding successful regeneration. Mayo Clinic expects to publish
an article in a peer-reviewed journal and we expect to be in a position to release additional information on this landmark case at that
time. Some of the results of this expanded access case was included in the IND for our CEI that we filed with the FDA in October 2019.
Our product candidates are currently in development and have not yet
received regulatory approval for sale anywhere in the world.
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Changing the Surgical Treatment of Esophageal
Disease
Illustration of esophageal disease site
Illustration of potential human application of Cellspan esophageal implant at site of esophageal disease (depicting implant prior to esophageal tissue reconstitution over implant)
We believe our technology may provide surgeons a new paradigm to address
life-threatening conditions of the esophagus due to infection, trauma, cancer or congenital abnormalities. Initially, our focus is to
treat patients with esophageal disease, absent of cancer, in adults that would require a short segment esophageal implant following clinically
indicated short segment resection of the thoracic esophagus with our CEI product candidate.
According to the World Health Organization’s International Agency
for Research on Cancer, there are approximately 572,000 new cases of esophageal cancer worldwide each year. A portion of all patients
diagnosed with esophageal cancer are treated via a surgical procedure known as an esophagectomy. The current standard of care for an esophagectomy
requires a complex surgical procedure that involves moving the patient’s stomach or a portion of their colon into the chest to replace
the portion of esophagus resected by the removal of the tumor. These current procedures have high rates of complications and can lead
to a severely diminished quality of life and require costly ongoing care. Our CEI product candidate aims to provide a simpler surgical
procedure, with reduced complications, that may result in a better quality of life after the operation and reduce the overall cost of
these patients to the healthcare system.
Focus on Pediatric Esophageal Atresia: a Congenital
Abnormality in Need of a Better Solution
Each year, several thousand children worldwide are born with a congenital
abnormality known as esophageal atresia, a condition where an infant is born with an esophagus that does not extend completely from the
mouth to the stomach. When a long segment of the esophagus is lacking, the current standard of care is a series of surgical procedures
where surgical sutures are applied to both ends of the esophagus in an attempt to stretch them and pull them together so they can be connected
at a later date. This process can take weeks and the procedure is plagued by serious complications and may carry high rates of failure.
Such approach also requires, in time, at least two separate surgical interventions. Other options include the use of the child’s
stomach or intestine that would be pulled up into the chest to allow a connection to the mouth. We are working to develop a CEI solution
to address the complications of esophageal atresia, that could potentially be life-changing, organ-sparing, or both.
Our Mission and Our Strategy
Our mission is to revolutionize regenerative medicine by bioengineering
patient-specific Cellspan implants that use the patient’s own mesenchymal stromal cells to stimulate organ regeneration and restore
an organ’s structure and continuity. Our business strategy to accomplish this mission includes:
Targeting life-threatening medical conditions. We are
focused on creating products to help physicians treat life-threatening conditions to the esophagus, central lung and trachea caused by
infection, trauma, cancer, or infection. We are also developing products for the treatment of congenital abnormalities of the esophagus
and airways. We are not targeting less severe conditions that have reasonable existing treatment options. Solutions for life-threatening
medical conditions present a favorable therapeutic index, or risk/benefit relationship, by providing the opportunity of a significant
medical benefit for patients who have poor or no treatment alternatives. We believe that product candidates targeting life-threatening
medical conditions may be eligible for review and approval by regulatory authorities under established expedited review programs, which
may result in savings of time in the regulatory approval process. Also, we believe that products targeting life-threatening medical conditions
may be more likely to receive favorable reimbursement compared with treatments for less critical medical conditions.
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Developing products that have a relatively short time to market.
Since the number of patients diagnosed each year in the U.S. with a life-threatening esophageal condition that would require
a short segment esophageal implant following clinically indicated short segment resection of the thoracic esophagus is relatively small,
we expect the number of patients that we would likely need to enroll in a clinical trial will also be relatively small. We expect up
to 10 patients to be enrolled in our first clinical trial, which implies a relatively fast enrollment time, subject to milestone achievement
requirements on initial patient(s) imposed by the FDA prior to enrolling additional patients, and a less expensive clinical development
program. Therefore, we expect to be able to conduct a clinical trial in a relatively short period of time, subject to enrollment time
constraints, compared to clinical trials in indications with larger patient populations. We intend to work closely with regulatory agencies
and clinical experts to design and size the clinical studies appropriately based on the specific conditions our products are intended
to treat. We are evaluating the potential impact of the COVID-19 pandemic on our study timelines and costs.
Using our Cellframe and Cellspan technology as a platform to address
multiple organs. We believe that pre-clinical data we have produced to date may suggest that our technology is a novel and innovative
approach to restoring organ function that may provide an ability to develop products that would address life-threatening conditions impacting
organs like the esophagus, bronchus and trachea, and perhaps lower portions of the gastrointestinal (GI) tract. We believe that our technology
may allow physicians to treat certain life-threatening conditions in ways not currently possible, and in some combination, to save patients’
lives, avoid or reduce complications experienced in the current standard of care, and improve the patients’ quality of life, while
at the same time reducing the overall cost of patient care to the healthcare system.
Supplying the finished Cellspan esophageal implant to the surgeon.
Our technology includes our proprietary bioreactor, as well as our proprietary biocompatible scaffold that is seeded with the patient’s
own mesenchymal stromal cells. We believe there is considerable value in supplying the final cell-seeded scaffold implant to the surgeon
so that the hospital and surgeon may focus solely on performing the implantation.
Collaborating with leading medical and research institutions.
We have and will continue to collaborate with leading medical and research institutions. We have a co-development initiative with
Mayo Clinic for regenerative medicine organ implant products for the esophagus and airways based on our technology. We are also collaborating
with Connecticut Children’s Medical Center on a co-development project to translate our technology for pediatric esophageal atresia
from pre-clinical studies to clinical trials. We believe the use of our product candidates by leading surgeons and institutions will increase
the likelihood that other surgeons and institutions will use our products.
Our Technology
Our technology is comprised of our proprietary bioengineered scaffold,
which is the foundation of our Cellframe technology, that is seeded with the patient’s own mesenchymal stromal cells in our proprietary
bioreactor to form our Cellspan implant prior to implantation. We believe that our technology combines a highly-engineered, biocompatible
scaffold and a robust population of cells that, by tapping into the stem cell niche of the surrounding native tissue after implantation,
will stimulate a tubular organ to remodel or regenerate tissue to close the gap created by a surgical resection of a portion of that organ.
This unique combination of technologies, developed through our extensive testing performed during the last few years, may potentially
provide solutions to life-threatening conditions for patients with unmet medical needs.
We believe that our technology is unique, in that its mode of action
appears to be different from other tissue engineering scaffold products developed previously, of which we are aware. Prior to our development
of the technology, our approach attempted to implant a biocompatible scaffold that would be incorporated into the patient’s body
by the surrounding native tissue growing into the scaffold. To our knowledge, all previous research and development efforts by other investigators
were based on that same concept. Our technology appears to work very differently. We believe that the unique combination of our highly-engineered
biocompatible scaffold with a population of the patient’s own mesenchymal cells enables an organ to develop new native tissue around
our scaffold, but not into it, so the scaffold acts as a type of frame or staging for the new tissue. As a result, our scaffold is not
incorporated into the body. Instead, it is retrieved from the body via an endoscopic procedure, not surgically, after sufficient tissue
remodeling and regeneration has occurred.
Biocompatible Scaffold Component
Our proprietary biocompatible scaffold component of the CEI is constructed
primarily of polyurethane. This material was chosen based on extensive testing of various materials. The scaffold is made using a manufacturing
process known as electrospinning. The combination of the electrospinning process, which provides control over the desired microstructure
of the scaffold fabric, with the polyurethane results in a scaffold that we believe has favorable biocompatibility characteristics.
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The Patient’s Cells
Based on current pre-clinical development efforts, the cells we seed
onto the scaffold are obtained from the patient’s adipose tissue (abdominal fat). This fat tissue is obtained from a standard biopsy
before the implant surgery. Mesenchymal stromal cells are extracted and isolated from the adipose tissue biopsy. The isolated cells are
then expanded, or grown, for a short period prior to surgery in order to derive a sufficient cell population to be seeded on the scaffold.
The cells are then seeded on the scaffold in our proprietary bioreactor and incubated there before the implant surgery.
We believe our CEI product candidate has the potential to provide a
major advance over the current therapeutic options for treating esophageal disease, damage from infection or trauma and congenital abnormalities.
We believe our CEI has the potential to overcome the major challenges in restoring organ function for a damaged esophagus. With our CEI
we are developing a surgical procedure that has the objective of reconstituting the continuity of the patient’s esophagus without
having to relocate another organ in its place. In addition, by reducing or eliminating complications that occur in the current standard
of care, we expect to reduce the costs of addressing and treating those additional complications. Because these substantial costs can
be reduced or even eliminated with our technology, we believe our products, if successfully developed, can help save lives, improve the
quality of life for patients and reduce overall healthcare costs.
Unmet Patient Needs and Cellspan Implant Solutions
Esophageal Disease
There are approximately 572,000 new diagnoses of esophageal cancer
globally each year, according to the World Health Organization’s International Agency for Research on Cancer. According to the American
Cancer Society, there are approximately 20,000 new diagnoses of esophageal cancer in the U.S. each year, and there are more than 16,000
deaths from esophageal cancer each year. Esophageal cancer is very deadly - the five-year survival rate for people with esophageal cancer
is 18% in the U.S. Approximately 5,000 esophagectomy surgeries occur in the U.S. annually to treat esophageal cancer, and approximately
10,000 esophagectomies occur in Europe annually. We believe that approximately one half of the world’s esophageal cancer cases occur
in China, which would represent the largest potential patient population for our adult esophageal product candidate. We believe that our
CEI, if approved, has the potential to provide a major advance over the current esophagectomy procedures for addressing esophageal disease,
which have high complication and morbidity rates.
The current standard of care for the esophagectomy requires either
(A) a gastric pull-up, where the stomach is cut and sutured into a tubular shape, then pulled up through the diaphragm to replace a portion
of the esophagus resected by the removal of the cancerous tumor; or (B) a colon interposition, where a portion of the colon is resected
and used to replace the portion of the esophagus resected by the removal of the cancerous tumor. Esophagectomies have 90-day mortality
rates of up to 19%. Serious complications, such as leakage at the anastomoses, which can lead to infections and sepsis, and pulmonary
complications, such as impaired pulmonary function or pneumonia, occur in up to 30% of esophagectomy cases. Other complications from esophagectomies,
such as a narrowing of the esophagus post-surgery, gastroesophageal reflux and dumping syndrome (repetitive nausea, dizziness and vomiting)
can also pose significant quality of life issues for patients.
We believe that our CEI has the potential to provide physicians a new,
simpler procedure to restore organ function while significantly reducing complication and morbidity rates compared with the current standard
of care, and without creating significant quality of life issues for patients. Our current CEI product candidate that was removed from
clinical hold by the FDA on March 19, 2020 will treat patients with esophageal disease, absent of cancer, in adults that would require
a short segment esophageal implant following clinically indicated short segment resection of the thoracic esophagus with our CEI product
candidate.
Pediatric Esophageal Atresia
Esophageal Atresia (EA) is a rare congenital abnormality in which an
infant is born without part of the esophagus. About 1 in 4,000 infants in the U.S. is born with EA. In some cases, the two sections can
be connected surgically. However, in cases where the gap is too great for a simple surgical reconnection, the current standard of care
is a gastric pull-up, a colon interposition, or a procedure known as the Foker process. In the Foker process, traction devices are surgically
attached to the two ends of the esophagus. Traction is then applied, usually for several weeks during which time the infant remains in
an Intensive Care Unit, to stimulate the ends of the esophagus to grow and narrow the gap. If the Foker process is successful in narrowing
the gap sufficiently, a second surgery is necessary to connect the two ends of the esophagus. In addition to the Foker process being complex,
it is also a very expensive procedure because the infant will normally be in the hospital for several months during the process.
We believe that a pediatric CEI may provide pediatric surgeons with
a better procedure to treat EA that would result in a connected esophagus with higher success rates, lower complications and lower overall
costs to the healthcare system.
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Central Lung Cancer
Lung cancer is the most common form of cancer and the most common cause
of death from cancer worldwide. There are more than 450,000 new lung cancer diagnoses annually in the U.S. and Europe. In approximately
25% of all lung cancer cases, the cancerous tumor resides only in a bronchus and not in the lobes of the lungs, and is known as central
lung cancer. Approximately 33,000 central lung cancer cases diagnosed in the U.S. and Europe are Stage I and II and are considered eligible
for surgical resection, often with adjuvant chemotherapy and radiation. Approximately 5,000 of those patients are treated via pneumonectomy,
a surgical procedure involving the resection of the cancer tumor, the whole bronchus below the tumor and the entire lung to which it is
connected. It is a complex surgery and, due to the removal of a lung, results in a 50% reduction in the patient’s respiratory capacity.
The procedure has reported rates of post-surgical (in hospital) mortality of 8% to 15%. Complication rates associated with pneumonectomy
are reported as high as 50%, and include post-operative pneumonia, supraventricular arrhythmias and anastomotic leakage, placing patients
at significant mortality risk post-discharge.
We believe that a Cellspan bronchial implant, once developed and approved
for marketing, has the potential to provide physicians a treatment alternative superior to the sleeve pneumonectomy to address central
lung cancer, a simpler procedure to restore organ function of the bronchus without sacrificing one of the patient’s lungs, resulting
in fewer post-surgery complications, improved mortality rates and improved quality of life for the patient.
Life-threatening conditions of the Trachea
There are approximately 8,000 patients per year in the U.S. and Europe
who suffer from a condition of the trachea that put the patient at high risk of death. These conditions can be due to tracheal trauma,
tracheal stenosis or trachea cancer. There are approximately 40,000 tracheal trauma patients diagnosed each year in the U.S. Of those,
approximately 1,000 are severe enough to need surgical resection procedures. Tracheal stenosis is a rare complication from tracheostomies
but may have a devastating impact on respiratory function for patients. Approximately 2,000 patients are diagnosed with stenosis from
tracheostomy in the U.S. each year. Trachea cancer is a very rare but extremely deadly cancer. Trachea cancer patients in the U.S. have
a median survival of 10 months from diagnosis and a 5-year survival of only 27%. There were approximately 200 cases of primary trachea
cancer diagnosed in the U.S. in 2013. Based on these facts, we estimate that there are approximately 8,000 patients in the U.S. and Europe
with conditions of the trachea that put them at high risk of death, but for whom there is currently no clinically effective tracheal implant
or replacement method currently available.
We believe that a Cellspan tracheal implant may potentially provide
physicians a treatment to re-establish the structural integrity and function of a damaged or diseased trachea to address life-threatening
conditions due to tracheal trauma, stenosis or cancer.
Our History
We were incorporated under the laws of the State of Delaware on May
3, 2012 as a wholly-owned subsidiary of Harvard Bioscience, Inc. (Harvard Bioscience) to provide a means for separating its regenerative
medicine business from its other businesses. Harvard Bioscience decided to separate its regenerative medicine business into our company,
a separate corporate entity (the Separation), and it spun off its interest in our business to its stockholders in November 2013. Since
the Separation we have been a separately-traded public company and Harvard Bioscience has not been a stockholder of our common stock or
controlled our operations. Following the Separation, we continued to innovate our bioreactors based on our physiology expertise, we developed
our materials science capabilities and we investigated and developed a synthetic tracheal scaffold. By that time, we had built and staffed
cell biology laboratories at our Holliston facility, to give ourselves the ability to perform and control our scientific investigation
and developments internally. At that point, we began the second phase of our company’s development.
In mid-2014, we increased the pace of our scientifically-based internal
analysis and development of our first-generation tracheal implant product, the HART-Trachea. From large-animal studies conducted thereafter
we found that the product elicited an unfavorable inflammatory response after implantation, which required additional development and
testing. These requirements extended our expectations regarding our regulatory milestones and we announced the additional testing and
extended milestone expectations in January 2015. During 2015 we isolated and tested all major variables of the organ scaffold and the
cell source and protocols, examining the effects of alternatives against the then-existing product approach. Through extensive in vitro
preclinical studies, and small-animal and large-animal studies, we made dramatic improvements, and discovered that the mechanism of action
of our approach was very different from our hypothesis regarding that of the first-generation product. Our technology uses a different
scaffold material and microstructure, a different source and concentration of the patient’s cells and several other changes from
our earlier trachea initiative.
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We believe that our technology, although built on learnings from our
earlier-generation product initiative, represents a new technology platform resulting from our rigorous science and development. We have
focused our development efforts on our Cellframe technology and Cellspan product candidates, which we have and will continue to develop
internally, and with our collaborators, via a rigorous scientific development process.
Clinical Trials
Our CEI has been designated by the FDA as a combination product. We
believe that this is a favorable designation as it allows for orphan designation and a more participatory path to approval. We have conducted
numerous pre-clinical studies in our esophageal implant programs and continue to see consistent regeneration. Additionally, our CEI product
candidate was used in an FDA-approved first-in-human compassionate use successfully in 2017. In October 2019, we filed an Investigational
New Drug (IND) application with the U.S. Food and Drug Administration (FDA) to treat patients with esophageal disease in adults that would
require a short segment esophageal implant following clinically indicated short segment resection of the thoracic esophagus with our CEI
product candidate. In November 2019, we received notice from the FDA placing our IND on clinical hold and providing a preliminary list
of clinical hold and non-clinical hold questions. In December 2019, we received the formal letter with clinical hold and non-clinical
hold questions and submitted our response to the clinical hold questions on February 18, 2020. On March 19, 2020, the FDA notified us
that the IND for our CEI product candidate has been removed from clinical hold and that we can proceed with our study. This FDA approval
enables us to start the transition to a clinical-stage biotechnology company, and start clinical planning, engaging with a clinical research
organization and site readiness in advance of starting the clinical trial for our CEI product candidate.
We are also pursuing a pediatric program and plan to file a protocol
amendment to our CEI clinical program after the initial adult patients are treated in the esophageal disease trial, subject to FDA approval.
In order to market our product candidate for both esophageal disease and pediatric esophagus atresia, we will need to successfully complete
applicable clinical trial requirements.
We believe that we have excellent pre-clinical and clinical support
of the pediatric atresia program through our collaboration with Connecticut Children’s Medical Center and our primary investigator
Dr. Christine Finck, who is also a member of our Scientific Advisory Board. Essentially, we liken the pediatric atresia market to a rare
disease market. Accordingly, the clinical trial population should reflect the ultra-orphan nature of the disease state.
Because life-threatening conditions of the esophagus requiring a short
segment esophageal implant following clinically indicated short segment resection of the thoracic esophagus affects a small population
in the U.S., and based on our IND submission, we anticipate that our clinical trial using our CEI product candidate will involve up to
10 patients. Therefore, once commenced, we expect to be able to conduct a clinical trial in a relatively short period of time compared
to clinical trials in indications with larger patient populations. We intend to work closely with regulatory agencies and clinical experts
to design and size the clinical studies appropriately based on the specific conditions our products are intended to treat. We also intend
to request expedited review from the FDA for our CEI product. Receipt of expedited review would reduce the overall time through the regulatory
approval process. These expedited requests are submitted during the IND process.
We believe that receiving regulatory approval to treat pediatric esophageal
atresia with our CEI product candidate may provide a shorter time to a commercial product and the greater overall potential value in the
U.S. market. In addition to providing a novel solution for a great medical need, approval of our pediatric esophageal atresia product
candidate may result in receipt of a priority review voucher, which if achieved, could potentially provide significant value to our company
in the future. We have continued to advance our CEI pediatric esophagus program and plan to file a protocol amendment with the FDA to
our CEI esophageal disease clinical program after the initial adult patients are treated in the esophageal disease trial, subject to FDA
approval.
We intend to initially pursue regulatory approval for our CEI product
candidate in the U.S., however as described above we are assessing the regulatory approval pathway in China and it is possible that this
pathway may end up being the initial pathway. We believe that approximately one half of the world’s esophageal disease cases occur
in China, which would represent the largest potential patient population for our adult esophageal implant product candidate, and we are
consequently preparing to address that market. Following clinical trials in other foreign markets, we expect to pursue regulatory approval
for our CEI in those foreign markets.
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Research and Development
Our primary research and development activities are focused in three
areas: materials science, cell biology and engineering. In materials science, we focus on designing and testing biocompatible organ scaffolds,
testing the structural integrity and the cellularization capacities of the scaffolds. In cell biology, we focus on developing and testing
isolation and expansion protocols, cell characterization and fate studies, investigating the effects of various cell types and concentrations,
evaluating the biocompatibility of scaffolds, experimenting with different cell seeding methodologies, and developing protocols for implantation
experiments. Our engineering group supports the materials science and cell biology groups across an array of their activities, i.e. designing,
engineering and making our proprietary bioreactors and autoseeders. All three of our R&D groups combine to plan and execute our in
vitro studies. A fundamental part of our R&D effort in developing our technology has been dedicated to the discovery and development
of small and large-animal model studies. The large-animal model employs the use of Yucatan mini-pigs. Our Cellspan scaffolds were implanted
in the cervical portion as well as the thoracic portion of the esophagus and the airways in studies to date.
In addition to our in-house engineering and scientific development
team, we collaborate with leaders in the field of regenerative medicine who are performing the fundamental research and surgeries in this
field to develop and test new products that will advance and improve the procedures being performed. We will work with our collaborators
to further enhance our products to make them more efficient and easier to use by surgeons. In the U.S., our principal collaborations have
been with Mayo Clinic and Connecticut Children’s Medical Center. Collaboration typically involves us developing new technologies
specifically to address issues these researchers and clinicians encounter, and then working together to translate our technology from
pre-clinical studies to clinical trials. In certain instances, we have entered into agreements that govern the ownership of the technologies
developed in connection with these collaborations.
We incurred approximately $2.1 million and $4.9 million of research
and development expenses in 2020 and 2019, respectively. As we have not yet applied for or received regulatory approval to market any
clinical products, no amount of these research and development costs have been passed on to our customers.
On March 28, 2018, we were awarded a Fast-Track Small Business Innovation
Research (SBIR) grant by the Eunice Kennedy National Institute of Child Health and Human Development (NICHD) to support testing of pediatric
Cellspan™ Esophageal Implants (CEIs). The award for Phase I provided for the reimbursement of approximately $0.2 million of qualified
research and development costs which was received and recognized as grant income during 2018.
On October 26, 2018, we were awarded the Phase II Fast-Track SBIR grant
from the Eunice Kennedy NICHD grant aggregating $1.1 million to support development, testing, and translation to the clinic through September
2019 and represented years one and two of the Phase II portion of the award. On August 3, 2020, we were awarded a third year of the Phase
II grant totaling $0.5 million for support of development, testing, and translation to the clinic covering qualified expenses incurred
from October 1, 2019 through September 30, 2020. In September of 2020, we filed and were granted a one year, no-cost extension for the
Phase II grant period extending through September 30, 2021.
For the years ended December 31, 2020 and 2019, we recognized $0.4
million and $0.5 million of grant income, respectively, from Phase II of the SBIR grant. The aggregate SBIR grant to date provides us
with a total award of $1.8 million, of which, approximately $1.3 million has been recognized through December 31, 2020.
In March 2021, we received additional cash proceeds of $0.2 million
from the Phase II grant.
Manufacturing and Resources
Biostage has developed a comprehensive manufacturing process for our
product candidates, including cell biology, scaffold production, cell isolation and expansion, seeding of cells on the scaffold, incubation
and expansion processes in the bioreactor and product transportation. We currently perform certain manufacturing steps in-house and subcontract
certain processes and activities, primarily those related to cell expansion, seeding and incubation, to experienced partners.
For our scaffolds we use a process called electrospinning to
create the fabric part of the scaffold. Electrospinning is a well-known fabrication process. It is useful for cell culture
applications as it can create extremely thin fibers (much thinner than a human hair) that can make a fabric with pores approximately
the same size as a cell. The electrospinning process parameters can be tuned to create a structure that is very similar to the
natural structure of the collagen fibers in human extracellular matrix. Our process and end product have been developed over many
years and involve many trade secrets and proprietary know-how. Our Cellspan scaffolds are made from polyurethane, an inert polymer
that is not bioresorbable. However, we also perform studies on the use of scaffolds made from bioresorbable materials. While we do
not manufacture the cells, as they will come from the patient’s adipose tissue, for regulatory purposes we are responsible for
the quality control of the cells and the seeding of the cells onto the scaffold in the bioreactor. For this we have, in
collaboration with our partners, developed standard operating procedures for the seeding of cells on the scaffold. For U.S. clinical
trials we anticipate that the seeding will be performed using our Cellspan automatic cell seeder with our bioreactor at a pre-
qualified third-party contract manufacturer using current Good Manufacturing Practices (cGMP) using our proprietary protocol and
under the supervision of our staff.
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For our scaffolds, our primary materials are medical-grade plastic
resins and solvents used to liquefy the resins in our manufacturing process. These materials are readily available from a variety of suppliers
and do not currently represent a large proportion of our total costs. For our autoseeders and bioreactors, we perform final assembly and
testing of components that we buy from third parties like machine shops, parts distributors, molding facilities and printed circuit board
manufacturers. These manufacturing operations are performed primarily at our Holliston, MA headquarters.
Sales and Marketing
We expect that most surgeries using our CEI product will be performed
at a relatively small number of major hospitals in the U.S., China and other countries that will establish themselves as specialized centers
of excellence based on countries that we receive regulatory approval in. We believe that a relatively small number of centers of excellence
in each country would be able to treat a large percentage of that country’s patients annually, given the expected number of patients
to be treated each year. So, we expect our markets to be served by a concentrated number of treatment centers. Further, our technology
platform is for the esophagus, the bronchi and the trachea, three organs all treated by thoracic surgeons. Therefore, all of those product
candidates, once approved, would be marketed primarily to physicians practicing in a single surgical specialty, so we expect that the
total number of physicians using our products will be a much smaller population than if our products were to be used by physicians in
multiple areas of surgical specialties. Due to our expectation of a population of physicians in one surgical specialty being the primary
users of our products in a concentrated number of centers of excellence in each national market, we expect to be able to support our markets
with a fairly small field sales force.
We expect to price the product commensurate with the medical value
created for the patient and the costs avoided with the use of our product. We further expect to be paid by the hospital that buys the
product from us. Finally, we expect that the hospital would seek reimbursement from payers for the entire transplant procedure, including
the use of our products.
Harvard Bioscience will be the exclusive distributor for the research
versions of our bioreactors. Harvard Bioscience can only sell those products to the research markets in accordance with the terms of a
distribution agreement we entered into with Harvard Bioscience. We retain all rights to manufacture and sell all our products for clinical
use.
Intellectual Property and Related Agreements
We actively seek to protect our products and proprietary information
by means of U.S. and foreign patents, trademarks and contractual arrangements. Our success will depend in part on our ability to obtain
and enforce patents on our products, processes and technologies to preserve our trade secrets and other proprietary information and to
avoid infringing on the patents or proprietary rights of others.
We anticipate that we will sell products in various markets in the
U.S. and various jurisdictions under brand name, logo and product design trademarks and service marks and that these marks will attain
material importance in the future.
We also own select U.S. Patents as well as certain patents in Germany.
These patents cover aspects of device and processes currently under development by our company. Patents for various processes and devices
extend for varying periods according to the date of patent filing or grant and the legal term of patents in the country or countries in
which the patent was obtained. The actual protection afforded by a patent can vary from country to country and depends on factors such
as the type of patent, scope of protection and available legal remedies.
In addition to issued patents, we have several pending patent applications
in the U.S. and key target jurisdictions. We believe that one or more of these pending patent applications may be of importance to material
position depending upon factors such as the relevant patent jurisdiction, type of patent granted, and scope of patent claims ultimately
allowed in a given jurisdiction. Depending upon factors such as the type of grant and the date on which the patent application was filed,
we anticipate that the term of certain pending patents may extend to 2036.
We also rely on unpatented proprietary technologies in the development
and commercialization of our products, and we depend upon the skills, knowledge and experience of our scientific and technical personnel,
and those of our advisors, consultants and other contractors. To help protect our proprietary know-how that may not be patentable, and
our inventions for which patents may be difficult to enforce, we rely on trade secret protection and confidentiality agreements to protect
our interests. To this end, we require employees, consultants and advisors to enter into agreements that prohibit the disclosure of confidential
information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions that
arise from their activities for us. Additionally, these confidentiality agreements require that our employees, consultants and advisors
do not bring to us, or use without proper authorization, any third party’s proprietary technology.
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Sublicense Agreement with Harvard Bioscience
We have entered into a sublicense agreement with Harvard Bioscience
pursuant to which Harvard Bioscience has granted us a perpetual, worldwide, royalty-free, exclusive, except as to Harvard Bioscience and
its subsidiaries, license to use the mark “Harvard Apparatus” in the name Harvard Apparatus Regenerative Technology. The mark
“Harvard Apparatus” is used under a license agreement between Harvard Bioscience and Harvard University, and we have agreed
to be bound by such license agreement in accordance with our sublicense agreement. We currently have no affiliation with Harvard University.
Separation Agreements with Harvard Bioscience
On November 1, 2013, to effect the Separation, Harvard Bioscience distributed
all of the shares of our common stock to the Harvard Bioscience stockholders (or the Distribution). Prior to the Distribution, Harvard
Bioscience contributed the assets of its regenerative medicine business, and approximately $15 million in cash, to our company to fund
our operations following the Distribution.
In connection with the Separation and immediately prior to the Distribution,
we entered into a Separation and Distribution Agreement, Intellectual Property Matters Agreement, Product Distribution Agreement, Tax
Sharing Agreement, Transition Services Agreement, and Sublicense Agreement with Harvard Bioscience to effect the Separation and Distribution
and provide a framework for our relationship with Harvard Bioscience after the Separation. These agreements govern the current relationships
among us and Harvard Bioscience and provided for the allocation among us and Harvard Bioscience of Harvard Bioscience’s assets,
liabilities and obligations (including employee benefits and tax-related assets and liabilities) attributable to periods prior to the
Separation.
Government Regulation
Any product that we may develop based on our technology, and any other
clinical products that we may develop, will be subject to considerable regulation by governments. We were informed by the FDA that our
previous-generation tracheal product candidate would be regulated under the BLA pathway in the U.S. and we were informed by the European
Medicines Agency (EMA) that the previous generation tracheal product would be regulated under the Advanced Therapy Medicinal Products
(ATMP), pathway in the European Union (E.U.). On October 18, 2016, we also received written confirmation from FDA’s Center for Biologics
Evaluation and Research (CBER), that the FDA intends to regulate our CEI as a combination product under the primary jurisdiction of CBER.
We further understand that CBER may choose to consult or collaborate with the FDA’s Center for Devices and Radiological Health (CDRH),
with respect to the characteristics of the synthetic scaffold component of our product based on CBER’s determination of need for
such assistance. Although our current technology differs in design and performance from the first-generation product candidate, we expect
that cellframe-based products will be regulated by the FDA and EMA under the same pathways as the first-generation tracheal product candidate.
This expectation is based on the fact that the cellframe-based technology is centered on the delivery of the patient’s own cells
seeded on an implanted synthetic scaffold in order to restore organ function and our belief that the cells provide the primary mode of
action. Of course, it is possible that some of our current and future products may use alternative regulatory pathways.
Regulatory Strategy
Domestic Regulation of Our Products and Business
The testing, manufacturing, and potential labeling, advertising, promotion,
distribution, importing and marketing of our products are subject to extensive regulation by governmental authorities in the U.S. and
in other countries. In the U.S., the FDA, under the Public Health Service Act, the Federal Food, Drug and Cosmetic Act, and its implementing
regulations, regulates biologics and medical device products.
The labeling, advertising, promotion, marketing and distribution of
biopharmaceuticals, or biologics and medical devices also must be in compliance with the FDA and U.S. Federal Trade Commission (FTC),
requirements which include, among others, standards and regulations for off-label promotion, industry sponsored scientific and educational
activities, promotional activities involving the internet, and direct-to-consumer advertising. The FDA and FTC have very broad enforcement
authority, and failure to abide by these regulations can result in penalties, including the issuance of a warning letter directing us
to correct deviations from regulatory standards and enforcement actions that can include seizures, injunctions and criminal prosecution.
Further, we are required to meet regulatory requirements in countries outside the U.S., which can change rapidly with relatively short
notice.
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We have been informed by the FDA that our CEI product candidates are
combination biologic/device products. Biological products must satisfy the requirements of the Public Health Services Act and the Food,
Drug and Cosmetics Act and their implementing regulations. In order for a biologic product to be legally marketed in the U.S., the product
must have a BLA approved by the FDA.
The BLA Approval Process
The steps for obtaining FDA approval of a BLA to market a biopharmaceutical,
or biologic product in the U.S. include:
·
completion of pre-clinical laboratory tests, animal studies and formulation studies under the FDA’s GLP regulations;
·
submission to the FDA of an IND application, for human clinical testing, which must become effective before human clinical trials may begin and which must include Institutional Review Board (IRB), approval at each clinical site before the trials may be initiated;
·
performance of adequate and well-controlled clinical trials in accordance with Good Clinical Practices (GCP), to establish the safety and efficacy of the product for each indication;
·
submission to the FDA of a BLA, which contains detailed information about the chemistry, manufacturing and controls for the product, extensive pre-clinical information, reports of the outcomes of the clinical trials, and proposed labeling and packaging for the product;
·
the FDA’s acceptance of the BLA for filing;
·
satisfactory review of the contents of the BLA by the FDA, including the satisfactory resolution of any questions raised during the review or by the advisory committee, if applicable;
·
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP regulations, to assure that the facilities, methods and controls are adequate to ensure the product’s identity, strength, quality and purity; and
·
FDA approval of the BLA.
Based on discussions with the FDA, we expect clinical trials for our
esophageal implant product candidates to be conducted in two sequential phases:
·
A Phase 1, or Pilot Trial, where our product would be tested on a small
number of patients, up to 10, to demonstrate the product’s safety. In addition, a protocol amendment could be submitted to the phase
1 trial after the treatment of a to be determined number of patients to add the treatment of patients with pediatric esophageal atresia.
·
If successful, the Phase 1 (or Pilot) Trial would be followed by a Phase II Registration, or Pivotal Trial, to test the product’s efficacy. We believe that the nature of our esophageal products and the sizes of their targeted patient populations would lead to a small number of patients in this trial, relative to most biotechnology clinical trials.
Clinical testing may not be completed successfully within any specified
time period, if at all. The FDA closely monitors the progress of each phase of clinical trials that are conducted under an IND and may,
at its discretion, reevaluate, alter, suspend, or terminate the testing based upon the data accumulated to that point and the FDA’s
assessment of the risk/benefit ratio to the patient. The FDA or the sponsor may suspend or terminate clinical trials at any time for various
reasons, including a finding that the subjects or patients are being exposed to an unacceptable health risk. The FDA can also request
that additional pre-clinical studies or clinical trials be conducted as a condition to product approval.
Companies also may seek Fast Track or Breakthrough Therapy designation
for their products. Fast Track or Breakthrough Therapy products are those that are intended for the treatment of a serious or life-threatening
condition and that demonstrate the potential to address unmet medical needs for such a condition. If awarded, the Fast Track or Breakthrough
Therapy designation applies to the product only for the indication for which the designation was received.
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If the FDA determines after review of preliminary clinical data submitted
by the sponsor that a Fast Track or Breakthrough Therapy product may be effective, it may begin review of portions of a BLA before the
sponsor submits the complete BLA (rolling review), thereby accelerating the date on which review of a portion of the BLA can begin. There
can be no assurance that any of our products will be granted Fast Track or Breakthrough Therapy designation. And even if they are designated
as Fast Track or Breakthrough Therapy products, we cannot ensure our products will be reviewed or approved more expeditiously for their
Fast Track or Breakthrough Therapy indications than would otherwise have been the case or will be approved promptly, or at all. Furthermore,
the FDA can revoke Fast Track or Breakthrough Therapy designation at any time.
In addition, products studied for their safety and effectiveness in
treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive Accelerated
Approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the product has an effect
on a surrogate endpoint that is reasonably likely to predict clinical benefit or on the basis of an effect on a clinical endpoint other
than survival or irreversible morbidity. As a condition of approval, the FDA may require that a sponsor of a product receiving Accelerated
Approval perform adequate and well-controlled post-approval clinical trials to verify and further define the product’s clinical
benefit and safety profile. There can be no assurance that any of our products will receive Accelerated Approval. Even if Accelerated
Approval is granted, the FDA may withdraw such approval if the sponsor fails to conduct the required post-approval clinical trials, or
if the post-approval clinical trials fail to confirm the early benefits seen during the Accelerated Approval Process.
Priority Review Voucher
Fast Track or Breakthrough Therapy designation and Accelerated Approval
should be distinguished from Priority Review designation although products awarded Fast Track or Breakthrough Therapy designation may
also be eligible for Priority Review designation.
Products regulated by the CBER may receive Priority Review designation
if they provide significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious or life-threatening
disease. The agency has agreed to the performance goal of reviewing products awarded Priority Review designation within six months, whereas
products under standard review receive a ten-month target. The review process, however, can be significantly extended by FDA requests
for additional information or clarification regarding information already provided in the submission. Priority Review designation is requested
at the time the BLA is submitted, and the FDA makes a decision as part of the agency’s review of the application for filing.
Separately, but somewhat related, is a product’s ability to qualify
its sponsor to receive a Priority Review Voucher (PRV). For a product aimed at prevention or treatment of a “rare pediatric disease”
as defined in the Food, Drug and Cosmetics Act, and that also meets certain other qualifying attributes, the product’s sponsor may
qualify, apply for and receive a PRV, from the FDA. A PRV entitles its holder to Priority Review for a drug application, and the PRV is
transferable. Some companies who have received PRV’s have sold their PRV’s to other companies who have then used the PRV to
receive Priority Review for a drug application with the FDA. Recent transfers of PRV’s from one company to another have occurred
at prices in the $80 – 125 million range. We intend to apply for rare pediatric disease designation for our pediatric esophageal
implant product candidate as a first step in pursuit of a PRV. A PRV is earned only upon marketing approval of the product. There is no
certainty that our pediatric esophageal product will achieve marketing approval from the FDA, or that if it does, that FDA would award
us a PRV. Further, if received, there is no certainty that the value of a PRV at that future date will compare favorably with the values
reflected in recent transfers of PRVs.
Orphan Drug Designations
The Orphan Drug Act provides incentives to manufacturers to develop
and market drugs and biologics for rare diseases and conditions affecting fewer than 200,000 persons in the U.S. at the time of application
for Orphan Drug Designation. In September 2014 the FDA granted orphan designation to our HART-Trachea product in the U.S. In November
2016, we were granted Orphan Drug Designation for our CEI by the FDA to restore the structure and function of the esophagus subsequent
to esophageal damage due to injury congenital abnormalities, or cancer. The first developer to receive FDA marketing approval for an orphan
biologic is entitled to a seven-year exclusive marketing period in the U.S. for that product. The marketing exclusivity prevents FDA approval
of another application for the same product for the same indication for a period of seven years. Orphan status also entitles the product’s
sponsor to certain other benefits, such as a waiver of the BLA user fee, which is currently a $2 million value. Orphan product designation
does not convey any advantage in or shorten the duration of the regulatory review and approval process.
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International
We plan to seek required regulatory approvals and comply with extensive
regulations governing product safety, quality, manufacturing and reimbursement processes in order to market our products in other major
foreign markets. The regulation of our products in the Asian and European markets, and in other foreign markets varies significantly from
one jurisdiction to another. The classification of the particular products and related approval or CE marking procedures can involve additional
product testing and additional administrative review periods. The time required to obtain these foreign approvals or to CE mark our products
may be longer or shorter than that required in the U.S., and requirements for approval may differ from the FDA requirements. Regulatory
approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one
country may negatively impact the regulatory process in others.
Legislation similar to the Orphan Drug Act has been enacted in other
jurisdictions, including the E.U. The orphan legislation in the E.U. is available for therapies addressing conditions that affect five
or fewer out of 10,000 persons. The marketing exclusivity period is for ten years, although that period can be reduced to six years if,
at the end of the fifth year, available evidence establishes that the product is sufficiently profitable not to justify maintenance of
market exclusivity.
Employees and Human Capital Resources
As of December 31, 2020, we had 7 employees working in our business,
of whom 6 were full-time and one was part-time. At that date, all of our employees were based in the U.S. None of our employees are unionized.
In general, we consider our relations with our employees to be good. Our employees are highly skilled, and many hold advanced degrees.
Our future performance depends significantly upon the continued service of our key scientific, technical and senior management personnel
and our continued ability to attract and retain highly skilled employees. We have taken proactive steps throughout the COVID-19 pandemic
to protect the health and safety of our employees. We expect to continue to implement these measures until we determine that the COVID-19
pandemic is adequately contained for purposes of our business. We may take further actions, in compliance with all appropriate government
regulations, that we determine to be in the best interest of our employees.
Competition
We are not aware of any companies whose products are directly competitive
with our cell-seeded biocompatible synthetic scaffold system. However, in our key markets we may in the future compete with multiple pharmaceutical,
biotechnology, and medical device companies, including, among others, Aldagen, Asterias Biotherapeutics, Athersys, BioTime, Caladrius
Biosciences, Cytori Therapeutics, E. I. du Pont de Nemours and Company, InVivo Therapeutics, Mesoblast, Miramatrix Medical, Nanofiber
Solutions, Neuralstem, Orgagen, Organovo, Osiris Therapeutics, Pluristem, Smiths Medical, Tissue Genesis, Inc., Tissue Growth Technologies,
United Therapeutics, Vericel Corporation and W.L. Gore and Associates. In addition, there are many academic and clinical centers that
are developing regenerative technologies that may one day become competitors of ours.
Many of our potential competitors have substantially greater financial,
technological, research and development, marketing, and personnel resources than we do. We cannot forecast if or when these or other companies
may develop competitive products.
We expect that other products will compete with our products and potential
products based on efficacy, safety, cost, and intellectual property positions. While we believe that these will be the primary competitive
factors, other factors include, in certain instances, obtaining marketing exclusivity under the Orphan Drug Act, availability of supply,
manufacturing, marketing and sales expertise and capability, and reimbursement coverage.
JOBS Act
Effective December 31, 2020, we are no longer considered an “emerging
growth company” under the Jumpstart Our Business Startups Act of 2012.
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Information about our Executive Officers
The following table shows information about our executive officers:
Name
Age
Position(s)
Hong Yu
48
President
Dr. William Fodor
62
Chief Scientific Officer
Peter Pellegrino
46
Interim Vice President of Finance
Hong Yu – President
Mr. Yu has served as our President since May 31, 2018. Mr. Yu is a
seasoned executive with extensive knowledge in strategic analytics, wealth management, and investment research. Prior to Biostage, Mr.
Yu was most recently a Senior Vice President responsible for strategic analytics at Bank of America, where he was employed for nearly
20 years. During his career, Mr. Yu has built strong business connections in various industries, including biotech/healthcare, financial
services, and robotics/artificial intelligence. He developed an expertise in matching emerging companies with cross-border investors,
often providing U.S. companies with market access to the vast capital supply in China. Mr. Yu graduated from Huanggang High School (Hubei,
China) in 1990 and obtained a B.S. in biophysics from Peking University (Beijing, China), and M.S. in biostatistics from School of Public
Health, University of Illinois (Chicago, IL). Mr. Yu is a charterholder of Chartered Financial Analyst (CFA).
Dr. William Fodor - Chief Scientific Officer
Dr. William Fodor has served as our Chief Scientific Officer since
July 2017. On July 2, 2018, Dr. Fodor became an employee of Biostage after serving via a consulting arrangement. Dr. Fodor was a founding
scientist at Alexion Pharmaceuticals, where he served as an executive management team member and Senior Director of the Cell/Tissue Engineering,
Transgenic Animal and Transplant Programs. He has also served as an Associate Professor at the University of Connecticut Department of
Molecular Cell Biology and the Center for Regenerative Biology, extending research areas into cells and cell engineering. Dr. Fodor was
Senior Director of Product Development at ViaCell Inc., leading programs in hematopoietic stem cell process development and manufacturing,
mesenchymal stem cell basic research and manufacturing for cardiac repair and pancreatic stem cell research. He was a consultant for the
biotechnology industry, serving clients in stem cell research, gene therapy, stem cell manufacturing and stem cell genome engineering.
Dr. Fodor has expertise in programs targeting transplant immunology, hematopoiesis, cardiac repair, stem cell potency, gene therapy for
liver diseases, tissue engineering, design and oversight of pre-clinical non-GLP and GLP animal models and IND Applications (Pre-clinical
and CMC Modules). Dr. Fodor earned a PhD. in genetics from Ohio State University. He completed post-doctoral work at Yale University School
of Medicine in the department of immunobiology, investigating the regulation of MHC class I and MHC class II genes in the histocompatibility
complex.
Peter Pellegrino – Interim Vice President of Finance
Mr. Pellegrino
has been working as a consultant for the Company since March 1, 2020 pursuant to our engagement of Point Providence Consulting, a financial
consultancy firm that specializes in working with life sciences companies. Mr. Pellegrino was appointed as our Interim Vice President
of Finance prior to the filing of this Form 10-K and is currently President of Point Providence Consulting. In his tenure at Point
Providence, Mr. Pellegrino serves in a variety of financial roles to a number of public and private companies in various stages of research,
clinical development and commercialization. Immediately prior to forming Point Providence Consulting, Mr. Pellegrino served as Vice President,
Corporate Controller and Treasurer of Verastem, Inc., a publicly traded biopharmaceutical company, from 2018 to 2019. From 2017 to 2018,
Mr. Pellegrino was employed by Merus, Inc., a publicly traded oncology company, as Vice President, Corporate Controller. Previously, Mr.
Pellegrino was Corporate Controller of Aspen Aerogels, Inc., a publicly traded designer, developer, and manufacturer of insulation products
from 2009 to 2017. Prior to 2009, he served in various managerial positions in the areas of accounting and financial reporting. Mr. Pellegrino
holds a B.S. in business administration from Bryant University.
Available Information and Website
Our website address is www.biostage.com . Our Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K, and exhibits and amendments to those reports filed or furnished with the Securities and Exchange
Commission (SEC) pursuant to Section 13(a) of the Exchange Act are available for review on our website and the SEC website at www.sec.gov.
Any such materials that we file with, or furnish to, the SEC in the future will be available on our website as soon as reasonably practicable
after they are electronically filed with, or furnished to, the SEC. The information on our website is not incorporated by reference into
this Annual Report on Form 10-K.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.