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What changed in Celularity Inc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Celularity Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+587 added−550 removedSource: 10-K (2024-07-30) vs 10-K (2023-03-31)

Top changes in Celularity Inc's 2023 10-K

587 paragraphs added · 550 removed · 336 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

121 edited+104 added−104 removed256 unchanged
Biggest change(acquired Kiadis Pharma N.V.), Century Therapeutics, Inc. and Nkarta, Inc. • A PPL-001; allogeneic MLASC therapies: Mesoblast Limited. • pEXO-001; exosomes: Aegle Therapeutics Corporation, Capricor Therapeutics, Inc., Evox Therapeutics Ltd., and Organicell Regenerative Medicine, Inc. • C ell therapy competition: Allogene Therapeutics, Inc., Atara Biotherapeutics, Inc., Adaptimmune Therapeutics PLC, Celyad S.A., CRISPR Therapeutics AG, Intellia Therapeutics, Inc., Gilead Sciences, Inc., Poseida Therapeutics, Inc., Precision Biosciences, Inc. and Sangamo Therapeutics, Inc. • Biomaterials competition: Mimedx Group, Inc., and Organogenesis Holdings Inc.
Biggest changePotential cellular therapy and biomaterials competitors include: • allogeneic CAR-T cellular therapies: Allogene Therapeutics, Inc., Atara Biotherapeutics, Inc., Cellectis S.A., Fate Therapeutics Inc. and Precision Biosciences, Inc. • allogeneic NK cellular therapies: Fate Therapeutics Inc., Century Therapeutics, Inc. and Nkarta, Inc. • allogeneic MLASC therapies: Mesoblast Limited. • exosomes: Aegle Therapeutics Corporation, Capricor Therapeutics, Inc., Evox Therapeutics Ltd., and Organicell Regenerative Medicine, Inc. • Cellular therapy competition: Allogene Therapeutics, Inc., Atara Biotherapeutics, Inc., Adaptimmune Therapeutics PLC, Celyad S.A., CRISPR Therapeutics AG, Intellia Therapeutics, Inc., Gilead Sciences, Inc., Poseida Therapeutics, Inc., Precision Biosciences, Inc. and Sangamo Therapeutics, Inc. • Biomaterials competition: Mimedx Group, Inc., and Organogenesis Holdings Inc. 14 Competition will also arise from non-cell-based therapies pursued by small-cap biotechnology and large-cap pharmaceutical companies including Amgen Inc., AstraZeneca plc, Bristol Myers Squibb Company, Incyte Corporation, Merck & Co., Inc., and F.
We believe the use of placental-derived cells, sourced from the placentas of full-term healthy informed consent donors, has potential inherent advantages, from a scientific and an economic perspective. First, relative to adult-derived cells, placental-derived cells demonstrate greater stemness, meaning the ability to expand and persist.
We believe the use of cells sourced from the placentas of full-term healthy informed consent donors has potential inherent advantages from a scientific and an economic perspective. First, relative to adult-derived cells, placental-derived cells demonstrate greater stemness, meaning the ability to expand and persist.
In addition, due to their nano-size, exosomes can cross the brain-blood barrier and can be delivered to broader target tissues and organs than cell-based therapeutics. pExo-001 is a human postpartum placenta derived exosome product which consists of cytokines, chemokines, and growth factors that have been reported to have regenerative and immuno-regulatory activities.
In addition, due to their nano-size, exosomes can cross the brain-blood barrier and be delivered to broader target tissues and organs than cell-based therapeutics. pExo-001 is a human postpartum placenta derived exosome product which consists of cytokines, chemokines, and growth factors that have been reported to have regenerative and immuno-regulatory activities.
The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.
The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.
Among the Affordable Care Act provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above, are the following: • an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs that began in 2011; • an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price (AMP); • a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; • extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; • expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; • expansion of the entities eligible for discounts under the 340B Drug Discount Program; • a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; • expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance; • a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; • requirements to report certain financial arrangements with physicians and teaching hospitals; • a requirement to annually report certain information regarding drug samples that manufacturers and distributors provide to physicians; 33 • establishment of a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending; and • a licensure framework for follow on biologic products.
Among the Affordable Care Act provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above, are the following: • an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs that began in 2011; • an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price (AMP); • a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; • extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; • expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; • expansion of the entities eligible for discounts under the 340B Drug Discount Program; • a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; • expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance; • a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; • requirements to report certain financial arrangements with physicians and teaching hospitals; 26 • a requirement to annually report certain information regarding drug samples that manufacturers and distributors provide to physicians; • establishment of a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending; and • a licensure framework for follow on biologic products.
At the federal level, an Executive Order was signed in July 2021 affirming the administration’s policy to (i) support legislative reforms that would lower the prices of prescription drug and biologics, including by allowing Medicare to negotiate drug prices, 34 imposing inflation caps and supporting the development and market entry of lower-cost generic drugs and biosimilars; and (ii) support the enactment of a public health insurance option.
At the federal level, an Executive Order was signed in July 2021 affirming the administration’s policy to (i) support legislative reforms that would lower the prices of prescription drug and biologics, including by allowing Medicare to negotiate drug prices, imposing inflation caps and supporting the development and market entry of lower-cost generic drugs and biosimilars; and (ii) support the enactment of a public health insurance option.
Our characterization data show that approximately one to five percent of placental-derived cells are CD34+ hematopoietic stem cells, or HSCs, among which expression of certain markers suggests that such HSCs have more self-renewal capacity and the potential to facilitate the early engraftment of the placental-derived cells. In addition, further characterization has shown low T-cell content and immature T subpopulations.
Our characterization data show that approximately 6 one to five percent of placental-derived cells are CD34+ hematopoietic stem cells, or HSCs, among which expression of certain markers suggests that such HSCs have more self-renewal capacity and the potential to facilitate the early engraftment of the placental-derived cells. In addition, further characterization has shown low T-cell content and immature T subpopulations.
Placental-derived T cells are also known to have greater immune tolerance and display impaired allogeneic activation, contributing to lower incidences of severe GvHD, which makes them an attractive cell population for use as an allogeneic, adoptive cell therapy. We have developed a robust process for the isolation, transduction and expansion of placental-derived T cells to generate “off-the-shelf” allogeneic CAR-T cells.
Placental-derived T cells are also known to have greater immune tolerance and display impaired allogeneic activation, contributing to lower incidences of severe GvHD, which makes them an attractive cell population for use as an allogeneic, adoptive cellular therapy. We have developed a robust process for the isolation, transduction, and expansion of placental-derived T cells to generate “off-the-shelf” allogeneic CAR-T cells.
Both intravenous and intramuscular administration formulations of the first generation of MLASCs have been developed and investigated in 7 clinical studies in Crohn’s Disease, multiple sclerosis, rheumatoid arthritis, stroke, diabetic foot ulcers and diabetic peripheral neuropathy. We are developing next generation genetically modified MLASCs for the treatment of degenerative diseases. Allogeneic human placental MLASCs are derived from healthy donor placentas.
Both intravenous and intramuscular administration formulations of the first generation of MLASCs have been developed and investigated in clinical studies in Crohn’s Disease, multiple sclerosis, rheumatoid arthritis, stroke, diabetic foot ulcers and diabetic peripheral neuropathy. We are developing next generation genetically modified MLASCs for the treatment of degenerative diseases. Allogeneic human placental MLASCs are derived from healthy donor placentas.
We use those cells to produce on-demand, off-the-shelf investigational allogeneic cellular therapy products investigational medicines that are designed to sidestep treatment delays inherent to more costly autologous cell therapies and other allogeneic cell therapy approaches, all while offering the potential for greater in vivo expansion, persistence, potency and acceptance.
We use those cells to produce on-demand, off-the-shelf investigational allogeneic cellular therapy products investigational medicines that are designed to sidestep treatment delays inherent to more costly autologous cellular therapies and other allogeneic cellular therapy approaches, all while offering the potential for greater in vivo expansion, persistence, potency, and acceptance.
These cells are then cryopreserved and available to be shipped upon request. For our genetically modified NK cells, our allogeneic modified NK cell product begins with the thawing and activation of the isolated placental NK cells. We then use a lentiviral vector transduction to augment the effector functions of the NK cells and to sustain their tumor-killing properties.
These cells are then cryopreserved and available to be shipped upon request. 7 For our genetically modified NK cells, our allogeneic modified NK cell product begins with the thawing and activation of the isolated placental NK cells. We then use a lentiviral vector transduction to augment the effector functions of the NK cells and to sustain their tumor-killing properties.
We intend to manufacture all finished product in-house at our manufacturing facility in Florham Park, New Jersey. We have invested resources to optimize our manufacturing process, including the development of improved analytical methods. We plan to continue to invest in process science, product characterization and manufacturing to improve our production and supply chain capabilities over time.
We intend to manufacture all finished product in-house at our manufacturing facility in Florham Park, New Jersey. We have invested resources to optimize our manufacturing process, including the development of improved analytical methods. We plan to continue to invest in process science, product characterization and manufacturing to improve our production and supply chain capabilities 11 over time.
The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to 31 maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.
The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.
Other member states allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
Other member states allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of 25 new products.
Before testing any biological product candidate, including our cellular therapeutic candidates, in humans, the therapeutic candidate enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product 24 chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate.
Before testing any biological product candidate, including our cellular therapeutic candidates, in humans, the therapeutic candidate enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate.
Although FDA had indicated in its Guidance that the agency would exercise enforcement discretion under limited conditions with respect to the IND application and pre-market approval requirements for certain HCT/Ps, this period of enforcement discretion ended May 31, 2021.
Although FDA had indicated in its Guidance that the agency would exercise enforcement discretion under 18 limited conditions with respect to the IND application and pre-market approval requirements for certain HCT/Ps, this period of enforcement discretion ended May 31, 2021.
The Hatch-Waxman Act permits a patent restoration term of up to five years, as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date.
The Hatch-Waxman Act permits a patent restoration term of up to five years, as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term 22 restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date.
In the EU, for example, a clinical trial application must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and IRB, respectively. Once the clinical trial application is approved in accordance with a country’s requirements, clinical trial development may proceed.
In the EU, for example, a clinical trial application must be submitted to each country’s national health authority and an independent ethics committee, 28 much like the FDA and IRB, respectively. Once the clinical trial application is approved in accordance with a country’s requirements, clinical trial development may proceed.
Our pipeline reflects our intent to leverage the unique biology of the placenta to develop placental-derived allogeneic cells for indications where the demonstrated properties of such cells could provide an advantage, both in terms of development (sourcing and 4 proliferation) and potential efficacy (affinity).
Our pipeline reflects our intent to leverage the unique biology of the placenta to develop placental-derived allogeneic cells for indications where the demonstrated properties of such cells could provide an advantage, both in terms of development (sourcing and proliferation) and potential efficacy (affinity).
We discovered a type of exosome that we call pEXO. Rich in growth factors, deoxyribonucleic acid, or DNA, fragments, miRNAs, and messenger RNAs, pEXO exhibit particular markers that distinguish them from other exosomes that are not derived from placenta-derived adherent cells.
We discovered a type of exosome that we call a placenta-derived adherent cell exosome, or pEXO. Rich in growth factors, deoxyribonucleic acid, or DNA, fragments, miRNAs, and messenger RNAs, pEXO exhibit particular markers that distinguish them from other exosomes that are not derived from placenta-derived adherent cells.
Our policy is to develop and maintain protection of our proprietary position by, among 21 other methods, filing or in-licensing U.S. and foreign patents and applications related to our technology, inventions, and improvements that are important to the development and implementation of our business.
Our policy is to develop and maintain protection of our proprietary position by, among other methods, filing or in-licensing U.S. and foreign patents and applications related to our technology, inventions, and improvements that are important to the development and implementation of our business.
Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution.
Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an IBC, a local institutional committee that reviews and oversees research utilizing recombinant or 16 synthetic nucleic acid molecules at that institution.
Only one patent applicable to an approved therapeutic is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent 29 and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.
Only one patent applicable to an approved therapeutic is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.
Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries. 35 The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country.
Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries. The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country.
Orphan drug exclusivity does not prevent FDA from 27 approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.
Orphan drug exclusivity does not prevent FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.
Pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and more 32 recent requirements in the Patient Protection Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, collectively, the Affordable Care Act.
Pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and more recent requirements in the Patient Protection Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, collectively, the Affordable Care Act.
If a product is designated as breakthrough therapy, FDA will expedite the development and review of such product. 28 Fast track designation, priority review and breakthrough therapy designation do not change the standards for approval but may expedite the development or approval process.
If a product is designated as breakthrough therapy, FDA will expedite the development and review of such product. Fast track designation, priority review and breakthrough therapy designation do not change the standards for approval but may expedite the development or approval process.
Patents issuing from these families have expected expiry dates ranging from 2023 to 2040 and include patents issued and pending patent applications in the United States and under the PCT, Argentina, Australia, Brazil, Canada, China, Colombia, Eurasian Patent Office, European Patent Office, Hong Kong, Israel, India, Indonesia, Japan, Republic of Korea, Mexico, Malaysia, New Zealand, Peru, Russian Federation, Singapore, Taiwan R.O.C., Ukraine, Venezuela, Vietnam, and South Africa.
Patents issuing from these families have expiry dates ranging from 2023 to 2040 and include patents issued and pending patent applications in the United States and under the PCT, Argentina, Australia, Brazil, Canada, China, Colombia, Eurasian Patent Office, European Patent Office, Hong Kong, Israel, India, Indonesia, Japan, Republic of Korea, Mexico, Malaysia, New Zealand, Peru, Russian Federation, 13 Singapore, Taiwan R.O.C., Ukraine, Venezuela, Vietnam, and South Africa.
During all phases of clinical development, regulatory agencies require extensive monitoring 25 and auditing of all clinical activities, clinical data, and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA.
During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA.
If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required. 26 Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured.
If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required. Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured.
Our patent portfolio includes patents and patent applications directed toward our five allogeneic placental-derived cell and extracellular vesicle types: CAR-T cells, unmodified NK cells, genetically modified NK cells, MLASCs and exosomes as follows: • We have six utility patent families in the CAR-T technology area supporting our CYCART-19 and CYCART-201 therapeutic candidates comprising three patent families owned by us to support both CYCART-19 and CYCART-201 and three patent families licensed from Sorrento to support CYCART-19.
Our patent portfolio includes patents and patent applications directed toward our five allogeneic placental-derived cell and extracellular vesicle types: CAR-T cells, unmodified NK cells, genetically modified NK cells, MLASCs and exosomes as follows: • We have four utility patent families in the CAR-T technology area supporting our CYCART-19 and CYCART-201 therapeutic candidates comprising three patent families owned by us to support both CYCART-19 and CYCART-201 and three patent families licensed from Sorrento to support CYCART-19.
Our Strategy Our goal is to lead the next evolution in cellular medicine by delivering off-the-shelf allogeneic cellular therapies, at greater scale and quality with attractive economics.
Our Strategy Our goal is to lead the next evolution in cellular and regenerative medicine by delivering off-the-shelf allogeneic cellular therapies, at greater scale and quality with attractive economics.
To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined.
To help reduce the risk of the introduction of adventitious agents with use of 17 biological products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined.
We believe achieving this goal will result in placental-derived allogeneic cell therapies becoming a standard of care in various indications across cancer, infectious and degenerative diseases, and enable us to make potentially lifesaving therapies more readily accessible to more patients throughout the world. We plan to achieve this mission by: • Leveraging the inherent advantages of placental-derived cells .
We believe achieving this goal will result in placental-derived allogeneic cellular therapies becoming a standard of care in various indications across cancer, infectious and degenerative diseases, and enable us to make potentially lifesaving therapies more readily accessible to more patients throughout the world. We plan to achieve this mission by: • Leveraging the inherent advantages of placental-derived cells .
Commercializing NK cell therapies has been limited by the difficulty and cost to scale the production of mature NK cells for clinical dosing. Utilizing our Celularity IMPACT platform, our proprietary process has mitigated these limitations by expanding and differentiating placental-derived stem cells into NK cells over a period of 35 days.
Commercializing NK cellular therapies has been limited by the difficulty and cost to scale the production of mature NK cells for clinical dosing. Utilizing our Celularity IMPACT platform, our proprietary process has mitigated these limitations by expanding and differentiating placental-derived stem cells into NK cells over a period of 35 days.
In addition, you can read our SEC filings over the Internet at the SEC’s website at www.sec.gov. The contents of these websites are not incorporated into this annual report on Form 10-K. Further, our references to the URLs for these websites are intended to be inactive textual references only. 36
In addition, you can read our SEC filings over the Internet at the SEC’s website at www.sec.gov. The contents of these websites are not incorporated into this annual report on Form 10-K. Further, our references to the URLs for these websites are intended to be inactive textual references only. 29
Although patent families in this technology area began to expire in 2021, we have numerous patent families in this technology area directed to improvements in the cells and methods/indications for their use, which include recently filed applications directed towards APPL-001, a second generation, genetically modified MLASC therapeutic candidate.
Although issued patents in this technology area began to expire in 2021, we have numerous patent families in this technology area directed to improvements in the cells and methods/indications for their use, which include recently filed applications directed towards APPL-001, a second generation, genetically modified MLASC therapeutic candidate.
In addition, we regularly survey the scientific and industry landscape for opportunities to license, partner or acquire technologies that may help us advance current or new cell therapies for the benefit of patients.
In addition, we regularly survey the scientific and industry landscape for opportunities to license, partner or acquire technologies that may help us advance current or new cellular therapies for the benefit of patients.
Allogeneic Cell Therapies — an “Off-the-Shelf” Approach There are two primary approaches to engineered cell therapies: autologous and allogeneic. Autologous therapies use engineered cells derived from the individual patient, while allogeneic therapies use cells derived from an unrelated third-party healthy donor.
Allogeneic Cellular therapies — an “Off-the-Shelf” Approach There are two primary approaches to engineered cellular therapies: autologous and allogeneic. Autologous therapies use engineered cells derived from the individual patient, while allogeneic therapies use cells derived from an unrelated third-party healthy donor.
Due to the promising therapeutic effect of cell therapies in clinical trials, we anticipate increasing competition from existing and new companies developing these therapies, as well as in the development of allogeneic cell therapies.
Due to the promising therapeutic effect of cellular therapies in clinical trials, we anticipate increasing competition from existing and new companies developing these therapies, as well as in the development of allogeneic cellular therapies.
The principal purposes of our incentive plans are to attract, retain and motivate selected employees, consultants, and directors through the granting of stock-based compensation awards and cash-based performance bonus awards.
The principal purposes of our incentive plans are to attract, retain and motivate selected employees, consultants, and directors through the granting of stock-based compensation awards and when available, cash-based performance bonus awards.
Applying proprietary manufacturing know-how, expertise and capacity utilizing our purpose-built U.S.-based current good manufacturing practices, or cGMP, compliant facility, we believe our fully integrated manufacturing operations and infrastructure will allow us to improve the manufacturing process, eliminate reliance on contract manufacturing organizations, or CMOs, and more rapidly advance therapeutic candidates.
Applying proprietary manufacturing know-how, expertise and capacity utilizing our purpose-built U.S.-based cGMP, compliant facility, we believe our fully integrated manufacturing operations and infrastructure will allow us to improve the 5 manufacturing process, eliminate reliance on contract manufacturing organizations, or CMOs, and more rapidly advance therapeutic candidates.
Many of our competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, preclinical testing, clinical trials, manufacturing and marketing than we do. Future collaborations and mergers and acquisitions may result in further resource concentration among a smaller number of competitors.
Hoffmann-La Roche AG. Many of our competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, preclinical testing, clinical trials, manufacturing, and marketing than we do. Future collaborations and mergers and acquisitions may result in further resource concentration among a smaller number of competitors.
The platform is designed to accelerate the speed at which therapies can be provided to patients while ensuring manufacturing excellence of high quality and pure placental-derived cell therapy products at a lower cost of revenues.
The platform is designed to accelerate the speed at which therapies can be provided to patients while ensuring manufacturing excellence of high quality and pure placental-derived cellular therapy products at a lower cost.
Research has shown that the human placenta is a novel and valuable source of multipotential stem/progenitor cells of mesenchymal and hematopoietic origin, which have multiple therapeutic applications.
Research has shown that the human placenta is a novel and valuable source of multi potential stem/progenitor cells of mesenchymal and hematopoietic origin, which have multiple therapeutic applications.
See the section entitled “ — Our Team and Corporate History — Celgene Corporation ” for a description of the ongoing relationship between us and Celgene, including the out license agreement and the CVRs. Sorrento Therapeutics, Inc.
See the section entitled “ — Our Team and Corporate History — Celgene Corporation ” for a description of the ongoing relationship between us and Celgene, including the out license agreement and the CVRs.
Our Celularity IMPACT manufacturing process is a seamless, fully integrated process designed to optimize speed and scalability from the sourcing of placentas from full-term healthy informed consent donors through the use of proprietary processing methods, cell 1 selection, product-specific chemistry, manufacturing and controls, or CMC, advanced cell manufacturing and cryopreservation.
Our Celularity IMPACT manufacturing process is a seamless, fully integrated process designed to optimize speed, scalability, and efficiency, from the sourcing of placentas from full-term healthy informed consent donors through the use of proprietary processing methods, cell selection, product-specific chemistry, manufacturing and controls, or CMC, advanced cell manufacturing and cryo preservation.
Further, as part of the acquisition of Anthrogenesis from Celgene, we granted Celgene a worldwide, royalty-free, fully paid up, non-exclusive license, to use certain intellectual property for both research and commercial purposes, and granted Celgene the CVRs, 20 which provide us the right to future milestone and royalty payments in certain circumstances.
Further, as part of the acquisition of Anthrogensis is from Celgene, we granted Celgene a worldwide, royalty-free, fully paid up, non-exclusive license, to use certain intellectual property for both research and commercial purposes, and granted Celgene the CVRs, which provide Celgene the right to future milestone and royalty payments in certain circumstances.
Exosome therapy has certain advantages over cell therapy such as: low/non-immunogenicity, easy storage, and administration.
Exosome therapy has certain advantages over cellular therapy such as: low/non-immunogenicity, easy storage, and administration.
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 therapeutics, operating restrictions and criminal prosecution. Employees and Human Capital Resources As of December 31, 2022, we had 225 full-time employees and 35 non-employee leased workers.
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 therapeutics, operating restrictions and criminal prosecution. Employees and Human Capital Resources As of December 31, 2023, we had 120 full-time employees and seven non-employee leased workers.
The high quantity of mesenchymal-like cells and Treg cells indicate that placental-derived cells can potentially contribute to prevention of GvHD and host microenvironment modulation. In summary, we believe the stemness, 6 potential capacity of proliferation and persistence of placental-derived cells support multiple potential therapeutic applications, including those in development by us.
The high quantity of mesenchymal-like cells and Treg cells indicate that placental-derived cells can potentially contribute to prevention of GvHD and host microenvironment modulation. In summary, we believe the stemness, potential capacity of proliferation and persistence of placental-derived cells support multiple potential therapeutic applications, including those in development by us. We are also researching placental-derived exosomes for potential therapeutic applications.
Pursuant to the license with Celgene, we granted Celgene a worldwide, royalty-free, fully-paid up, non-exclusive license under Anthrogenesis’ intellectual property in existence as of the date of the Celgene license or as developed by Celgene in connection with any transition services activities related to the merger for preclinical research purposes, as well as to develop, manufacture, commercialize and fully exploit products and services that relate to the construction of any CAR, the modification of any T-cell or NK cell to express such a CAR, and/or the use of such CARs or T-cells or NK cells for any purpose, which commercial license is sublicensable.
Pursuant to the Celgene License, we granted Celgene a worldwide, royalty-free, fully-paid up, non-exclusive license, without the right to grant sublicenses (other than to its affiliates), under Anthrogenesis’ intellectual property in existence as of the date of the Celgene License or as developed by Celgene in connection with any transition services activities related to the merger for non-commercial pre-clinical research purposes, as well as to develop, manufacture, commercialize and fully exploit products and services that relate to the construction of any CAR, the modification of any T-cell or NK cell to express such a CAR, and/or the use of such CARs or T-cells or NK cells for any purpose, which commercial license is sublicensable.
Patents issuing from these families have expected expiry dates ranging from 2028 to 2041 and include patents issued and pending patent applications in the United States and under the PCT, Australia, Brazil, Canada, China, Colombia, Eurasian Patent Office, European Patent Office, Hong Kong, Israel, India, Indonesia, Japan, Republic of Korea, Mexico, Malaysia, New Zealand, Russian Federation, Singapore, Taiwan R.O.C., Ukraine, Vietnam, and South Africa. • We have approximately 25 utility patent families owned by us in the MLASC technology area supporting our APPL-001 therapeutic candidate and former legacy MLASC candidates that include patents covering product characterization and method of production, as well as product description and indications.
Issued patents directed towards our NK technology have expected expiry dates ranging from 2028 to 2041 and include patents issued and pending patent applications in the United States and under the PCT, e.g., Australia, Brazil, Canada, China, Colombia, Eurasian Patent Office, European Patent Office, Hong Kong, Israel, India, Indonesia, Japan, Republic of Korea, Mexico, Malaysia, New Zealand, Russian Federation, Singapore, Taiwan R.O.C., Ukraine, Vietnam, and South Africa. • We have approximately 380 utility applications owned by us in the MLASC technology area supporting our former legacy MLASC candidates, which that include pending patent applications and issued patents covering product characterization and method of production, as well as product description and indications.
Our cell therapeutics will be regulated as biologics. With this classification, commercial production of our cellular therapeutics will need to occur in registered facilities in compliance with cGMP for biologics.
With this classification, commercial production of our cellular therapeutics will need to occur in registered facilities in compliance with cGMP for biologics.
If a therapeutic that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the therapeutic is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the therapeutic with orphan drug exclusivity.
The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process. 20 If a therapeutic that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the therapeutic is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the therapeutic with orphan drug exclusivity.
Licensing Agreements We enter into license agreements in the ordinary course of our business. We have in-licensed certain technology from Sorrento that is necessary to research and develop our CYCART-19 program.
Licensing Agreements We enter into license agreements in the ordinary course of our business. We in-licensed certain technology from Sorrento that was necessary to research and develop our CYCART-19 program. We subsequently ceased development of that program.
We are also researching placental-derived exosomes for potential therapeutic applications. Exosomes are a kind of extracellular vesicle that act as communication channels between cells and cause functional changes in recipient cells. Exosomes enable intercellular communication by transferring specific cargo contents to a recipient cell and can confer epigenetic changes in the recipient cells by delivering microRNAs, or miRNAs.
Exosomes are a kind of extracellular vesicle that act as communication channels between cells and cause functional changes in recipient cells. Exosomes enable intercellular communication by transferring specific cargo contents to a recipient cell and can confer epigenetic changes in the recipient cells by delivering microRNAs, or miRNAs.
Our Celularity IMPACT manufacturing process is a seamless, fully integrated process that is built to optimize speed and scale from sourcing of human full term healthy postpartum donated placentas through proprietary processing methods, cell selection, 3 product-specific CMC, advanced cell manufacturing and cryopreservation and result in allogeneic inventory-ready and on demand placental-derived cell therapy products.
Our Celularity IMPACT manufacturing process is a seamless, fully integrated process that is built to optimize speed and scale, from the sourcing of human full term healthy postpartum placentas from informed consent donors through proprietary processing methods, cell selection, product-specific CMC, advanced cell manufacturing, and cryopreservation resulting in allogeneic inventory-ready and on-demand cellular therapy products.
Patents issuing from these families have expected expiry dates ranging from 2039 to 2042 and include pending patent applications in the United States and under the PCT, Australia, Brazil, Canada, China, Eurasian Patent Organization, European Patent Convention, Hong Kong, India, Japan, Korea, Mexico, New Zealand, Philippines, Singapore, and South Africa. • We have approximately 15 utility patent families owned by us in the NK technology area supporting our CYNK-001, CYNK-301 and CYNK-302 therapeutic candidates that include patents and patent applications covering process, treatment of indications, and product characterization.
Patents issuing from these families have expected expiry dates ranging from 2039 to 2042 and include pending patent applications in the United States and under the PCT, Australia, Brazil, Canada, China, Eurasian Patent Organization, European Patent Convention, Hong Kong, India, Japan, Korea, Mexico, New Zealand, Philippines, Singapore, and South Africa. • We have approximately 224 utility patent applications in the NK technology that include patents and patent applications covering process, treatment of indications, and product characterization.
We are the owner of, co-owner of, or the licensee of over 1,500 patents and patent applications in the United States and worldwide protecting our Celularity IMPACT platform, our processes, technologies and current key cell therapy programs.
As of the filing date, we are the owner of, co- owner of, or the licensee of 358 patents and patent applications in the United States and worldwide protecting our Celularity IMPACT platform, our processes, our technologies and current key cell therapy programs.
We believe that by harnessing the placenta’s unique biology and ready availability, we will be able to develop therapeutic solutions that address a significant unmet global need for effective, accessible and affordable therapeutics. We also actively develop and market biomaterial products derived from the placenta.
We believe that by harnessing the placenta’s unique biology and ready availability, we will be able to develop therapeutic solutions that address a significant unmet global need for effective, accessible, and affordable therapeutics.
We believe cell therapy inventory should be available to physicians on demand to treat patients in need and to enable repeat dosing regimens that other cell therapy platforms will not be able to support.
We believe our IMPACT platform enables cellular therapy inventory to be available to physicians on demand to treat patients in need and to enable repeat dosing regimens that other cellular therapy platforms will not be able to support.
Future Pipeline Opportunities We plan to utilize our Celularity IMPACT platform to pursue additional targets of interest. These include the additional indications for the four allogeneic cell types currently in the pipeline as well as other targets that might be validated in the future. Our placental-derived T cell platform has potential to target other receptors.
These include the additional indications for the four allogeneic cell types currently in the pipeline as well as other targets that might be validated in the future. Our placental-derived T cell platform has potential to target other receptors.
Our human placenta-derived allogeneic platform currently includes placental CAR-T cells (CYCART-19 and CYCART-201), NK cells (CYNK-001, CYNK-301 and CYNK-302), MLASCs (APPL-001) and exosomes (pEXO-001). CYCART Currently, autologous CAR-T products are manufactured by isolating T cells from the patient’s blood through a process known as leukapheresis.
Our human placental-derived allogeneic cryopreserved, off-the-shelf platform currently includes placental CAR-T cells, or CYCART, NK cells MLASCs, or APPL-001, and exosomes, or pEXO-001. CYCART Currently, autologous CAR-T products are manufactured by isolating T cells from the patient’s blood through a process known as leukapheresis.
Intellectual Property Our commercial success depends in part on our ability to obtain and maintain proprietary protection for the technologies supporting our Celularity IMPACT platform, and our lead cellular therapeutic candidates, CYCART-19, CYNK-001, CYNK-101, APPL-001, PDA-002 and future therapeutic candidates, as well as novel discoveries, product development technologies, and know-how.
Intellectual Property Our commercial success depends in part on our ability to obtain and maintain proprietary protection for the technologies supporting our Celularity IMPACT platform, and our future therapeutic candidates, as well as novel discoveries, product development technologies, and know-how.
Our cellular therapeutic candidates are considered more than minimally manipulated and will require evaluation in clinical trials and the submission and approval of a BLA before we can market them.
Our cellular therapeutic candidates are considered more than minimally manipulated and will require evaluation in clinical trials and the submission and approval of a BLA before we can market them. Our developmental advance biomaterial products will be regulated as medical devices.
Overview of Exosomes Exosomes are acellular, nano-size lipid bilayer membrane particles released by cells into extracellular space and play important roles in cell to cell, tissue to tissue and organ to organ communications. Exosomes are generated from late endosomes with 30-200 nanometers in diameter.
Overview of Exosomes Exosomes are acellular, nano-size lipid bilayer membrane particles released by cells into extracellular space and play important roles in cell to cell, tissue to tissue and organ to organ communications.
Celgene Corporation (acquired by Bristol Myers Squibb) License Agreement In August 2017, in connection with the Anthrogenesis acquisition, we entered into a license agreement with Celgene.
Celgene Corporation In August 2017, in connection with the Anthrogenesis acquisition, we entered into a license agreement, or the Celgene License, with Celgene, which has since been acquired by Bristol Meyers Squibb.
We have also used CMOs, as needed, on a non-exclusive basis, and may use CMOs in the future, for certain of our therapeutic candidates. For example, we used a CMO for the clinical manufacture and supply of CYNK-001 through 2022 which we internalized the manufacture for and anticipate that all finished product will be manufactured in-house going forward.
We have also used CMOs, as needed, on a non-exclusive basis, and may use CMOs in the future, for certain of our therapeutic candidates. For example, we used a CMO for the clinical manufacture and supply of CYNK-001 through 2022. We subsequently manufactured CYNK-001 in house. All other finished products are manufactured in-house.
Conversely, our allogeneic placental-derived T cells are derived from healthy donors that have undergone rigorous donor screening and selection. Manufactured drug product can be deployed to patients immediately in sufficient quantities because administration is not limited by patient cell sourcing and individual drug product expansion. As an “off-the-shelf” treatment, CYCART cells also offer the potential to re-dose patients, if necessary.
Conversely, our allogeneic placental-derived T cells are derived from healthy donors that have undergone rigorous donor screening and selection. Manufactured drug product can be deployed to patients immediately in sufficient quantities because 8 administration is not limited by patient cell sourcing and individual drug product expansion.
Breakthrough therapy designation comes with all of the benefits of fast track designation, which means that the sponsor may file sections of the BLA for review on a rolling basis if certain conditions are satisfied, including an agreement with FDA on the proposed schedule for submission of portions of the application and the payment of applicable user fees before the FDA may initiate a review.
Breakthrough therapy designation comes with all of the benefits of fast track designation, which means that the sponsor may file sections of the BLA for review on a rolling basis if certain conditions are satisfied, including an agreement with FDA on the proposed schedule for submission of portions of the application and the payment of applicable user fees before the FDA may initiate a review. 21 The breakthrough therapy designation is a distinct status from both accelerated approval and priority review, which can also be granted to the same product if relevant criteria are met.
Of these employees, 41 held Ph.D. or M.D. degrees, 35 were engaged in research, 12 were engaged in clinical development and 89 were engaged in technical operations. Substantially all of our employees are located in Florham Park, New Jersey. Our employees are not represented by labor unions or covered by collective bargaining agreements.
Of these employees, 21 held Ph.D. and/or M.D. degrees, 28 were engaged in research and development and 36 were engaged in technical operations. Substantially all of our employees are located in Florham Park, New Jersey. Our employees are not represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.
When fused with the targeted cells, the molecular cargos (proteins, lipids, DNAs, mRNAs, and microRNAs) exosomes carry are inserted into the cells to exert the functions. Recently, exosomes are being recognized as promising candidates in the treatment of degenerative diseases. Evidence has suggested that part of the observed cell therapeutic effects is mediated by exosomes.
When fused with the targeted cells, the molecular cargos (e.g., proteins, lipids, DNAs, mRNAs, and microRNAs) carried by exosomes are inserted into the cells to exert the functions. Recently, exosomes are being recognized as promising candidates in the treatment of degenerative diseases.
The federal civil and criminal false claims laws, including the federal civil False Claims Act, prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other federal government programs that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease 30 or conceal an obligation to pay money to the federal government, including federal healthcare programs.
Further, violations of the Anti-Kickback Statute are subject to civil and criminal fines and penalties for each violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs. 23 The federal civil and criminal false claims laws, including the federal civil False Claims Act, prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other federal government programs that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government, including federal healthcare programs.
Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.
Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.
Contingent Value Rights In August 2017, in connection with the Anthrogenesis acquisition, we issued shares of our Series X Preferred Stock to Celgene as merger consideration and entered into the contingent value agreement with Celgene, or the CVR Agreement.
In August 2017, Legacy Celularity also issued shares of its Series X Preferred Stock to Celgene as merger consideration and entered into a contingent value rights agreement, or the CVR Agreement, with Celgene pursuant to which Legacy Celularity issued one contingent value right or CVR, in respect of each share of Legacy Celularity Series X Preferred Stock issued to Celgene in connection with the Anthrogenesis acquisition.
It is an intact, natural extracellular matrix that provides a foundation for the wound regeneration process and acts as a scaffold for restoration of functional tissue. Interfyl is human connective tissue matrix derived from the placenta of a healthy, full-term pregnancy.
We also market our Biovance and Interfyl products, directly or through our distribution network. Biovance is decellularized, dehydrated human amniotic membrane derived from the placenta of a healthy, full-term pregnancy. It is an intact, natural extracellular matrix that provides a foundation for the wound regeneration process and acts as a scaffold for restoration of functional tissue.
We have also developed technologies that can achieve high 8 genetic modification efficiency by transducing placenta HSCs and produce downstream stable gene modified CYNK cells with enhanced cancer killing activities. These cells are then frozen and can be shipped to clinical administration immediately upon request.
We have also developed technologies that can achieve high genetic modification efficiency by transducing placenta HSCs and produce downstream stable gene modified CYNK cells with enhanced and selective cytotoxic and senolytic activity for potential use in age-related diseases, including cancer, and autoimmune diseases. These cells are cryopreserved and can be shipped to clinical administration immediately upon request.
We intend to continue to invest in the discovery and development of additional pipeline cell franchises and explore other placental-derived cell opportunities. Preclinical and early clinical data demonstrating the unique biological activity and potential of placental-derived stem cells, provide potential for multiple highly effective cell therapy programs. • Benefiting from collective experience of deep, seasoned management team .
Preclinical and early clinical data demonstrating the unique biological activity and potential of placental-derived stem cells, provide potential for multiple highly effective cellular therapy programs. • Benefiting from collective experience of deep, seasoned management team .
Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life. U.S. Review and Approval Processes After the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biological product.
Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life. U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are not successful, or choose not to implement a reverse stock split, we anticipate that our securities would begin trading on the over-the-counter market. Delisting from Nasdaq and trading on the over-the-counter market could adversely affect the liquidity of our securities.
Biggest changeIf our share price once again violates the minimum bid price requirement and we are not able to effectuate another reverse stock split, or we do not implement the compliance plan and regain compliance on or before August 30, 2024, or we violate any other listing qualifications of Nasdaq and are unable to regain compliance, we anticipate that our securities would begin trading on the over-the-counter market.
In November 2017, the FDA released a guidance document entitled “Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use — Guidance for Industry and Food and Drug Administration Staff”, which it revised and reissued in July 2020.
In November 2017, the FDA released a guidance document entitled “Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use — Guidance for Industry and Food and Drug Administration Staff” ("Guidance"), which it revised and reissued in July 2020.
Breakthrough therapy designation is intended to expedite the development and review of therapeutic candidates that are designed to treat serious or life-threatening diseases when “preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.” The designation of a therapeutic candidate as a breakthrough therapy provides potential benefits that include more frequent meetings with FDA to discuss the development plan for the therapeutic candidate and ensure collection of appropriate data needed to support approval; more frequent written correspondence from FDA about such things as the design of the proposed clinical trials and use of biomarkers; intensive guidance on an efficient drug development program, beginning as early as Phase 1; organizational commitment involving senior managers; and eligibility for rolling review and priority review.
Breakthrough therapy designation is intended to expedite the development and review of therapeutic candidates that are designed to treat serious or life-threatening diseases when “preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.” The designation of a therapeutic candidate as a breakthrough therapy provides potential benefits that include more frequent meetings with the FDA to discuss the development plan for the therapeutic candidate and ensure collection of appropriate data needed to support approval; more frequent written correspondence from the FDA about such things as the design of the proposed clinical trials and use of biomarkers; intensive guidance on an efficient drug development program, beginning as early as Phase 1; organizational commitment involving senior managers; and eligibility for rolling review and priority review.
In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.
In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.
We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating as a public company.
We expect that significant additional capital may be needed in the future to continue our planned operations, including, commercialization efforts, expanded research and development activities, conducting clinical trials and costs associated with operating as a public company.
Events that may prevent successful or timely completion of clinical development include: • inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation of clinical studies; • delays in sufficiently developing, characterizing or controlling a manufacturing process suitable for clinical trials; • difficulty sourcing healthy full-term donor placentas of sufficient quality and in sufficient quantity to meet our development needs; • delays in developing suitable assays for screening patients for eligibility for trials with respect to certain therapeutic candidates; • delays in reaching a consensus with regulatory agencies on study design; • delays in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical study sites; • delays in obtaining required IRB approval at each clinical study site; • imposition of a temporary or permanent clinical hold by regulatory agencies for a number of reasons; • delays in patient recruitment, and or difficulty collaborating with patient groups and investigators, or other issues involving patient, such as completing participation or return for post-treatment follow-up, or dropping-out; • failure by our CROs, other third parties or us to adhere to clinical study requirements; • failure to perform in accordance with the FDA’s GCP requirements or applicable regulatory guidelines in other countries; • issues with manufacturing of cellular therapeutics, including delays in manufacturing, testing, releasing, validating sufficient stable quantities of our therapeutic candidates for use in clinical studies or the inability to do any of the foregoing; • occurrence of adverse events associated with the therapeutic candidate that are viewed to outweigh its potential benefits; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; • changes in the standard of care on which a clinical development plan was based, which may require new or additional trials; • the cost of clinical studies of our therapeutic candidates being greater than we anticipate; • negative or inconclusive results from clinical studies, which may result in us deciding, or regulators requiring us, to conduct additional clinical studies or abandon development programs; and 42 • delays or failure to secure supply agreements with suitable raw material suppliers, or any failures by suppliers to meet its quantity or quality requirements for necessary raw materials.
Events that may prevent successful or timely completion of clinical development include: • inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation of clinical studies; 34 • delays in sufficiently developing, characterizing or controlling a manufacturing process suitable for clinical trials; • difficulty sourcing healthy full-term donor placentas of sufficient quality and in sufficient quantity to meet our development needs; • delays in developing suitable assays for screening patients for eligibility for trials with respect to certain therapeutic candidates; • delays in reaching a consensus with regulatory agencies on study design; • delays in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical study sites; • delays in obtaining required IRB approval at each clinical study site; • imposition of a temporary or permanent clinical hold by regulatory agencies for a number of reasons; • delays in patient recruitment, difficulty collaborating with patient groups and investigators, or other issues involving patients, such as completing participation or return for post-treatment follow-up, or dropping-out; • failure by our CROs, other third parties or us to adhere to clinical study requirements; • failure to perform in accordance with the FDA’s GCP requirements or applicable regulatory guidelines in other countries; • issues with manufacturing of cellular therapeutics, including delays in manufacturing, testing, releasing, validating sufficient stable quantities of our therapeutic candidates for use in clinical studies or the inability to do any of the foregoing; • occurrence of adverse events associated with the therapeutic candidate that are viewed to outweigh its potential benefits; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; • changes in the standard of care on which a clinical development plan was based, which may require new or additional trials; • the cost of clinical studies of our therapeutic candidates being greater than we anticipate; • negative or inconclusive results from clinical studies, which may result in us deciding, or regulators requiring us, to conduct additional clinical studies or abandon development programs; and • delays or failure to secure supply agreements with suitable raw material suppliers, or any failures by suppliers to meet its quantity or quality requirements for necessary raw materials.
Our charter provides that the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: • any derivative claim or cause of action brought on our behalf; 69 • any claim or cause of action for breach of a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; • any claim or cause of action against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provision of the DGCL, our charter or the bylaws; • any claim or cause of action seeking to interpret, apply, enforce or determine the validity of our charter or bylaws; • any claim or cause of action as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; and • any claim or cause of action against us or any of our directors, officers or other employees governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
Our charter provides that the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: • any derivative claim or cause of action brought on our behalf; • any claim or cause of action for breach of a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; • any claim or cause of action against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provision of the DGCL, our charter or the bylaws; • any claim or cause of action seeking to interpret, apply, enforce or determine the validity of our charter or bylaws; • any claim or cause of action as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; and • any claim or cause of action against us or any of our directors, officers or other employees governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
If Nasdaq delists our securities from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant negative consequences including: • limited availability of market quotations for our securities; • a determination that the Class A common stock is a “penny stock” which will require brokers trading in the Class A common stock to adhere to more stringent rules; • possibly resulting in a reduced level of trading activity in the secondary trading market for shares of the Class A common stock; • a limited amount of analyst coverage; and 68 • a decreased ability to issue additional securities or obtain additional financing in the future.
If Nasdaq delists our securities from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant negative consequences including: • limited availability of market quotations for our securities; • a determination that the Class A common stock is a “penny stock” which will require brokers trading in the Class A common stock to adhere to more stringent rules; • possibly resulting in a reduced level of trading activity in the secondary trading market for shares of the Class A common stock; • a limited amount of analyst coverage; and • a decreased ability to issue additional securities or obtain additional financing in the future.
Even if we obtain orphan drug designation, exclusive marketing rights in 55 the United States may be limited if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the therapeutic to meet the needs of patients with the rare disease or condition, or if a subsequent applicant demonstrates clinical superiority over our therapeutics, if approved.
Even if we obtain orphan drug designation, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the therapeutic to meet the needs of patients with the rare disease or condition, or if a subsequent applicant demonstrates clinical superiority over our therapeutics, if approved.
Additionally, termination of these agreements or reduction or elimination of our rights under these agreements, or restrictions on our ability to freely assign or sublicense our rights under such agreements when it is in the interest of our business to do 62 so, may result in us having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology or impede, or delay or prohibit the further development or commercialization of one or more technologies that rely on such agreements.
Additionally, termination of these agreements or reduction or elimination of our rights under these agreements, or restrictions on our ability to freely assign or sublicense our rights under such agreements when it is in the interest of our business to do so, may result in us having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology or impede, or delay or prohibit the further development or commercialization of one or more technologies that rely on such agreements.
Current and future growth imposes significant added responsibilities on members of management, including: • identifying, recruiting, integrating, maintaining and motivating additional employees; • managing our internal development efforts effectively, including the clinical and FDA review process for our therapeutic candidates, while complying with our contractual obligations to contractors and other third parties; and • improving our operational, financial and management controls, reporting systems and procedures.
Moreover, current and future growth imposes significant added responsibilities on members of management, including: • identifying, recruiting, integrating, maintaining and motivating additional employees; • managing our internal development efforts effectively, including the clinical and FDA review process for our therapeutic candidates, while complying with our contractual obligations to contractors and other third parties; and • improving our operational, financial and management controls, reporting systems and procedures.
Further, we may be unable to enter into agreements with a new supplier on commercially reasonable terms, which could have a material adverse impact on our business. If we or third party suppliers acting on our behalf use hazardous, non-hazardous, biological or other materials in a manner that causes injury or violates applicable law, we may be liable for damages.
Further, we may be unable to enter into agreements with a new supplier on commercially reasonable terms, which could have a material adverse impact on our business. 44 If we or third party suppliers acting on our behalf use hazardous, non-hazardous, biological or other materials in a manner that causes injury or violates applicable law, we may be liable for damages.
The Guidance stated that the FDA intended to exercise enforcement discretion under limited conditions with respect to the IND application and pre-market approval requirements for certain HCT/Ps for a period that expired on May 31, 2021. The FDA’s approach is risk-based, and the Guidance clarified that high-risk products and uses could be subject to immediate enforcement action.
The Guidance stated that the FDA intended to exercise enforcement discretion under limited conditions with respect to the IND application and pre-market approval requirements for certain HCT/Ps for a period that expired on 45 May 31, 2021. The FDA’s approach is risk-based, and the Guidance clarified that high-risk products and uses could be subject to immediate enforcement action.
In addition, we expect the cost to manufacture our products will increase due to the costs to comply with the requirements that apply to Section 351 53 biological products, such as current cGMP and ongoing product testing costs. Increased costs relating to regulatory compliance could have an adverse impact on our business, financial condition and results of operations.
In addition, we expect the cost to manufacture our products will increase due to the costs to comply with the requirements that apply to Section 351 biological products, such as current cGMP and ongoing product testing costs. Increased costs relating to regulatory compliance could have an adverse impact on our business, financial condition and results of operations.
Switching or adding third parties to conduct our clinical trials involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition 51 period when a new third party commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines.
Switching or adding third parties to conduct our clinical trials involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition period when a new third party commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects. Risks Related to Ownership of Our Class A Common Stock There may not be an active trading market for our securities, which may make it difficult to sell shares of Class A common stock.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects. 58 Risks Related to Ownership of Our Class A Common Stock There may not be an active trading market for our securities, which may make it difficult to sell shares of Class A common stock.
Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our therapeutic candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our therapeutic candidates as having the requisite potential to demonstrate safety and efficacy.
Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative 39 arrangements for our therapeutic candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our therapeutic candidates as having the requisite potential to demonstrate safety and efficacy.
Our failure to obtain and maintain required federal and state licenses and registration will limit our ability to generate revenue. 49 Our relationships with customers, physicians, and third-party payors are subject to numerous laws and regulations. If we or our employees, independent contractors, consultants, commercial partners and vendors violate these laws, we could face substantial penalties.
Our failure to obtain and maintain required federal and state licenses and registration will limit our ability to generate revenue. Our relationships with customers, physicians, and third-party payors are subject to numerous laws and regulations. If we or our employees, independent contractors, consultants, commercial partners and vendors violate these laws, we could face substantial penalties.
Regulatory authorities in jurisdictions outside of the United States have requirements for approval of therapeutic candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for it and could delay or prevent the introduction of our products in certain countries.
Regulatory authorities in jurisdictions outside of the United States have requirements for approval of therapeutic candidates with which we must comply prior to marketing in those jurisdictions. 48 Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for it and could delay or prevent the introduction of our products in certain countries.
Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the third-party payor’s determination that use of a therapeutic is: 58 • a covered benefit under our health plan; • safe, effective and medically necessary; • appropriate for the specific patient; • cost-effective; and • neither experimental nor investigational.
Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the third-party payor’s determination that use of a therapeutic is: • a covered benefit under our health plan; • safe, effective and medically necessary; • appropriate for the specific patient; • cost-effective; and • neither experimental nor investigational.
Accordingly, if our cybersecurity measures or those of our service providers fail to protect against unauthorized access, attacks (which may include sophisticated cyberattacks), compromise or the mishandling of data by our employees or contractors, then our reputation, customer trust, business, results of operations and financial condition could be adversely affected.
Accordingly, if our cybersecurity measures or those of our service providers fail to protect against unauthorized access, attacks (which may include sophisticated cyberattacks), compromise or the mishandling of data by our employees or contractors, then our reputation, customer trust, business, results of operations and financial condition could be 40 adversely affected.
In the U.S., HIPAA imposes requirements at the federal level relating to the privacy, security and transmission of individually identifiable health information, while individual states, such as California and Virginia, have adopted privacy regulations restricting the use of personal information and providing individuals certain rights with respect to the collection and use of their data.
In the U.S., HIPAA imposes requirements at the federal level relating to the privacy, security and transmission of individually identifiable health information, while 42 individual states, such as California and Virginia, have adopted privacy regulations restricting the use of personal information and providing individuals certain rights with respect to the collection and use of their data.
Further, if we encounter delays in our clinical trials, the 60 period of time during which we could market our therapeutic candidates under patent protection would be reduced. Further, changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products. Depending on decisions by the U.S.
Further, if we encounter delays in our clinical trials, the period of time during which we could market our therapeutic candidates under patent protection would be reduced. Further, changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products. Depending on decisions by the U.S.
In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own.
In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in 53 executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own.
Accordingly, the evolving case law in the United States, and abroad, may adversely affect us and our licensor’s ability to obtain new patents or to enforce existing patents and may facilitate third party challenges to any owned or licensed patents. 65 Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
Accordingly, the evolving case law in the United States, and abroad, may adversely affect us and our licensor’s ability to obtain new patents or to enforce existing patents and may facilitate third party challenges to any owned or licensed patents. Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions.
This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. 62 Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions.
Accordingly, we are subject to ongoing periodic unannounced inspection by the FDA and other governmental agencies to ensure strict compliance with cGMP, including GTPs as applicable, and other government regulations. The manufacture of biopharmaceutical products is complex and requires significant expertise, including the development of advanced manufacturing techniques and process controls.
Accordingly, we are subject to ongoing periodic unannounced inspection by the FDA and other governmental agencies to ensure strict compliance with cGMP, including GTPs as applicable, and other government regulations. 36 The manufacture of biopharmaceutical products is complex and requires significant expertise, including the development of advanced manufacturing techniques and process controls.
Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. Additionally, many of our adversaries or adversaries of our licensors in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can.
Defense of these claims, regardless of their merit, would involve substantial litigation expense and 55 would be a substantial diversion of employee resources from our business. Additionally, many of our adversaries or adversaries of our licensors in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can.
If we or our current and future licensors fail to adequately protect this intellectual property, our ability to commercialize products could suffer. Our therapeutic candidates are based on novel technologies, which makes it difficult to predict the time and cost of therapeutic candidate development and obtaining regulatory approval.
If we or our current and future licensors fail to adequately protect this intellectual property, our ability to commercialize products could suffer. 32 Our therapeutic candidates are based on novel technologies, which makes it difficult to predict the time and cost of therapeutic candidate development and obtaining regulatory approval.
As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our therapeutic candidates may give rise to claims of infringement of the patent rights of others. 61 Third parties may assert that we infringe their patents or are otherwise employing their proprietary technology without authorization and may sue.
As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our therapeutic candidates may give rise to claims of infringement of the patent rights of others. Third parties may assert that we infringe their patents or are otherwise employing their proprietary technology without authorization and may sue.
Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or other legal proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs 63 and distract our management and other employees.
Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or other legal proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees.
In addition, costs to treat patients with certain cancers or other targeted 43 indications, including treating any potential side effects, could be significant. Accordingly, our clinical trial costs for our cellular therapeutic candidates are likely to be significantly higher than for more conventional therapeutic technologies or drug products.
In addition, costs to treat patients with certain cancers or other targeted indications, including treating any potential side effects, could be significant. Accordingly, our clinical trial costs for our cellular therapeutic candidates are likely to be significantly higher than for more conventional therapeutic technologies or drug products.
Specifically, there have been several recent U.S. congressional inquiries and federal and state legislative activity designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient assistance 59 programs, and reform government program reimbursement methodologies for drugs.
Specifically, there have been several recent U.S. congressional inquiries and federal and state legislative activity designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient assistance programs, and reform government program reimbursement methodologies for drugs.
Negative public opinion and increased regulatory scrutiny of genetic research and therapies involving gene editing or modified cells may damage public perception of our therapeutic candidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our therapeutic candidates. The gene-editing technologies that we use are novel.
Negative public opinion and increased regulatory scrutiny of genetic research and therapies involving gene editing or modified cells may damage public perception of our therapeutic candidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our therapeutic candidates. 49 The gene-editing technologies that we use are novel.
Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. 41 We may not be able to submit INDs to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit such trials to proceed.
Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. We may not be able to submit INDs to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit such trials to proceed.
The loss of the services of any of our executive officers, other key 46 employees, and other scientific and medical advisors, and our inability to find suitable replacements could result in delays in product development and harm our business. We conduct substantially all of our operations at our facilities in New Jersey.
The loss of the services of any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements could result in delays in product development and harm our business. We conduct substantially all of our operations at our facilities in New Jersey.
Any third parties conducting our clinical trials are not and will not be our employees and, except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our ongoing preclinical, clinical and nonclinical programs.
Any third parties conducting our clinical trials are not and will not be our employees and, except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our ongoing 43 preclinical, clinical and nonclinical programs.
Accordingly, we expect that we will be subject to additional risks related to operating in foreign countries, including: • differing regulatory requirements in foreign countries; • unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; • differing standards for the conduct of clinical trials; • increased difficulties in managing the logistics and transportation of storing and shipping therapeutic candidates or biomaterials produced in the United States and shipping the therapeutic candidate to the patient abroad, which may necessitate local or regional manufacture, including the need to source healthy full-term donor placentas outside the United States; • import and export requirements and restrictions, including as they pertain to donor placentas and human tissue collection and manufacture; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • difficulties staffing and managing foreign operations; • workforce uncertainty in countries where labor unrest is more common than in the United States; • differing payor reimbursement regimes, governmental payors or patient self-pay systems, and price controls; 45 • potential liability under the FCPA or comparable foreign regulations; • challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; • production shortages resulting from any events affecting raw material supply, including obtaining sufficient donor placentas, and other issues with manufacturing abroad; and • business interruptions resulting from the COVID-19 pandemic or other natural or man-made disasters, including earthquakes, tsunamis, fires or other medical epidemics, or geo-political actions, including war and terrorism.
Accordingly, we expect that we will be subject to additional risks related to operating in foreign countries, including: • differing regulatory requirements in foreign countries; • unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; • differing standards for the conduct of clinical trials; • increased difficulties in managing the logistics and transportation of storing and shipping therapeutic candidates or biomaterials produced in the United States and shipping the therapeutic candidate to the patient abroad, which may necessitate local or regional manufacture, including the need to source healthy full-term donor placentas outside the United States; • import and export requirements and restrictions, including as they pertain to donor placentas and human tissue collection and manufacture; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; 37 • foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • difficulties staffing and managing foreign operations; • workforce uncertainty in countries where labor unrest is more common than in the United States; • differing payor reimbursement regimes, governmental payors or patient self-pay systems, and price controls; • potential liability under the FCPA or comparable foreign regulations; • challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; • production shortages resulting from any events affecting raw material supply, including obtaining sufficient donor placentas, and other issues with manufacturing abroad; and • business interruptions resulting from natural or man-made disasters, including earthquakes, tsunamis, fires or other medical epidemics, or geo-political actions, including war and terrorism.
Additional testing, different types of testing or a revised regulatory approach may delay our clinical trials, increase costs in our trials or otherwise preclude our trial from being given permission to proceed absent substantial time, effort and resources on our part.
Additional testing, different types of testing or a revised regulatory approach may delay our future clinical trials, increase costs in our future trials or otherwise preclude our trial from being given permission to proceed absent substantial time, effort and resources on our part.
These technologies are relatively new, and may not be shown to be effective at achieving the expected effect in clinical studies, or may be associated with safety issues, either in our clinical development programs or those of others using these novel technologies.
These technologies are relatively new, and may not be shown to be effective at achieving the expected effect in clinical studies, or may be associated with safety issues, either in our clinical development programs or 31 those of others using these novel technologies.
We cannot assure any stability or other issues relating to the manufacture of our therapeutic candidates will not occur in the future. 44 We or any other of our vendors may fail to manage the logistics of storing and shipping our raw materials, including donor placentas.
We cannot assure any stability or other issues relating to the manufacture of our therapeutic candidates will not occur in the future. We or any other of our vendors may fail to manage the logistics of storing and shipping our raw materials, including donor placentas.
For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our therapeutic candidates. Litigation may be necessary to defend against these and other claims challenging inventorship.
For example, we may have inventorship disputes arise 56 from conflicting obligations of consultants or others who are involved in developing our therapeutic candidates. Litigation may be necessary to defend against these and other claims challenging inventorship.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export 64 otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States.
More established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us.
More established 54 companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us.
We anticipate incurring significant additional net losses for the foreseeable future, and our ability to utilize NOL carryforwards associated with any such losses 70 to offset future taxable income may be limited to the extent we incur future ownership changes.
We anticipate incurring significant additional net losses for the foreseeable future, and our ability to utilize NOL carryforwards associated with any such losses to offset future taxable income may be limited to the extent we incur future ownership changes.
These include allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings.
These include allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, 57 inter partes review and derivation proceedings.
Even with these procedures in place, these centers and hospitals may have difficulty observing patients and treating toxicities or any other adverse events, which could lead to more severe or prolonged toxicities or even patient deaths.
Even with appropriate procedures in place, these centers and hospitals may have difficulty observing patients and treating toxicities or any other adverse events, which could lead to more severe or prolonged toxicities or even patient deaths.
As an early-stage company without 48 significant investments in data security protection, we may not be sufficiently protected against such occurrences, and may not have the resources to allocate to such efforts.
As an early-stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences, and may not have the resources to allocate to such efforts.
Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims.
Treatment-related side effects could 33 also affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims.
The objective of this workforce reduction was to realign our workforce to meet our needs in light of the results we received in clinical trials and the ongoing evaluation of clinical development plans.
The objective of the workforce reduction was to realign our workforce to meet our needs in light of the results we received in clinical trials and the ongoing evaluation of clinical development plans.
While we have experience managing the process for our research and existing clinical trial needs, we may not be able to mass-produce off-the-shelf placental-derived allogeneic cellular therapeutics to satisfy demands for any of our therapeutic candidates as we expand into later stage clinical trials, or for commercial production post-approval.
While we have experience managing the process for our research and early stage clinical trial needs, we may not be able to mass-produce off-the-shelf placental-derived allogeneic cellular therapeutics to satisfy demands for any of our therapeutic candidates as we expand into later stage clinical trials, or for commercial production post-approval.
We also maintain an annual registration with the FDA as a tissue bank, and national accreditation by the American Association of Blood Banks.
We also 41 maintain an annual registration with the FDA as a tissue bank, and national accreditation by the American Association of Blood Banks.
During the COVID-19 public health emergency, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the ongoing COVID-19 pandemic and may experience delays in their regulatory activities.
During the COVID-19 public health emergency, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures and may experience delays in their regulatory activities.
A BLA must include extensive preclinical and clinical data and supporting information to establish the therapeutic candidate’s safety and effectiveness for each desired indication. The BLA must also include significant information regarding the chemistry, manufacturing and controls for the product. We expect the novel nature of our therapeutic candidates to create further challenges in obtaining regulatory approval.
A BLA must include extensive preclinical and clinical data and supporting information to establish the therapeutic candidate’s safety and effectiveness for each desired indication. The BLA must also include significant information regarding the chemistry, manufacturing and controls for the product. We expect the novel nature of our potential future therapeutic candidates to create further challenges in obtaining regulatory approval.
We expect the therapeutic candidates we develop will be regulated as biological products, or biologics, and they may be subject to competition sooner than anticipated. The BPCIA, was enacted as part of the Affordable Care Act to establish an abbreviated pathway for the approval of biosimilar and interchangeable biological products.
We expect the cell therapy therapeutic candidates we develop will be regulated as biological products, or biologics, and they may be subject to competition sooner than anticipated. The BPCIA, was enacted as part of the Affordable Care Act to establish an abbreviated pathway for the approval of biosimilar and interchangeable biological products.
In such circumstances, the trading price of our securities may not recover and may experience a further decline. 66 Factors affecting the trading price of our securities may include: • the realization of any of the risk factors presented in this annual report; • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • our operating results failing to meet the expectation of securities analysts of investors in a particular period; • operating and share price performance of other companies that investors deem comparable to us; • the volume of shares of Class A common stock available for public sale; • future issuances, sales, resales or repurchases or anticipated issuances, sales, resales or repurchases of our securities; • the commencement, enrollment or results of our ongoing and planned clinical trials of our therapeutic candidates or any future clinical trials we may conduct, or changes in the development status of our therapeutic candidates; • our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial; • adverse results or delays in clinical trials; • any delay in our regulatory filings for our therapeutic candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; • our failure to commercialize our therapeutic candidates; • adverse regulatory decisions, including failure to receive regulatory approval of our therapeutic candidates; • changes in laws or regulations applicable to our therapeutic candidates, including but not limited to clinical trial requirements for approvals; • adverse developments concerning manufacturers or suppliers; • our inability to manufacture or obtain adequate supply for any approved therapeutic or inability to do so at acceptable prices; • our inability to establish collaborations if needed; • additions or departures of key scientific or management personnel; • unanticipated serious safety concerns related to cellular therapies; • introduction of new therapeutics or services offered by our competitors; • announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; • our ability to effectively manage growth; • actual or anticipated variations in quarterly operating results; • our cash position; • our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; • publication of research reports about us or our industry, or cellular therapy in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts; • changes in the structure of healthcare payment systems; • changes in the market valuations of similar companies; • overall performance of the equity markets; • speculation in the press or investment community; • sales of Class A common stock by us or our stockholders in the future; 67 • the trading volume of our Class A common stock; • changes in accounting practices; • the ineffectiveness of our internal control over financial reporting; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain or maintain patent protection for our technologies; • significant lawsuits, including patent or stockholder litigation; • general political and economic conditions, including health pandemics, such as COVID-19; and • other events or factors, many of which are beyond our control.
Factors affecting the trading price of our securities may include: • the realization of any of the risk factors presented in this annual report on Form 10-K; • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • our operating results failing to meet the expectation of securities analysts of investors in a particular period; • operating and share price performance of other companies that investors deem comparable to us; • the volume of shares of Class A common stock available for public sale; • future issuances, sales, resales or repurchases or anticipated issuances, sales, resales or repurchases of our securities; • the commencement, enrollment or results of our ongoing and planned clinical trials of our therapeutic candidates or any future clinical trials we may conduct, or changes in the development status of our therapeutic candidates; • our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial; • adverse results or delays in clinical trials; • any delay in our regulatory filings for our therapeutic candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; • our failure to commercialize our therapeutic candidates; • adverse regulatory decisions, including failure to receive regulatory approval of our therapeutic candidates; • changes in laws or regulations applicable to our therapeutic candidates, including but not limited to clinical trial requirements for approvals; • adverse developments concerning manufacturers or suppliers; • our inability to manufacture or obtain adequate supply for any approved therapeutic or inability to do so at acceptable prices; • our inability to establish collaborations if needed; • additions or departures of key scientific or management personnel; • unanticipated serious safety concerns related to cellular therapies; • introduction of new therapeutics or services offered by our competitors; • announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; 59 • our ability to effectively manage growth; • actual or anticipated variations in quarterly operating results; • our cash position; • our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; • publication of research reports about us or our industry, or cellular therapy in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts; • changes in the structure of healthcare payment systems; • changes in the market valuations of similar companies; • overall performance of the equity markets; • speculation in the press or investment community; • sales of Class A common stock by us or our stockholders in the future; • the trading volume of our Class A common stock; • changes in accounting practices; • the ineffectiveness of our internal control over financial reporting; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain or maintain patent protection for our technologies; • significant lawsuits, including patent or stockholder litigation; • general political and economic conditions, including health pandemics, such as COVID-19; and • other events or factors, many of which are beyond our control.
Our Class A common stock may be delisted from the Nasdaq and begin trading in the over-the-counter markets if we are not successful in regaining compliance with the Nasdaq’s continued listing standards, which may negatively impact the price of our common stock and our ability to access the capital markets.
Our Class A common stock may be delisted from the Nasdaq and begin trading in the over-the-counter markets if we are not successful in retaining compliance with the Nasdaq’s continued listing standards, which may negatively impact the price of our common stock and our ability to access the capital markets.
Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential therapeutic candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval and become commercially viable. As a result, we are not profitable and have incurred net losses in each period since our inception.
Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront expenditure and significant risk that any potential therapeutic candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval and become commercially viable. As a result, we are not profitable and have incurred net losses in each period since our inception.
For additional information regarding our competition, see the section entitled “Business — Competition.” We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
For additional information regarding our competition, see the section entitled “ Business — Competition .” 38 We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
However, these restructuring and cost cutting activities may yield unintended consequences and costs, such as attrition beyond our intended reduction-in-force, a reduction in morale among our remaining employees, and the risk we may not achieve the anticipated benefits of the such reduction-in-force measure, all of which may have an adverse effect on our results of operations or financial condition.
Further restructuring and cost cutting activities may yield unintended consequences and costs, such as attrition beyond our intended reduction-in-force, a reduction in morale among our remaining employees, and the risk we may not achieve the anticipated benefits of the such reduction-in-force measure, all of which may have an adverse effect on our results of operations or financial condition.
For example, the FDA may require that we conduct a comparative trial against an approved therapy including potentially an approved autologous cell therapy, which would significantly delay our development timelines and require substantially more resources.
The FDA may require that we conduct a comparative trial against an approved therapy including potentially an approved autologous cell therapy, which would significantly delay our development timelines and require substantially more resources.
See the section entitled “Business — Government Regulation and Product Approval – Healthcare Reform ” for a discussion of these laws and regulations. There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare.
See the 51 section entitled “ Business — Government Regulation and Product Approval – Healthcare Reform ” for a discussion of these laws and regulations. There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare.
For example, in the first quarter of 2022, we submitted an IND to investigate CYCART-19 for treatment of B-cell malignancies and in late May 2022, received formal written communication from FDA requesting 38 additional information before we can proceed with the planned Phase 1/2 clinical trial.
For example, in the first quarter of 2022, we submitted an IND to investigate CYCART-19 for treatment of B-cell malignancies and in late May 2022, received formal written communication from FDA requesting additional information before we could proceed with the planned Phase 1/2 clinical trial.
For more information on coverage and reimbursement requirements see the section entitled “ Business — Government Regulation and Product Approval – Coverage, Pricing and Reimbursement.” Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment.
For more information on coverage and reimbursement requirements see the section entitled “Business — Government Regulation and Product Approval – Coverage, Pricing and Reimbursement.” 50 Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment.
We may also discover the reductions in workforce and cost cutting measures will make it difficult for us to resume development activities we have suspended or pursue new initiatives, requiring us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses.
We may also discover that further reductions in workforce and cost cutting measures will make it difficult for us to resume development activities we have suspended or pursue new initiatives, requiring us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses.
On March 14, 2023, we received notice from the Listing Qualifications department of the Nasdaq Stock Market LLC, or Nasdaq, notifying us that the we no longer comply with the minimum bid price requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5450(a)(1) because the closing bid price for our Class A common stock has fallen below $1.00 per share for the last 30 consecutive business days.
On March 14, 2023, we received notice from the Listing Qualifications department of the Nasdaq Stock Market LLC, or Nasdaq, notifying us that the we no longer complied with the minimum bid price requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5450(a)(1) because the closing bid price for our Class A common stock had fallen below $1.00 per share for the last 30 consecutive business days.
Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential therapeutic to market could decrease our ability to generate sufficient revenue to maintain our business. The FDA may disagree with our regulatory plan and we may fail to obtain regulatory approval of our cell therapeutic candidates.
Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential therapeutic to market could decrease our ability to generate sufficient revenue to maintain our business. The FDA may disagree with our future regulatory plans and we may fail to obtain regulatory approval of our cell therapeutic candidates .
Any issues with the novel gene editing technologies, even if not experienced by us, could negatively affect our development programs. For instance, the genetic modifications may create unintended changes to the DNA, such as a non-target site gene-editing, a large deletion, or a DNA translocation, any of which could lead to unwanted side-effects.
Any issues with the novel gene editing technologies, even if not experienced by us, could negatively affect our development programs. Genetic modifications may create unintended changes to the DNA of the edited cell, such as a non-target site gene-editing, a large deletion, or a DNA translocation, any of which could lead to unwanted side-effects.
The FDA’s review of our data for ongoing clinical trials may, depending on the data, also result in the delay, suspension or termination of one or more of our clinical trials, which would also delay or prevent the initiation of our other planned clinical trials.
The FDA’s review of our data for future clinical trials may, depending on the data, also result in the delay, suspension or termination of one or more of our potential clinical trials, which would also delay or prevent the initiation of our other planned clinical trials.
See Item 1 “ Business — Other U.S. Healthcare Laws and Compliance Requirements ” for more information regarding U.S. privacy and data protection laws. Further, the collection and use of personal information in Europe is governed by the EU’s General Data Protection Regulation and the United Kingdom’s implementation of the same, or the GDPR.
See Item 1 “Business — Other U.S. Healthcare Laws and Compliance Requirements” for more information regarding U.S. privacy and data protection laws. Further, the collection and use of personal information in Europe is governed by the EU’s General Data Protection Regulation and the United Kingdom’s implementation of the same, or the GDPR.
For example, the IRA includes a 15% corporate alternative minimum tax and a 1% excise tax on share repurchases. We urge investors to consult with their legal and tax advisers regarding the implications of changes in tax laws on an investment in our securities.
For example, the Inflation Reduction Act of 2022, or IRA, includes a 15% corporate alternative minimum tax and a 1% excise tax on share repurchases. We urge investors to consult with their legal and tax advisers regarding the implications of changes in tax laws on an investment in our securities.
We operate in a highly regulated industry, and our relationships with customers, physicians, and third-party payors are subject to numerous laws and regulations. See the section entitled “ Business — Government Regulation and Product Approval – Other U.S. Healthcare Laws and Compliance Requirements ”.
We operate in a highly regulated industry, and our relationships with customers, physicians, and third-party payors are subject to numerous laws and regulations. See the section entitled “Business — Government Regulation and Product Approval – Other U.S. Healthcare Laws and Compliance Requirements”.
For additional details, see the discussion under “Overview—Going Concern” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We will need to raise additional capital to support our operations. This additional funding may not be available on acceptable terms or at all.
For additional details, see the discussion under “ Overview—Going Concern ” in Item 7 “ Management’s Discussion and Analysis of Financial Condition and Results of Operations .” We will need to raise additional capital to support our operations. This additional funding may not be available on acceptable terms or at all.
Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs. The price and availability of key components used to manufacture our products has been increasing and may continue to fluctuate significantly.
Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs. 63 The price and availability of key components used to manufacture our products has been increasing and may continue to fluctuate significantly. In addition, the cost of labor could increase significantly due to regulation or inflationary pressures.
The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue from our cellular therapeutic candidates. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.
The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue from our current and future biomaterial products. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.
We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As of December 31, 2022, we had approximately $84.6 million of U.S. federal and $18.2 million state NOL carryforwards, and these NOL carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability.
We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As of December 31, 2023, we had approximately $96.2 million of U.S. federal and $19.8 million state NOL carryforwards, and these NOL carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability.
We have concentrated our research, development and manufacturing efforts on our placental-derived allogeneic T cell, NK cell and MLASC therapeutic candidates, and our future success depends on the successful development of these therapeutic approaches. We have developed our Celularity IMPACT platform, which covers biosourcing through manufacturing of cryopacked cells, and continues to invest in optimizing and improving our technologies.
We have concentrated our research, development and manufacturing efforts on our placental-derived allogeneic T cell, NK cell and MLASC therapeutic candidates. We have developed our Celularity IMPACT platform, which covers biosourcing through manufacturing of cryopacked cells, and continues to invest in optimizing and improving our technologies.
Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Approved autologous cell therapies and those under development have shown frequent rates of CRS and neurotoxicity, and adverse events have resulted in the death of patients.
Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Approved autologous cell therapies and those under development have shown frequent rates of CRS and neurotoxicity, and adverse events have resulted in the death of patients. Our potential future therapeutic candidates may undergo genetic engineering.
We are a clinical-stage biopharmaceutical company, have no cellular therapeutics approved for commercial sale, have not generated any revenue from cellular therapeutic sales to date, generate limited revenues from our degenerative disease and biobanking businesses, and will continue to incur significant research and development and other expenses related to our ongoing operations.
We are a clinical-stage biopharmaceutical company, have no cellular therapeutics approved for commercial sale, have not generated any revenue from cellular therapeutic sales to date, and will continue to incur research and development and other expenses related to our ongoing operations.
As our development and commercialization plans and strategies developed, and as we began operations as a public company following the Business Combination, we expanded our employee base and expect to add managerial, operational, sales, research and development, marketing, financial and other personnel.
As our development and commercialization plans and strategies developed, and as we began operations as a public company, we expanded our employee base and expected to add managerial, operational, sales, research and development, marketing, financial and other personnel.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of outcome, litigation can have an adverse impact because of defense and settlement costs, diversion of management resources and other factors. On June 9, 2021, John Schlechtweg, a former employee, filed a complaint against us in the United States District Court for the District of Connecticut alleging breach of verbal contract and, alternatively, unjust enrichment.
Biggest changeRegardless of outcome, litigation can have an adverse impact because of defense and settlement costs, diversion of management resources and other factors. Arbitration Demand from Palantir Technologies Inc.
We received a Civil Investigative Demand, or the Demand, under the False Claims Act, 31 U.S.C. § 3729, dated August 14, 2022, from the U.S. Attorney’s Office for the Eastern District of Pennsylvania.
Civil Investigative Demand We received a Civil Investigative Demand, or Demand, under the False Claims Act, 31 U.S.C. § 3729, dated August 14, 2022, from the U.S. Attorney’s Office for the Eastern District of Pennsylvania.
The Demand requests documents and information relating to claims submitted to Medicare, Medicaid, or other federal insurers for services or procedures involving injectable human tissue therapy products derived from amniotic fluid or birth tissue and includes Interfyl. We are cooperating with the request and are engaged in an 72 ongoing dialogue with the Assistant U.S. Attorneys handling the Demand.
The Demand requests documents and information relating to claims submitted to Medicare, Medicaid, or other federal insurers for services or procedures involving injectable human tissue therapy products derived from amniotic fluid or birth tissue and includes Interfyl. We are cooperating with the request and are engaged in an ongoing dialogue with the Assistant U.S. Attorneys handling the Demand.
Item 3. Legal Proceedings. From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business.
Item 3. Legal Proceedings. From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business other than as described below.
The matter is still in preliminary stages and there is uncertainty as to whether the Demand will result in any liability. Item 4. Mine Saf ety Disclosures. Not applicable. 73 PART II
The matter is still in preliminary stages and there is uncertainty as to whether the Demand will result in any liability. TargetCW v. Celularity Inc .
We believe the remaining claim asserted in the action is without merit and intend to vigorously defend against it, but there can be no assurance as to the outcome of the litigation.
We intend to vigorously pursue the matter to recover the outstanding payments owed by Evolution, as well as interest and reasonable attorney's fees, but there can be no assurance as to the outcome of the litigation.
Removed
The complaint specifically alleges that we have refused to pay Mr. Schlechtweg additional compensation relating to his involvement in the sale of certain assets to Sanuwave. Following preliminary motion practice, the matter was transferred to the United States District Court for the District of New Jersey.
Added
On April 20, 2023, Palantir Technologies Inc., or Palantir, commenced an arbitration with JAMS Arbitration, or JAMS, asserting claims for declaratory relief and breach of contract relating to the May 5, 2021 Master Service Agreement, or Palantir MSA, seeking damages in an amount equal to the full value of the contract.
Removed
The breach of contract claim was subsequently dismissed on motion to dismiss on the pleadings, with the sole remaining claim for unjust enrichment. The are parties currently engaged in discovery.
Added
We have responded to the arbitration demand and asserted counterclaims for breach of contract, breach of warranty, fraudulent inducement, violation of California’s Unfair Competition Law, amongst others, in relation to the Palantir MSA.
Removed
On February 4, 2021, a putative class action lawsuit was filed in the Supreme Court of the State of New York by a purported stockholder in connection with the Business Combination: Spero v. GX Acquisition Corp., et al., Index No. 650812/2021 (N.Y. Sup Ct. Feb 04, 2021).
Added
On December 21, 2023, we entered into a settlement and release agreement pursuant to the JAMS arbitration proceeding asserting claims for declaratory relief and breach of contract relating to the Palantir MSA. Both parties agreed to dismiss the arbitration proceeding and dispute and provide for mutual releases upon satisfaction of our settlement payment 65 obligation.
Removed
On February 26, 2021, the same purported stockholder filed an amended complaint in the lawsuit removing the class action allegations and certain of the other allegations, or the Spero Complaint. On February 8, 2021, a complaint was filed with the Supreme Court of the State of New York by a purported stockholder in connection with the Business Combination: Rogalla v.
Added
Through June 3, 2024, we made total settlement payments of $3.5 million and issued Palantir an aggregate of 60,584 shares of our Class A common stock as consideration for further amendments to the settlement and release agreement, and on June 4, 2024, the parties dismissed all claims and counterclaims.
Removed
GX Acquisition Corp., et al., Index No. 650877/2021 (N.Y. Sup Ct. Feb 08, 2021), or the Rogalla Complaint, and together with the Spero Complaint, the Complaints). The Complaints name our Company and members of our board of directors (prior to the Business Combination), or GX and the GX Board, respectively, as defendants.
Added
The Master Service Agreement with Palantir is now fully terminated and neither party has any further rights or obligations thereunder. The shares of our Class A common stock issued to Palantir were issued with piggyback registration rights. Resale of such shares by Palantir shall be included on any future registration statement we file. Celularity Inc. v.
Removed
Additionally, the Rogalla Complaint named First Merger Sub, Second Merger Sub and Celularity as defendants. The Rogalla Complaint alleged breach of fiduciary duty claims against the GX Board in connection with the Business Combination and aiding and abetting the GX Board’s breaches of fiduciary duties claims against GX, First Merger Sub, Second Merger Sub and Celularity.
Added
Evolution Biologyx, LLC, et al. On April 17, 2023, we filed a complaint against Evolution Biologyx, LLC, Saleem S. Saab, individually, and Encyte, LLC, (collectively, Evolution), in the U.S. District Court for the District of New Jersey to recover unpaid invoice amounts for the sale of our biomaterial products in the amount of approximately $2.35 million, plus interest.
Removed
These claims are based on allegations that the prospectus in connection with the Business Combination was materially misleading and/or omitted material information concerning the Business Combination. The Spero Complaint alleged breach of fiduciary duty claims against the GX Board in connection with the Business Combination and aiding and abetting the GX Boards’ breaches of fiduciary duties claims against GX.
Added
In September 2021, we executed a distribution agreement with Evolution, whereupon Evolution purchased biomaterial products from us for sale through Evolution’s distribution channels. We fulfilled Evolution’s orders and otherwise performed each of our obligations under the distribution agreement.
Removed
These claims were based on the sales process and valuation of Celularity, as well as allegations that the S-4 Registration Statement related to the Business Combination was materially misleading and/or omitted material information concerning the Business Combination. The Complaints generally requested injunctive relief or rescission, unspecified damages and awards of attorneys’ and experts’ fees, among other remedies.
Added
Despite attempts to recover the outstanding invoices and Evolution’s promise to pay, Evolution has refused to pay any of the invoices and has materially breached its obligations under the distribution agreement. Our complaint asserts claims of breach of contract and fraudulent inducement, amongst others.
Removed
On April 29, 2021, the plaintiff that filed the Spero Complaint voluntarily discontinued that action. On July 20, 2021, the plaintiff that filed the Rogalla Complaint voluntarily discontinued that action.
Added
On March 27, 2024, WMBE Payrolling, Inc., dba TCWGlobal, filed a complaint in the United States District Court for the Southern District of California alleging a breach of contract and account stated claims relating to a Master Services Agreement dated May 4, 2020, or the TCWGlobal MSA, for the provision of certain leased workers to perform services on our behalf.
Removed
The GX Board also received four demands from putative stockholders of GX dated February 18, 2021, March 2, 2021, March 19, 2021 and March 24, 2021, together, the Demands, alleging that GX and the GX Board have breached their fiduciary duties and violated federal securities laws because the prospectus allegedly was materially misleading and/or omitted material information concerning the Business Combination.
Added
The complaint alleges that we breached the TCWGlobal MSA by failing to make payments on certain invoices for the services of the leased workers.
Removed
The Demands sought the issuance of corrective disclosures in an amendment or supplement to the prospectus. While GX believed that the above allegations were all without merit, on March 29, 2021, GX filed an amended Form S-4 with the SEC that contained certain additional information that mooted the disclosure claims asserted in the Complaints and the Demands, the Supplemental Disclosures.
Added
On May 7, 2024, we entered into a settlement agreement and mutual release with TCW whereupon we agreed to pay $516,127.31 in tiered monthly installments, with the last payment due and payable on May 1, 2025, in exchange for a dismissal of the complaint and full release of all claims. Item 4. Mine Saf ety Disclosures.
Removed
In connection with the filing of the Supplemental Disclosures, counsel for the plaintiffs in the Complaint and the Demands agreed that, in light of the mootness of their claims, they would stand down and not take any further action with respect to the Business Combination or the prospectus, and subsequently entered into a confidential agreement with GX to resolve any and all claims that were or could have been raised in the Complaints and the Demands.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur ticker symbol for our warrants exercisable for one share of Class A common stock at an exercise price of $11.50 per share is “CELUW”. Holders As of March 31, 2023, there were approximately 111 stockholders of record of our Class A common stock and 6 holders of our warrants.
Biggest changeOur ticker symbol for our warrants, which are each exercisable for one-tenth of a share of Class A common stock at an exercise price of $115.00 per share, as adjusted for the reverse stock split, is “CELUW”.
Any future determination to pay dividends will be made at the discretion of our board of directors. Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this annual report Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.
Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this annual report on Form 10-K.
Removed
Dividends We have never declared or paid any dividends on our capital or common stock. We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future.
Added
Holders As of July 8, 2024, there were approximately 106 stockholders of record of our Class A common stock and four holders of record of our publicly traded warrants.
Added
Recent Sales of Unregistered Securities On September 18, 2023, we issued 270,731 shares of our Class A common stock, par value $0.0001 per share to YA II PN, Ltd., or Yorkville, pursuant to a Supplemental Letter Agreement by and among us and Yorkville dated September 18, 2023 in consideration for Yorkville’s forbearance from taking any action related to our default under the Pre-Paid Advance Agreement dated September 15, 2022.
Added
The shares, which have not been registered, were issued pursuant to the exemption requirements provided in Section 4(a)(2) of the Securities Act. Issuer Purchases of Equity Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Comparison of Year Ended December 31, 2022 to December 31, 2021 Year Ended December 31, Percent 2022 2021 Increase (Decrease) Increase (Decrease) Net revenues: Product sales and rentals $ 3,749 $ 3,801 (52 ) (1.4 )% Services 5,512 5,522 (10 ) (0.2 )% License, royalty and other 8,714 12,012 (3,298 ) (27.5 )% Total revenues 17,975 21,335 (3,360 ) (15.7 )% Operating expenses: Cost of revenues (excluding amortization of acquired intangible assets) Product sales and rentals 2,353 3,528 (1,175 ) (33.3 )% Services 3,536 3,649 (113 ) (3.1 )% License, royalty and other 13,776 2,476 11,300 456.4 % Research and development 78,363 88,353 (9,990 ) (11.3 )% Selling, general and administrative 66,021 71,341 (5,320 ) (7.5 )% Change in fair value of contingent consideration liability (126,277 ) (41,145 ) (85,132 ) 206.9 % Goodwill impairment 3,610 — 3,610 100.0 % Amortization of acquired intangible assets 2,193 2,192 1 0.0 % Total operating expense 43,575 130,394 (86,819 ) (66.6 )% Loss from operations $ (25,600 ) $ (109,059 ) $ 83,459 (76.5 )% Net Revenues and Cost of Revenues Net revenues for the year ended December 31, 2022 was $18.0 million, a decrease of $3.4 million, or 15.7%, compared to the prior year period.
Biggest changeAll of these areas involve substantial judgment on the part of management and are inherently uncertain. 75 Results of Operations Comparison of Year Ended December 31, 2023 to December 31, 2022 (in thousands) Year Ended December 31, Percent 2023 2022 Increase (Decrease) Increase (Decrease) Net revenues: Product sales $ 13,149 $ 3,749 $ 9,400 250.7 % Services 5,441 5,512 (71 ) (1.3 )% License, royalty and other 4,181 8,714 (4,533 ) (52.0 )% Total revenues 22,771 17,975 4,796 26.7 % Operating expenses: Cost of revenues (excluding amortization of acquired intangible assets) Product sales 8,628 2,353 6,275 266.7 % Services 1,650 3,536 (1,886 ) (53.3 )% License, royalty and other 5,738 13,776 (8,038 ) (58.3 )% Research and development 30,465 78,363 (47,898 ) (61.1 )% Selling, general and administrative 50,576 66,021 (15,445 ) (23.4 )% Change in fair value of contingent consideration liability (104,339 ) (126,277 ) 21,938 (17.4 )% Goodwill impairment 112,347 3,610 108,737 3,012.1 % IPR&D impairment 107,800 — 107,800 100.0 % Amortization of acquired intangible assets 2,193 2,193 - — % Total operating expense 215,058 43,575 171,483 393.5 % Loss from operations $ (192,287 ) $ (25,600 ) $ (166,687 ) 651.1 % Net Revenues and Cost of Revenues Net revenues for the year ended December 31, 2023 was $22.8 million, an increase of $4.8 million, or 26.7%, compared to the prior year period.
Going Concern In accordance with Accounting Standards Update ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), or ASU 205-40, we evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
Going Concern In accordance with Accounting Standards Update, or ASU, No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), or ASU 205-40, we evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
Pursuant to the Celgene license, we granted Celgene a worldwide, royalty-free, 78 fully-paid up, non-exclusive license, without the right to grant sublicenses (other than to its affiliates), under Anthrogenesis’ intellectual property in existence as of the date of the Celgene license or as developed by Celgene in connection with any transition services activities related to the merger for non-commercial pre-clinical research purposes, as well as to develop, manufacture, commercialize and fully exploit products and services that relate to the construction of any CAR, the modification of any T-cell or NK cell to express such a CAR, and/or the use of such CARs or T-cells or NK cells for any purpose, which commercial license is sublicensable.
Pursuant to the Celgene License, we granted Celgene a worldwide, royalty-free, fully-paid up, non-exclusive license, without the right to grant sublicenses (other than to its affiliates), under Anthrogenesis’ intellectual property in existence as of the date of the Celgene License or as developed by Celgene in connection with any transition services activities related to the merger for non-commercial pre-clinical research purposes, as well as to develop, manufacture, commercialize and fully exploit products and services that relate to the construction of any CAR, the modification of any T-cell or NK cell to express such a CAR, and/or the use of such CARs or T-cells or NK cells for any purpose, which commercial license is sublicensable.
Even if these efforts are successful, it is uncertain when, if ever, we will generate significant sales or operate in a profitable manner to sustain our operations without needing to continue to rely on outside capital. Continued decline in our share price could result in impairment of goodwill or long-lived assets in a future period.
Even if these efforts are successful, it is uncertain when, if ever, we will generate significant sales or operate in a profitable manner to sustain our operations without needing to continue to rely on outside capital. Continued decline in our share price could result in further impairment of our goodwill or long-lived assets in a future period.
The magnitude and timing of our selling, general and administrative costs will depend on the progress of clinical trials, 79 commercialization efforts for any approved therapies including the release of new products within the degenerative disease portfolio, changes in the regulatory environment or staffing needs to support our business strategy.
The magnitude and timing of our selling, general and administrative costs will depend on the progress of clinical trials, commercialization efforts for any approved therapies including the release of new products within the degenerative disease portfolio, changes in the regulatory environment or staffing needs to support our business strategy.
In August 2017, Legacy Celularity also issued shares of its Series X Preferred Stock to Celgene as merger consideration and entered into a CVR Agreement, with Celgene pursuant to which Legacy Celularity issued one contingent value right or CVR, in respect of each share of Legacy Celularity Series X Preferred Stock issued to Celgene in connection with the Anthrogenesis acquisition.
In August 2017, Legacy Celularity also issued shares of its Series X Preferred Stock to Celgene as merger consideration and entered into a contingent value rights agreement, or the CVR Agreement, with Celgene pursuant to which Legacy Celularity issued one contingent value right or CVR, in respect of each share of Legacy Celularity Series X Preferred Stock issued to Celgene in connection with the Anthrogenesis acquisition.
The portion of total changes in fair value of debt attributable to 84 changes in instrument-specific credit risk are determined through specific measurement of periodic changes in the discount rate assumption exclusive of base market changes and are presented as a component of comprehensive income (loss) in the accompanying consolidated statements of operations and comprehensive income (loss).
The portion of total changes in fair value of debt attributable to changes in instrument-specific credit risk are determined through specific measurement of periodic changes in the discount rate assumption exclusive of base market changes and are presented as a component of comprehensive income (loss) in the accompanying consolidated statements of operations and comprehensive income (loss).
The actual settlement of the short-term debt could differ from current estimates based on the timing of when and if Yorkville elects to convert amounts into common shares, potential cash repayment by us prior to maturity, and movements in our common share price.
The actual settlement of the short-term debt could differ from estimates based on the timing of when and if Yorkville elects to convert amounts into common shares, potential cash repayment by us prior to maturity, and movements in our common share price.
We do not expect to generate any revenues from cellular therapeutic product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our therapeutic candidates, which we expect will take a number of years.
We do not expect to generate any revenues from cellular therapeutic product sales unless and until we successfully 77 complete development and obtain regulatory approval for one or more of our therapeutic candidates, which we expect will take a number of years.
The CVR Agreement entitles the holders of the CVRs to an aggregate amount, on a per program basis, of $50 million in regulatory milestones and an aggregate $125 million in commercial milestone payments with respect to certain of our investigational therapeutic programs.
The CVR Agreement entitles the holders of the CVRs to an aggregate amount, on a per program basis, of $50.0 million in regulatory milestones and an aggregate $125.0 million in commercial milestone payments with respect to certain of our investigational therapeutic programs.
If we obtain regulatory approval for any of our therapeutic candidates, we expect to incur significant commercialization expenses related to therapeutic sales, 81 marketing, manufacturing and distribution as our current commercialization efforts are limited to our biobanking and degenerative disease businesses.
If we obtain regulatory approval for any of our therapeutic candidates, we expect to incur significant commercialization expenses related to therapeutic sales, marketing, manufacturing and distribution as our current commercialization efforts are limited to our biobanking and degenerative disease businesses.
In August 2017, in connection with the Anthrogenesis acquisition, we entered into a license agreement, with Celgene, which has since been acquired by Bristol Meyers Squibb.
In August 2017, in connection with the Anthrogenesis acquisition, we entered into a license agreement, or the Celgene License, with Celgene, which has since been acquired by Bristol Meyers Squibb.
We are developing a pipeline of off-the-shelf placental-derived allogeneic cell therapy product candidates including T cells engineered with a chimeric antigen receptor, or CAR, natural killer, or NK, cells, mesenchymal-like adherent stromal cells, or MLASCs and exosomes. These therapeutic candidates target indications across cancer, infectious and degenerative diseases.
We are developing a pipeline of off-the-shelf placental-derived allogeneic cell therapy product candidates including T cells engineered with a chimeric antigen receptor, or CAR, natural killer, or NK cells, mesenchymal-like adherent stromal cells, or MLASCs, and exosomes. These therapeutic candidates may potentially target indications across cancer, infectious and degenerative diseases.
As of the issuance date, we had approximately $8.6 million of unrestricted cash and cash equivalents available to fund our operations and no available additional sources of outside capital to sustain our operations for a period of 12 months beyond the issuance date. These uncertainties raise substantial doubt about our ability to continue as a going concern.
As of the issuance date, we had approximately $0.6 million of unrestricted cash and cash equivalents available to fund our operations and no available additional sources of outside capital to sustain our operations for a period of 12 months beyond the issuance date. These uncertainties raise substantial doubt about our ability to continue as a going concern.
Warrant Liability Accounting for liability classified warrants requires management to exercise judgment and make estimates and assumptions regarding their fair value (for more information about the material inputs and assumptions used to value the liability classified warrants refer to Note 4, “Fair Value of Financial Assets and Liabilities” of our consolidated financial statements included elsewhere in this annual report on Form 10-K).
Warrant Liability Accounting for liability classified warrants requires management to exercise judgment and make estimates and assumptions regarding their fair value (for more information about the material inputs and assumptions used to value the liability classified warrants refer to Note 3, “Fair Value of Financial Assets and Liabilities” of our audited consolidated financial statements included elsewhere in this annual report on Form 10-K).
We expect to continue to incur significant operating losses and use net cash in operations for the foreseeable future. • As of the issuance date, we had approximately $8.6 million of unrestricted cash and cash equivalents available to fund our operations and no available additional sources of outside capital to sustain our operations for a period of 12 months beyond the issuance date. • We expect to incur substantial expenditures to fund our investments for the foreseeable future.
We expect to continue to incur significant operating losses and use net cash in operations for the foreseeable future. 72 • As of the issuance date, we had approximately $0.6 million of unrestricted cash and cash equivalents available to fund our operations and no available additional sources of outside capital to sustain our operations for a period of 12 months beyond the issuance date. • We expect to incur substantial expenditures to fund our investments for the foreseeable future.
In October 2018, we acquired CariCord, a family cord blood bank established by ClinImmune Labs University of Colorado Cord Blood Bank and the Regents of the University of Colorado, a body corporate, for and on behalf of the University of Colorado School of Medicine.
In October 2018, we acquired CariCord Inc., or CariCord, a family cord blood bank established by ClinImmune Labs University of Colorado Cord Blood Bank and the Regents of the University of Colorado, a body corporate, for and on behalf of the University of Colorado School of Medicine.
In some cases you can identify forward-looking statements by terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions. Factors that could cause or contribute to differences in results include, but are not limited to, those set forth under Item 1.B. “Risk Factors” and elsewhere in this annual report.
In some cases you can identify forward-looking statements by terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions. Factors that could cause or contribute to differences in results include, but are not limited to, those set forth under Item 1.B. “Risk Factors” and elsewhere in this annual report on Form 10-K.
Our primary use of our capital resources is funding our operating expenses, which consist primarily of funding the research and development of our cellular therapeutic candidates, and to a lesser extent, selling, general and administrative expenses.
Our primary use of our capital resources is funding our operating expenses, which consists primarily of funding the research and development of our cellular therapeutic candidates, and to a lesser extent, selling, general and administrative expenses.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.
Item 7. Management’s Disc ussion and Analysis of Financial Condition and Results of Operations. The following discussion contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.
As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. 85
As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. 81
Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, assumptions related to the accounting for business combinations, goodwill and intangible impairment assessment, the valuation of inventory, contingent consideration, short-term debt, and contingent stock consideration, determination of incremental borrowing rates, accrual of research and development expenses, and the valuations of stock options and preferred stock warrants.
Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, assumptions related to goodwill and intangible impairment assessment, the valuation of inventory, contingent consideration, short-term debt, and contingent stock consideration, determination of incremental borrowing rates, accrual of research and development expenses, and the valuations of stock options and preferred stock warrants.
As of the date the accompanying consolidated financial statements were issued (the “issuance date”), management evaluated the significance of the following adverse conditions and events in accordance with ASU 205-40: • Since inception, we have incurred significant operating losses and used net cash outflows from operations.
As of the date the accompanying consolidated financial statements were issued, or the issuance date, management evaluated the significance of the following adverse conditions and events in accordance with ASU 205-40: • Since inception, we have incurred significant operating losses and used net cash outflows from operations.
Licensing Agreements In the ordinary course of business, we license in intellectual property and other rights from third parties and have also outlicensed our intellectual property and other rights, including in connection with our acquisitions and divestitures, described above.
Licensing Agreements In the ordinary course of business, we license intellectual property and other rights from third parties and have also out-licensed our intellectual property and other rights, including in connection with our acquisitions and divestitures, described above.
The increase was primarily due to a change in the fair value of the warrant liabilities due to the decrease in the price of our common stock (see Note 4, “Fair Value of Financial Assets and Liabilities” of our consolidated financial statements included elsewhere in this annual report on Form 10-K).
The decrease was primarily due to a change in the fair value of the warrant liabilities due to the decrease in the price of our Class A common stock (see Note 3, “Fair Value of Financial Assets and Liabilities” of our audited consolidated financial statements included elsewhere in this annual report on Form 10-K).
Degenerative Disease produces, sells and licenses products used in surgical and wound care markets, such as Biovance, Biovance 3L, Interfyl and Centaflex. We sell products in this segment both using our own sales force as well as independent distributors. We are developing additional tissue-based products for the Degenerative Disease segment.
Degenerative Disease produces, sells and licenses products used in surgical and wound care markets, such as Biovance, Biovance 3L, Interfyl and CentaFlex. We sell products in this segment using independent sales representatives as well as distributors. We are developing additional tissue-based products for the Degenerative Disease segment.
See Note 14, "Stock-Based Compensation" to our audited consolidated financial statements included elsewhere in this annual report for information concerning certain of the specific assumptions used in applying the Black-Scholes option-pricing model to determine the estimated fair value of stock options granted during the years ended December 31, 2022 and 2021.
See Note 13, "Stock-Based Compensation" to our audited consolidated financial statements included elsewhere in this annual report on Form 10-K for information concerning certain of the specific assumptions used in applying the Black-Scholes option-pricing model to determine the estimated fair value of stock options granted during the years ended December 31, 2023 and 2022.
Actual results may differ from our estimates. 83 Contingent Consideration We have acquisition-related contingent consideration, which consists of potential milestone and royalty obligations, which was recorded in the consolidated balance sheets at our acquisition-date estimated fair value. We remeasure the fair value each reporting period, with changes recorded in the consolidated statements of operations.
Contingent Consideration We have acquisition-related contingent consideration, which consists of potential milestone and royalty obligations, which was recorded in the consolidated balance sheets at our acquisition-date estimated fair value. We remeasure the fair value each reporting period, with changes recorded in the consolidated statements of operations.
The IBR used in the calculation of the present value of lease payments in calculating lease liabilities and the corresponding ROU requires the use of significant judgment by management. Short-Term Debt We elected the fair value option to account for the financial instrument as per the pre-paid advance agreement with Yorkville.
The IBR used in the calculation of the present value of lease payments in calculating lease liabilities and the corresponding ROU requires the use of significant judgment by management. Short-Term Debt 80 We elected the fair value option to account for the financial instrument as per the PPA.
Refer to the Going Concern section above for further details. To date, we have not had any cellular therapeutics approved for sale and have not generated any revenues from the sale of our cellular therapeutics. We generate limited revenues from our biobanking and degenerative disease businesses.
Refer to the Going Concern section above for further details. To date, we have not had any cellular therapeutics approved for sale and have not generated any revenues from the sale of our cellular therapeutics.
Each PIPE Warrant has an exercise price of $3.00 per share, is immediately exercisable, will expire on March 27, 2028 (five years from the date of issuance), and is subject to customary adjustments for certain transactions affecting our capitalization.
Each January 2024 PIPE Warrant has an exercise price of $2.4898 per share, is immediately exercisable, will expire on January 16, 2029 (five years from the date of issuance), and is subject to customary adjustments for certain transactions affecting our capitalization.
The estimate of the fair value was determined using a binomial lattice model. The fair value measurement of the debt is determined using Level 3 inputs and assumptions unobservable in the market.
The fair value measurement of the debt was determined using Level 3 inputs and assumptions unobservable in the market.
The decrease resulted from changes in market-based assumptions and underlying projections (for more information about changes in the fair value of contingent consideration liability refer to Note 4, “Fair Value of Financial Assets and Liabilities” of our consolidated financial statements included elsewhere in this annual report on Form 10-K).
The increase resulted from changes in market-based assumptions and underlying projections as we discontinued our Cell Therapy clinical trials during 2023 which caused a decrease in the contingent consideration liability (for more information about changes in the fair value of contingent consideration liability refer to Note 3, “Fair Value of Financial Assets and Liabilities” of our audited consolidated financial statements included elsewhere in this annual report on Form 10-K).
Components of Operating Results Net revenues Net revenues include: (i) sales of biomaterial products, including Biovance, Biovance 3L, Interfyl, and Centaflex of which our direct sales are included in Product Sales and Rentals while sales through our network of distribution partners are included in License, royalty and other; (ii) the collection, processing and storage of umbilical cord and placental blood and tissue after full-term pregnancies, collectively, Services; and, (iii) license fees and royalties received under the license agreement with Sanuwave through the third quarter of 2021, collectively, License, royalty and other.
Upon execution of the agreement, we received an initial $0.3 million payment towards the first year of the two year period. 74 Components of Operating Results Net revenues Net revenues include: (i) sales of biomaterial products, including Biovance, Biovance 3L, Interfyl, and Centaflex of which our direct sales are included in Product Sales and Rentals while sales through our network of distribution partners are included in License, royalty and other; (ii) the collection, processing and storage of umbilical cord and placental blood and tissue after full-term pregnancies, collectively, Services.
Liquidity and Capital Resources As of December 31, 2022, we had $14.0 million of cash and cash equivalents and an accumulated deficit of $645.5 million.
Liquidity and Capital Resources As of December 31, 2023, we had $0.2 million of cash and cash equivalents and an accumulated deficit of $841.8 million.
In May 2018, we acquired certain assets from Alliqua, including Alliqua’s biologic wound care business, which included the marketing and distribution rights to Biovance and Interfyl. In August 2017, we acquired Anthrogenesis, a wholly-owned subsidiary of Celgene. The Anthrogenesis acquisition included a portfolio of pre-clinical and clinical stage assets, including key cellular therapeutic assets that we continue to develop.
In August 2017, we acquired Anthrogenesis, a wholly-owned subsidiary of Celgene. The Anthrogenesis acquisition included a portfolio of pre-clinical and clinical stage assets, including key cellular therapeutic assets that we continue to develop.
Pursuant to the terms of the Loan, we agreed to customary negative covenants restricting our ability to repay indebtedness, pay dividends to stockholders, repay or incur other indebtedness other than as permitted, grant or suffer to exist a security interest in any our assets, other than as permitted, or hold cash and cash equivalents less than $3.0 million for more than five consecutive business days.
Pursuant to the terms of the RWI Second Amended Bridge Loan, we agreed to customary negative covenants restricting its ability to pay dividends to stockholders, repay or incur other indebtedness other than as permitted, or grant or suffer to exist a security interest in any of our assets, other than as permitted.
For the year ended December 31, 2022, we incurred a net operating loss of $25.6 million and used net cash in operations of $137.9 million. As of December 31, 2022, we had an accumulated deficit of $645.5 million.
For the year ended December 31, 2023, we incurred a net operating loss of $192.3 million and used net cash outflows in operations of $38.7 million. As of December 31, 2023, we had an accumulated deficit of $841.8 million.
The increase was primarily due to a $4.6 million increase in production and material variances driven by increased spend in anticipation of degenerative disease sales that did not materialize in addition to an increase in cost of revenues driven by the increase in product sales to distribution partners. 80 Research and Development Expenses Research and development expenses for the year ended December 31, 2022 were $78.4 million, a decrease of $10.0 million, or 11.3%, compared to the prior year period.
During the year ended December 31, 2022, there were charges for production and material variances driven by increased spend in anticipation of degenerative disease sales that did not materialize, in addition to an increase in cost of revenues driven by the increase in product sales to distribution partners.
It is an intact, natural extracellular matrix that provides a foundation for the wound regeneration process and acts as a scaffold for restoration of functional tissue. Interfyl is human connective tissue matrix derived from the placenta of a healthy, full-term pregnancy.
Biovance 3L is a tri-layer decellularized, dehydrated human amniotic membrane derived from the placenta of a healthy, full-term pregnancy. It is an intact, natural extracellular matrix that provides a foundation for the wound regeneration process and acts as a scaffold for restoration of functional tissue. We are developing new placental biomaterial products to deepen the biomaterials commercial pipeline.
Additional details regarding our licensing agreements can be found in Note 16, “License and Distribution Agreements” to our audited consolidated financial statements for the year ended December 31, 2022 included elsewhere in this annual report on Form 10-K. In September 2020, we entered into a license and transfer agreement with Sorrento.
Additional details regarding our licensing agreements can be found in Note 15, “License and Distribution Agreements” to our audited consolidated financial statements included elsewhere in this annual report on Form 10-K.
Investing Activities We used $5.2 million and $5.9 million of net cash in investing activities during the years ended December 31, 2022 and 2021, respectively, which consisted of capital expenditures in each period offset by $0.3 million in gross proceeds from promissory note in the prior year period.
Investing Activities We used $4.0 million and $5.2 million of net cash in investing activities during the years ended December 31, 2023 and 2022, respectively, which consisted of capital expenditures in each period as well as the purchase of acquired IPR&D assets of $3.0 million in the current year period.
BioBanking collects stem cells from umbilical cords and placentas and provides storage of such cells on behalf of individuals for future use. We operate in the biobanking business primarily under the LifebankUSA brand. For more information about our reportable business segments refer to Note 19, “Segment Information” of our consolidated financial statements included elsewhere in this annual report.
BioBanking collects stem cells from umbilical cords and placentas and provides storage of such cells on behalf of individuals for future use. We operate in the biobanking business primarily under the LifebankUSA brand.
Except as required by law, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes. Overview We are a biotechnology company leading the next evolution in cellular medicine by developing off-the-shelf placental-derived allogeneic cell therapies for the treatment of cancer and immune and infectious diseases.
Except as required by law, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes. Overview We are a cell therapy and regenerative medicine company focused on addressing aging related diseases including cancer and degenerative diseases.
In the event we are unable to regain or maintain compliance with the Nasdaq listing requirements, the liquidity of our publicly traded securities will be adversely affected and our ability to secure additional outside capital through public markets will be adversely affected. • In the event we are unable to secure additional outside capital to fund our obligations when they become due over the next 12 months beyond the issuance date, which includes the funds needed to repay the outstanding principal on the PPA (plus unpaid accrued interest and the 5% premium) that has become due and will become fully due in September 2023, and/or obtain a waiver to defer the remaining repayment amount currently due to Yorkville, and/or regain compliance with the Nasdaq listing requirements, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment of our operations, a sale of certain of our assets, a sale of our entire company to strategic or financial investors, and/or allowing us to become insolvent by filing for bankruptcy protection under the provisions of the U.S.
If we are unable to regain compliance, our securities will be delisted from the Nasdaq, which such delisting would have a materially adverse effect on our ability to continue as a going concern. • In the event we are unable to secure additional outside capital to fund our obligations when they become due, including repayment of our outstanding debt, over the next 12 months beyond the issuance date, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment of our operations, a sale of certain of our assets, a sale of our entire company to strategic or financial investors, and/or allowing us to become insolvent by filing for bankruptcy protection under the provisions of the U.S.
Change in Fair Value of Contingent Consideration Liability The change in fair value of contingent consideration liability for the year ended December 31, 2022 was $126.3 million, a decrease of $85.1 million, or 206.9%.
Change in Fair Value of Contingent Consideration Liability The change in fair value of contingent consideration liability for the year ended December 31, 2023 was $104.3 million, an increase of $21.9 million, or 17.4%.
However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies.
Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies.
Basic research, research collaborations involving partners and research designed to enable successful regulatory submissions is critical to our current and future success in cell therapy. As a result of our reprioritization efforts, we anticipate that our research and development expenditures will decrease in the near term.
Basic research, research collaborations involving partners and research designed to enable successful regulatory submissions is critical to our current and future success in cell therapy.
We believe that by harnessing the placenta’s unique biology and ready availability, we will be able to develop therapeutic solutions that address a significant unmet global need for effective, accessible and affordable therapeutics. We also actively develop and market biomaterial products derived from the placenta.
We believe that by harnessing the placenta’s unique biology and ready availability, we will be able to develop therapeutic solutions that address a significant unmet global need for effective, accessible and affordable therapeutics. Our advanced biomaterials business today is comprised primarily of the sale of our Biovance 3L products, directly or through our distribution network.
Financing Activities We generated $119.8 million of net cash from financing activities for the year ended December 31, 2022, which consisted primarily of $46.5 million in cash proceeds from the exercise of warrants to acquire 13,281,386 shares of common stock, $27.4 million in cash proceeds from a May 2022 private placement, $39.2 million in cash proceeds from the Yorkville pre-paid advance agreement, and $6.0 million in cash proceeds from the sale of common stock in the ATM Program.
We generated $119.8 million of net cash from financing activities for the year ended December 31, 2022, which consisted primarily of $46.5 million in cash proceeds from the exercise of warrants to acquire 1,328,139 shares of common stock, $27.4 million in cash proceeds from a May 2022 private placement, $39.2 million in cash proceeds from the PPA, and $6.0 million in cash proceeds from the sale of common stock in the ATM Program. 78 Critical Accounting Estimates Our significant accounting policies are summarized in Note 2, “Summary of Significant Accounting Policies,” included in our consolidated financial statements included elsewhere in this annual report on Form 10-K.
Bankruptcy Code. We expect to incur substantial expenses in the foreseeable future for the development and potential commercialization of our cellular therapeutic candidates, expansion of our degenerative disease business and ongoing internal research and development programs.
Bankruptcy Code. We expect to incur substantial expenses in the foreseeable future for the expansion of our degenerative disease business and ongoing internal research and development programs. We will require substantial additional funding in the future to build the sales, marketing and distribution infrastructure that will be necessary to commercialize our biomaterials products.
Accordingly, COVID-19 could have a material adverse effect on our business, results of operations, financial condition, and prospects. Business Segments We manage our operations through an evaluation of three distinct business segments: Cell Therapy, Degenerative Disease, and BioBanking. The reportable segments were determined based on the distinct nature of the activities performed by each segment.
Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties. Business Segments We manage our operations through an evaluation of three distinct business segments: Cell Therapy, Degenerative Disease, and BioBanking. The reportable segments were determined based on the distinct nature of the activities performed by each segment.
Absent an ability to secure additional outside capital in the very near term, we will be unable to meet its obligations as they become due over the next 12 months beyond the issuance date. • We had approximately $37.0 million of borrowings outstanding under a financing arrangement referred to as the PPA with a private investor, Yorkville, as of December 31, 2022.
Absent an ability to secure additional outside capital in the very near term, we will be unable to meet our obligations as they become due over the next 12 months beyond the issuance date. • As of the issuance date, we had approximately $42.7 million of debt outstanding, all of which is currently due or due within one year of the issuance date.
The securities were issued pursuant to an exemption from registration provided for under Section 4(a)(2) of the Securities Act of 1933, as amended, or the Act, and Regulation D promulgated thereunder. We relied on this exemption from registration based in part on representations made by the purchasers.
The closing of the private placement occurred on January 16, 2024. The securities were issued pursuant to an exemption from registration provided for under Section 4(a)(2) of the Securities Act, and Regulation D promulgated thereunder.
The HLI CT acquisition also provided us with rights to a portfolio of biomaterial assets, including Biovance and Interfyl. At the time of the HLI CT acquisition, Biovance and Interfyl were subject to an exclusive distribution arrangement with Alliqua Biomedical, Inc., or Alliqua.
At the time of the HLI CT acquisition, Biovance and Interfyl were subject to an exclusive distribution arrangement with Alliqua Biomedical, Inc., or Alliqua. In May 2018, we acquired certain assets from Alliqua, including Alliqua’s biologic wound care business, which included the marketing and distribution rights to Biovance and Interfyl.
Selling, General and Administrative Expenses Selling, general and administrative expenses for the year ended December 31, 2022 were $66.0 million, a decrease of $5.3 million, or 7.5%, compared to the prior year period.
Research and Development Expenses Research and development expenses for the year ended December 31, 2023 were $30.5 million, a decrease of $47.9 million, or 61.1%, compared to the prior year period.
As a result, until such time, if ever, as we can generate substantial revenue from therapeutics and sales of our biomaterials products, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements, including drawdowns under the At-The-Market Sales Agreement, dated as of September 8, 2022, by and between us and BTIG, LLC, Oppenheimer & Co.
As a result, until such time, if ever, as we can generate sufficient revenues to fund operations, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements.
In May 2017, we acquired HLI Cellular Therapeutics, LLC, or HLI CT, from HLI. HLI CT operated LifebankUSA, a private umbilical cord blood stem cell and cord tissue bank that offers parents the option to collect, process and cryogenically preserve newborn umbilical cord blood stem cells and cord tissue units.
HLI CT operated LifebankUSA, a private umbilical cord blood stem cell and cord tissue bank that offers parents the option to collect, process and 73 cryogenically preserve newborn umbilical cord blood stem cells and cord tissue units. The HLI CT acquisition also provided us with rights to a portfolio of biomaterial assets, including Biovance and Interfyl.
Other Income (Expense) Year Ended December 31, Percent 2022 2021 Increase (Decrease) Increase (Decrease) Interest income $ 365 $ 332 $ 33 9.9 % Interest expense — (3,171 ) 3,171 (100.0 )% Change in fair value of warrant liabilities 42,109 13,482 28,627 212.3 % Change in fair value of debt (2,522 ) — (2,522 ) 100.0 % Other expense, net (147 ) (1,682 ) 1,535 (91.3 )% Total other income $ 39,805 $ 8,961 $ 30,844 344.2 % For the year ended December 31, 2022, other income (expense), increased by $30.8 million compared to the prior year period.
Other Income (Expense) (in thousands) Year Ended December 31, Percent 2023 2022 Increase (Decrease) Increase (Decrease) Interest income $ 320 $ 365 $ (45 ) (12.3 )% Interest expense (3,015 ) — (3,015 ) 100.0 % Change in fair value of warrant liabilities 6,164 42,109 (35,945 ) (85.4 )% Change in fair value of debt (1,177 ) (2,522 ) 1,345 (53.3 )% Other income (expense), net (6,290 ) (147 ) (6,143 ) 4178.9 % Total other income (expense) $ (3,998 ) $ 39,805 $ (43,803 ) (110.0 )% For the year ended December 31, 2023, total other income (expense), decreased by $43.8 million compared to the prior year period.
Goodwill Impairment Goodwill impairment for the year ended December 31, 2022 was $3.6 million compared to no impairment in the prior year period. The goodwill impairment was the result of lower forecasted sales and growth in the Degenerative Disease reporting unit.
Impairments Goodwill impairment for the year ended December 31, 2023 was $112.3 million compared to $3.6 million in the prior year period.
Robert Hariri, providing for the private placement of (i) 9,381,841 shares of our Class A common stock, and (ii) accompanying warrants to purchase up to 9,381,841 shares of Class A common stock, or the PIPE Warrants, for $0.8343 per share and $0.125 per accompanying PIPE Warrant, for an aggregate purchase price of approximately $9.0 million (of which Dr.
Private Placement On January 12, 2024, we entered into a securities purchase agreement with an existing investor, Dragasac Limited, providing for the private placement of (i) 2,141,098 shares of our Class A common stock and (ii) accompanying warrants to purchase up to 535,274 shares of our Class A common stock, or the January 2024 PIPE Warrants, for $2.4898 per share and $1.25 per accompanying January 2024 PIPE Warrant, for an aggregate purchase price of approximately $6.0 million.
Inc., one of our significant stockholders, or Starr, providing for a loan in the aggregate principal amount of $5.0 million net of an original issue discount of $100,000, which bears interest at a rate of 12.0% per year, with the first year of interest being paid in kind on the last day of each month, and matures March 17, 2025, or the Loan, and warrants to acquire up to an aggregate 750,000 shares of our Class A common stock, or the Starr Warrant, at a purchase price of $0.125 per whole share underlying the Starr Warrant (or $93,750).
The RWI Second Amended Bridge Loan provided for an additional loan in the aggregate principal amount of $15.0 million net of an original issue discount of $3.75 million, which bears interest at a rate of 12.5% per year, with the first year of interest being paid in kind on the last day of each month, and matures July 16, 2025.
Products within our Degenerative Disease segment generally do not contain multiple elements. We allow for a right of return for those products but to date returns have been minimal. Under the license agreement with Sanuwave, we received a quarterly license fee and a defined royalty on each product sold.
Products within our Degenerative Disease segment generally do not contain multiple elements. We allow for a right of return for those products but to date returns have been minimal. Valuation of Goodwill and Intangible Assets We have acquired and may continue to acquire significant intangible assets in connection with business combinations, which we record at fair value.
Acquisitions and Divestitures Our current operations reflect strategic acquisitions and divestitures that we have made since formation. Additional details regarding the following acquisitions can be found in Note 1, “Nature of Business” to our consolidated financial statements for the year ended December 31, 2022 included elsewhere in this annual report.
For more information about our reportable business segments refer to Note 18, “Segment Information” of our audited consolidated financial statements included elsewhere in this annual report on Form 10-K. Acquisitions and Divestitures Our current operations reflect strategic acquisitions and divestitures that we have made since formation.
However, management can provide no assurance that we will be able to regain compliance with the minimum bid requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance, or maintain compliance with the other Nasdaq listing requirements.
We submitted to Nasdaq a compliance plan to regain compliance prior to June 17, 2024 and we now have until August 30, 2024 to regain compliance. There can be no assurance that we will regain compliance within the compliance period or maintain compliance with the other Nasdaq listing requirements.
The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the assets and could potentially impact our results of operations.
The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the assets and could potentially impact our results of operations. Actual results may differ from our estimates. For the year ended December 31, 2023, we recognized goodwill impairment charges of $112.3 million and indefinite-lived intangible asset impairment charges associated with IPR&D of $107.8 million.
Cost of revenues for the year ended December 31, 2022 was $19.7 million, an increase of $10.0 million, or 103.7%, compared to the prior year period.
The increase was primarily due to the $9.4 million increase in product sales driven by increased demand for Biovance 3L. Cost of revenues for the year ended December 31, 2023 was $16.0 million, a decrease of $3.6 million, or 18.6%, compared to the prior year period.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 Change Cash (used in)/provided by Operating activities $ (137,876 ) $ (110,096 ) $ (27,780 ) Investing activities (5,236 ) (5,903 ) 667 Financing activities 119,838 98,562 21,276 Net change in cash, cash equivalents and restricted cash $ (23,274 ) $ (17,437 ) $ (5,837 ) Operating Activities Net cash used in operations for the year ended December 31, 2022 was $27.8 million higher than the prior year period, primarily due to current year net income (loss) adjusted for non-cash items and build up of inventory partially offset by the prior year period including a reduction in deferred revenue related to the termination of the Sanuwave license agreement.
Cash Flows The following table summarizes our cash flows for the periods indicated: (in thousands) Year Ended December 31, 2023 2022 Change Cash (used in)/provided by Operating activities $ (38,685 ) $ (137,876 ) $ 99,191 Investing activities (4,048 ) (5,236 ) 1,188 Financing activities 24,094 119,838 (95,744 ) Net change in cash, cash equivalents and restricted cash $ (18,639 ) $ (23,274 ) $ 4,635 Operating Activities We used $38.7 million of net cash in operations for the year ended December 31, 2023 compared to $137.9 million for the year ended December 31, 2022.
We also received and paid back $5.0 million in short-term loans. 82 Critical Accounting Estimates Our significant accounting policies are summarized in Note 2, “Summary of Significant Accounting Policies,” included in our consolidated financial statements included elsewhere in this annual report on Form 10-K.
For more information about the trigger events leading to the impairments refer to Note 2, “Summary of Significant Accounting Policies” and Note 7, “Goodwill and Intangible Assets, Net” of our consolidated financial statements included elsewhere in this annual report on Form 10-K).
Removed
Prior to 2023, we marketed those products domestically primarily serving the orthopedic and wound care markets. We now intend to market placental biomaterials outside of the United States with an initial focus on markets in the Middle East and North Africa.
Added
Our goal is to ensure all individuals have the opportunity to live healthier longer. We develop and market off-the-shelf placental-derived allogeneic advanced biomaterial products including allografts and connective tissue matrices for soft tissue repair and reconstructive procedures in the treatment of degenerative disorders and diseases including those associated with aging.
Removed
Our biomaterials business today is comprised primarily of the sale of our Biovance and Interfyl products, directly or through our distribution network. Biovance is decellularized, dehydrated human amniotic membrane derived from the placenta of a healthy, full-term pregnancy.
Added
Our Celularity IMPACT platform capitalizes on the benefits of placenta-derived cells to target multiple diseases, and provides seamless integration, from bio sourcing through manufacturing cryopreserved and packaged allogeneic cells, in our purpose-built U.S.- based 147,215 square foot facility.
Removed
It is used by a variety of medical specialists to fill soft tissue deficits resulting from wounds, trauma, or surgery. We are developing new placental biomaterial products to deepen the commercial pipeline beyond Biovance and Interfyl.
Added
We believe the use of placental-derived cells, sourced from the placentas of full-term healthy informed consent donors, has potential inherent advantages, from a scientific and an economic perspective. First, relative to adult- derived cells, placental-derived cells demonstrate greater stemness, meaning the ability to expand and persist.
Removed
In January 2023, we announced reprioritization of efforts which resulted in a reduction of approximately one-third of our workforce as of March 2023. Recent Developments Private Placement On March 20, 2023, we entered into a securities purchase agreement with two accredited investors, including our Chairman and Chief Executive Officer, Dr.
Added
Second, placental-derived cells are immunologically naïve, meaning the cells have never been exposed to a specific antigen, and suggesting the potential for less toxicity and for low or no graft-versus-host disease, or GvHD, in transplant.
Removed
Hariri subscribed for $2.0 million). The closing of the private placement occurred on March 27, 2023 and was subject to the satisfaction of customary closing conditions.
Added
Third, our placental-derived cells are allogeneic, meaning they are intended for use in any patient, as compared to autologous cells, which are derived from an individual patient for that patient’s sole use. We believe this is a key difference that will enable readily available off-the-shelf treatments that can be delivered faster, more reliably, at greater scale and to more patients.
Removed
The PIPE Warrants may not be exercised if the aggregate number of shares of Class A common stock beneficially owned by the holder thereof (together with its affiliates) would exceed the specified percentage cap provided therein (which may be adjusted upon 61 days advance notice) immediately after exercise thereof.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest Rate Risk We had cash and cash equivalents of $14.0 million as of December 31, 2022, which consists principally of cash held in commercial bank accounts and money market funds having an original maturity of less than three months.
Biggest changeInterest Rate Risk We had cash and cash equivalents of $0.2 million as of December 31, 2023, which consists principally of cash held in commercial bank accounts and money market funds having an original maturity of less than three months.
At December 31, 2022, substantially all cash and cash equivalents were held in either commercial bank accounts or money market funds. The primary objective of our investment activities is to preserve capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk.
At December 31, 2023, substantially all cash and cash equivalents were held in either commercial bank accounts or money market funds. The primary objective of our investment activities is to preserve capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk.
Because our investments are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant, and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We have no variable interest debt outstanding as of December 31, 2022.
Because our investments are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant, and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We have no variable interest debt outstanding as of December 31, 2023.

Other CELUW 10-K year-over-year comparisons