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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
⌧ ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 001-36641
BRAINSTORM CELL THERAPEUTICS INC.
(Exact Name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
1325 Avenue of Americas, 28th Floor
New York, NY
(Address of principal executive offices)
20-7273918
(I.R.S. Employer
Identification No.)
10019
(Zip Code)
Registrant’s telephone number, including area code: (201) 488-0460
Securities registered under Section 12(b) of the Act:
Title of each class
Common Stock, $0.00005 par value
Trading Symbol(s)
BCLI
Name of each exchange on which registered
The Nasdaq Stock Market LLC
(Nasdaq Capital Market)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes ☐ No ⌧
Securities registered under Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ⌧ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ⌧ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer ☐
Non-accelerated filer ⌧
Emerging growth company ☐
Accelerated filer ☐
Smaller reporting company ⌧
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report,. Yes ☒ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧
The approximate aggregate market value of the voting and non-voting common equity held by non-affiliates of the issuer as of June 30, 2021 (the last business day of the
registrant’s most recently completed second fiscal quarter), was $119,594,493.
As of March 28, 2022, the number of shares outstanding of the registrant's Common Stock, $0.00005 par value per share, was 36,486,180.
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BRAINSTORM CELL THERAPEUTICS INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2021
TABLE OF CONTENTS
ITEM
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
9C.
10.
11.
12.
13.
14.
15.
16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
PART IV
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4
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PART I
SPECIAL NOTE
Unless otherwise specified in this Annual Report on Form 10-K, all references to currency, monetary values and dollars set forth herein
shall mean United States (U.S.) dollars.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains numerous statements, descriptions, forecasts and projections, regarding BrainStorm Cell Therapeutics Inc.
(together with its consolidated subsidiaries, the “Company,” “BrainStorm,” “we,” “us” or “our”) and its potential future business
operations and performance, including financial results for the most recent fiscal year, statements regarding the market potential for
treatment of neurodegenerative disorders such as ALS, the sufficiency of our existing capital resources for continuing operations in 2022
and beyond, the safety and clinical effectiveness of our NurOwn® technology, our clinical trials of NurOwn® and its related clinical
development, and our ability to develop collaborations and partnerships to support our business plan. In some cases you can identify
such “forward-looking statements” by the use of words like “may,” “will,” “should,” “could,” “expects,” “hopes,” “anticipates,”
“believes,” “intends,” “plans,” “projects,” “targets,” “goals,” “estimates,” “predicts,” “likely,” “potential,” or “continue” or the
negative of any of these terms or similar words. These statements, descriptions, forecasts and projections constitute “forward-looking
statements,” and as such involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of
activity, performance and achievements to be materially different from any results, levels of activity, performance and achievements
expressed or implied by any such “forward-looking statements.” These risks and uncertainties include, but are not limited to our need to
raise additional capital, our ability to continue as a going concern, regulatory approval of our NurOwn® treatment candidate, the
success of our product development programs and research, regulatory and personnel issues, development of a global market for our
services, the ability to secure and maintain research institutions to conduct our clinical trials, the ability to generate significant revenue,
the ability of our NurOwn® treatment candidate to achieve broad acceptance as a treatment option for ALS, PMS, AD or other
neurodegenerative diseases, our ability to manufacture and commercialize our NurOwn® treatment candidate, obtaining patents that
provide meaningful protection, competition and market developments, our ability to protect our intellectual property from infringement
by third parties, heath reform legislation, demand for our services, currency exchange rates and product liability claims and litigation,
disruptions in our business due to continuing concerns resulting from the COVID 19 outbreak, including our clinical development
activities, and other factors described under “Risk Factors” in this annual report on Form 10-K for the fiscal year ended December 31,
2021. These “forward-looking statements” are based on certain assumptions that we have made as of the date hereof. To the extent these
assumptions are not valid, the associated “forward-looking statements” and projections will not be correct. Although we believe that the
expectations reflected in these “forward-looking statements” are reasonable, we cannot guarantee any future results, levels of activity,
performance, or achievements. It is routine for our internal projections and expectations to change as the year or each quarter in the
year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which we base our
expectations may change prior to the end of each quarter or the year. Although these expectations may change, we may not inform you if
they do and we undertake no obligation to do so, except as required by applicable securities laws and regulations. We caution investors
that our business and financial performance are subject to substantial risks and uncertainties. In evaluating our business, prospective
investors should carefully consider the information set forth under the caption “Risk Factors” in this annual report on Form 10-K for the
fiscal year ended December 31, 2021, in addition to the other information set forth herein and elsewhere in our other public filings with
the Securities and Exchange Commission (“SEC”).
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Item 1. BUSINESS.
Company Overview
BrainStorm Cell Therapeutics Inc. is a leading biotechnology company committed to the development and commercialization of best-in-
class autologous cellular therapies for the treatment of neurodegenerative diseases, including: Amyotrophic Lateral Sclerosis (“ALS”,
also known as Lou Gehrig’s disease); Progressive Multiple Sclerosis (“PMS”); Alzheimer's disease (“AD”); and other neurodegenerative
diseases. NurOwn®, our proprietary cell therapy platform, leverages cell culture methods to induce autologous bone marrow-derived
mesenchymal stem cells (MSCs) to secrete high levels of neurotrophic factors (NTFs), modulate neuroinflammatory and
neurodegenerative disease processes, promote neuronal survival and improve neurological function.
NurOwn® has completed its Phase 3 ALS and Phase 2 PMS clinical trials. On November 17, 2020, we announced top-line data from our
Phase 3 ALS trial. On March 24, 2021, we announced positive top-line data from our Phase 2 trial evaluating three repeated intrathecal
administrations of NurOwn®, each given 2 months apart, as a treatment for PMS. On June 24, 2020, we announced a new clinical
program focused on the development of NurOwn® as a treatment for AD. We are currently evaluating next steps based on emerging
scientific insights and the rapidly changing regulatory landscape for AD following the recent FDA decision on Aducanumab.
Our wholly-owned Israeli subsidiary, BrainStorm Cell Therapeutics Ltd. (“Israeli Subsidiary”), holds exclusive rights to commercialize
NurOwn® technology through a licensing agreement with Ramot (“Ramot”), the technology transfer company of Tel Aviv University,
Israel.
NurOwn® has a strong and comprehensive intellectual property portfolio and was granted Fast Track designation by the U.S. Food and
Drug Administration (FDA) and Orphan Drug status by the FDA and the European Medicines Agency (EMA) for ALS. For more
information, visit BrainStorm’s website at www.brainstorm-cell.com.
Our human capital resource objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing
and new employees, advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and
reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and
the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives. We
currently employ 43 employees in the United States and in Israel. Most of the senior management team is based in the United States, and
all of our clinical trial sites for ALS and PMS are in the United States. Our R&D center is located in Petach Tikva, Israel. In addition, we
currently lease two GMP certified manufacturing facilities in Jerusalem, Israel at Hadassah Medical Centerand in Tel Aviv at the
Sourasky Medical Center to manufacture NurOwn®. These two facilities more than double our capacity to manufacture and ship
NurOwn® into the EU and local Israeli markets.
Continuing concerns resulting from the pandemic caused by the novel strain of coronavirus, SARS-CoV 2 (COVID-19) disease,
including the emergence of new variants, has currently impacted and may continue to adversely impact our business, including our
preclinical studies and clinical trials. In December 2019, a novel strain of coronavirus, surfaced in Wuhan, China. Since then, COVID-
19 has spread worldwide, significantly impacting the United States, Europe and Israel, where the Company conducts its operations, as
well as its clinical trials for NurOwn®. In response to the spread of COVID-19 and to ensure safety of employees and continuity of
business operations, we closed our offices, with our administrative employees continuing their work remotely and limited the number of
staff in any given research and development laboratory. Our research and development laboratory in Israel and manufacturing sites in
U.S. and in Israel remained open. Post vaccination, our administrative offices in Israel and the U.S. are now open. The full extent to
which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend
on future developments that are highly uncertain and cannot be accurately predicted at this time, including new information that may
emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and
international markets. Our management team is actively monitoring this situation and the possible effects on our financial condition,
liquidity, operations, suppliers, industry, and workforce. For additional information on risks posed by the COVID-19 pandemic, please
see Part II, Item 1A – Risk Factors – Risks Related to the COVID-19 Pandemic.
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Recent Highlights
● On July 23, 2020, we announced the results of a groundbreaking pre-clinical study of NurOwn® derived Exosome-based
treatment for COVID-19 acute respiratory distress syndrome (ARDS). Intratracheal administration of exosomes extracted from
MSC-NTF cells (NurOwn®) resulted in statistically significant improvement in multiple lung parameters in a mouse model.
With this study, the Company successfully completed its first milestone in developing an innovative exosome-based platform-
technology for the treatment of severe COVID-19 related infection.
● On November 17, 2020, we announced top-line data from our Phase 3 ALS trial in the U.S. Results from the trial showed that
NurOwn® was generally well tolerated in the population of rapidly progressing ALS patients. While showing a numerical
improvement in the treated group compared to placebo across the primary and key secondary efficacy endpoints, the trial did
not reach statistically significant results. In an important, pre-specified subgroup with early disease based on the ALSFRS-R
baseline total score of 35, we believe NurOwn® demonstrated a clinically meaningful treatment response across the primary
and key secondary endpoints and remained consistent with our pre-trial, data-derived assumption. In this subgroup, there were
34.6% responders who met the primary endpoint definition on NurOwn® and 15.6% on Placebo (p=0.288), and the average
change from baseline to week 28 in ALSFRS-R total score was -1.77 on NurOwn® and -3.78 on Placebo (p=0.198), an
improvement of 2.01 ALSFRS-R points favoring NurOwn®. No new safety concerns were identified. On February 22, 2021,
we announced high-level FDA feedback on our NurOwn® ALS Clinical Development Program. The FDA concluded from
their initial review that the current level of clinical data does not provide the threshold of substantial evidence that FDA is
seeking to support a Biologics License Application (BLA). In addition, the FDA advised that this recommendation does not
preclude Brainstorm from proceeding with a BLA submission. We are in active consultation with principal investigators, ALS
experts, expert statisticians, regulatory advisors, and ALS advocacy groups to assess the benefit/risk of a BLA submission
before making a final decision.
● On January 20, 2021, we announced the peer-reviewed publication of a preclinical study in the journal Stem Cell and Research
Therapy. The study, entitled "MSC-NTF (NurOwn®) exosomes: a novel therapeutic modality in the mouse LPS-induced ARDS
model," evaluated the use of NurOwn® (MSC-NTF cell) derived exosomes in a mouse model of acute respiratory distress
syndrome (ARDS).
● On February 9, 2021, we announced feedback from our Type-C Meeting with FDA to review specific aspects of our planned
manufacturing modifications to support the development of a semi-automated manufacturing process for NurOwn® (MSC-
NTF cells).
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● On March 24, 2021, we announced positive top-line data in our Phase 2 Study trial evaluating three repeated administrations of
NurOwn®, each given 2 months apart, as a treatment for PMS. The 28-week open-label Phase 2 clinical trial enrolled 20
primary and secondary PMS patients based on the 2017 revised McDonald Criteria, ages 18-65, with baseline Expanded
Disability Status Scale (EDSS) scores between 3-6.5, without evidence of relapse within 6 months of enrollment, able to walk
25 feet in 60 seconds or less and were permitted to be on a stable dose of disease modifying therapy. Of the 20 patients enrolled,
18 were treated and 16 (80%) completed the study. Two patients discontinued related to procedure-related AEs. There were no
study deaths or AEs related to multiple sclerosis worsening. The mean age of study patients was 47, 56% were female, and
mean baseline EDSS score was 5.4. The clinical trial compared clinical efficacy outcomes with a 48-patient matched clinical
cohort from the Comprehensive Longitudinal Investigations in MS at the Brigham & Woman’s Hospital (CLIMB Study). MS
Function and Cognition measures in the top-line results included the timed 25-foot walk (T25FW); 9-hole peg test (9-HPT);
Low Contrast Letter Acuity (LCLA); Symbol Digit Modality Test (SDMT); and the 12 item MS Walking Scale (MSWS-12).
Prespecified response thresholds of 25% improvement in the T25FW and 9-HPT from baseline to 28 weeks were observed in
14% and 13% of NurOwn® treated patients, respectively, and were observed in 0% of the pre-specified matched historical
controls in the CLIMB registry. Thirty eight percent of NurOwn® treated patients showed at least a 10-point improvement in
the MSWS-12 from baseline to week 28, a patient-reported outcome that evaluates walking function. In addition, 47% of
treated patients showed at least an 8-letter improvement across 28 weeks in the LCLA, a visual function test, and 67% showed
at least a 3-point improvement in the SDMT, a measure of cognitive processing. In addition, NurOwn® treated patients showed
a mean improvement from baseline of 10% in T25FW and a 4.8% improvement from baseline on the 9-HPT dominant hand,
compared to 1.8% and 1.4% worsening respectively in matched historical controls from the CLIMB registry. Also, NurOwn®
treated patients showed a 6% improvement from baseline in MSWS-12. All results reported are based on observed data.
Cerebrospinal fluid (CSF) biomarkers were obtained at 3 consecutive time points, just prior to each intrathecal administration of
NurOwn®. We observed increases in neuroprotective molecules (VEGF, HGF) and decreases in neuroinflammatory biomarkers
(MCP-1, and Osteopontin) in the CSF samples. Additionally, we recently completed analyses of secondary efficacy data, and
detailed CSF and blood biomarker analyses. As described further, below, we presented a detailed summary of the study
outcomes at the 37th Congress of the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS) on
October 14, 2021 and intend to publish our findings in a peer-reviewed journal. We are currently considering how best to
advance NurOwn® as an innovative treatment option in PMS.
● On May 25, 2021, we presented preclinical data at the ISCT 2021 New Orleans Virtual Meeting demonstrating that intrathecal
administration of NurOwn-derived exosomes resulted in statistically significant improvements in multiple lung parameters in a
mouse model of acute respiratory distress syndrome (ARDS).
● On June 15, 2021, we announced the expansion of our IP Portfolio with the grant and allowance of multiple patents and
applications in major markets. These included EU patent No. 2880151, Hong-Kong patent No. HK1209453, Israel patent
application No. 246943, Canadian patent application No. 2,937,305, U.S. patent No. 10,869,899, U.S. patent application No.
16/047,129. For more details, please refer to our “Intellectual Property” section below.
● On July 27, 2021, we announced approval of GMP certification by the Israel Ministry of Health (MOH) for three state-of-the-
art cleanrooms leased by the Company at the Tel Aviv Sourasky Medical Center (“Sourasky Hospital”). The GMP approval
confirms that these cleanrooms are compliant with Israeli GMPs, which are aligned with European Union (EU) GMPs, and
more than doubles the Company’s capacity to manufacture and ship NurOwn® into the EU and local Israeli markets.
● On August 9, 2021, the Company entered into an Amended and Restated Distribution Agreement (the “New Distribution
Agreement”) with the Agents pursuant to which the Company may sell from time to time, through the Agents, shares of
Common Stock, having an aggregate offering price of up to $100,000,000 (the “August 9, 2021, ATM”). Sales under the
August 9, 2021, ATM are to be made by any method permitted by law that is deemed to be an “at the market” offering as
defined in Rule 415 promulgated under the Securities Act, including, without limitation, sales made directly on the Nasdaq
Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the
Company and the Agents. In connection with the New Distribution Agreement, the Company terminated the previous
Distribution Agreement and the September 25, 2020, ATM. During the quarter ended December 31, 2021, the Company did not
sell any shares of its Common Stock pursuant to the August 9, 2021, ATM.
● On October 8, 2021, Dr. James Berry, Winthrop Family Scholar in ALS Sciences, Director of the Massachusetts General
Hospital (MGH) multidisciplinary ALS clinic and Chief of the Division of ALS and Motor Neuron Diseases and principal
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investigator on the Phase 3 trial of NurOwn(R) in ALS, presented a poster titled "CSF biomarker correlations with primary
outcome in NurOwn Phase 3 clinical trial" at the 2021 Northeast Amyotrophic Lateral Sclerosis Consortium(R) (NEALS)
conference. The presentation highlighted changes in CSF biomarkers that demonstrate high accuracy in predicting the primary
clinical outcome using an unbiased stepwise logistic regression analysis.
● On October 14, 2021, Dr. Jeffery Cohen, Director of Experimental Therapeutics at the Cleveland Clinic Mellen Center for
Multiple Sclerosis, presented findings from the Phase 2 PMS study as an oral presentation at the fully digital 37th Congress of
the ECTRIMS. Data from the study showed that it achieved the primary endpoint of safety and tolerability. The data also
showed a reduction of neuroinflammatory biomarkers and an increase in neuroprotective biomarkers in the CSF and consistent
improvement across multiple sclerosis functional outcome measures, including measures of walking, upper extremity function,
vision and cognition, with NurOwn® treatment.
● On October 18, 2021, we announced the presentation of the poster titled, "Therapeutic Benefits of MSC-NTF (NurOwn®)
Exosomes in Acute Lung Injury Models" at the NYSCF 2021 VIRTUAL Meeting. Results in both LPS and Bleomycin mouse
models of acute lung injury showed that the beneficial effects of intratracheal administration of NurOwn-derived exosomes
were superior to those of exosomes isolated from naïve mesenchymal stem cells in multiple parameters, including increase in
blood oxygen saturation and reduction in lung pathology, inflammatory infiltration and levels of proinflammatory cytokines in
bronchoalveolar lavage fluid (BALF), in addition to reduction of lung fibrosis in the Bleomycin model.
● On November 30, 2021, Dr. Jonathan Katz, principal investigator on the Phase 3 trial of NurOwn® in ALS, Chair of the
Neurology Department and Director of the Forbes Norris ALS Clinic at the California Pacific Medical Center, presented new
analyses from the trial at the 4th Annual ALS ONE Research Symposia. Pre-specified and post hoc analyses leveraging the
published ENCALS model demonstrated a potential NurOwn-induced treatment effect on ALS disease progression in trial
participants with less severe disease and showed that this effect was protected by randomization.
● On December 7, 2021, Dr. Robert Brown, Director of the Program in Neurotherapeutics at the University of Massachusetts
Medical School, and principal investigator in the Phase 3 trial of NurOwn® in ALS, presented at the 32nd International
Symposium on ALS/MND. The presentation, titled “NurOwn targets multiple disease pathways in ALS Phase 3 Trial” focused
on biomarker data that suggest that NurOwn® drives significant changes in biomarkers across ALS disease pathways which
may be important for achieving clinical outcomes.
● On December 7, 2021, we finalized the technology transfer for NurOwn® manufacturing to Catalent, which allows for
continuous supply of NurOwn® for future clinical trials and initial commercialization, if approved.
● On December 13, 2021, we announced the peer reviewed publication of Phase 3 clinical data in Muscle and Nerve. The paper,
entitled "A Randomized Placebo-Controlled Phase 3 Study of Mesenchymal Stem Cells Induced to Secrete High Levels of
Neurotrophic Factors in Amyotrophic Lateral Sclerosis," reported data from the randomized, double-blind, placebo-controlled,
Phase 3 trial evaluating the safety and efficacy of repeat doses of NurOwn® in patients with ALS. Although previously
announced results showed that the trial did not reach statistical significance on the primary or secondary endpoints, pre-
specified and post hoc analyses featured in the publication show a greater NurOwn-induced treatment effect across primary and
secondary efficacy outcomes in trial participants with less advanced disease.
● On December 27, 2021 the FDA recommended that Brainstorm submit an Expanded Access Protocol amendment to provide
additional dosing of NurOwn® for these participants.
● On March 16, 2022, Dr. Merit Cudkowicz, Chief of Neurology at Massachusetts General Hospital, Julieanne Dorn Professor of
Neurology at Harvard Medical School, Director of the Sean M. Healey & AMG Center for ALS at Massachusetts General
Hospital and principal investigator in the Phase 3 trial of NurOwn(R) in ALS, delivered a late breaking oral presentation at the
2022 Muscular Dystrophy and Association Clinical and Scientific Conference. The presentation, titled "Relationship UNC13A
Single-Nucleotide Polymorphisms to Clinical Outcomes in NurOwn Phase 3 ALS Clinical Trial" focused on pre-specified
genetic analyses from the NurOwn Phase 3 trial in ALS which suggests that NurOwn treatment may influence disease
progression in patients who possess the UNC13A risk allele.
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NurOwn® Proprietary Technology
NurOwn® technology is based on an innovative manufacturing protocol, which induces the differentiation of purified and expanded
bone marrow-derived mesenchymal stem cells (“MSC”) and consistently generates cells that release high levels of multiple neurotrophic
factors (“MSC-NTF” cells) to modulate neuroinflammatory and neurodegenerative disease processes, promote neuronal survival and
improve neurological function. These factors are known to be critical for the growth, survival and differentiation of neurons, including:
glial-derived neurotrophic factor (“GDNF”); brain-derived neurotrophic factor (“BDNF”); vascular endothelial growth factor (“VEGF”);
and hepatocyte growth factor (“HGF”), among others. VEGF is one of the most potent neuronal and motor neuron survival factors and
has demonstrated important neuroprotective effects in ALS and several other neurodegenerative diseases.
NurOwn® manufacturing involves a multi-step process that includes the following: harvesting and isolating undifferentiated stem cells
from the patient's own bone marrow; processing of cells at the manufacturing site; cryopreservation of MSC to enable multiple
treatments from a single bone marrow sample; and intrathecal (“IT”) administration of MSC-NTF cells into the same patient by standard
lumbar puncture. This administration procedure does not require hospitalization and has been shown to be generally well tolerated in
multiple CNS clinical trials to date. The completed NurOwn® U.S. Phase 3 ALS and the NurOwn® U.S. Phase 2 PMS trials evaluated
the therapeutic potential of repeated intrathecal MSC-NTF cell administration (three doses at bi-monthly intervals). We are actively
reviewing the opportunity in Alzheimer’s Disease and will consider the best course of action based on recent scientific and regulatory
insights.
The proprietary technology and manufacturing processing of NurOwn® (MSC-NTF cells) for clinical use is conducted in full
compliance with current Good Manufacturing Practice (“cGMP”). The NurOwn® proprietary technology is fully owned or
developed by our Israeli Subsidiary. All granted patents related to NurOwn® (MSC-NTF cells) manufacturing process are fully
assigned to or owned by our Israeli Subsidiary (please see Intellectual Property section for details).
The NurOwn® Transplantation Process
● Bone marrow aspiration from the patient;
● MSC Isolation and propagation;
● MSC Cryopreservation;
● MSC thawing and differentiation into neurotrophic-factor secreting (MSC-NTF; NurOwn®) cells; and
● Intrathecal administration into the patient’s cerebrospinal fluid by standard lumbar puncture.
Differentiation before Transplantation
We believe that the ability to induce autologous adult mesenchymal stem cells into differentiated MSC-NTF cells makes NurOwn®
uniquely suited for the treatment of neurodegenerative diseases.
The specialized MSC-NTF cells secrete multiple neurotrophic factors and immunomodulatory cytokines that may result in:
● Protection of existing neurons;
● Promotion of neuronal repair;
● Neuronal functional improvement; and
● Immunomodulation and reduced neuroinflammation.
Autologous (Self-transplantation)
The NurOwn® technology platform is autologous, using the patient’s own bone-marrow derived stem cells for “self-
transplantation.” In autologous cellular treatment, there is no introduction of unrelated donor antigens that may lead to alloimmunity,
no risk of rejection, and no need for treatment with immunosuppressive agents, which can cause severe and/or long-term side
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effects. In addition, the use of adult stem cells is free of several ethical concerns associated with the use of embryonic-derived stem
cells in some countries.
NurOwn® ALS Clinical Program
We announced top-line data from the Phase 3 clinical trial of NurOwn® in ALS on November 17, 2020. We have been granted Fast
Track designation by the U.S. Food and Drug Administration (“FDA”) for this indication, and have been granted Orphan Drug Status, in
the U.S. and Europe, which provides us the potential for an extended period of exclusivity.
Phase 1/2 ALS Open Label Trials
We have completed two early stage Phase 1/2 and 2 open-label clinical trials of NurOwn® in patients with ALS at the Hadassah Medical
Center (“Hadassah”) in Jerusalem, Israel, as well as a Phase 2 double-blind, placebo-controlled, multicenter clinical trial at three
prestigious U.S. Medical centers - the Massachusetts General Hospital (MGH) in Boston, Massachusetts Memorial Hospital in
Worcester, Massachusetts, and the Mayo Clinic in Rochester, Minnesota - all highly experienced in the management and investigation of
ALS.
The first two open-label trials were approved by the Israeli MoH. The first-in-human trial, a Phase 1 safety and efficacy trial of
NurOwn® administered either intramuscularly or intrathecally in 12 ALS patients, was initiated in June 2011. In the Phase 2 dose-
escalating study, 14 ALS patients were administered NurOwn® by a combined route of intramuscular and intrathecal administration.
These studies demonstrated the safety of NurOwn® by both routes of administration and showed preliminary signs of efficacy.
In January 2016, the results of the two completed Phase 1/2 study and Phase 2 open label trials were published in JAMA Neurology. The
results demonstrated a slower rate of disease progression following MSC-NTF cell transplantation as measured by the ALSFRS-R, the
gold standard for the evaluation of ALS functional status, and Forced Vital Capacity (“FVC”), a measure of pulmonary function, as well
as positive trends in the rate of decline of muscle volume and the compound motor axon potential (“CMAPs”). This was the first
published clinical data using autologous mesenchymal stem cells, induced under culture conditions to produce NTFs, with the potential
to deliver a combined neuroprotective and immunomodulatory therapeutic effect in ALS and potentially modify the course of this
disease.
Phase 2 ALS Randomized Trial
The Phase 2 U.S. study was conducted under an FDA Investigational New Drug (“IND”) application. This randomized, double-blind,
placebo-controlled multi-center U.S. Phase 2 clinical trial evaluating NurOwn® in ALS patients was conducted at three clinical sites: (i)
the Massachusetts General Hospital (MGH) in Boston, (ii) Massachusetts Memorial Hospital in Worcester, Massachusetts, and (iii) the
Mayo Clinic in Rochester, Minnesota. For this trial, NurOwn® was manufactured at the Connell and O’Reilly Cell Manipulation Core
Facility at the Dana Farber Cancer Institute in Boston and at the Human Cellular Therapy Lab at the Mayo Clinic. In this study, 48
patients were randomized 3:1 to receive NurOwn® or placebo.
Results of this Phase 2 Study were published in the peer reviewed Journal ‘Neurology’. The publication entitled “NurOwn, Phase 2,
Randomized, Clinical Trial in Patients with ALS: Safety, Clinical, and Biomarker Results” was published in December 2019.
Key findings from the trial were as follows:
The study achieved its primary objective, demonstrating that NurOwn® transplantation was well-tolerated. There were no
discontinuations from the trial due to AEs and there were no deaths in the study. The most common adverse events ( mild or moderate
severity), were transient procedure-related AEs such as headache, back pain, pyrexia arthralgia and injection-site discomfort, which were
more commonly seen in the NurOwn®-treated participants compared to placebo.
NurOwn® achieved multiple secondary efficacy endpoints, showing evidence of a clinically meaningful benefit. Notably, response rates
in the ALS functional rating scale (48-point ALSFRS-R outcome measure) were higher in NurOwn®-treated participants, compared to
placebo, at all study timepoints over 24 weeks.
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A pre-specified responder analysis examined percentage improvements in the post treatment ALSFRS-R slope (in points change per
month) compared to pre-treatment slope and demonstrated that a higher proportion of NurOwn® treated participants achieved a 100%
improvement in the post-treatment vs. pre-treatment slope, compared to the placebo group. This analysis also demonstrated that a higher
proportion of the NurOwn® treated participants achieved a 1.5 point per month or greater improvement in the post-treatment vs. pre-
treatment ALSFRS-R slope, compared to the placebo group.
The treatment effects were greater in the rapid progressor subgroup (in which pretreatment ALSFRS-R declined by 2 or more points in
the three months pre-treatment).
As an important confirmation of NurOwn®’s mechanism of action, levels of neurotrophic factors and inflammatory markers were
measured in the cerebrospinal fluid (“CSF”) samples collected from participants pre and two weeks post treatment. In the samples of
those participants treated with NurOwn®, statistically significant increases in levels of neurotrophic factors VEGF, HGF and LIF and a
statistically significant reduction in inflammatory markers MCP-1, SDF-1 and CHIT-1 were observed post-treatment. Furthermore, the
observed reduction in inflammatory markers correlated with ALS functional improvements. These clinical-biomarker correlations were
not seen in placebo-treated participants, consistent with the proposed combined neuroprotective and immunomodulatory mechanism of
action of NurOwn® in ALS.
In summary, a higher proportion of NurOwn® treated participants, particularly those with more rapid disease progression, experienced
stabilization or improvement in ALS function, as measured by the post-treatment vs. pre-treatment ALSFRS-R slope change.
Phase 3 ALS Clinical Trial
Following successful completion of the Phase 2 study, we conducted a Phase 3 trial (a multi-dose double-blind, placebo-controlled,
multicenter trial protocol) that was designed to generate data to potentially support a Biologic License Application (“BLA”) submission
in the U.S. for NurOwn® in ALS. In October 2019, the clinical trial completed enrollment of an enriched patient population of rapid
progressors based on superior outcomes observed
is registered at
www.clinicaltrials.gov (ClinicalTrials.gov Identifier: NCT03280056).
the Phase-2 pre-specified sub-group. The study
in
We announced top-line data from our Phase 3 ALS trial on November 17, 2020. Results from the trial showed that NurOwn® was
generally well tolerated in the population of rapidly progressing ALS patients. However, the trial did not reach statistically significant
results. No new safety concerns were identified. On February 9, 2021, we announced feedback from our Type-C Meeting with FDA to
review specific aspects of our planned manufacturing modifications to support the development of a semi-automated commercial
manufacturing process for NurOwn® (MSC-NTF cell). On February 22, 2021, we announced high-level FDA feedback on NurOwn®
ALS clinical development program. The FDA concluded from their initial review that the clinical data provided at the time did not
provide the threshold of substantial evidence that FDA seeks to support a BLA. In addition, the FDA advised that this recommendation
does not preclude the Company from proceeding with a BLA submission. We are in active consultation with principal investigators, ALS
experts, expert statisticians, regulatory advisors, and ALS advocacy groups to assess the benefit/risk of a BLA submission before making
a final decision.
Key findings from the trial were as follows:
● NurOwn® was generally well tolerated in this population of rapidly progressing ALS patients.
● While showing a numerical improvement in the treated group compared to placebo across the primary and key
secondary efficacy endpoints, the trial did not reach statistically significant results.
● The primary efficacy endpoint, a responder analysis evaluating the proportion of participants who experienced a 1.25
points per month improvement in the post-treatment ALSFRS-R slope compared to pre-treatment, was powered on
assumed treatment response rates of 35% on NurOwn® versus 15% on Placebo. These estimates were based on
available historical clinical trial data and the NurOwn® Phase 2 data. The primary endpoint was achieved in 32.6% of
NurOwn® participants versus 27.7% for Placebo (p=0.453). Therefore, the trial met the expected ~35% NurOwn®
treatment group efficacy response assumption, however the high placebo response exceeded the placebo response
expected based on contemporary ALS trials.
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● The secondary efficacy endpoint measuring average change in ALSFRS-R total score from baseline to Week 28, was
-5.52 with NurOwn® versus -5.88 on Placebo, a difference of 0.36 (p= 0.693).
● In an important, pre-specified subgroup early in the disease course based on ALSFRS-R baseline score greater than 35,
NurOwn® demonstrated a clinically meaningful treatment response across the primary and key secondary endpoints
and remained consistent with our pre-trial, data-derived assumptions. In this subgroup, there were 34.6% responders
who met the primary endpoint definition on NurOwn® and 15.6% on Placebo (p=0.288), and the average change from
baseline to week 28 in ALSFRS-R total score was -1.77 on NurOwn® and -3.78 on Placebo (p=0.198), an
improvement of 2.01 ALSFRS-R points favoring NurOwn®.
● The NurOwn phase 3 trial enrolled a broad set of participants, including some with advanced ALS disease (ALSFRS-
R≤25), making this trial subject to the impact of floor effects and reduced ALSFRS-R sensitivity. A post-hoc analysis
was done using participants with baseline ALSFRS-R>25 for the primary endpoint and the % response for NurOwn
was 34.7% and 20.5% for Placebo, p=0.053. This analysis suggests a treatment effect with NurOwn in participants
with less advanced disease. Cerebrospinal fluid (CSF) biomarker analyses confirmed that treatment with NurOwn®
resulted in a statistically significant increase of neurotrophic factors (VEGF) and reduction in neurodegenerative
(neurofilament) and neuroinflammatory biomarkers (MCP-1) that was not observed in the placebo treatment group.
● Pre-specified statistical modeling designed to predict clinical response with high sensitivity and specificity based on
ALS biomarkers and ALS Function confirmed that NurOwn® treatment outcomes could be predicted by baseline ALS
function as well as key CSF neurodegenerative and neuroinflammatory biomarkers.
On October 6, 2021, we announced that a scientific abstract titled “CSF biomarker correlations with primary outcome in NurOwn Phase
3 clinical trial” would be presented as a scientific poster at the fully digital 2021 Northeast Amyotrophic Lateral Sclerosis Consortium®
(NEALS) conference. The presentation was delivered by James Berry, M.D. MPH, Winthrop Family Scholar in ALS Sciences, Director
of the Massachusetts General Hospital (MGH) multidisciplinary ALS clinic and Chief of the Division of ALS and Motor Neuron
Diseases, Boston MA. The presentation highlighted CSF biomarkers that demonstrate high accuracy in predicting the primary clinical
outcome using an unbiased stepwise logistic regression analysis.
NurOwn® Clinical Manufacturing
We have developed a validated cryopreservation process for the long-term storage of MSC, that allows multiple doses of NurOwn® to be
created from a single bone marrow harvest procedure in the multi-dose clinical trials and to avoid the need for patients to undergo
repeated bone marrow aspiration. A validation study was conducted in 2017 comparing NurOwn® derived from fresh MSC to those
derived from cryopreserved MSC. Company scientists were successful in showing that the MSC can be stored in the vapor phase of
liquid nitrogen for prolonged periods of time, while maintaining their characteristics. Cryopreserved MSC are capable of differentiating
into NurOwn®, similar to the NurOwn® derived from fresh MSC from the same patient/donor, prior to cryopreservation and maintain
their key functional properties including immunomodulation and neurotrophic factor secretion.
We contracted with City of Hope's Center for Biomedicine and Genetics to manufacture clinical supplies of NurOwn® adult stem cells
for our Phase 3 clinical study. City of Hope supported the manufacturing of NurOwn® and placebo for the participants treated in the
Phase 3 study. The Connell and O’Reilly Cell Manipulation Core Facility at the Dana Farber Cancer Institute (DFCI) in Boston was also
contracted to manufacture NurOwn® and placebo for our Phase 3 ALS clinical study participants and commenced manufacturing in
October 2018. DFCI core manufacturing facility also supplied NurOwn® for our Phase 2 PMS study.
On October 22, 2020, we announced a partnership with Catalent, the leading global provider of advanced delivery technologies, to
manufacture NurOwn®, which has been evaluated for the treatment of ALS in our Phase 3 clinical trial. If we decide to file a BLA and
are granted approval, Catalent will be our partner for manufacturing commercial quantities of NurOwn® to treat patients with ALS. Our
technology transfer to Catalent has been successfully completed and will allow for continuous supply of NurOwn® for the Expanded
Access program and for future clinical trials. Our partnership with R&D to help us establish in-house manufacturing capabilities will
accelerate once a regulatory pathway is clear.
We currently lease two GMP certified manufacturing facilities in Jerusalem, Israel at Hadassah Medical Center and in Tel Aviv at the
Sourasky Medical Center to manufacture NurOwn®. These two facilities more than double our capacity to manufacture and ship
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NurOwn® into the EU and local Israeli markets. In addition, we currently lease a GMP certified manufacturing facility in Jerusalem,
Israel. On July 27, 2021, we announced the approval of GMP certification for a second production site in Israel from the Israel Ministry
of Health (MOH) for three state-of-the-art cleanrooms leased by us at the Tel Aviv Sourasky Medical Center (“Sourasky Hospital”). The
GMP approval confirms that these cleanrooms are compliant with Israeli GMPs, which are aligned with European Union (EU) GMPs,
and more than doubles the Company’s capacity to manufacture and ship NurOwn® into the EU and local Israeli markets. These
partnerships will ensure an ongoing cGMP clinical supply of NurOwn® and enable us to provide rapid treatment access to patients if we
obtain regulatory approval.
On December 7th, 2021, we and Catalent announced completion of technology transfer for NurOwn® manufacturing at the Catalent’s
cell therapy facility in Houston, Texas.
Meetings with the FDA and FDA Senior Management
In July 2019, the BrainStorm management team was invited to participate in a special in-person, high-level meeting with the senior
management of the FDA Drug and Biologics Centers and, ‘I AM ALS’, a grassroots ALS advocacy group advocating for an ALS cure.
FDA’s Dr. Peter Marks, Director of the Center for Biologics Evaluation and Research (CBER) and Dr. Janet Woodcock Director of the
Center for Drug Evaluation and Research (CDER) were in attendance with senior FDA staff. BrainStorm’s Phase 3 ALS principal
Investigators Dr. Robert Brown (Massachusetts Memorial Hospital, Worcester, Massachusetts) and Dr. Merit Cudkowicz (Massachusetts
General Hospital, Boston) joined by teleconference. The meeting’s purpose was to discuss BrainStorm’s ongoing Phase 3 ALS clinical
trial as well as efforts to speed treatment access to the ALS patient community. The meeting enabled an open and effective dialogue
between the FDA and BrainStorm, setting the stage for future meetings to explore practical options to quickly bring our investigational
treatment to those living with ALS.
On February 11, 2020,we announced that we held a high-level meeting with the FDA to discuss potential NurOwn® regulatory pathways
for approval in ALS. In the planned meeting with senior CBER leadership and several leading U.S. ALS experts, the FDA confirmed that
the Phase 3 ALS trial was collecting relevant data critical to the assessment of NurOwn® efficacy. The FDA indicated that they would
look at the "totality of the evidence" in the expected Phase 3 clinical trial data.
On February 9, 2021, we announced feedback on a Type-C Meeting with FDA on future NurOwn® manufacturing plans and to review
specific aspects of our planned manufacturing modifications to support the development of a semi-automated commercial manufacturing
process for NurOwn® (MSC-NTF cell). The meeting included a detailed review of the requirements for comparability testing to support
future modifications along with geographic considerations in the sourcing of starting materials and future manufacturing production. We
plan to incorporate feedback from the FDA meeting and our experience from Phase 3 manufacturing to finalize a robust comparability
plan that could enable semiautomatic manufacturing to be introduced at the appropriate time in the future. We also plan to finalize the
remaining steps necessary to proceed with running NurOwn® validation batches. The FDA also provided comments on several key
aspects of the current manufacturing process, which we will use as we continue our work to enable operations at our commercial
manufacturing partner, Catalent.
On February 22, 2021, we announced high-level FDA feedback on NurOwn® ALS Clinical Development Program. The FDA concluded
from their initial review that the current level of clinical data does not provide the threshold of substantial evidence that FDA is seeking
to support a BLA. In addition, the FDA advised that this recommendation does not preclude the Company from proceeding with a BLA
submission. We are in active consultation with principal investigators, ALS experts, expert statisticians, regulatory advisors, and ALS
advocacy groups to find the best path forward to provide NurOwn for ALS patients.
ALS Expanded Access Program
On December 14, 2020, we announced the NurOwn® Expanded Access Program (EAP) through which NurOwn® will be made
available for ALS patients who completed all Phase 3 scheduled treatments and follow-up assessments and meet specific eligibility
criteria.
The protocol for the EAP was developed in partnership with the FDA to provide access to NurOwn® for Phase 3 clinical trial
participants who meet specific eligibility criteria. Initially, patients less severely affected by ALS, as measured by ALSFRS-R, will be
the first to receive treatment. This approach is informed by recently announced top-line data from the Company's Phase 3 clinical trial.
According
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to the FDA, EAPs, alternatively known as "compassionate use" programs, provide a pathway for patients to receive an investigational
medicine for a serious disease or condition outside of a clinical trial.
Through the EAP, the six clinical centers participating in the Phase 3 NurOwn® trial each had the opportunity to treat ALS patients who
completed the trial. These six centers are: University of California, Irvine; Cedars-Sinai Medical Center; California Pacific Medical
Center; Massachusetts General Hospital; University of Massachusetts Medical School; and the Mayo Clinic. EAP treatment of ALS
patients who have completed the Phase 3 clinical trial will not interfere with data or regulatory timelines. The Cell Manipulation Core
Facility (CMCF) at the Dana Farber Cancer Institute manufactured the investigational therapy, assisted by on-site BrainStorm personnel.
In the course of 2021, 10 eligible patients that had completed the Phase 3 study, were enrolled in the EAP at the six participating medical
centers to receive three additional doses of NurOwn® eight weeks apart. Eight patients completed the program receiving all three
treatment doses. Two participants withdrew consent after receiving two treatment doses. There were no serious adverse events (SAEs) in
the treated participants.
On December 27, 2021, we announced plans for a dosing extension of NurOwn® for participants who completed the Expanded Access
Protocol. The FDA recommended that Brainstorm submit an EAP protocol amendment to provide additional dosing for these participants
. Under the original EAP protocol, participants who had completed the Phase 3 NurOwn® trial and who met specific eligibility criteria
had the opportunity to receive 3 doses of NurOwn®. Under the amended EAP protocol, these eligible participants will receive up to 3
additional doses. Data collected from the original EAP treatments informed the decision to move forward with additional doses for
participants who completed it.
Patient Access Programs (ALS)
The Company, had worked collaboratively with the Tel Aviv Sourasky Medical Center (Ichilov Hospital), to treat ALS patients with
NurOwn®, under the Israel Hospital Exemption (HE) regulatory pathway for Advanced Therapy Medicinal Products (ATMP), which
was adopted by the Israeli MoH from the EMA regulation. Between Q1, 2019 and Q4, 2021, the Company enrolled and treated 12 ALS
patients with NurOwn®, under the HE pathway. Thus far, the Company has received $3.4 million in gross proceeds in connection with
the treatment of the aforementioned patients.
NurOwn® in Progressive Multiple Sclerosis (PMS)
On December 15, 2018, the FDA approved the Company’s IND to conduct a Phase 2 open label trial of repeated intrathecal
administration of NurOwn® in PMS (www.clinicaltrials.gov Identifier NCT03799718). The study entitled “A Phase 2, open-label,
multicenter study to evaluate the safety and efficacy of repeated administration of NurOwn® (Autologous Mesenchymal Stem Cells
Secreting Neurotrophic Factors; MSC-NTF cells) in participants with Progressive Multiple Sclerosis (PMS)” was designed to recruit 20
PMS participants at 5 leading U.S. Multiple Sclerosis centers.
On December 18, 2019, the clinical trial independent Data Safety Monitoring Board (DSMB) for the U.S. Phase 2 PMS study completed
the first, pre-specified interim analysis, of safety outcomes for the first 9 participants enrolled in the study. After careful review of all
available clinical trial data, the DSMB unanimously concluded “the study should continue as planned without any protocol
modification”.
In August 2021, the clinical trial independent Data Safety Monitoring Board (DSMB) for the U.S. Phase 2 PMS study issued an end-of-
study statement concluding that, based on the data, the procedures and treatment involved in BCT-101-US were relatively safe and
tolerable. Given that the study was “open label” with no active comparator arm(s), it was not possible to evaluate efficacy, except
through comparison to non-contemporaneous natural history data sets or to prior clinical trials of similar populations. Therefore, no
evaluation of potential risk/benefit could be done.
Phase 2 PMS Clinical Trial
On March 24, 2021, the Company announced positive top-line data in the Phase 2 study evaluating three repeated administrations of
NurOwn®, each given 2 months apart, as a treatment for PMS. The 28-week open-label Phase 2 clinical trial enrolled 20 primary
and secondary progressive MS patients based on the 2017 revised McDonald Criteria, ages 18-65, with baseline Expanded Disability
Status Scale (EDSS) scores between 3-6.5, without evidence of relapse within 6 months of enrollment, able to walk 25 feet in 60
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seconds or less and were permitted to be on a stable dose of disease modifying therapy. Of the 20 patients enrolled, 18 were treated
and 16 (80%) completed the study. Two patients discontinued related to procedure-related AEs. There were no study deaths or AEs
related to multiple sclerosis worsening. The mean age of study patients was 47, 56% were female, and mean baseline EDSS score
was 5.4. The clinical trial compared clinical efficacy outcomes with a 48-patient matched clinical cohort from the Comprehensive
Longitudinal Investigations in MS at the Brigham & Woman’s Hospital (CLIMB Study). MS Function and Cognition measures in
the top-line results included the timed 25-foot walk (T25FW); 9-hole peg test (9-HPT); Low Contrast Letter Acuity (LCLA);
Symbol Digit Modality Test (SDMT); and the 12 item MS Walking Scale (MSWS-12).
Key findings from the trial were as follows:
● Prespecified 25% improvements in the timed T25FW and 9-HPT (combined average) from baseline to 28 weeks were
observed in 14% and 13% of NurOwn® treated patients, respectively, and improvement in 9-HPT (combined average)
was observed in 0% of the pre-specified matched historical controls in the CLIMB registry.
● 38% of NurOwn® treated patients showed at least a 10-point improvement in the MSWS-12 from baseline to week 28,
a patient reported outcome that evaluates walking function.
● 47% of NurOwn® treated patients showed at least an 8-letter improvement across 28 weeks in the LCLA binocular
1.25%, a visual function test. Additionally, 27% of NurOwn® treated patients showed at least an 8-letter improvement
across 28 weeks in the LCLA binocular 2.5%,
● 67% of NurOwn® treated patients showed at least a 3-point improvement in the SDMT, a measure of cognitive
processing.
● NurOwn® treated patients showed a mean improvement from baseline of 10% in T25FW and a 4.8% improvement
from baseline on the 9-HPT dominant hand, compared to 1.8% and 1.4% worsening respectively in matched historical
controls from the CLIMB registry.
● NurOwn® treated patients showed a 6% improvement from baseline in MSWS-12.
All results reported are based on observed data. Cerebrospinal fluid (CSF) biomarkers were obtained at 3 consecutive time points, just
prior to each intrathecal administration of NurOwn®. We observed increases in neuroprotective molecules (VEGF, HGF) and decreases
in neuroinflammatory biomarkers (MCP-1, and Osteopontin).
Additionally, we completed secondary efficacy data and detailed CSF and blood biomarker analyses. We presented a detailed summary
of the study outcomes at the 37th Congress of the ECTRIMS on October 14, 2021 and expect to publish our findings in a peer reviewed
journal and consider how best to advance NurOwn® as an innovative treatment option in PMS.
On November 14, 2019, we received a $495,330 grant from the National Multiple Sclerosis Society, through its Fast Forward program,
to advance BrainStorm’s Phase 2 open-label, multicenter clinical trial of repeated intrathecal administration of NurOwn® in participants
with progressive Multiple Sclerosis. As of December 31, 2021, we received $396,264 on account of the grant .
NurOwn® in Alzheimer’s Disease (AD)
On June 24, 2020, we announced a new clinical program focused on the development of NurOwn® as a treatment for Alzheimer’s
disease, or AD. We are currently evaluating next steps based on emerging scientific insights and the changing regulatory landscape for
AD following the recent FDA decision on Aducanumab.
While many Alzheimer's therapies have focused on a single target such as tau or beta-amyloid, we believe NurOwn® has the capability
to simultaneously target multiple relevant biological pathways and bring a comprehensive approach to this multifactorial disease.
Importantly, NurOwn®’s mechanism of action may allow the therapy to enable synergistic combinations with anti-tau or anti-beta-
amyloid treatments, further underscoring its potential to address critical unmet needs in AD. In such a complex disease, addressing
inflammation and neuroprotection is an innovative approach and a first in the world for this technology.
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Non-Dilutive Funding
In July 2017, we were awarded a grant in the amount of $15,912,390 from the California Institute for Regenerative Medicine (CIRM) to
aid in funding the Company’s pivotal Phase 3 study of NurOwn®, for the treatment of ALS. We received $12,550,000 of the CIRM grant
from 2017 2019: $9,050,000 from 2017 through 2018, and an additional $3,500,000 in 2019. On March 16, 2020, we received
$2,200,000 from CIRM for achieving our pre-determined milestones. In July 2020, we received an additional $700,000 for making
further progress in our Phase 3 study. On December 1, 2020, we received our final payment of $462,390. We have now received in full
the total amount of the $15,912,390 grant funding awarded by CIRM. The grant does not bear a royalty payment commitment nor is the
grant otherwise refundable.
On November 14, 2019, we were awarded a $495,330 grant from the National Multiple Sclerosis Society (NMSS), through its Fast
Forward program, for serum and CSF biomarkers analysis in BrainStorm’s Phase 2 open-label, multicenter clinical trial of repeated
intrathecal administration of NurOwn® in participants with PMS. As of December 31, 2021, we have received $396,264 out of the
$495,330 awarded.
On April 3, 2020, we announced that our wholly owned subsidiary, BrainStorm Cell Therapeutics Ltd., has been awarded a new non-
dilutive grant of approximately $1.5 million by the Israel Innovation Authority (“IIA”). The grant enables the Company to continue
development of advanced cellular manufacturing capabilities, furthers development of MSC-NTF derived exosomes as a novel
therapeutic platform, and will ultimately enable BrainStorm to expand the therapeutic pipeline in neurodegenerative disorders. As of
December 31, 2021, we have received $1.3 million out of the $1.5 million awarded.
On June 9, 2020, we announced that The ALS Association and I AM ALS have awarded us a combined grant of $500,000 to support an
ALS biomarker research study. The grant will be used to draw insights from data and samples collected from patients who participated in
BrainStorm’s Phase 3 clinical trial and treated with NurOwn®, and to further the understanding of critical biomarkers associated with
treatment response for people with ALS. As of December 31, 2021, we have received $200,000 out of $500,000 awarded.
Intellectual Property
A key element of our overall strategy is to establish a broad portfolio of patents and other methods described below to protect its
proprietary technologies and products. BrainStorm is the sole licensee or assignee of 27 granted patents, and 23 patent applications in the
United States, Canada, Europe, Israel and Brazil, as well as in additional countries worldwide, including countries in the Far East and
South America (in calculating the number of granted patents and patent applications, each European patent validated in multiple
jurisdictions was counted as a single patent).
On February 18, 2020, the U.S. Patent and Trademark Office (USPTO) issued U.S. Patent No. 10,564,149 titled ‘Populations of
Mesenchymal Stem Cells That Secrete Neurotrophic Factors’. The allowed claims cover a pharmaceutical composition for MSC-NTF
cells secreting neurotrophic factors (NurOwn®) comprising a culture medium as a carrier and an isolated population of differentiated
bone marrow-derived MSCs that secrete neurotrophic factors.
On June 3, 2020, the European Patent Office (EPO) granted European patent No. 2880151 titled ‘Methods of Generating Mesenchymal
Stem Cells which secrete Neurotrophic Factors’. The allowed claims cover the method for manufacturing MSC-NTF cells (NurOwn®).
On September 1, 2020, the Israeli Patent Office issued Israeli Patent No. 246943 titled ‘Method of Qualifying Cells’. The granted claims
cover a method of qualifying whether a cell population is a suitable therapeutic for treating Amyotrophic Lateral Sclerosis (ALS) and an
isolated population of cells that secrete neurotrophic factors which are qualified useful as a therapeutic for treating ALS.
On September 16, 2020, the Company announced that the Japanese Patent Office (JPO) has granted Brainstorm's Japanese Patent No.
6,753,887, titled: "Methods of Generating Mesenchymal Stem Cells Which Secrete Neurotrophic Factors". The allowed claims cover a
method of generating cells which secrete neurotrophic factors from human undifferentiated mesenchymal stem cells (MSCs) derived
from the bone marrow of a single donor. The said neurotrophic factors includes: brain derived neurotrophic factor (BDNF); glial derived
neurotrophic factor (GDNF); hepatocyte growth factor (HGF); and vascular endothelial growth factor (VEGF).
On December 15, 2020, the Canadian Patent office sealed Patent No. 2,937,305 titled ‘Pharmaceutical composition comprising bone-
marrow derived mesenchymal stem cells’. The granted claims include a pharmaceutical composition for NurOwn® (MSC-NTF cells,
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Mesenchymal Stem Cells secreting Neurotrophic Factors), comprising a culture medium as a carrier and an isolated population of
differentiated bone marrow-derived MSCs that secrete neurotrophic factors
On 22 December 2020 the U.S. Patent and Trademark Office (USPTO) issued U.S. Patent No. 10,869,899 titled: Isolated cells and
populations comprising same for the treatment of CNS diseases. Granted claims cover an isolated cell population secreting GDNF, a
pharmaceutical composition comprising the isolated cells, and a device comprising the pharmaceutical composition, including a device
that is adapted for administration of the isolated cell population into the spinal cord
On February 19, 2021, the Hong Kong patent office sealed Patent No. HK1209453 titled ‘Methods of Generating Mesenchymal Stem
Cells which secrete Neurotrophic Factors’. Allowed claims cover the method for manufacturing MSC-NTF cells (NurOwn®).
On November 30, 2021, the US Patent and Trademark Office (USPTO) issued US Patent No. 11,185,572 titled ‘Mesenchymal stem cells
for the treatment of CNS diseases’. The granted claims are for a method of treating a disease selected from the group consisting of
Parkinson’s disease, amyotrophic lateral sclerosis (ALS), Alzheimer’s disease, stroke and Huntington’s disease using MSC-NTF cells
(NurOwn).
Patents protecting NurOwn® have been issued in the United States, Canada, Japan, Europe, Hong Kong, Brazil and Israel.
Recent Scientific and Industry Presentations
Between October 12-16, 2020, Dr. Stacy Lindborg, Ph.D., delivered an on-demand webinar at the 2020 Cell & Gene Meeting on the
Mesa, held virtually.
On October 20, 2020, the Company presented a poster titled, "MSC-NTF (NurOwn®) Exosomes: A Novel Therapeutic Modality in the
Mouse LPS-induced ARDS model Analysis" at the NYSCF Conference Meeting, being held virtually.
On December 9, 2020, the Company presented results from the Company's placebo controlled, randomized, double-blind Phase 3 trial
evaluating NurOwn® (MSC-NTF cells) as a treatment for ALS at the 31st International Symposium on ALS/MND virtual symposium.
On January 21, 2021, Dr. Ralph Kern, MD MHSc presented results from the Company’s placebo controlled, randomized, double-blind
Phase 3 trial evaluating NurOwn® (MSC-NTF cells) as a treatment for ALS at the California ALS Research Summit.
On February 26, 2021, Dr. Stacy Lindborg, PhD, presented at the SVB Leerink 10th Global Healthcare Conference.
On May 25, 2021, we presented a poster titled, “Molecular Mechanisms Underlying MSC-NTF (NurOwn®) Exosome Benefits in a
Mouse LPS-induced ARDS Model” at the ISCT 2021 New Orleans Virtual Meeting.
On October 6, 2021 we announced that a scientific abstract titled “CSF biomarker correlations with primary outcome in NurOwn Phase 3
clinical trial” was presented as a scientific poster at the fully digital 2021 Northeast Amyotrophic Lateral Sclerosis Consortium®
(NEALS) conference.
Between October 12-14, and October 19-20, 2021 Stacy Lindborg, Ph.D. delivered a presentation (which was made available via virtual
platform) at the 2021 Cell & Gene Meeting on the Mesa, which was held as a hybrid conference. Dr. Lindborg’s presentation highlighted
the expansion of Brainstorm’s technology portfolio to include autologous and allogeneic product candidates, covering multiple
neurological diseases. The most progressed clinical development program, which includes a completed Phase 3 trial of NurOwn® in
ALS patients, remains the highest priority for Brainstorm. Dr. Lindborg emphasized that Brainstorm is committed to pursuing the best
and most expeditious path forward to enable patients to access NurOwn®.
On October 14, 2021 the findings from the Phase 2 PMS study were presented by Dr. Jeffrey Cohen, Director of Experimental
Therapeutics at the Cleveland Clinic Mellen Center for Multiple Sclerosis, as an oral presentation at the fully digital 37th Congress of the
ECTRIMS. The study achieved the primary endpoint of safety and tolerability. It demonstrated a reduction of neuroinflammatory
biomarkers and an increase in neuroprotective biomarkers in the cerebrospinal fluid (CSF) and consistent improvement across Multiple
Sclerosis functional outcome measures, including measures of walking, upper extremity function, vision and cognition.
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Research and Development
We are actively engaged in research and development to evaluate the potential for clinical development of NurOwn® and MSC-NTF
derived Exosomes in various neurodegenerative disorders, neurodegenerative eye disease and acute respiratory distress syndrome
(ARDS). MSC-NTF derived Exosomes are an example of ongoing research in additional specialized derivative cell products. Exosomes
are extracellular nano-vesicles (secreted by the cells) that carry various molecular components of their cell of origin, including nucleic
acids, proteins and lipids. Exosomes can transfer molecules from one cell to another, thereby mediating cell-to-cell communication,
ultimately regulating many cell processes, which are suitable for clinical applications in multiple neurodegenerative diseases. NurOwn®
derived exosomes may possess unique features for the enhanced delivery of therapeutics to the brain, due to their ability to cross the
blood brain barrier and to penetrate the brain and spinal cord.
The exosome research efforts are primarily focused on manufacturing of MSC-NTF exosomes from bone marrow derived MSC:
1. Developing and optimizing large scale cell culture processes using bioreactors, to generate exosomes.
2. Developing advanced scalable purification GMP methods that can be applied to commercial use.
3. Quantification, characterization of phenotype and exosome cargo.
4. Assessment of MSC-NTF exosomes potency and stability.
5. Establishment of a method for exosomes modification.
6. Preclinical experiments in neurodegenerative and lung injury models.
NurOwn® derived exosomes have the potential to treat acute respiratory distress syndrome (ARDS) due to their ability to penetrate deep
tissues and decrease the inflammatory response. ARDS is a type of respiratory failure associated with widespread inflammation and lung
damage mediated by dysregulated cytokine production and is one of the severe features of COVID-19.
MSC exosomes may be delivered intravenously or directly into the lungs via intratracheal administration have several practical
advantages over cellular therapy including ease of storage, stability, formulation and low immunogenicity.
In a preclinical study, we evaluated MSCs and NurOwn® derived exosomes in an LPS ARDS-mouse model, relevant to severe acute
lung injury. The results from the study showed that intratracheal administration of NurOwn® derived exosomes resulted in a statistically
significant improvement in multiple lung parameters. These included the clinically relevant factors: functional lung recovery, reduction
in pro-inflammatory cytokines and most importantly, attenuation of lung damage. Moreover, MSC-NTF cell derived exosomes exhibited
a superior effect when compared to treatment with exosomes derived from naïve MSCs from the same donor. On January 20, 2021, we
announced the peer-reviewed publication of this preclinical study in the journal Stem Cell and Research Therapy. The study, entitled
"MSC-NTF (NurOwn®) exosomes: a novel therapeutic modality in the mouse LPS-induced ARDS model," evaluated the use of
NurOwn® (MSC-NTF cell) derived exosomes in a mouse model of acute respiratory distress syndrome (ARDS).
On May 25, 2021, we made a scientific presentation of NurOwn® Exosome preclinical ARDS data at the ISCT 2021 New Orleans
Virtual Meeting demonstrating that intrathecal administration of NurOwn-derived exosomes resulted in statistically significant
improvements in multiple lung parameters in a mouse model of acute respiratory distress syndrome (ARDS).
A poster titled, “Therapeutic Benefits of MSC-NTF (NurOwn®) Exosomes in Acute Lung Injury Models” was presented on October 19,
2021 at the NYSCF 2021 Virtual Meeting, which was held on October 19-20, 2021. Results in two different acute lung injury models
showed that the beneficial effects of intratracheal administration of Exo MSC-NTF (MSC-NTF derived exosomes) were more active than
Exo MSC (MSC-derived Exosomes) in multiple parameters, including increase in blood oxygen saturation and reduction in lung
pathology, inflammatory infiltration and levels of proinflammatory cytokines in bronchoalveolar lavage fluid (BALF), in addition to
reduction of lung fibrosis in the Bleomycin model.
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The observed positive preclinical results suggest that intratracheal administration of Exo MSC-NTF may have clinical potential as a
therapy for acute lung related pathologies and has the potential to modify physiological, pathological, and biochemical outcomes with
greater activity than sEVs isolated from naïve MSCs.
For the completed multidose clinical studies in ALS and PMS, the Company has improved the efficiency of NurOwn® production and
improved its stability, allowing manufacturing to take place at centralized clean room facilities from which NurOwn® is distributed to
the clinical trial sites, where the cells are then administered to patients. The Company is also engaged in several research initiatives to
further improve and scale-up manufacturing capacity and extend the shelf life of NurOwn®.
Corporate Information
We are incorporated under the laws of the State of Delaware. Our principal executive offices are located at 1325 Avenue of Americas,
28th Floor, New York, NY 10019, and our telephone number is (201) 488-0460. We also maintain an office in Petach Tikva, Israel. We
maintain a website at http://www.brainstorm-cell.com. The information on our website is not incorporated into this Annual Report on
Form 10-K.
History
In 2004, the Company entered into a research and license agreement with Ramot to acquire certain stem cell technology, commenced
development of novel cell therapies for neurodegenerative diseases, and discontinued its previous business selling digital data recorders.
The Company was reincorporated in the State of Delaware on November 15, 2006, and previously was incorporated in the State of
Washington. In October 2004, the Company formed the Israeli Subsidiary. The Israeli Subsidiary formed wholly owned subsidiaries
Brainstorm Cell Therapeutics UK Ltd., in the United Kingdom on February 19, 2013 (currently inactive), Advanced Cell Therapies Ltd.
in Israel on June 21, 2018 and Brainstorm Cell Therapeutics Limited in Ireland on October 1, 2019. A reverse stock split of the
Company’s shares of Common Stock by a ratio of 1-for-15 was effected after market close on September 15, 2014, in connection with
the September 30, 2014 listing of the Company’s Shares of Common Stock on the Nasdaq Capital Market. Unless otherwise indicated,
all share numbers and exercise prices in this Annual Report on Form 10-K are split-adjusted.
The Company’s Common Stock trades on the Nasdaq Capital Market under the ticker symbol “BCLI.”
Company Business Strategy
Our business strategy is to develop and commercialize NurOwn® for the treatment of neurodegenerative diseases. Our highest priority is
to obtain regulatory approval of NurOwn® for ALS and the rapid execution of our U.S. open-label, multicenter Phase 2 clinical trial in
PMS and planned multi-national Phase 2 clinical trial in Europe for AD. Positive top-line clinical trial results from our Phase 2 PMS trial
evaluating three repeated intrathecal administrations of NurOwn®, each given 2 months apart, as a treatment for PMS was announced on
March 24, 2021.
We are leveraging our strong existing pre-clinical data to advance innovative IND-enabling pre-clinical programs in several
neurodegenerative disease with high unmet medical need. We have developed NurOwn® exosome-based platform-technology to expand
our technology platform and pipeline. The most advanced preclinical data using this platform technology for ARDS, one of the most
severe complications of COVID-19 pandemic, showed that intratracheal administration of exosomes extracted from MSC’s using
NurOwn® (MSC-NTF) resulted in statistically significant improvement in multiple lung parameters in a mouse model. MSC-NTF
exosomes were superior to control in reducing ARDS markers, including physiological damage as well as increasing oxygenation levels.
With this study, the Company has successfully completed its first milestone in developing an innovative exosome-based platform-
technology for the treatment of severe ARDS. On January 20, 2021 we announced the peer-reviewed publication of this preclinical study
in the journal Stem Cell and Research Therapy. The study, entitled "MSC-NTF (NurOwn®) exosomes: a novel therapeutic modality in
the mouse LPS-induced ARDS model," evaluated the use of NurOwn® (MSC-NTF cell) derived exosomes in a mouse model of acute
respiratory distress syndrome (ARDS).
We are also engaged in strategic partnerships to expand our cGMP capabilities. Our technology transfer to Catalent has already been
completed and will allow for continuous supply of NurOwn® for future clinical trials and initial commercialization, if approved. Our
partnership with RR&D, to help us establish in-house manufacturing capabilities, will accelerate once a regulatory pathway is clear.
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These partnerships will ensure an ongoing cGMP clinical supply of NurOwn® and enable us to provide rapid treatment access to patients
if we obtain regulatory approval.
We may also choose to seek a strategic partnership with a pharmaceutical or biotechnology company for the global commercialization of
NurOwn® for ALS, if approved, or to support the execution of additional BLA-enabling clinical programs in other neurodegenerative
diseases.
NurOwn® in CNS Disease
Our highest priority is to obtain regulatory approval of NurOwn® for ALS. We also strategically focused on fully executing the clinical
development of NurOwn® in PMS, reviewing the optimal approach in AD as well as continuing our pre-clinical evaluation of the
NurOwn® technology platform in other CNS disorders based on our broad preclinical experience in ALS, PMS, AD, Huntington’s
Disease and Autism.
Amyotrophic Lateral Sclerosis (ALS)
ALS, often referred to as “Lou Gehrig's disease,” is a progressive neurodegenerative disease that primarily affects motor nerve cells in
the brain and the spinal cord. Motor neurons reach from the brain to the spinal cord and from the spinal cord to the muscles throughout
the body. The progressive degeneration of the motor neurons in ALS patients lead to progressive weakness, respiratory failure and
eventually, death. The median survival for ALS patients is between 2 and 5 years from the onset of symptoms. Across the world, the
prevalence of ALS is approximately 4-7 per 100,000. It is estimated that as many as 30,000 Americans have the disease at any given
time, with about 51,000 individuals affected in the territory of the European Single Market. Estimated annual treatment and health care
costs for advanced stage patients can be as high as $100,000-$200,000 per annum. Worldwide it is estimated that there are 450,000
patients with ALS.
Treatment decisions are typically determined by the patient's symptoms, preferences and the stage of the disease. Approved disease
modifying medications include:
* Riluzole –approved by the FDA to treat ALS. Riluzole extends the time to death or ventilation by several months; however, it
has not been shown to improve the daily functioning of ALS patients.
* Radicava (Edaravone) – a free radical scavenger- approved by FDA (May 2017) based on a single Phase 3 study carried out in
Japan.
Progressive Multiple Sclerosis (PMS)
Progressive Multiple Sclerosis (PMS) is characterized by the relentless accumulation of central nervous system injury due to peripheral
and compartmentalized inflammation, demyelination, axonal damage, and neuronal degeneration and results in increasing motor, visual,
and cognitive impairment and significant disability that impacts daily living, employment, and socioeconomic status. There is currently
no effective regenerative therapy for this disabling disease that affects approximately one million individuals in the US.
There are currently over 1.25 million people with PMS worldwide, with roughly 0.5 million of these patients located in the U.S. Over
10,000 new cases are diagnosed annually in the U.S., mostly affecting women between the ages of 20 and 50. Annual drug treatment
costs for PMS can be as much as $80,000 a year per patient.
The lack of safe and effective therapies in PMS, the intrinsic immunomodulatory properties of MSC-NTF cells and the potential of
MSC-NTF secreted neurotrophic factors to promote neuronal repair and remyelination makes NurOwn® an attractive treatment option to
evaluate in PMS.
Alzheimer’s Disease (AD)
Alzheimer’s Disease (AD) is the most common form of dementia, a progressive brain disease that slowly destroys memories and
thinking skills. The Alzheimer’s pathology starts 15-20 years before symptoms appear. Symptoms usually start with difficulty storing
and
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retrieving new information. In advanced stages, symptoms include confusion, as well as mood and behavior changes, and inability to
perform basic life tasks. Throughout the disease process there is a steady, unstoppable death of brain cells. This is a fatal disease with an
average time of 8 years from diagnosis to death. No cure exists, but medications and management strategies may temporarily improve
symptoms, in a modest fashion. Recently the FDA approved Aduhelm, a monoclonal antibody directed against amyloid for the treatment
of AD. The implications of Aduhelm approval on the AD treatment market is evolving and we are actively reviewing the implications on
the development of AD disease modifying therapies.
Over 5 million people in the U.S. currently have AD. The number of Americans with AD is projected to triple to 16 million by 2050. In
the EU, it is estimated that greater than 7.5 million people who currently have AD and is projected to reach over 13 million by 2050.
Worldwide about 50 million people have some form of dementia, and someone in the world develops dementia every three seconds.
Every 65 seconds someone in U.S. develops AD. By 2050 this is projected to be every 33 seconds. In the age group above 55, AD is the
most feared disease of all diseases including cancer. It is estimated that the potential healthcare cost savings from early diagnosis of AD
to be approximately $7.9 trillion.
Intellectual Property
We are committed to the protection of our technology and intellectual property with patents and other methods described below.
We are the sole licensee or assignee of 27 granted patents and 23 patent applications in the United States, Canada, Europe, and Israel, as
well as in additional countries worldwide, including countries in the Far East and South America (in calculating the number of granted
patents, each European patent validated in multiple jurisdictions was counted as a single patent).
On June 18, 2006, an International Patent Application (Publication No. WO 2006/134602) was filed entitled "Isolated Cells and
Populations Comprising Same for the Treatment of CNS Diseases." National phase applications were filed in many jurisdictions
including US and Europe.
On February 11, 2014, the U.S. Patent and Trademark Office (“USPTO”) granted US patent, 8,647,874 which claims priority from this
PCT application. This patent relates to the production method of the Company's proprietary stem cells induced to secrete large quantities
of neurotrophic factors.
On September 3, 2014, a European patent was granted by the European Patent Office (“EPO”) which claims priority from WO
2006/134602. This patent (No. 1893747) has been validated in the following European countries: CH, CZ, DE, DK, ES, FR, GB, IE, IT
and NL. The granted claims relate to the method of generating the cells.
On January 30, 2018, the U.S. Patent and Trademark Office (“USPTO”) granted US patent, No. 9,879,225 which claims priority from
this same PCT application This patent relates to methods of treating amyotrophic lateral sclerosis (ALS) and Parkinson's disease using
mesenchymal stem cells that secrete neurotrophic factors, specifically glial derived neurotrophic factor (GDNF).
On May 26, 2009, an International Patent Application (Publication No. WO 2009/144718) was filed entitled "Mesenchymal stem cells
for the treatment of CNS diseases". National phase applications were filed in US, Europe and Israel.
On March 4, 2014, we were granted U.S. Patent (No. 8,663,987) which claims priority from WO 2009/144718. The claims of this
granted patent relate to the composition of cells.
On August 6, 2013, an International Patent Application (Publication No. WO 2014/024183) was filed entitled "Methods of generating
Mesenchymal stem cells which secrete neurotrophic factors". National phase applications were filed in the US, Europe, Hong Kong,
Canada, Brazil, Japan and Israel.
A divisional patent application therefrom was granted as US Patent No. 8,900,574 on December 2, 2014. The claims of this granted
patent relate to a method of treating neurodegenerative disorders by administering MSC-derived cells which secrete BDNF and do not
secrete bNGF. The neurodegenerative diseases include Parkinson’s disease, amyotrophic lateral sclerosis (ALS) and Huntingdon’s
disease.
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A subsequent divisional patent application therefrom was granted on October 25, 2016 as United States Patent No. 9,474,787 titled
"Mesenchymal Stem Cells for the Treatment of CNS Diseases. The granted claims cover mesenchymal stem derived-cells that secrete
neurotrophic factors, including brain-derived neurotrophic factor (BDNF) and glial derived neurotrophic factor (GDNF), as well as
pharmaceutical compositions comprising these factors.
In September 2015, we were granted patent No. 209604 by Israel’s Patent Office for our application titled “Mesenchymal stem cells for
the treatment of CNS diseases " which claims priority from WO 2009/144718. The claims cover the cell composition itself, the method
of generating and the use of the cells for treating any CNS disease or disorder.
In July 2018, the European Patent Office ("EPO") granted a Europe-wide patent for Patent No 2285951, which claims priority from WO
2009/144718. The allowed claims cover methods of treating ALS using mesenchymal stem cells that secrete neurotrophic factors,
including brain derived neurotrophic factor (BDNF). This patent will provide protection for MSC-NTF cells (NurOwn®) in the EU
validated states until 2029.
In August 2018, the USPTO granted US Patent No 10,052,363 which relates to methods of treating ALS, Parkinson's disease and
Huntington Disease with NurOwn®. This patent will provide protection for MSC-NTF cells (NurOwn®) in the US until 2029.
On July 6, 2018, the Japanese Patent Office ("JPO") granted Japanese patent No. 6,362,596, entitled: 'Methods of Generating
Mesenchymal Stem Cells Which Secrete Neurotrophic Factors” which claims priority from WO 2014/024183. This patent will provide
protection for MSC-NTF cells (NurOwn®) in Japan until 2033. The allowed claims cover a method of generating cells which secrete
brain derived neurotrophic factor (BDNF), glial derived neurotrophic factor (GDNF), hepatocyte growth factor (HGF) and vascular
endothelial growth factor (VEGF).
On August 24, 2018, the U.S. Patent and Trademark Office (“USPTO”) granted US Patent No. 10,046,010 titled 'Methods of Generating
Mesenchymal Stem Cells Which Secrete Neurotrophic Factors'. Allowed claims cover the method for generating MSC-NTF cells
(NurOwn®) in industrial amounts for clinical practice. This patent will provide protection for MSC-NTF cells (NurOwn®) in the US
until 2033.
On October 10, 2018, the European Patent Office allowed the European Patent Application No. 13164650.7 titled “Mesenchymal stem
cells for the treatment of CNS diseases" which claims priority from WO 2009/144718. The allowed claims cover the isolated cells as
well as their use in the manufacture of a medicament for treating a CNS disease or disorder (selected from the group consisting of
Parkinson's, multiple sclerosis, epilepsy, amyotrophic lateral sclerosis, stroke, autoimmune encephalomyelitis, diabetic neuropathy,
glaucomatous neuropathy, Alzheimer's disease and Huntingdon's disease)
On December 21, 2018, the Israel Patent Office granted patent No. 237124 titled 'Methods of Generating Mesenchymal Stem Cells
Which Secrete Neurotrophic Factors'. The allowed claims cover the isolated population of cells, the method of manufacturing the cells,
and the use of the isolated population of cells for preparation of a medicament for treating a disease (consisting of a neurodegenerative
disease, a neurological disease and an immune disease etc.).
In March 2019, the European Patent Office ("EPO") granted a European-wide patent titled 'Mesenchymal Stem Cells for the treatment of
CNS Diseases.' The European Patent Application published in the European Patent Bulletin 19/13 on March 27, 2019, under Patent No.
2620493. The allowed claims cover the isolated cells as well as their use in the manufacture of a medicament for treating a CNS disease
or disorder, selected from the group consisting of Parkinson's, multiple sclerosis, epilepsy, amyotrophic lateral sclerosis, stroke,
autoimmune encephalomyelitis, diabetic neuropathy, glaucomatous neuropathy, Alzheimer's disease and Huntingdon's disease.
On August 27, 2019, the Canadian Intellectual Property Office granted Canadian Patent No. 2,877,223 entitled ‘Methods of Generating
Mesenchymal Stem Cells which secrete Neurotrophic Factors’. The allowed claims cover the method for generating the Mesenchymal
Stem Cells Secreting Neurotrophic Factors (MSC-NTF cells).
On September 16, 2019, the United States Patent and Trademark Office (USPTO) issued a Notice of Allowance for BrainStorm's new
US Patent Application, number: 15/113,105, titled: ‘Method of Qualifying Cells'. The allowed claims cover a pharmaceutical
composition for MSC-NTF cells secreting neurotrophic factors (NurOwn®) comprising a culture medium as a carrier and an isolated
population of differentiated bone marrow-derived MSCs that secrete neurotrophic factors. US Patent No. 10,564,149 for this application
was granted on February 18, 2020 and titled ‘Populations of Mesenchymal Stem Cells that secrete Neurotrophic Factors’.
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On October 21, 2019, the Japan Patent Office (JPO) issued a Decision to Grant Japanese Patent Application, number: 2016-548691,
titled: ‘Method of Qualifying Cells.’ The patent covers cell populations which are therapeutic for the treatment of ALS and the method of
qualifying the cells for therapeutic use.
On December 6, 2019, the Hong Kong patent office granted patent No. HK1182133 titled “Mesenchymal stem cells for the treatment of
CNS diseases" which claims priority from WO 2009/144718. The allowed claims cover the isolated cells as well as their use in the
manufacture of a medicament for treating a CNS disease or disorder, selected from the group consisting of: Parkinson's, multiple
sclerosis, epilepsy, amyotrophic lateral sclerosis, stroke, autoimmune encephalomyelitis, diabetic neuropathy, glaucomatous neuropathy,
Alzheimer's disease and Huntingdon's disease.
On January 9, 2020, the European Patent Office (EPO) communicated its intention to grant a European patent titled 'Methods of
Generating Mesenchymal Stem Cells which secrete Neurotrophic Factors' (Application No. 13767124.4). The allowed claims cover the
method for manufacturing MSC-NTF cells (NurOwn®).
On January 27, 2020, the Israeli Patent Office issued a Notice of Acceptance for Israeli patent application No. 246943 titled ‘Method of
Qualifying Cells'. The allowed claims cover the cells that secrete neurotrophic factors which are qualified to be useful as a therapeutic for
treating ALS and a method for qualifying said cell population.
On January 29, 2020, the European Patent Office (EPO) has communicated its intention to grant a European patent titled 'Methods of
Generating Mesenchymal Stem Cells which secrete Neurotrophic Factors'. The allowed claims cover the method for manufacturing
MSC-NTF cells (NurOwn®).
On February 18, 2020, the US Patent and Trademark Office (USPTO) issued US Patent No. 10,564,149 titled ‘Populations of
Mesenchymal Stem Cells That Secrete Neurotrophic Factors’. The allowed claims cover a pharmaceutical composition for MSC-NTF
cells secreting neurotrophic factors (NurOwn®) comprising a culture medium as a carrier and an isolated population of differentiated
bone marrow-derived MSCs that secrete neurotrophic factors.
On September 16, 2020, the Company announced that the Japanese Patent Office (JPO) has granted Brainstorm's Japanese Patent,
number: 6,753,887, titled: "Methods of Generating Mesenchymal Stem Cells Which Secrete Neurotrophic Factors". The allowed claims
cover a method of generating cells which secrete neurotrophic factors from human undifferentiated mesenchymal stem cells (MSCs)
derived from the bone marrow of a single donor. The said neurotrophic factors includes brain derived neurotrophic factor (BDNF); glial
derived neurotrophic factor (GDNF); hepatocyte growth factor (HGF); and vascular endothelial growth factor (VEGF).
On September 1, 2020, the Israeli Patent Office issued Israeli Patent No. 246943 titled ‘Method of Qualifying Cells’. The granted claims
include a cell population that secretes neurotrophic factors which is qualified useful as a therapeutic for treating ALS, and a method for
qualifying said population.
On December 15, 2020, the Canadian Patent office sealed Patent no. 2,937,305 titled ‘Pharmaceutical composition comprising bone-
marrow derived mesenchymal stem cells. The granted claims include a pharmaceutical composition for NurOwn® (MSC-NTF cells,
Mesenchymal Stem Cells secreting Neurotrophic Factors), comprising a culture medium as a carrier and an isolated population of
differentiated bone marrow-derived MSCs that secrete neurotrophic factors.
On January 18, 2022 the Brazilian Patent Office granted patent No BR112015001435-6 titled: "A method of generating cells which
secrete Brain Derived Neurotrophic Factor (BDNF), Glial Derived Neurotrophic Factor (GDNF), Hepatocyte Growth Factor (HGF) And
Vascular Endothelial Growth Factor (VEGF), wherein said cells do not Secrete Nerve Growth Factor (NGF)." The granted claims cover a
method of manufacturing MSC-NTF cells (NurOwn®).
Patents protecting NurOwn® have been issued in the United States, Canada, Japan, Europe, Hong-Kong,Brazil and in Israel.
Additional PCT patent applications have been filed and National phase applications are currently under examination in several
jurisdictions worldwide. Specifically, International Patent Application WO 2018/015945 was filed on July 17, 2017 and
WO/2019/198077 was filed on April 10, 2019.
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The following table provides a description of our key patents and patent applications and is not intended to represent an assessment of
claims, limitations or scope. In some cases, a jurisdiction is listed as both pending and granted for a single patent family. This is due to
pending continuation or divisional applications of the granted case.
Pending
Jurisdictions
Allowed
Jurisdictions
Granted
Jurisdictions
Europe, US
Expiry
Date
2030
Family
No.
1
2
3
4
5
6
7
Patent Name/ Int. App. No.
Isolated Cells and Populations Comprising Same for the
Treatment of CNS Diseases/PCT/IL2006/000699
Mesenchymal Stem Cells for The Treatment of CNS
Diseases PCT/ IL2009/000525
Methods of Generating Mesenchymal Stem Cells Which
Secrete Neurotrophic Factors / PCT/IL2013/050660
US
A Method of generating cells which secrete Brain Derived
Neurotrophic Factor (BDNF), Glial Derived Neurotrophic
Factor (GDNF), Hepatocyte Growth Factor (HGF) and
Vascular Endothelial Growth Factor (VEGF), wherein Said
cells do not Secrete Nerve Growth Factor (NGF)
Method of Qualifying Cells /PCT IL2015/050159
Populations of Mesenchymal Stem Cells that secrete
Neurotrophic Factors US 10,564,149
Pharmaceutical composition comprising bone-marrow
derived mesenchymal stem cells Canadian Patent no.
2,937,305
Methods of treating ALS PCT/IL2017/050801
Methods for diagnosing ALS
Cell-Type Specific Exosomes and Use Thereof
PCT/IL2019/050401
Methods and Compositions for Treating Lung Conditions
PCT/IL2021/050885
Europe, Hong
Kong, Brazil
US, Israel,
Japan, S.
Korea,
Australia,
Canada
Europe,
US, Europe,
Israel, Japan,
S. Korea,
Australia,
Canada
Publication #
WO
2022/018729
US, Israel,
Europe, Hong
Kong
US, Canada,
Japan, Israel,
Europe Hong
Kong
Brazil
US, Japan,
Israel
US
Canada
2032
2037
2037
2040
2040
2040
2042
2043
2046
Trademarks
NurOwn® is a registered trademark (application no. 85154891, filed October 18, 2010) for use in connection with “compositions of cells
derived from stem cells for medical purposes; stem cells for medical purposes.” US Trademark No. 4641441 for NurOwn® was
registered on November 18, 2014.
The patent applications of families #1 and #2 (see table above) as well as relevant know-how and research results are either licensed or
joint with Ramot. We intend to work with Ramot to protect and enhance our mutual intellectual property rights by filing continuations
and divisional patent applications. The current NurOwn® proprietary technology is fully owned by Brainstorm Cell Therapeutics Ltd.,
our wholly-owned subsidiary (the “Israeli Subsidiary”). All granted patents related to NurOwn® (MSC-NTF cells) manufacturing
process and clinical development (families #3 through #6) are fully assigned to and owned by Brainstorm Cell Therapeutics Ltd. New
discoveries arising in the course of research and development within the Company were and will be patented by us independently.
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Research and License Agreement with Ramot
We have maintained a commercial relationship with Ramot, the technology transfer group within Tel Aviv University, since July 2004,
when the Company and Ramot entered into a Research and License Agreement (the “Original Agreement”). The Original Agreement
was amended in both March and May of 2006, when the parties signed, respectively, an Amended and Restated Research and License
Agreement (the “Amended and Restated Agreement”) and Amendment Number 1 to the Amended and Restated Agreement. Thereafter,
the Company and Ramot entered into a Letter Agreement in December 2009 which further amended the Amended and Restated
Agreement by releasing the Company from various duties and obligations (including the Company’s commitment to fund three (3) years
of additional Ramot research - a financial commitment of $1,140,000), while converting other payments due and owing to Ramot by the
Company into shares of Common Stock. In December 2011, the Company assigned the Amended and Restated Agreement (as amended)
to its Israeli Subsidiary with the consent of Ramot, provided the Company agreed to guaranty the performance obligations of its Israeli
Subsidiary thereunder. The Amended and Restated Agreement was amended in both April 2014 (Amendment Number 2) and March
2016 (Amendment Number 3).
In addition to the foregoing, on April 30, 2014, the Israeli Subsidiary executed a consulting agreement (the “Offen Consulting
Agreement”) with Professor Offen of Tel Aviv University, which expressly replaced their previous agreement (signed in July 2004).
Pursuant to the Offen Consulting Agreement, Professor Offen granted our Israeli Subsidiary exclusive rights, title and interest in and to
all work product and deliverables resulting from the provision of his services thereunder, except that any new intellectual property arising
from this agreement would be deemed a joint invention that is jointly owned by both our Israeli Subsidiary and Ramot. No joint
inventions resulted from this consulting agreement and it was terminated on January 18, 2018.
The primary focus of our agreements (and subsequent amendments) with Ramot has and continues to be the commissioning of a group of
scientists within Tel Aviv University to carry out research in the area of the stem-cell technology referenced above, and the granting of
rights to the Company (and later our Israeli Subsidiary, after the assignment referenced above) in the inventions, know-how and results
procured from such research (the “Ramot IP”).
In consideration for the rights granted to our Israeli Subsidiary in and to the Ramot IP, our Israeli Subsidiary is required to pay Ramot
royalties ranging between three percent (3%) and five percent (5%) of all net sales realized from the exploitation of the Ramot IP, as well
as remittances of between twenty percent (20%) and twenty-five percent (25%) on revenues received from the sub-licensing of the
Ramot IP.
Pursuant to the third amendment of the Amended and Restated Agreement referenced above, Ramot agreed to convert the exclusive
licenses then-existing, to outright transfers and assignments of the Ramot IP, thereby granting our Israeli Subsidiary ownership thereof.
Government Regulation and Product Approval
We intend to pursue regulatory approval for our bone marrow derived differentiated neurotrophic-factor secreting cell products,
NurOwn®, for autologous transplantation in patients by neurosurgeons in medical facilities in the U.S., Europe, Japan and Israel.
In January 2013, the EMA Committee for Advanced Therapies designated NurOwn® as an Advanced Therapy Medicinal Product.
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U.S. Drug Development Process
The FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. Drugs are also
subject to other federal, state and local statutes and regulations. Biologics are subject to regulation by the FDA under the FDCA, the
Public Health Service Act, or the PHSA, and related regulations and other federal, state and local laws and regulations. Biological
products include a wide variety of products including vaccines, blood and blood components, gene therapies, tissue and proteins. Unlike
most prescription products made through chemical processes, biological products generally are made from human and/or animal
materials. To be lawfully marketed in interstate commerce, a biologic product must be the subject of a Biological License Application
(“BLA”), issued by the FDA on the basis of a demonstration that the product is safe, pure and potent, and that the facility in which the
product is manufactured meets standards to assure that it continues to be safe, pure and potent. The FDA has developed and is
continuously updating the requirements with respect to cell and gene therapy products and has issued documents concerning the
regulation of cellular and tissue-based products. Manufacturers of cell and tissue-based products must comply with the FDA’s current
good tissue practices, or GTP, which are FDA regulations that govern the methods used in, and the facilities and controls used for, the
manufacture of such products. The primary intent of the GTP requirements is to ensure that cell and tissue-based products are
manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease.
The process of obtaining regulatory approvals and ensuring compliance with appropriate federal, state, local and foreign statutes and
regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements
at any time during the product development process, approval process, or after approval, may subject an applicant to administrative or
judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical
hold, warning letters, product recalls, product seizures, product detention, total or partial suspension of production or distribution,
injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. The process required by the
FDA before a biological product or drug may be marketed in the United States generally involves the following:
* Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices or
other regulations;
*
*
*
*
Submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical
trials may begin;
Performance of adequate and well-controlled clinical trials according to Good Clinical Practices, or GCP, to establish the safety
and efficacy of the proposed biological product or drug for its intended use;
Submission to the FDA of a new drug application, or NDA, for a new drug; or a biologic license application for a new
biological product;
Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess
compliance with Good Manufacturing Practices, or cGMP, to assure that the facilities, methods and controls are adequate to
preserve the drug’s or biologic’s identity, strength, quality and purity; and
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FDA review and approval of the BLA or NDA.
The testing and approval process require substantial time, effort and financial resources and we cannot be certain that any approvals for
our stem cell therapies will be granted on a timely basis, if at all.
All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations.
These regulations include the requirement that all research subjects provide informed consent. Further, an institutional review board, or
IRB, must review and approve the plan for any clinical trial before it commences at any institution. An IRB considers, among other
things, whether the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The
IRB also approves the information regarding the clinical trial and the consent form that must be provided to each clinical trial subject or
his or her legal representative and must monitor the clinical trial until completed. Once an IND is in effect, each new clinical protocol
and any amendments to the protocol must be submitted to the IND for FDA review, and to the IRBs for approval.
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Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
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Phase 1. The product is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,
metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases, especially when the
product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in
patients having the specific disease.
Phase 2. Phase 2 trials involve investigations in a limited patient population to identify possible adverse effects and safety risks,
to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and the
optimal dosage and schedule.
Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population
at geographically dispersed clinical trial sites. These trials are intended to establish the overall risk/benefit ratio of the product
and provide an adequate basis for regulatory approval and product labeling.
Post-approval studies, also called Phase 4 trials, may be conducted after initial marketing approvals. These studies are used to obtain
additional experience from the treatment of patients in the intended therapeutic indication and may be required by the FDA as part of the
approval process.
Safety reports detailing the adverse events identified in the course of the clinical trials must be submitted annually to the FDA and safety
reports must be submitted to the FDA and the investigators for serious and unexpected side effects. Phase 1, Phase 2 and Phase 3 testing
may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial
at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.
Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in
accordance with the IRB’s requirements or if the stem cell therapy has been associated with unexpected serious harm to patients.
Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about
the chemistry and physical characteristics of the product and finalize a process for manufacturing the product in commercial quantities in
accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the stem
cell therapy and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the
final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that
the stem cell therapy does not undergo unacceptable deterioration over its shelf life.
The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process,
analytical tests conducted on the stem cell therapy, proposed labeling and other relevant information, are submitted to the FDA as part of
an NDA or BLA, requesting approval to market the product. The submission of an NDA or BLA is subject to the payment of substantial
user fees which may be waived under certain limited circumstances.
The approval process is lengthy and difficult and the FDA may refuse to approve a BLA or NDA if the applicable regulatory criteria are
not satisfied or may require additional clinical data or other data and information.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for
use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain
contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require Phase 4 testing which
involves clinical trials designed to further assess a drug’s or biologic’s safety and effectiveness after BLA or NDA approval and may
require testing and surveillance programs to monitor the safety of approved products that have been commercialized.
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Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a stem cell therapy intended to treat a rare disease or condition,
which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000
individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a stem cell
therapy available in the United States for this type of disease or condition will be recovered from sales of the product. Orphan product
designation must be requested before submitting an NDA or BLA. After the FDA grants orphan product designation, the identity of the
therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any
advantage in or shorten the duration of the regulatory review and approval process. However, orphan product designation does provide
the potential for a period of exclusivity and we may be eligible for grant funding to defray costs of clinical trial expenses, tax credits for
clinical research expenses and potential exemption from the FDA application user fee.
If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such
designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to
market the same stem cell therapy for the same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan
designation is revoked; (ii) its marketing approval is withdrawn; (iii) the orphan exclusivity holder consents to the approval of another
applicant’s product; (iv) the orphan exclusivity holder is unable to assure the availability of a sufficient quantity of drug; or (v) a showing
of clinical superiority to the product with orphan exclusivity by a competitor product. Competitors, however, may receive approval of
different products for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a
different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block the approval of one of our
products for seven years if a competitor obtains approval of the same stem cell therapy as defined by the FDA or if our stem cell therapy
is determined to be contained within the competitor's product for the same indication or disease. If a stem cell therapy designated as an
orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product
exclusivity. Orphan drug status in the European Union has similar but not identical benefits in the European Union.
In February 2011, we received Orphan Drug Designation for NurOwn® for the treatment of ALS in the United States. In July 2013, we
received Orphan Medicinal Product Designation for NurOwn® for the treatment of ALS from the European Commission. Orphan
designation grants a 10-year marketing exclusivity in the EU for the designated indication, as well as several other regulatory incentives.
ACT for ALS and Congressional Hearing on Advancing Treatments and cures for Neurodegenerative Diseases including ALS
The U.S. House of Representatives Subcommittee on Health of the Committee on Energy and Commerce held a hearing on July 29,
2021. The hearing was entitled, "The Path Forward: Advancing Treatments and Cures for Neurodegenerative Diseases." The aim of the
hearing was to discuss the challenge of advancing treatments and cures for neurodegenerative diseases to ensure collaboration and
multidiscipline coordination between FDA, NIH, academic researchers, private drug companies, and patients. Leading ALS neurologists
and advocates testified regarding the immense unmet medical need in ALS and the urgency to exercise for regulatory flexibility when
evaluating therapies for 100% fatal and heterogenous diseases such as ALS. The following are excerpts from the testimonies from the E
and C Hearing:
Jinsy Andrews, MD, MSc representing Herself, The ALS Association, and Columbia University at this hearing stated, “We have seen the
ability for regulatory flexibility and speed in other areas. The reality is that ALS is 100 percent fatal. The pipeline and our understanding
have grown significantly in the last five years.” “Approving a new drug for ALS — or Alzheimer’s or other diseases — can have a
bigger impact than just providing people with a single new treatment. New approvals can spur innovation and investment by industry in a
disease space with few available treatments available. But in cases of fatal neurological diseases without cures, when a promising drug
comes along that has the potential to retain function and extend life, patients’ needs are paramount”
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Merit Cudkowicz, MD Chair, Dept of Neurology, Mass General Hospital Director Sean M. Healey & AMG Center for ALS, Mass
General Hospital Julianne Dorn Professor of Neurology, Harvard Medical School testified the following at this hearing, “We must
disrupt the current, slow approach to therapy development and partner expertise from our field and other fields with the FDA to think
more creatively and become more effective in choosing the best treatments for the right person at the right time. We have begun to do
this with the AMX035 (Centaur), NurOWN and Toferson (SOD1 gene therapy) trials and the new Healey ALS Platform Trial.”
Specifically, she remarked , “We have heard reports from people in the NurOWN trial and expanded access program of improvements in
function. This is not something we typically see or hear in ALS. There were important changes in important biomarkers in the phase 3
trial and better responses in people who started treatment in an earlier stage of the disease. The manuscript with full results is under
review. Continued dialogue with the FDA on how to identify subsets of responder is critical as it is very likely that this treatment and
many future treatments will work better in one group of people than another.”
Brian Wallach & Sandra Abrevaya Co-Founders, I AM ALS cited the 2019 ALS therapy Guidance document in their testimony and
stated the following: “ When the Guidance was finally released, the ALS community was filled with hope as it stressed the need for
“regulatory flexibility in applying the statutory standards to drugs for serious diseases with unmet medical needs.” Moreover, it explicitly
stated that “[w]hen making regulatory decisions about drugs to treat ALS, FDA will consider patient tolerance for risk and the serious
and life-threatening nature of the condition in the context of statutory requirements for safety and efficacy.” They further addressed
specific therapies and remarked, “The second, NurOwn, involves the extraction, enrichment and injection of a patient’s own stem cells.
The Phase III trial for NurOwn did not meet its overall primary endpoint. Going into the trial the drug company identified a score of 35
on the ALSFRS, the clinical assessment of a patient’s disease progression, as the mean expected score of patients when they first
enrolled. In the end, more patients with lower ALSFRS scores enrolled in the trial than was expected. Thus, the actual mean ALSFRS
was below 35. Of the patients who started the trial with a score of more than 35, they not only had a significantly higher response rate
than those on placebo, but also their ALSFRS was two points higher than those on the placebo at the end of the trial. Given these results,
why didn't the FDA approve NurOwn for at least those patients with ALSFRS scores above 35 and at the same time require the company
to complete a confirmatory trial on the larger group? That is an approach that gives people living with ALS today a chance while giving
FDA more data. With a disease as complex and heterogeneous as ALS we need this type of flexibility and urgency from the FDA.” They
closed their testimony with the following: “This generation of patients and our families demand better from ourselves, the medical
community and policymakers. You have the power to help make ALS like MS, to change ALS from a “rare disease” to a disease that
more than 1 million Americans are living with. Moreover, ALS is linked to Alzheimer’s, Parkinson’s and Frontotemporal Dementia,
among others. Meaning if we cure ALS, we can help unlock cures for all. That is a future worth fighting for.”
The Act for ALS was signed into law on December 23, 2021. The law establishes grant programs to address neurodegenerative diseases,
such as ALS and contains other related provisions. It authorized up to 100 million dollars per year for 5 years, $500 million dollars total.
The Department of Health and Human Services (HHS) shall award grants to eligible entities for scientific research utilizing data from
expanded access to investigational ALS treatments for individuals who are not otherwise eligible for clinical trials. The FDA shall award
grants to public and private entities to cover the costs of research and development of drugs that diagnose or treat ALS and other rare
neurodegenerative diseases. HHS shall also establish the Public-Private Partnership for Neurodegenerative Diseases between the
National Institutes of Health, the FDA, and at least one eligible entity (generally, an institution of higher education or a nonprofit
organization). The partnership shall support the development and regulatory review of drugs that address ALS and other rare
neurodegenerative diseases.
Brian Wallach, ALS patient and co-founder of the organization I AM ALS, stated regarding the passage of Act for ALS: “For 160 years,
there has been no hope for those diagnosed with ALS. That changed tonight. Tonight, as a result of tens of thousands of ALS advocates
working nonstop to make their voices heard and demanding the chance to live, hope has finally come to people living with ALS.”
Significant policy changes and Congressional actions taken have elevated the focus on research for ALS and other neurodegenerative
diseases and increased funding sources to expedite therapy development.
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Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of FDA marketing approval of our stem cell therapies, some of our U.S. patents may
be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly
referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit 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 patent term restoration
period is generally one-half the time between (a) the effective date of an IND and the submission date of a BLA or an NDA plus (b) the
time between the submission date of a BLA or an NDA and the approval of that application. Only one patent applicable to an approved
stem cell therapy is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent
and within 60 days of approval of the stem cell therapy. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews
and approves the application for any patent term extension or restoration.
Post-Approval Requirements
Any drugs for which we receive FDA approval are subject to continuing regulation by the FDA, including, among other things, record-
keeping requirements, reporting of adverse effects with the product, reporting of changes in distributed products, providing the FDA with
updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and
signature requirements and complying with FDA promotion and advertising requirements. In September 2007, the Food and Drug
Administration Amendments Act of 2007 was enacted, giving the FDA enhanced post-marketing authority, including the authority to
require post marketing studies and clinical trials, labeling changes based on new safety information, and compliance with risk
evaluations and mitigation strategies, or REMS, approved by the FDA. The FDA strictly regulates labeling, advertising, promotion and
other types of information on products that are placed on the market. Drugs and biologics may be promoted only for the approved
indications and in accordance with the provisions of the approved label. Further, manufacturers of drugs and biologics must continue to
comply with cGMP requirements, which are extensive and require considerable time, resources and ongoing investment to ensure
compliance. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other
types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA
review and approval.
Drug and biologic manufacturers and other entities involved in the manufacturing and distribution of approved drugs and biologics are
required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by
the FDA and certain state agencies for compliance with cGMP, GTP applicable to biologics, and other laws. The cGMP requirements
apply to all stages of the manufacturing process, including the production, processing, sterilization, packaging, labeling, storage and
shipment of the drug. Manufacturers must establish validated systems to ensure that products meet specifications and regulatory
standards, and test each product batch or lot prior to its release. Manufacturers and other parties involved in the drug supply chain for
prescription drugs must also comply with applicable product tracking and tracing requirements and for notifying the FDA of counterfeit,
diverted, stolen and intentionally adulterated products or products that are otherwise unfit for distribution in the United States.
The FDA may withdraw a product approval if compliance with regulatory standards is not maintained or if problems occur after the
product reaches the market. Discovery of previously unknown problems with a product subsequent to its approval may result in
restrictions on the product or even complete withdrawal of the product from the market. Further, the failure to maintain compliance with
regulatory requirements may result in administrative or judicial actions, such as fines, warning letters, holds on clinical trials, product
recalls or seizures, product detention or refusal to permit the import or export of products, refusal to approve pending applications or
supplements, restrictions on marketing or manufacturing, injunctions or civil or criminal penalties.
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions
governing the approval, manufacturing and marketing of products regulated by the FDA. In addition to new legislation, the FDA
regulations and policies are often revised or reinterpreted by the agency in ways that may significantly affect our business and our stem
cell therapies. It is impossible to predict whether further legislative or FDA regulation or policy changes will be enacted or implemented
and what the impact of such changes, if any, may be.
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Foreign Regulation
In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and
commercial sales and distribution of our stem cell therapies to the extent we choose to clinically evaluate or sell any products outside of
the United States. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable
regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The
approval process varies from country to country and the time may be longer or shorter than that required for FDA approval. The
requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
As in the United States, post-approval regulatory requirements, such as those regarding product manufacture, marketing, or distribution
would apply to any product that is approved outside the United States.
Third Party Payor Coverage and Reimbursement
In the United States and markets in other countries, patients generally rely on third-party payors to reimburse all or part of the costs
associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and
Medicaid, and commercial payors is critical to new product acceptance. Our ability to successfully commercialize our product candidates
will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be
available from government health administration authorities, private health insurers and other organizations. Government authorities and
third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and
establish reimbursement levels. The availability of coverage and extent of reimbursement by governmental and private payors is essential
for most patients to be able to afford treatments such as gene therapy products. Sales of these or other product candidates that we may
identify will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid
by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government
health administration authorities, private health coverage insurers and other third-party payors. If coverage and adequate reimbursement
is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if
coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient
to realize a sufficient return on our investment.
Coverage and reimbursement status of any approved therapy carries significant uncertainty and risk related to the insurance coverage and
reimbursement of newly approved products, and coverage may be more limited than the purposes for which the medicine is approved by
the FDA or comparable foreign regulatory authorities. Failure to obtain or maintain adequate coverage and reimbursement for any of our
product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue. In both the
United States and foreign markets, our ability to commercialize our stem cell therapies successfully, and to attract commercialization
partners for our stem cell therapies, depends in significant part on the availability of adequate financial coverage and reimbursement
from third party payors, including, in the United States, governmental payors such as the Medicare, Medicaid and the Veterans Affairs
Health programs. and private health insurers. Medicare is a federally funded program managed by the Centers for Medicare and
Medicaid Services, or CMS, through local fiscal intermediaries and carriers that administer coverage and reimbursement for certain
healthcare items and services furnished to the elderly and disabled. Medicaid is an insurance program for certain categories of patients
whose income and assets fall below state defined levels and who are otherwise uninsured that is both federally and state funded and
managed by each state. The federal government sets general guidelines for Medicaid and each state creates specific regulations that
govern its individual program. Each third-party payor has its own process and standards for determining whether it will cover and
reimburse a procedure or product. Factors payors consider in determining reimbursement are based on whether the product is:
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a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
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Private payors often rely on the lead of the governmental payors in rendering coverage and reimbursement determinations. Therefore,
achieving favorable CMS coverage and reimbursement is usually a significant gating issue for successful introduction of a new product.
The competitive position of some of our products will depend, in part, upon the extent of coverage and adequate reimbursement for such
products and for the procedures in which such products are used. Prices at which we or our customers seek reimbursement for our stem
cell therapies can be subject to challenge, reduction or denial by the government and other payors.
Possible legislation at the Federal and State levels in the United States focused on cost containment and price transparency may impact
our ability to sell our stem cell therapies for maximum profitably. It appears likely that the pressure on pharmaceutical pricing will
continue, especially under the Medicare program, which may also increase our regulatory burdens and operating costs. Moreover,
additional changes could be made to governmental healthcare programs that could significantly impact the success of our stem cell
therapies.
The 21st Century Cures Act and its regenerative medicine provisions may be beneficial to the development of our stem cell therapy. The
21st Century Cures Act was signed into law on December 13, 2016. The goal of this landmark legislation is to accelerate the discovery,
development, and delivery of new treatments. It includes regenerative medicines provisions aimed at bringing new innovations and
advances to patients quicker and more efficiently. The FDA issued a comprehensive regenerative medicine policy framework. The final
guidance issued by the FDA defines the regenerative medicine provisions in the 21st Century Cures Act by providing additional
information to further the development and access to innovative regenerative medicine therapies.
The cost of pharmaceuticals continues to generate substantial governmental and third-party payor interest. We expect that the
pharmaceutical industry will experience pricing pressures due to the trend toward managed healthcare, the increasing influence of
managed care organizations and additional legislative proposals. Our results of operations could be adversely affected by current and
future healthcare reforms.
Some third-party payors also require pre-approval of coverage for new or innovative devices, biologics or drug therapies before they will
reimburse healthcare providers that use such therapies. Increasingly, third-party payors are requiring that drug companies provide them
with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that
reimbursement will be available for any therapy that we commercialize and, if reimbursement is available, the level of reimbursement. In
addition, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as
average sales price, or ASP, and best price. Penalties may apply in some cases when such metrics are not submitted accurately and
timely. Further, these prices for therapies may be reduced by mandatory discounts or rebates required by government healthcare
programs. While we cannot predict whether any proposed cost-containment measures will be adopted or otherwise implemented in the
future, the announcement or adoption of these proposals could have a material adverse effect on our ability to obtain adequate prices for
our stem cell therapies and operate profitably. Further, due to the COVID-19 pandemic, millions of individuals have lost or will be losing
employer-based insurance coverage, which may adversely affect our ability to commercialize our stem cell therapies.
Different pricing and reimbursement schemes exist in other countries. In the European Union, governments influence the price of
pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part
of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only
be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may
require the completion of clinical trials that compare the cost-effectiveness of a particular stem cell therapy to currently available
therapies. 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 in general, particularly prescription drugs and biologics, has become very intense. As a result,
increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-
priced markets exert a commercial pressure on pricing within a country.
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Other Healthcare Laws and Compliance Requirements
In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the
FDA, including CMS, other divisions of the United States Department of Health and Human Services (“HHS”) (e.g., the Office of
Inspector General (“OIG”)), the United States Department of Justice and individual United States Attorney offices within the Department
of Justice, and state and local governments. For example, our clinical research, sales, marketing and scientific/educational grant
programs may have to comply with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy and
security provisions of the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and similar state laws, each as
amended, as applicable, including:
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the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering
or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in
kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order, arrangement or
recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal
healthcare program, such as the Medicare and Medicaid programs; a person or entity does not need to have actual knowledge of
the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation. In addition, the government may
assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false
or fraudulent claim for purposes of the federal False Claims Act or federal civil money penalties statute;
the federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which prohibit,
among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for
payment to, or approval by Medicare, Medicaid, or other federal healthcare programs, knowingly making, using or causing to
be made or used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit money to
the federal government, or knowingly concealing or knowingly and improperly avoiding or decreasing or concealing an
obligation to pay money to the federal government. Manufacturers can be held liable under the False Claims Act even when
they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent
claims. The False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on behalf of the
federal government alleging violations of the False Claims Act and to share in any monetary recovery;
the anti-inducement law, which prohibits, among other things, the offering or giving of remuneration, which includes, without
limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or
Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular
supplier of items or services reimbursable by a federal or state governmental program;
* HIPAA, which includes federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a
scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or
promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program,
regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or
device a material fact or making any materially false, fictitious, or fraudulent statements or representations in connection with
the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; similar to the federal Anti-
Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order
to have committed a violation;
* HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective
implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare
clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure
of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable
health information;
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the federal transparency requirements under the ACA, including the provision commonly referred to as the Physician Payments
Sunshine Act, and its implementing regulations, which requires applicable manufacturers of drugs, devices, biologics and
medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to
report annually to the U.S. Department of Health and Human Services, CMS, information related to payments or other transfers
of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching
hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family
members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-
physician providers such as physician assistants and nurse practitioners;
federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and
timely manner to government programs; and
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that
potentially harm consumers.
In addition to the above, on November 20, 2020, the OIG finalized further modifications to the federal Anti-Kickback Statute. Under the
final rules, OIG added safe harbor protections under the Anti-Kickback Statute for certain coordinated care and value-based
arrangements among clinicians, providers, and others, yet removed safe harbor protection for price reductions from pharmaceutical
manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required
by law. 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 final rule (with some exceptions) became effective
January 19, 2021. We continue to evaluate what effect, if any, these rules will have on our business.
Additionally, we are subject to state and foreign equivalents of each of the healthcare laws and regulations described above, among
others, some of which may be broader in scope and may apply regardless of the payor. Many U.S. states have adopted laws similar to the
federal Anti-Kickback Statute and False Claims Act, and may apply to our business practices, including, but not limited to, research,
distribution, sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental payors,
including private insurers. In addition, some states have passed laws that require pharmaceutical companies to comply with the April
2003 OIG Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of
America’s Code on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or require
pharmaceutical companies to make marketing or price disclosures to the state. There are ambiguities as to what is required to comply
with these state requirements and if we fail to comply with an applicable state law requirement, we could be subject to penalties. Finally,
there are state and foreign laws governing the privacy and security of health information (e.g., the California Consumer Privacy Act),
many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
In addition to requirements of US federal and state law, we may also be subject to additional privacy restrictions around the world
including Israel. Israel has implemented data protection laws and regulations, including the Israeli Protection of Privacy Law, 5741-
1981, or the PPL. The PPL imposes certain obligations on the owners of databases containing personal data, including, e.g., a
requirement to register databases with certain characteristics, an obligation to notify data subjects of the purposes for which their
personal data is collected and processed and of the disclosure of such data to third parties, a requirement to respond to certain requests
from data subjects to access, rectify, and/or delete personal data relating to them and an obligation to maintain the security of personal
data. In addition, the Protection of Privacy Regulations (Data Security), 5777-2017, that entered into force in May 2018, impose
comprehensive data security requirements on the processing of personal data. The Protection of Privacy Regulations (Transfer of Data to
Overseas Databases), 5761-2001, further impose certain conditions on cross-border transfers of personal data from databases in Israel.
Certain violations of the PPL are considered a criminal and/or a civil offense and could expose the violating entity to criminal,
administrative, and financial sanctions, as well as to civil actions. Additionally, the Israel Privacy Protection Authority, or the Privacy
Protection Authority, may issue a public statement that an entity violated the PPL, and such a determination could potentially be used
against such entity in civil litigation. The Israeli Ministry of Justice has introduced amendments to the PPL designed, among other things,
to enhance the Privacy Protection Authority’s investigative and enforcement powers (including powers to impose fines) and to broaden
data subject rights
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Further, should we begin trials in or otherwise have operations in or collect data from individuals un the European Economic Area, we
will be subject to stringent European data protection rules. The collection, use, storage, disclosure, transfer, or other processing of
personal data regarding individuals in the European Economic Area, or EEA, including personal health data, is subject to the General
Data Protection Regulation 2016/679 (GDPR), which became effective on May 25, 2018 and the United Kingdom General Data
Protection Regulation, as tailored by the Data Protection Act 2018 (“UK GDPR”). The GDPR and UK GDPR are wide-ranging in scope
and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and
other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals
regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing
notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR/UK GDPR also impose
strict rules on the transfer of personal data to countries outside the European Economic Area and the United Kingdom, respectively,
including to the United States, and permit data protection authorities to impose large penalties for violations, including potential fines of
up to €20 million or 4% of annual global revenues under the EU GDPR and up to £17.5 million or 4% of worldwide revenue for
violations of the UK GDPR, whichever is greater. The GDPR/UK GDPR also confer a private right of action on data subjects and
consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages
resulting from violations of the GDPR/UK GDPR. In addition, the GDPR/UK GDPR include restrictions on cross-border data transfers.
Compliance with the GDPR/UK GDOR will be a rigorous and time-intensive process that may increase our cost of doing business or
require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties,
litigation, and reputational harm in connection with our European and United Kingdom activities.
Because of the breadth of these laws, it is possible that some of our business activities could be subject to challenge under one or more of
such laws.
Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including penalties, fines, imprisonment and/or
exclusion or suspension from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with
the U.S. government. In addition, private individuals have the ability to bring actions on behalf of the U.S. government under the federal
False Claims Act as well as under the false claims laws of several states.
Law enforcement authorities are increasingly focused on enforcing fraud and abuse laws, and it is possible that some of our practices
may be challenged under these laws. Efforts to ensure that our current and future business arrangements with third parties, and our
business generally, will comply with applicable healthcare laws and regulations will involve substantial costs. If our operations,
including our arrangements with physicians and other healthcare providers are found to be in violation of any of such laws or any other
governmental regulations that apply to us, we may be subject to penalties, including, without limitation, administrative, civil and criminal
penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, the curtailment
or restructuring of our operations, exclusion from participation in federal and state healthcare programs (such as Medicare and
Medicaid), and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.
If any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance
with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded
healthcare programs, which may also adversely affect our business.
The risk of our being found in violation of these laws is increased by the fact that many of these laws have not been fully interpreted by
the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of
these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s
attention from the operation of our business. The shifting compliance environment and the need to build and maintain a robust system to
comply with multiple jurisdictions with different compliance and reporting requirements increases the possibility that a healthcare
company may violate one or more of the requirements. Efforts to ensure that our business arrangements with third parties will comply
with applicable healthcare laws and regulations will involve substantial cost.
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Healthcare reform
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other payors have
attempted to control costs by limiting coverage and the amount of reimbursement for particular medical products. For example, in March
2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or ACA
was enacted, which, among other things, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid
Drug Rebate Program; introduced 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; extended the Medicaid Drug Rebate Program
to utilization of prescriptions of individuals enrolled in Medicaid managed care plans; imposed mandatory discounts for certain Medicare
Part D beneficiaries as a condition for manufacturers’ outpatient drugs coverage under Medicare Part D; subjected drug manufacturers to
new annual, nondeductible fees based on pharmaceutical companies’ share of sales to federal healthcare programs; imposed a new
federal excise tax on the sale of certain medical devices; expanded healthcare fraud and abuse laws, including the False Claims Act and
the Anti-Kickback Statute, new government investigative powers and enhanced penalties for non-compliance; expanded eligibility
criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals with income
at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; expanded the
entities eligible for discounts under the Public Health Service Act’s pharmaceutical pricing program, also known as the 340B Drug
Pricing Program; created new requirements to report financial arrangements with physicians and teaching hospitals, commonly referred
to as the Physician Payments Sunshine Act; created a new requirement to annually report the identity and quantity of drug samples that
manufacturers and authorized distributors of record provide to physicians; created a new Patient Centered Outcomes Research Institute to
oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and
established the Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and
Medicaid spending.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the
ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Various portions of the ACA are
currently undergoing legal and constitutional challenges in the United States Supreme Court; the Trump Administration issued various
Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost,
fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or
medical devices; and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA. The
United States Supreme Court is expected to rule on a legal challenge to the constitutionality of the ACA in early 2021. The
implementation of the ACA is ongoing, the law appears likely to continue the downward pressure on pharmaceutical pricing, especially
under the Medicare program, and may also increase our regulatory burdens and operating costs. Litigation and legislation related to the
ACA are likely to continue, with unpredictable and uncertain results. It is unclear whether the ACA will be overturned, repealed,
replaced, or further amended. We cannot predict what affect further changes to the ACA would have on our business.
Other legislative changes have been proposed and adopted since the ACA was enacted. For example, in August 2011, former President
Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit
Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not
achieve a targeted deficit reduction of at least $1.2 trillion for fiscal years 2012 through 2021, triggering the legislation’s automatic
reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal
year, which went into effect beginning on April 1, 2013 and, due to legislation amendments to the statute, including the BBA, will stay in
effect through 2030 unless additional Congressional action is taken. However, pursuant to the Coronavirus Aid, Relief and Economic
Security Act, or CARES Act, and subsequent legislation, these Medicare sequester reductions are suspended from May 1, 2020 through
March 31, 2022 due to the COVID-19 pandemic. Then, a 1% payment reduction will occur beginning April 1, 2022 through June 30,
2022, and the 2% payment reduction will resume on July 1, 2022. Proposed legislation, if passed, would extend this suspension until the
end of the COVID-19 pandemic. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other
things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment
centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
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Additionally, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing
practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation
designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review
the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for
drugs. At the federal level, the former Trump administration’s budget proposal for fiscal year 2021 included a $135 billion allowance to
support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and
increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump administration sent “principles” for
drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy
expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical
price increases. Further, the Trump administration also previously released a “Blueprint”, or plan, to lower drug prices and reduce out of
pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of
certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs
of drug products paid by consumers. HHS has implemented certain of these initiatives. For example, in May 2019, CMS issued a final
rule to allow Medicare Advantage Plans the option of using step therapy, a type of prior authorization, for Part B drugs beginning
January 1, 2020. In addition, there have been several changes to the 340B. Legal challenges to certain 340B reimbursement calculations
are ongoing, and it is unclear how these developments could affect covered hospitals who might purchase our future products and affect
the rates we may charge such facilities for our approved products in the future, if any. While a number of these and other proposed
measures will require authorization through additional legislation to become effective, Congress has indicated that it will continue to
seek new legislative and/or administrative measures to control drug costs.
Further, on July 24, 2020 and September 13, 2020, former President Trump signed several Executive Orders aimed at lowering drug
pricing that seek to implement several of the administration's proposals. In response, the FDA released a final rule on September 24,
2020, which went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from
Canada. Further, on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model
under which Medicare Part B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug
manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per
capita. The MFN Model regulations mandate participation by identified Part B providers and will apply in all U.S. states and territories
for a seven-year period beginning January 1, 2021 and ending December 31, 2027. The Interim Final Rule has not been finalized and is
subject to revision and legal challenge by certain industry advocacy groups and participants. Additionally, on November 20, 2020, HHS
finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under
Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. 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. Although a number of these, and other proposed measures may require authorization
through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures,
Congress has indicated that it will continue to seek new legislative measures to control drug costs.
Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control
pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access
and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries
and bulk purchasing.
Compliance with Environmental, Health and Safety Laws
In addition to FDA regulations, we are also subject to evolving federal, state and local environmental, health and safety laws and
regulations. In the past, compliance with environmental, health and safety laws and regulations has not had a material effect on our
capital expenditures. We believe that we comply in all material respects with existing environmental, health and safety laws and
regulations applicable to us. Compliance with environmental, health and safety laws and regulations in the future may require additional
capital expenditures.
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Manufacturing
We intend to establish and maintain fully-equipped cGMP-certified Cell-Processing Centers in strategic locations to conduct NurOwn®
production and distribution over the broadest geographic area. Each Cell-Processing Center would receive an initial bone marrow sample
of the patient, harvested at a medical center. The patient’s MSC cells would be isolated expanded and cryopreserved in order to produce
doses of NurOwn®. Each individual patient MSCs would be cryopreserved and maintained for production of NurOwn® doses on a long-
term basis for future treatments. These doses would be produced as needed and transported to the medical centers, where they would then
be transplanted back into the patient.
We have already initiated activities to support commercial launch if our product is approved by regulatory authorities. These activities
include scaling out production capacity, logistics and supply. In support of commercialization and to expand our cGMP capabilities we
are engaged in several strategic partnerships. Our technology transfer to Catalent has already been completed and will allow for
continuous supply of NurOwn® for future clinical trials and initial commercialization. Our partnership with RR&D, to help us establish
in-house manufacturing capabilities, will accelerate once a regulatory pathway is clear. These partnerships will ensure an ongoing cGMP
clinical supply of NurOwn® and enable us to provide rapid treatment access to patients if we obtain regulatory approval.
Competition
There are several clinical trials underway evaluating experimental treatments for ALS, of which only one is a cell-based trials being
conducted by other commercial entities. Corestem, a Korean company has commercialized its NEURONATA-R® inj., an autologous
bone marrow mesenchymal stem cell (BM-MSC) therapy for ALS in South Korea based on the results from a phase 2 Korean trial and
although it has been reported that a phase 3 trial was authorized by the FDA, it is only being conducted in South Korea. There are 2
companies conducting Tregs trials, Coya and Rapa Therapeutics in Phase 2 and Phase 1/2, respectively. In August 2021, Cytokinetics
announced the launch of a Phase 3 study in ALS for Reldesemtiv.
Several experimental ALS therapies such as Masitinib (AB Science), NP-001 (Neuraltus, now Neuvivo), are selectively targeting
neuroinflammation. AB Science stopped and resumed a Phase 3 trial for masitinib in ALS and is now conducting another add-on trial of
masitinib with Riluzole in participants with mild forms of ALS. Neuraltus Pharma was developing NP001, is a small molecule that
modulates macrophages to promote an anti-inflammatory state in order to reduce the rate of motoneuron loss. NP001 failed to
demonstrate efficacy in a Phase 2 clinical trial. A post hoc analysis demonstrated a potential subgroup for which efficacy may be
observed and the program is now being advanced by Neuvivo. Amylyx Pharmaceuticals is developing TURSO, a combination of two
compounds, sodium phenylbutyrate and tauroursodeoxycholic acid, that are proposed to have a synergistic effect when administered
together. Amylyx recently published data from its CENTAUR trial demonstrating a clinically meaningful benefit and a favorable safety
profile for people living with ALS and possibly a survival advantage over 2 years compared to placebo. The TURSO NDA is currently
under FDA review with a PDUFA date of June 29, 2022. The Healy platform trial is evaluating 5 ALS therapies: Zilucoplan;
Pridopidine; Trehalose; Verdiperstat; and CNM-Au8. The Zilucoplan arm was recently stopped after futility analysis and only the
Trehalose arm is actively enrolling. Therapies specifically targeting genetic mutations in a small subset of ALS patents, such as SOD1
and C9ORF72, are being evaluated using antisense oligonucleotide technology (Biogen, IONIS, and WAVE Therapeutics).
Currently, there are only two FDA-approved ALS therapies, Riluzole and Radicava, that have demonstrated modest improvements in
survival and ALS function, respectively. Riluzole, approved by the FDA in 1995, extends the time to death or ventilation by several
months; however, it has not been shown to improve the daily functioning of ALS patients. Radicava (Edaravone) is a free radical
scavenger approved by FDA in May 2017 based on a single Phase 3 study carried out in Japan. In addition, Edaravone oral formulation
has received a priority review from the FDA.
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If our security measures are breached or unauthorized access to individually identifiable health information or other personally
identifiable information is otherwise obtained, our reputation may be harmed, and we may incur significant liabilities.
Unauthorized access to, or security breaches of, our systems and databases could result in unauthorized access to data and information
and loss, compromise or corruption of such data and information. Cyber incidents have been increasing in sophistication and frequency
and can include third parties gaining access to employee or customer data using stolen or inferred credentials, computer malware,
viruses, spamming, phishing attacks, ransomware, card skimming code, and other deliberate attacks and attempts to gain unauthorized
access. Because the techniques used by computer programmers who may attempt to penetrate and sabotage our network security or our
website change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques.
In the event of a security breach, our company could suffer loss of business, severe reputational damage adversely affecting investor
confidence, regulatory investigations and orders, litigation, indemnity obligations, damages for contract breach, penalties for violation of
applicable laws or regulations, significant costs for remediation and other liabilities. For example, the loss of preclinical study or clinical
trial data from completed or future preclinical studies or clinical trials could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a
loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur
liability and the further development and commercialization of our product candidates could be delayed.
We have incurred and expect to incur significant expenses to prevent security breaches, including costs related to deploying additional
personnel and protection technologies, training employees, and engaging third-party solution providers and consultants. Although we
expend significant resources to create security protections that shield our customer data against potential theft and security breaches, such
measures cannot provide absolute security. Moreover, as we outsource more of our information systems to vendors and rely more on
cloud-based information systems, the related security risks will increase, and we will need to expend additional resources to protect our
technology and information systems.
Despite our efforts, we remain at risk for security incidents, including, without limitation, breaches that may occur as a result of third-
party action, or employee, vendor or contractor error or malfeasance and other causes. If, in the future, we experience a data breach or
security incident, we would be likely to experience harm to our reputation, financial performance, and customer and vendor
relationships, and the possibility of litigation or regulatory investigations or actions by state and federal governmental authorities and
non-U.S. authorities. Additionally, actual, potential or anticipated attacks may cause us to incur increasing costs, including costs to
deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants.
Human Capital
We currently have 43 employees, all of whom are full-time. None of our employees is represented by a labor union. Our human capital
resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new
employees, advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward
personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the
success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
Additional Information
We maintain a website at www.brainstorm-cell.com. We make available through our website, free of charge, our Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after
we electronically file those reports with, or furnish them to, the SEC. We also similarly make available, free of charge through our
website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the
Exchange Act. We are not including the information contained at www.brainstorm-cell.com or at any other Internet address as part of, or
incorporating it by reference into, this Annual Report on Form 10-K.
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Item 1A. RISK FACTORS
Summary of our Risks:
Our ability to implement our business strategy is subject to numerous risks that you should be aware of before making an investment
decision. These risks are described more fully in the section entitled “Risk Factors” in this Form 10-K. These risks include, among
others:
* We will need substantial additional funding to pursue our business objectives and continue our operations. If we are unable to
raise capital when needed, we may be required to delay, limit, reduce or terminate our research or product development efforts
or future commercialization efforts.
* Our Company has a history of losses and we expect to incur losses for the foreseeable future.
*
The continuing effects of the novel coronavirus disease, COVID-19, including the emergence of new variants, could adversely
impact our business, including our clinical trials and supply chain.
* Our product development programs are based on novel technologies and are inherently risky. The field of stem cell therapy is
relatively new and our development efforts may not yield an effective treatment of human diseases.
* Our NurOwn® stem cell therapy may not demonstrate safety and efficacy sufficient to obtain regulatory approval, and may not
receive regulatory approval. Our NurOwn® stem cell therapy, even if approved, may not be accepted in the marketplace;
therefore, we may not be able to generate significant revenue, if any.
*
If serious or unexpected adverse side effects are identified during the development of our NurOwn® stem cell therapy, we may
need to abandon or limit its development.
* Our success will depend in part on establishing and maintaining effective strategic partnerships and collaborations, which may
impose restrictions on our business and subject us to additional regulation.
* We have never manufactured our NurOwn® stem cell therapy at commercial scale and there can be no assurance that it can be
manufactured in compliance with regulations at a cost or in quantities necessary to make it commercially viable.
*
*
Part of our business. in the foreseeable future will be based on technology licensed from Ramot and if this license were to be
terminated upon failure to make required royalty payments in the future, we would need to change our business strategy and we
may be forced to cease our operations.
Technological and medical developments or improvements in conventional therapies could render the use of stem cells and our
services and planned products obsolete.
* We face substantial competition in developing cell therapies for ALS and other neurodegenerative diseases, which may result in
others discovering, developing or commercializing products before or more successfully than we do.
*
It is uncertain to what extent the government, private health insurers and third-party payors will approve coverage or provide
reimbursement for the therapies and products to which our services relate. Availability for such reimbursement may be further
limited by an increasing uninsured population and reductions in Medicare and Medicaid funding in the United States.
* We are exposed to fluctuations in currency exchange rates. The dollar cost of our operations in Israel will increase to the extent
increases in the rate of inflation in Israel are not offset by a devaluation of the NIS in relation to the dollar, which would harm
our results of operations.
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Risks Related to the COVID-19 Pandemic
Continuing concerns resulting from the pandemic of COVID-19 and the future outbreak of other highly infectious or contagious
diseases, could have a material adverse impact on our business, financial condition and results of operations, including our
preclinical studies and clinical trials.
Continuing concerns resulting from the pandemic caused by the novel strain of coronavirus, SARS-CoV 2 (COVID-19) disease,
including the emergence of new variants, has currently impacted and may continue to adversely impact our business, including our
preclinical studies and clinical trials. In December 2019, a novel strain of coronavirus, surfaced in Wuhan, China. Since then, COVID-19
has spread worldwide, significantly impacting the United States, Europe and Israel, where the Company conducts its operations, as well
as its clinical trials for NurOwn®. In response to the spread of COVID-19 and to ensure safety of employees and continuity of business
operations, we closed our offices, with our administrative employees continuing their work remotely and limited the number of staff in
any given research and development laboratory. Our research and development laboratory in Israel and manufacturing sites in U.S. and in
Israel remain open. The full extent to which the COVID 19 pandemic will directly or indirectly impact our business, results of operations
and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted at this time,
including new information that may emerge concerning COVID 19, the actions taken to contain it or treat its impact and the economic
impact on local, regional, national and international markets. Our management team is actively monitoring this situation and the possible
effects on our financial condition, liquidity, operations, suppliers, industry, and workforce.
We completed dosing of all participants in our Phase 3 ALS trial in July 2020, and we announced top-line data from this trial on
November 17, 2020. Results from the trial showed that NurOwn® was generally well tolerated in the population of rapidly progressing
ALS patients. While showing a numerical improvement in the treated group compared to placebo across the primary and key secondary
efficacy endpoints, the trial did not reach statistically significant results. In an important, pre-specified subgroup with early disease based
on ALS Functional Rating Score (“ALSFRS-R”) baseline score 35, NurOwn® demonstrated a clinically meaningful treatment response
across the primary and key secondary endpoints and remained consistent with our pre-trial, data-derived assumption. In this subgroup,
there were 34.6% responders who met the primary endpoint definition on NurOwn® and 15.6% on Placebo (p=0.288), and the average
change from baseline to week 28 in ALSFRS-R total score was -1.77 on NurOwn ® and -3.78 on Placebo (p=0.198), an improvement of
2.01 ALSFRS-R points favoring NurOwn ®. When following the SAP to implement sensitivity to the primary endpoint, there is a slight
change in the percentage of responders but no P value change. No new safety concerns were identified. Following the completion of our
phase 3 ALS trial, we are diligently pursuing next steps, including active discussions with the FDA to identify regulatory pathways that
may support NurOwn®’s approval in ALS. We are also in active dialog with the FDA around our Chemistry, Manufacturing and
Controls (CMC) plans for registration, and completed a successful meeting in December 2020.
The U.S. Phase 2 PMS trial faced slight delays in enrollment due to the COVID-19 pandemic, but as of June 2020, all the trial sites were
back on track to continue with the trial. On December 18, 2020, we announced the completion of all dosing in the study participants in
the trial and positive top-line clinical trial results were announced on March 24,2021.
We recently announced a new clinical program focused on the development of NurOwn® as a treatment for AD. Following the recent
approval of Aduhelm, we are reviewing scientific, regulatory and payer insights to determine the optimal path forward in AD.
Since the beginning of the COVID-19 pandemic, three vaccines for COVID-19 were granted Emergency Use Authorization by the FDA
and two of those later received marketing approval. Additional vaccines may be authorized in the future. The resultant demand for
vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or
equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed for our
clinical trials, which could lead to delays in these trials.
As of May 26, 2021, the FDA noted it is continuing to ensure timely reviews of applications for medical products during the ongoing
COVID-19 pandemic in line with its user fee performance goals and conducting mission critical domestic and foreign inspections to
ensure compliance of manufacturing facilities with FDA quality standards. However, the FDA may not be able to continue its current
pace and approval timelines could be extended, including where a pre-approval inspection or an inspection of clinical sites is required
and due to the ongoing COVID-19 pandemic and travel restrictions FDA is unable to complete such required inspections during the
review period. In 2020 and 2021, a number of companies announced receipt of complete response letters due to the FDA's inability to
complete required inspections for their applications.
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Risks Related to our Financial Condition and Capital Requirements
We need to raise additional capital. If we are unable to raise additional capital in favorable terms and a timely manner, we will not be
able to execute our business plan and we could be forced to restrict or cease our operations.
Although we have sufficient cash to continue with our operations for at least the next twelve months, we may need to raise additional
funds to meet our anticipated expenses so that we can execute our business plan. We expect to incur substantial and increasing net losses
for the foreseeable future as we increase our spending to execute our development and commercial programs.
The amount of financing required will depend on many factors including our financial requirements to fund any additional research and
clinical trials, our ability to secure partnerships and achieve partnership milestones and our ability to establish manufacturing and
delivery processes for our NurOwn® stem cell therapy as well as to fund other working capital requirements. Our ability to access the
capital markets or to enlist partners is mainly dependent on the progress of our research and development and regulatory approval of our
products.
To date, the Company has not generated revenues from its activities and has incurred substantial operating losses. Management expects
the Company to continue to generate substantial operating losses and to continue to fund its operations primarily through utilization of its
current financial resources and through additional raises of capital.
Management’s plan includes raising funds from outside potential investors, including under the ATM Program. However, there is no
assurance such funding will be available to the Company or that it will be obtained on terms favorable to the Company or will provide
the Company with sufficient funds to meet its objectives. Should we raise additional funds through the issuance of equity, equity-related
or debt securities, these securities may have rights, preferences or privileges (including registrations rights) senior to those of the rights
of our Common Stock and our stockholders will experience additional dilution.
Our Company has a history of losses and we expect to incur losses for the foreseeable future.
As a development stage pre-revenue company, we are in the early stages of executing our business plan. We had no operational revenues
for the fiscal years ended December 31, 2019, December 31, 2020 or December 31, 2021. We are currently in the process of introducing
the Company to strategic partners. In the upcoming three years, the Company will focus on completing its ongoing clinical trials and
commercialization of NurOwn® for ALS, if approved. We are unable, at this time, to foresee when we will generate operational revenues
from strategic partnerships. If NurOwn® is approved by the FDA for ALS, we hope to commercialize and start generating revenues
shortly thereafter., We expect to incur substantial and increasing operating losses for the next several years as we increase our spending
to execute our development programs and commercialization efforts. These losses are expected to have an adverse impact on our
working capital, total assets and stockholders’ equity.
We are exposed to fluctuations in currency exchange rates.
A significant portion of our business, particularly our research and development, is conducted outside the United States. Therefore, we
are exposed to currency exchange fluctuations in other currencies such as the New Israeli Shekels (“NIS”) and the Euro. Moreover, a
portion of our expenses in Israel and Europe are paid in NIS and Euros, respectively, which subjects us to the risks of foreign currency
fluctuations. Our primary expenses paid in NIS are employee salaries, fees for consultants and subcontractors and lease payments on our
Israeli facilities.
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The dollar cost of our operations in Israel will increase to the extent increases in the rate of inflation in Israel are not offset by a
devaluation of the NIS in relation to the dollar, which would harm our results of operations.
Since a considerable portion of our expenses such as employees' salaries are linked to an extent to the rate of inflation in Israel, the dollar
cost of our operations is influenced by the extent to which any increase in the rate of inflation in Israel is or is not offset by the
devaluation of the NIS in relation to the dollar. As a result, we are exposed to the risk that the NIS, after adjustment for inflation in Israel,
will appreciate in relation to the dollar. In that event, the dollar cost of our operations in Israel will increase and our dollar-measured
results of operations will be adversely affected. During the past few years inflation-adjusted NIS appreciated against the dollar, which
raised the dollar cost of our Israeli operations. We cannot predict whether the NIS will appreciate against the dollar or vice versa in the
future. Any increase in the rate of inflation in Israel, unless the increase is offset on a timely basis by a devaluation of the NIS in relation
to the dollar, will increase labor and other costs, which will increase the dollar cost of our operations in Israel and harm our results of
operations.
Risks Related to our Cell Therapy Product Development Efforts
If our NurOwn® stem cell therapy does not demonstrate safety and efficacy sufficient to obtain regulatory approval, it may not
receive regulatory approval and we will be unable to market it.
The therapeutic treatment development and regulatory approval process is expensive, uncertain and time-consuming. As part of the
regulatory process, we are conducting clinical trials, for our NurOwn® stem cell therapy to demonstrate safety and efficacy in humans to
meet the requirements of the FDA and regulatory authorities in other countries. We have completed our Phase 3 ALS trial and announced
on February 2021 that the FDA concluded from their initial review that the current level of clinical data does not provide the threshold of
substantial evidence that FDA is seeking to support a BLA. We are in active consultation with principal investigators, ALS experts,
expert statisticians, regulatory advisors, and ALS advocacy groups to assess potential pathways for approval of NurOwn® for ALS. If we
fail to obtain regulatory approval for our NurOwn® stem cell therapy, we will be unable to market and sell it and we may never be
profitable.
A failure of one or more of our clinical trials can occur at any stage of testing. Results of later stage clinical trials may fail to show the
desired safety and efficacy despite acceptable results in earlier clinical trials. Moreover, preclinical and clinical data are often susceptible
to varying interpretations and analyses and many companies that have believed their product candidates performed satisfactorily in
preclinical and clinical trials have nonetheless failed to obtain marketing approval of their treatments.
Specifically, we are currently comparing NurOwn® stem cell therapy against placebo. Comparisons of outcomes of other reported
clinical trials may provide some insight into the efficacy of NurOwn® stem cell therapy, however, these studies may be of limited
comparative value due to the many factors that affect the outcome of clinical trials, some of which are not apparent in published reports.
Additionally, several of our past, planned and ongoing clinical trials utilize an “open-label” trial design. An “open-label” clinical trial is
one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an
existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes
may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect
as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient
bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In
addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological
outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group
more favorably given this knowledge. The results from an open-label trial may not be predictive of future clinical trial results with any of
our product candidates for which we include an open-label clinical trial when studied in a controlled environment with a placebo or
active control.
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Our product development programs are based on novel technologies and are inherently risky.
We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our stem
cell therapy creates significant challenges with regard to product development and optimization, manufacturing, government regulations,
and market acceptance. For example, the FDA has relatively limited experience with stem cell therapies. None have been approved by
them for commercial sale, and the pathway to regulatory approval for our stem cell therapies may accordingly be more complex and
lengthy. As a result, the development and commercialization pathway for our therapies may be subject to increased uncertainty, as
compared to the pathway for new conventional drugs.
If serious or unexpected adverse side effects are identified during the development of our NurOwn® stem cell therapy, we may need
to abandon or limit its development.
Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics.
Undesirable side effects caused by NurOwn® could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could
result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities.
The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential
product liability claims. If patients treated with our NurOwn® stem cell therapy suffer serious or unexpected adverse effects, we may
need to abandon its development or limit development to certain uses or subpopulations in which these effects are less prevalent, less
severe or more acceptable from a risk-benefit perspective. Any of these occurrences may harm our business, financial condition and
prospects significantly.
Despite our experience conducting and managing clinicals, we may not be able to be conduct and manage future trials successfully
and have limited experience in the application process necessary to obtain regulatory approvals.
Despite our prior experience in conducting and managing clinicals, we may not be able to be conduct and manage future trials
successfully. We have limited experience in the application process to obtain regulatory approvals. If our clinical trials are unsuccessful,
or if we do not complete our clinical trials, we may not receive regulatory approval for or be able to commercialize our stem cell
therapies.
If we do not succeed in conducting and managing our preclinical development activities or clinical trials, or in obtaining regulatory
approvals, we might not be able to commercialize our stem cell therapies, or might be significantly delayed in doing so, which will
materially harm our business.
Our ability to generate revenues from any of our stem cell therapies will depend on a number of factors, including our ability to
successfully complete clinical trials, obtain necessary regulatory approvals and implement our commercialization strategy. We may, and
anticipate that we will need to, transition from a company with a research and development focus to a company capable of supporting
commercial activities and we may not succeed in such a transition.
We may not be able to secure and maintain research institutions to conduct our clinical trials.
We rely on research institutions to conduct our clinical trials. Our reliance upon research institutions, including hospitals and clinics,
provides us with less control over the timing and cost of clinical trials and the ability to recruit subjects. If we are unable to reach
agreements with suitable research institutions on acceptable terms, or if any resulting agreement is terminated, we may be unable to
quickly replace the research institution with another qualified institution on acceptable terms. Furthermore, we may not be able to secure
and maintain suitable research institutions to conduct our clinical trials.
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Risks Related to Our Business Operations and Commercialization of Stem Cell Therapies
The field of stem cell therapy is relatively new and our development efforts may not yield an effective treatment of human diseases.
Our intended cell therapeutic treatment NurOwn® for ALS involves a new approach using stem cells to treat ALS. Cell therapy is still a
developing area of research, with few cell therapy products approved for clinical use. Many of the existing cellular therapy candidates
are based on novel cell technologies that are inherently risky and may not be understood or accepted by the marketplace. The novel
nature of our cell therapy technology creates significant challenges with respect to product development and optimization,
manufacturing, government regulation and approval, third-party reimbursement.
Our NurOwn® stem cell therapy, even if approved, may not be accepted in the marketplace; therefore, we may not be able to generate
significant revenue, if any.
Even if our NurOwn® stem cell therapy is approved for sale, physicians and the medical community may not ultimately use it or may
use it only in applications more restricted than we anticipate. Our NurOwn® stem cell therapy, if successfully developed, will compete
with a number of traditional products manufactured and marketed by major pharmaceutical and biotechnology companies. Our
NurOwn® stem cell therapy may also compete with new products currently under development by such companies and others.
Physicians will prescribe a treatment only if they determine, based on experience, clinical data, side effect profiles and other factors, that
it is beneficial as compared to other products currently available and in use. Physicians also will prescribe a product based on their
traditional preferences. Many other factors influence the adoption of new products, including patient perceptions and preferences,
marketing and distribution restrictions, adverse publicity, product pricing, views of thought leaders in the medical community and
reimbursement by government and private payors. Any of these factors could have a material adverse effect on our business, financial
condition, and results of operations.
Adoption of our NurOwn® stem cell therapy for the treatment of patients with ALS, PMS, AD or other neurodegenerative diseases,
even if approved, may be slow or limited. If our NurOwn® stem cell therapy does not achieve broad acceptance as a treatment option
for ALS, PMS, AD or other neurodegenerative diseases, our business would be negatively impact our revenue forecast.
If approved, the rate of adoption of our NurOwn® stem cell therapy as a treatment for ALS, PMS, AD or other neurodegenerative
diseases, and the ultimate sales volume for our treatment, will depend on several factors, including educating treating physicians on how
to use our NurOwn® stem cell therapy. Our NurOwn® stem cell therapy utilizes individualized stem cell therapy, which is significantly
different from the pharmacological approach currently used to treat neurodegenerative diseases. Acceptance of our NurOwn® stem cell
therapy by physicians may require us to provide them with extensive education regarding the mechanism of action of our treatment, the
method of delivery of the treatment, expected side effects and the method of monitoring patients for efficacy and follow-up. In addition,
the manufacturing and delivery processes associated with our treatment will require physicians to adjust their current treatment of
patients, which may delay or prevent market adoption of our NurOwn® stem cell therapy as a preferred therapy, even if approved.
Our success will depend in part on establishing and maintaining effective strategic partnerships and collaborations, which may
impose restrictions on our business and subject us to additional regulation.
A key aspect of our business strategy is to establish strategic relationships to expand or complement our research and development or
commercialization capabilities, and to reduce the cost of such activities. There can be no assurance that we will enter into such
relationships, that the arrangements will be on favorable terms or that such relationships will be successful. If we are ultimately
successful in executing our strategy of securing collaborations with companies that would undertake advanced clinical development and
commercialization of our products, we may not have day-to-day control over their activities. Potential collaborators may have significant
discretion in determining the efforts and amount of resources that they dedicate to our collaborations or may be unwilling or unable to
fulfill their obligations to us, including their development and commercialization. Potential collaborators may underfund or not commit
sufficient resources to the testing, marketing, distribution or other development of our products. They may also not properly maintain or
defend our intellectual property rights or they may utilize our proprietary information in such a way as to invite litigation that could
jeopardize or potentially invalidate our proprietary information or expose us to potential liability. Potential collaboration partners may
have the right to terminate the collaboration on relatively short notice and if they do so or if they fail to perform or satisfy their
obligations to us, the development or commercialization of products may be delayed and our ability to realize any potential milestone
payments and royalty revenue would be adversely affected.
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We will need to develop or acquire additional capabilities in order to commercialize our NurOwn® stem cell therapy, if approved for
sale, and we may encounter unexpected costs or difficulties in doing so.
We will need to acquire additional capabilities and effectively manage our operations and facilities to successfully pursue and complete
future research, development and, if our NurOwn® stem cell therapy receives regulatory approval, commercialization efforts. Currently,
we have no experience in preparing applications for marketing approval, commercial-scale manufacturing, managing of large-scale
information technology systems or managing a large-scale distribution system. We will need to add personnel and expand our
capabilities, which may strain our existing managerial, operational, regulatory compliance, financial and other resources. To do this
effectively, we must:
*
*
*
train, manage and motivate a growing employee base;
accurately forecast demand for our treatment; and
expand existing operational, financial and management information systems.
We expect to expand our development, regulatory, manufacturing and sales and marketing capabilities, and as a result, we may
encounter difficulties in managing our growth, which could disrupt our operations.
We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of
product development, regulatory affairs, manufacturing and sales and marketing. To manage our anticipated future growth, we must
continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and
train additional qualified personnel. Due to our limited financial resources and our limited experience in managing a company with such
anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified
personnel. The physical expansion of our operations may lead to significant costs and may divert our management and business
development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
We have never manufactured our NurOwn® stem cell therapy at commercial scale and there can be no assurance that it can be
manufactured in compliance with regulations at a cost or in quantities necessary to make it commercially viable.
Although, several members of our management team have experience in commercial scale cell therapy manufacturing, we have no
experience in commercial-scale stem cell therapy manufacturing. We may develop our manufacturing capacity in part by expanding our
current facilities and/or by setting up additional facilities in other regions of the country. These activities would require substantial
additional funds and we would need to hire and train significant numbers of qualified employees to staff these facilities.
To this end, we are working with Catalent, a third party manufacturer for producing commercial quantities of NurOwn® to treat patients
with Neurodegenerative disease. We are also working with RR&D, to help us establish in-house manufacturing capabilities. Our current
dependence on others for the manufacture of our drug candidates may adversely affect our ability to develop and deliver such drug
candidates on a timely and competitive basis. Any performance failure on the part of a third-party manufacturer could delay clinical
development, regulatory approval or, ultimately, sales of our NurOwn®. Our third-party manufacturers may encounter difficulties
involving production yields, regulatory compliance, lot release, quality control and quality assurance, as well as shortages of qualified
personnel. Approval of our NurOwn® could be delayed, limited or denied if the FDA does not approve our or a third-party
manufacturer’s processes or facilities.
If any CMO with whom we contract fails to perform its obligations, we may be forced to manufacture the materials ourselves, for which
we may not have the capabilities or resources, or enter into an agreement with a different CMO, which we may not be able to do on
reasonable terms, if at all. In either scenario, our clinical trials supply could be delayed significantly as we establish alternative supply
sources. In some cases, the technical skills required to manufacture our products or product candidates may be unique or proprietary to
the original CMO and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills to a
back-up or alternate supplier, or we may be unable to transfer such skills at all. In addition, if we are required to change CMOs for any
reason, we will be required to verify that the new CMO maintains facilities and procedures that comply with quality standards and with
all applicable regulations. We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing
process will produce our product candidate according to the specifications previously submitted to the FDA or another regulatory
authority. The delays associated with the verification of a new CMO could negatively affect our ability to develop product candidates
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or commercialize our products in a timely manner or within budget. Furthermore, a CMO may possess technology related to the
manufacture of our product candidate that such CMO owns independently. This would increase our reliance on such CMO or require us
to obtain a license from such CMO in order to have another CMO manufacture our product candidates. In addition, changes in
manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct bridging studies
between our prior clinical supply used in our clinical trials and that of any new manufacturer. We may be unsuccessful in demonstrating
the comparability of clinical supplies which could require the conduct of additional clinical trials.
In addition, in response to the COVID-19 pandemic, on March 10, 2020 the FDA announced its intention to postpone most inspections
of foreign manufacturing facilities while local, national and international conditions warrant. Since March 2020 when foreign and
domestic inspections of facilities were largely placed on hold, the FDA has been working to resume routine surveillance, bioresearch
monitoring and pre-approval inspections on a prioritized basis. Since April 2021, the FDA has conducted limited inspections and
employed remote interactive evaluations, using risk management methods, to meet user fee commitments and goal dates. Ongoing travel
restrictions and other uncertainties continue to impact oversight operations both domestic and abroad and it is unclear when standard
operational levels will resume. The FDA is continuing to complete mission-critical work, prioritize other higher-tiered inspectional needs
(e.g., for-cause inspections), and carry out surveillance inspections using risk-based approaches for evaluating public health. Should FDA
determine that an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to restrictions
on travel, and the FDA does not determine a remote interactive evaluation to be adequate, the agency has stated that it generally intends
to issue, depending on the circumstances, a complete response letter or defer action on the application until an inspection can be
completed. 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. If we are not successful in establishing regulatory compliant, scaled manufacturing capabilities, our commercialization could
be delayed, which would further delay the period when we would be able to generate revenues from the sale of such of our products.
Furthermore, we must supply all necessary documentation, including product characterization and process validation, to regulatory
authorities in support of our BLA on a timely basis and must adhere to cGMP regulations and current Good Tissue Practices (“GTP”)
enforced by the regulatory authority through its facilities inspection program. If the FDA determines that the products used in our clinical
trials are not sufficiently characterized, we may be required to repeat all or a portion of our clinical trials. If our facilities cannot pass a
pre-approval plant inspection, the regulatory approval of the stem cell therapies will not be granted.
Lack of coordination internally among our employees and externally with physicians, hospitals and third-party suppliers and
carriers, could cause manufacturing difficulties, disruptions or delays and cause us to not meet our expected clinical trial
requirements or potential commercial requirements.
Manufacturing our NurOwn® stem cell therapy requires coordination internally among our employees and externally with physicians,
hospitals and third-party suppliers and carriers. For example, a patient’s physician or clinical site will need to coordinate with us for the
shipping of a patient’s bone marrow to our manufacturing facility, and we will need to coordinate with them for the shipping of the
treatment components to them. Such coordination involves a number of risks that may lead to failures or delays in manufacturing our
NurOwn® stem cell therapy, including:
*
*
*
*
failure to obtain a sufficient supply of key raw materials of suitable quality;
difficulties in manufacturing our stem cell therapies for multiple patients simultaneously;
difficulties in obtaining adequate patient-specific material, such as bone marrow samples, from physicians;
difficulties in completing the development and validation of the harvested cells required to ensure the consistency of our
NurOwn® stem cell therapy;
*
failure to ensure adequate quality control and assurances in the manufacturing process as we increase production quantities;
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*
*
*
*
difficulties in the timely shipping of patient-specific materials to us or in the shipping of the stem cell therapies to the treating
physicians due to errors by third-party carriers, transportation restrictions or other reasons;
loss or destruction of, or damage to, patient-specific materials or our NurOwn® stem cell therapy during the shipping process
due to improper handling by third-party carriers, hospitals, physicians or us;
loss or destruction of, or damage to, patient-specific materials or our NurOwn® stem cell therapy during storage at our
facilities; and
loss or destruction of, or damage to, patient-specific materials or our NurOwn® stem cell therapy stored at clinical and future
commercial sites due to improper handling or holding by clinicians, hospitals or physicians.
If we are unable to coordinate appropriately, we may encounter delays or additional costs in achieving our clinical and commercialization
objectives, including in obtaining regulatory approvals of our stem cell therapies and supplying products, which could materially damage
our business and financial position.
We face competition in our efforts to develop cell therapies for ALS and other neurodegenerative diseases.
We face competition in our efforts to develop cell therapies and other treatment or procedures to cure or slow the effects of ALS and
other neurodegenerative diseases. Among our competitors are companies that are involved in the fetal-derived cell transplants or
embryonic stem cell derived cell therapy and companies developing adult stem cells. Other companies are developing traditional
chemical compounds, new biological drugs, cloned human proteins and other treatments, which are likely to impact the markets that we
intend to target. Some of our competitors possess longer operating histories and greater financial, managerial, scientific and technical
resources than we do, and some possess greater name recognition and established customer bases. Some also have significantly more
experience in preclinical testing, human clinical trials, product manufacturing, the regulatory approval process and marketing and
distribution than we do.
The trend towards consolidation in the pharmaceutical and biotechnology industries may adversely affect us.
There is a trend towards consolidation in the pharmaceutical and biotechnology industries. This consolidation trend may result in the
remaining companies having greater financial resources and discovery technological capabilities, thus intensifying competition in these
industries. This trend may also result in fewer potential collaborators or licensees for our stem cell therapies. Also, if a consolidating
company is already doing business with our competitors, we may lose existing licensees or collaborators as a result of such
consolidation.
There is a scarcity of experienced professionals in the field of cell therapy and we may not be able to retain key personnel or hire new
key personnel needed to implement our business strategy and develop our products and businesses. If we are unable to retain or hire
key personnel, we may be unable to continue to grow our business or to implement our business strategy, and our business may be
materially and adversely affected.
Given the specialized nature of cell therapy and the fact that it is a young field, there is an inherent scarcity of experienced personnel in
the field. Our success depends on a significant extent to the continued services of certain highly qualified scientific and management
personnel. We face competition for qualified personnel from numerous industry sources, and there can be no assurance that we will be
able to attract and retain qualified personnel on acceptable terms. The loss of service of any of our key personnel could have a material
adverse effect on our operations or financial condition. In the event of the loss of services of such personnel, no assurance can be given
that we will be able to obtain the services of adequate replacement personnel. The future success of the Company also depends upon our
ability to attract and retain additional qualified personnel (including medical, scientific, technical, commercial, business and
administrative personnel) necessary to support our anticipated growth, develop our business, and maintain appropriate licensure, on
acceptable terms. There can be no assurance that we will be successful in attracting or retaining personnel required by us to continue and
grow our operations. The loss of a key employee, the failure of a key employee to perform in his or her current position or our inability
to attract and retain skilled employees, as needed, could result in our inability to continue to grow our business or to implement our
business strategy, or may have a material adverse effect on our business, financial condition and results of operations.
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Technological and medical developments or improvements in conventional therapies could render the use of stem cells and our
services and planned products obsolete.
The pharmaceutical industry is characterized by rapidly changing markets, technology, emerging industry standards and frequent
introduction of new products. The introduction of new products embodying new technologies, including new manufacturing processes,
and the emergence of new industry standards may render our technologies obsolete, less competitive or less marketable. Advances in
other treatment methods or in disease prevention techniques could significantly reduce or entirely eliminate the need for our stem cell
services, planned products and therapeutic efforts. Additionally, technological or medical developments may materially alter the
commercial viability of our technology or services, and require us to incur significant costs to replace or modify equipment in which we
have a substantial investment. In either event, we may experience a material adverse effect on our business, results of operations and
financial condition. To date, approved conventional therapies have not shown significant clinical benefit as disease modifying therapies
in the indications that we are currently working on.
We may expend our limited resources to pursue our NurOwn® stem cell therapy or a specific indication for its use and fail to
capitalize on stem cell therapies or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we have focused development of our NurOwn® stem cell therapy for use in
patients with ALS, PMS and AD. As a result, we may forego or delay pursuit of opportunities with other stem cell therapies or for other
indications that later prove to have greater commercial potential. Our resource allocation decisions also may cause us to fail to capitalize
on a viable commercial treatment, a more viable indication or profitable market opportunities.
We have based our research and development efforts on our NurOwn® stem cell therapy. Notwithstanding our large investment to date
and anticipated future expenditures in our NurOwn® stem cell therapy, we have not yet developed, and may never successfully develop,
any marketed treatments using this approach. As a result of pursuing the development of our NurOwn® stem cell therapy, we may fail to
develop stem cell therapies or address indications based on other scientific approaches that may offer greater commercial potential or for
which there is a greater likelihood of success.
Our NurOwn® stem cell therapy is based on a novel technology, which may raise development issues that we may not be able to
resolve, regulatory issues that could delay or prevent approval or personnel issues that may keep us from being able to develop our
treatments.
Regulatory approval of stem cell therapies that utilize novel technology such as ours can be more expensive and take longer than for
other treatments that are based on more well-known or more extensively studied technology. This may lengthen the regulatory review
process, require us to perform additional studies, including clinical trials, increase our development costs, lead to changes in regulatory
positions and interpretations, delay or prevent approval and commercialization of these stem cell therapies or lead to significant post-
approval limitations or restrictions. For example, the differentiated cell component of our NurOwn® stem cell therapy is a complex
biologic product that is manufactured from the patient’s own bone marrow that must be appropriately harvested, isolated, expanded and
differentiated so that its identity, strength, quality, purity and potency may be characterized prior to release for treatment. No
differentiated cell treatment for ALS has yet been approved for marketing by the FDA or any other regulatory agency.
The novel nature of our NurOwn® stem cell therapy also means that fewer people are trained in or experienced with treatments of this
type, which may make it difficult to recruit, hire and retain capable personnel for the research, development and manufacturing positions
that will be required to continue our development and commercialization efforts.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws health information
privacy and security laws, and other health care laws and regulations. If we are unable to comply, or have not fully complied, with
such laws, we could face substantial penalties.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our
operations will be directly, or indirectly through our prescribers, customers and purchasers, subject to various federal and state fraud and
abuse laws and regulations, including, without limitation, the federal Health Care Program Anti-Kickback Statute, the federal civil and
criminal False Claims Act and Physician Payments Sunshine Act and regulations. These laws will impact, among other things, our
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proposed sales, marketing and educational programs. In addition, we may be subject to patient privacy laws by both the federal
government and the states in which we conduct our business. The laws that will affect our operations include, but are not limited to:
*
*
*
*
the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully
soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly,
overtly or covertly, in cash or in kind, to induce, or in return for, the purchase, lease, order, arrangement, or recommendation of
any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program,
such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the federal Anti-
Kickback Statute or specific intent to violate it to have committed a violation. Violations 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. In addition, the government may assert that a claim including items or services resulting from
a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims
Act or federal civil money penalties;
the federal civil and criminal false claims laws and civil monetary penalty laws, such as the federal False Claims Act, which
impose criminal and civil penalties and authorize civil whistleblower or qui tam actions, against individuals or entities for,
among other things: knowingly presenting, or causing to be presented, to the federal government, claims for payment that are
false or fraudulent; knowingly making, using or causing to be made or used, a false statement of record material to a false or
fraudulent claim or obligation to pay or transmit money or property to the federal government or knowingly concealing or
knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government. Manufacturers can be
held liable under the federal False Claims Act even when they do not submit claims directly to government payors if they are
deemed to “cause” the submission of false or fraudulent claims. The federal False Claims Act also permits a private individual
acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the federal False Claims
Act and to share in any monetary recovery;
the anti-inducement law, which prohibits, among other things, the offering or giving of remuneration, which includes, without
limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or
Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular
supplier of items or services reimbursable by a federal or state governmental program;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes
that prohibit a person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare
benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property
owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private)
and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any
materially false, fictitious, or fraudulent statements or representations in connection with the delivery of, or payment for,
healthcare benefits, items or services relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person or
entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a
violation;
* HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH and
their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose
requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective
business associates, independent contractors or agents of covered entities, that perform services for them that involve the
creation, maintenance, receipt, use, or disclosure of, individually identifiable health information relating to the privacy, security
and transmission of individually identifiable health information. HITECH also created new tiers of civil monetary penalties,
amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general
new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek
attorneys’ fees and costs associated with pursuing federal civil actions. In addition, there may be additional federal, state and
non-U.S. laws which govern the privacy and security of health and other personal information in certain circumstances, many
of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;
*
The U.S. federal transparency requirements under the ACA, including the provision commonly referred to as the Physician
Payments Sunshine Act, and its implementing regulations, which requires applicable manufacturers of drugs, devices, biologics
and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to
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report annually to CMS, information related to payments or other transfers of value made to physicians (defined to include
doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment
interests held by the physicians described above and their immediate family members. Effective January 1, 2022, these
reporting obligations extend to include transfers of value made to certain non-physician providers such as physician assistants
and nurse practitioners;
*
*
federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and
timely manner to government programs;
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that
potentially harm consumers; and
* Many states in the United States have enacted laws that regulate the privacy and/or security of certain types of personal
information. For example, in California the California Consumer Protection Act (CCPA), which went into effect on January 1,
2020, establishes a new privacy framework for covered businesses by creating an expanded definition of personal information,
establishing new data privacy rights for consumers in the State of California, imposing special rules on the collection of
consumer data from minors, and creating a new and potentially severe statutory damages framework for violations of the CCPA
and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. After a delay,
the CCPA became subject to enforcement as of July 1, 2020. Although clinical trial data and protected health information
subject to HIPAA are currently exempt from CCPA, we may be subject to the CCPA with respect to other personal information
regarding California residents. Further, a new California privacy law, the California Privacy Rights Act, or CPRA, was passed
by California voters on November 3, 2020. The CPRA will create additional obligations with respect to processing and storing
personal information that are scheduled to take effect on January 1, 2023 (with certain provisions having retroactive effect to
January 1, 2022). Additionally, some observers have noted that the CCPA and CPRA could mark the beginning of a trend
toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our
business. Already, in the United States, we have witnessed significant developments at the state level. For example, on March 2,
2021, Virginia enacted the Consumer Data Protection Act (the "CDPA") and, on July 8, 2021, Colorado's governor signed the
Colorado Privacy Act ("CPA"), into law. The CDPA and the CPA will both become effective January 1, 2023. While the CDPA
and CPA incorporate many similar concepts of the CCPA and CPRA, there are also several key differences in the scope,
application, and enforcement of the law that will change the operational practices of regulated businesses. The new laws will,
among other things, impact how regulated businesses collect and process personal sensitive data, conduct data protection
assessments, transfer personal data to affiliates, and respond to consumer rights requests. A number of other states have
proposed new privacy laws, some of which are similar to the above discussed recently passed laws. Such proposed legislation,
if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional
investment of resources in compliance programs, impact strategies and the availability of previously useful data and could
result in increased compliance costs and/or changes in business practices and policies. The existence of comprehensive privacy
laws in different states in the country would make our compliance obligations more complex and costly and may increase the
likelihood that we may be subject to enforcement actions or otherwise incur liability for noncompliance.
In addition to the above, on November 20, 2020, the Office of Inspector General, or OIG finalized further modifications to the federal
Anti-Kickback Statute. Under the final rules, OIG added safe harbor protections under the Anti-Kickback Statute for certain coordinated
care and value-based arrangements among clinicians, providers, and others, yet removed safe harbor protection for price reductions from
pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price
reduction is required by law. 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. This rule (with exceptions) became
effective January 19, 2021. We continue to evaluate what effect, if any, these rules will have on our business.
Additionally, we are subject to state and foreign equivalents of each of the healthcare laws and regulations described above, among
others, some of which may be broader in scope and may apply regardless of the payor. Many U.S. states have adopted laws similar to the
federal Anti-Kickback Statute and False Claims Act, and may apply to our business practices, including, but not limited to, research,
distribution, sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental payors,
including private insurers. In addition, some states have passed laws that require pharmaceutical companies to comply with the April
2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research
and Manufacturers of America’s Code on Interactions with Healthcare Professionals. Several states also impose other marketing
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restrictions or require pharmaceutical companies to make marketing or price disclosures to the state and require the registration of
pharmaceutical sales representatives. State and foreign laws, including for example the GDPR in the EEA, also govern the privacy and
security of health information in some circumstances, many of which differ from each other in significant ways and often are not
preempted by HIPAA, thus complicating compliance efforts. There are ambiguities as to what is required to comply with these state
requirements and if we fail to comply with an applicable state law requirement we could be subject to penalties. Finally, there are state
and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and
often are not preempted by HIPAA, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of
our business activities could be subject to challenge and may not comply under one or more of such laws, regulations, and guidance. Law
enforcement authorities are increasingly focused on enforcing fraud and abuse laws, and it is possible that some of our practices may be
challenged under these laws. Efforts to ensure that our current and future business arrangements with third parties, and our business
generally, will comply with applicable healthcare laws and regulations will involve substantial costs. If our operations, including our
arrangements with physicians and other healthcare providers, some of whom receive share options as compensation for services
provided, are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to
penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages,
reputational harm, diminished profits and future earnings, the curtailment or restructuring of our operations, exclusion from participation
in federal and state healthcare programs (such as Medicare and Medicaid), and imprisonment, as well as additional reporting obligations
and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with
these laws, any of which could adversely affect our ability to operate our business and our financial results.
It is uncertain to what extent the government, private health insurers and third-party payors will approve coverage or provide
reimbursement for the therapies and products to which our services relate. Availability for such reimbursement may be further
limited by an increasing uninsured population and reductions in Medicare and Medicaid funding in the United States.
In the United States and markets in other countries, patients generally rely on third-party payors to reimburse all or part of the costs
associated with their treatment. Our ability to successfully commercialize our human therapeutic products will depend significantly on
our ability to obtain acceptable prices and the availability of reimbursement to the patient from third-party payors, such as government
and private insurance plans. Although we have commenced initial discussions with such parties, pricing for our product, if approved, is
yet to determined. Sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the
costs of our product candidates will be covered and paid by health maintenance, managed care, pharmacy benefit and similar healthcare
management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other
payors. If coverage and adequate reimbursement are not available, or are available only to limited levels, we may not be able to
successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high
enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment. We may not be able to
provide data sufficient to gain acceptance with respect to coverage and reimbursement. If reimbursement is not available, or is available
only at limited levels, we may not be able to successfully commercialize our product candidates, if approved. The process for
determining whether a payor will provide coverage for a product may be separate from the process for setting the reimbursement rate that
the payor will pay for the product. Payors may limit coverage to specific products on an approved list, or formulary, which might not
include all of the FDA-approved products for a particular indication. A decision by a payor not to cover our gene therapies could reduce
physician utilization of our products once approved, and have a material adverse effect on our sales, results of operations and financial
condition.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States,
the principal decisions about coverage and reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid
Services, or CMS, an agency within the U.S. Department of Health and Human Services, or HHS, as CMS decides whether and to what
extent a new medicine will be covered and reimbursed under Medicare. Private payors tend to follow the CMS to a substantial degree. It
is difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no
body of established practices and precedents for these new products. Factors payors consider in determining reimbursement are based on
whether the product is:
*
*
a covered benefit under its health plan;
safe, effective and medically necessary;
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*
*
*
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
These third-party payors frequently require companies to provide predetermined discounts from list prices, and they are increasingly
challenging the prices charged for pharmaceuticals and other medical products. Our human therapeutic products may not be considered
cost-effective, and reimbursement to the patient may not be available or sufficient to allow us to sell our products on a competitive basis.
Further, as cost containment pressures are increasing in the health care industry, government and private payors adopt strategies designed
to limit the amount of reimbursement paid to health care providers. Such cost containment measures may include:
* Reducing reimbursement rates;
* Challenging the prices charged for medical products and services;
*
Limiting services covered;
* Decreasing utilization of services;
* Negotiating prospective or discounted contract pricing;
* Adopting capitation strategies; and
*
Seeking competitive bids.
Similarly, the trend toward managed health care and bundled pricing for health care services in the United States could significantly
influence the purchase of healthcare services and products, resulting in lower prices and reduced demand for our therapies.
We may not be able to negotiate favorable reimbursement rates for our human therapeutic products. If we fail to obtain acceptable prices
or an adequate level of reimbursement for our products, the sales of our products would be adversely affected or there may be no
commercially viable market for our products.
Unintended consequences of recently adopted health reform legislation in the U.S. may adversely affect our business.
The healthcare industry is undergoing fundamental changes resulting from political, economic and regulatory influences. In the U.S.,
comprehensive programs are under consideration that seek to, among other things, increase access to healthcare for the uninsured and
control the escalation of healthcare expenditures within the economy. Payors, whether domestic or foreign, or governmental or private,
are developing increasingly sophisticated methods of controlling healthcare costs and those methods are not always specifically adapted
for new technologies such as gene therapy and therapies addressing rare diseases such as those we are developing. In both the United
States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that
could impact our ability to sell our products profitably. In particular, in 2010, the Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, was enacted, which, among other things,
subjected biologic products to potential competition by lower-cost biosimilars; addressed 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; increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; extended the
Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations; subjected
manufacturers to new annual fees and taxes for certain branded prescription drugs; created a new Medicare Part D coverage gap discount
program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, effective as
of January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage
gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; and provided incentives to
programs that increase the federal government’s comparative effectiveness research.
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Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the
ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Various portions of the ACA are
currently undergoing legal and constitutional challenges in the United States Supreme Court; the former Trump Administration issued
various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a
cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or
medical devices; and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA. The
United States Supreme Court is expected to rule on a legal challenge to the constitutionality of the ACA in early 2021. The
implementation of the ACA is ongoing, the law appears likely to continue the downward pressure on pharmaceutical pricing, especially
under the Medicare program, and may also increase our regulatory burdens and operating costs. Litigation and legislation related to the
ACA are likely to continue, with unpredictable and uncertain results. It is unclear whether the ACA will be overturned, repealed,
replaced, or further amended. We cannot predict what affect further changes to the ACA would have on our business.
In addition, other legislative and regulatory changes have been proposed and adopted in the United States since the ACA was enacted:
● On August 2, 2011, the U.S. Budget Control Act of 2011, among other things, included aggregate reductions of Medicare
payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent
legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension
from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. Following the temporary suspension, a 1%
payment reduction will occur beginning April 1, 2022 through June 30, 2022, and the 2% payment reduction will resume
on July 1, 2022.
● On January 2, 2013, the U.S. American Taxpayer Relief Act of 2012 was signed into law, which, among other things,
further reduced Medicare payments to several types of providers.
● On April 13, 2017, CMS published a final rule that gives states greater flexibility in setting benchmarks for insurers in the
individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under
the ACA for plans sold through such marketplaces.
● On May 30, 2018, the Right to Try Act, was signed into law. The law, among other things, provides a federal framework
for certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that
are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without
enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no
obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right
to Try Act.
● On May 23, 2019, CMS published a final rule to allow Medicare Advantage Plans the option of using step therapy for Part
B drugs beginning January 1, 2020.
● On December 20, 2019, former President Trump signed into law the Further Consolidated Appropriations Act (H.R. 1865),
which repealed the Cadillac tax, the health insurance provider tax, and the medical device excise tax. It is impossible to
determine whether similar taxes could be instated in the future.
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Additionally, there has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices.
Specifically, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed
products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to,
among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, and review the
relationship between pricing and manufacturer patient programs. At a federal level, President Biden signed an Executive Order on July
9, 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, by imposing inflation caps, and, by supporting the development and
market entry of lower-cost generic drugs and biosimilars; and (ii) support the enactment of a public health insurance option. Among
other things, the Executive Order also directs HHS to provide a report on actions to combat excessive pricing of prescription drugs,
enhance the domestic drug supply chain, reduce the price that the Federal government pays for drugs, and address price gouging in the
industry; and directs the FDA to work with states and Indian Tribes that propose to develop section 804 Importation Programs in
accordance with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and the FDA’s implementing
regulations. FDA released such implementing regulations on September 24, 2020, which went into effect on November 30, 2020,
providing guidance for states to build and submit importation plans for drugs from Canada. On September 25, 2020, CMS stated drugs
imported by states under this rule will not be eligible for federal rebates under Section 1927 of the Social Security Act and manufacturers
would not report these drugs for “best price” or Average Manufacturer Price purposes. Since these drugs are not considered covered
outpatient drugs, CMS further stated it will not publish a National Average Drug Acquisition Cost for these drugs. If implemented,
importation of drugs from Canada may materially and adversely affect the price we receive for any of our product candidates. Further, on
November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare
Part B reimbursement rates would have been be calculated for certain drugs and biologicals based on the lowest price drug manufacturers
receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita.
However, on December 29, 2021 CMS rescinded the Most Favored Nations rule. Additionally, on November 30, 2020, HHS published a
regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either
directly or through pharmacy benefit managers, unless the price reduction is required by law. 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. Pursuant to court order, the removal and addition of the aforementioned safe harbors were delayed and
recent legislation imposed a moratorium on implementation of the rule until January 1, 2026. Although a number of these and other
proposed measures may require authorization through additional legislation to become effective, and the Biden administration may
reverse or otherwise change these measures, both the Biden administration and Congress have indicated that they will continue to seek
new legislative measures to control drug costs.
At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and
biological product pricing, including price or patient reimbursement constraints, discounts, or restrictions on certain product access, and
marketing cost disclosure and transparency measures, which, in some cases, are designed to encourage importation from other countries
and bulk purchasing.
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. We cannot predict the initiatives that may be
adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of
healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
*
*
*
*
*
the demand for our product candidates, if we obtain regulatory approval;
our ability to set a price that we believe is fair for our products;
our ability to generate revenue and achieve or maintain profitability;
the level of taxes that we are required to pay; and
the availability of capital.
Any denial in coverage or reduction in reimbursement from Medicare or other government programs may result in a similar denial or
reduction in payments from private payors, which may adversely affect our future profitability.
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Ethical and other concerns surrounding the use of stem cell therapy may negatively impact the public perception of our stem cell
services, thereby suppressing demand for our services.
Although our stem cell business pertains to adult stem cells only and does not involve the more controversial use of embryonic stem
cells, the use of adult human stem cells for therapy could give rise to similar ethical, legal and social issues as those associated with
embryonic stem cells, which could adversely affect its acceptance by consumers and medical practitioners. Additionally, it is possible
that our business could be negatively impacted by any stigma associated with the use of embryonic stem cells if the public fails to
appreciate the distinction between adult and embryonic stem cells. Delays in achieving public acceptance may materially and adversely
affect the results of our operations and profitability.
We may be subject to significant product liability claims and litigation which could adversely affect our future earnings and financial
condition.
Our business exposes us to potential product liability risks inherent in the testing, processing and marketing of stem cell therapy
products. Specifically, the conduct of clinical trials in humans involves the potential risk that the use of our stem cell therapy products
will result in adverse effects. Such liability claims may be expensive to defend and result in large judgments against us. We currently
maintain liability insurance for our clinical trials; however, such liability insurance may not be adequate to fully cover any liabilities that
arise from clinical trials of our stem cell therapy products. We also maintain errors and omissions, directors and officers, workers’
compensation and other insurance appropriate to our business activities. If we were to be subject to a claim in excess of this coverage or
to a claim not covered by our insurance and the claim succeeded, we would be required to pay the claim from our own limited resources,
which could have a material adverse effect on our financial condition, results of operations and business. Additionally, liability or alleged
liability could harm our business by diverting the attention and resources of our management and damaging our reputation and that of our
subsidiaries.
Political, economic and military instability in Israel may impede our ability to execute our plan of operations.
Our principal operations and the research and development facilities of the scientific team funded by us under the Second Ramot
Agreement are located in Israel. Accordingly, political, economic and military conditions in Israel may affect our business. Since the
establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. Acts of
random terrorism periodically occur which could affect our operations or personnel. Ongoing or revived hostilities or other factors
related to Israel could harm our operations and research and development process and could impede our ability to execute our plan of
operations.
In addition, Israeli-based companies and companies doing business with Israel have been the subject of an economic boycott by members
of the Arab League and certain other predominantly Muslim countries since Israel's establishment. Although Israel has entered into
various agreements with certain Arab countries and the Palestinian Authority, and various declarations have been signed in connection
with efforts to resolve some of the economic and political problems in the Middle East, we cannot predict whether or in what manner
these problems will be resolved. Wars and acts of terrorism have resulted in damage to the Israeli economy, including reducing the level
of foreign and local investment.
Furthermore, certain of our officers and employees may be obligated to perform annual reserve duty in the Israel Defense Forces and are
subject to being called up for active military duty at any time. Israeli citizens who have served in the army may be subject to an
obligation to perform reserve duty until they are between 40 and 49 years old, depending upon the nature of their military service.
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Man-Made Problems Such as Computer Viruses or Terrorism May Disrupt Our Operations and Harm Our Operating Results
Despite our implementation of network security measures our servers are vulnerable to computer viruses, break-ins, and similar
disruptions from unauthorized tampering with our computer systems. Any such event could have a material adverse effect on our
business, operating results, and financial condition. Efforts to limit the ability of malicious third parties to disrupt the operations of the
internet or undermine our own security efforts may meet with resistance. In addition, the continued threat of terrorism and heightened
security and military action in response to this threat, or any future acts of terrorism, may cause further disruptions to the economies of
the United States, Israel and other countries and create further uncertainties or otherwise materially harm our business, operating results,
and financial condition. Likewise, events such as widespread blackouts could have similar negative impacts. To the extent that such
disruptions or uncertainties result in delays or access to data or personal information, our business, operating results, and financial
condition could be materially and adversely affected.
Changes in Tax Law may Adversely Affect our Business and Financial Condition
The laws and rules dealing with U.S. federal, state and local income taxation are routinely being reviewed and modified by governmental
bodies, officials and regulatory agencies, including the Internal Revenue Service and the U.S. Treasury Department. Since inception,
many such changes have been made and changes are likely to continue to occur in the future. It cannot be predicted whether, when, in
what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or issued, that could result in an
increase in our or our stockholders’ tax liability.
Risks Related to Government Regulation
We are subject to a strict regulatory environment. If we fail to obtain and maintain required regulatory approvals for our potential
cell therapy products, our ability to commercialize our potential cell therapy products will be severely limited.
None of our stem cell therapies have received regulatory approval for commercial sale yet.
Numerous statutes and regulations govern human testing and the manufacture and sale of human therapeutic products in the United
States and other countries where we intend to market our products. Such legislation and regulation bears upon, among other things, the
approval of protocols and human testing, the approval of manufacturing facilities, testing procedures and controlled research, review and
approval of manufacturing, preclinical and clinical data prior to marketing approval including adherence to cGMP during production and
storage as well as regulation of marketing activities including advertising and labeling.
The completion of the clinical testing of our stem cell therapies and the obtaining of required approvals are expected to require the
expenditure of substantial resources. We may experience numerous unforeseen events during, or as a result of, the clinical trial process
that could delay or prevent regulatory approval and/or commercialization of our stem cell therapies, including the following:
● The FDA or similar foreign regulatory authorities may find that our stem cell therapies are not sufficiently safe or effective
or may find our processes or facilities unsatisfactory;
● Officials at the Israeli MoH, the FDA or similar foreign regulatory authorities may interpret data from preclinical studies
and clinical trials differently than we do;
● Our clinical trials may produce negative or inconclusive results or may not meet the level of statistical significance
required by the Israeli MoH, the FDA or other regulatory authorities, and we may decide, or regulators may require us, to
conduct additional preclinical studies and/or clinical trials or to abandon one or more of our development programs;
● The Israeli MoH, the FDA or similar foreign regulatory authorities may change their approval policies or adopt new
regulations;
● There may be delays or failure in obtaining approval of our clinical trial protocols from the Israeli MoH, the FDA or other
regulatory authorities or obtaining institutional review board approvals or government approvals to conduct clinical trials at
prospective sites;
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● We, or regulators, may suspend or terminate our clinical trials because the participating patients are being exposed to
unacceptable health risks or undesirable side effects; and
● Enrollment in our clinical trials for our stem cell therapies may occur more slowly than we anticipate, or we may
experience high drop-out rates of subjects in our clinical trials, resulting in significant delays.
Investors should be aware of the risks, problems, delays, expenses and difficulties which may be encountered by us in light of the
extensive regulatory environment in which our business operates. In particular, our development costs will increase if we have material
delays in our clinical trials, or if we are required to modify, suspend, terminate or repeat a clinical trial. If we are unable to conduct our
clinical trials properly and on schedule, marketing approval may be delayed or denied by the Israeli MoH or the FDA. On February 22,
2021, we announced high-level FDA feedback on NurOwn(R) ALS Clinical Development Program. The FDA concluded from their
initial review that the current level of clinical data does not provide the threshold of substantial evidence that FDA is seeking to support a
BLA. On March 2, 2021, the FDA issued a public statement that the data from the Phase 3 ALS study do not support the proposed
clinical benefit of NurOwn(R) and that the FDA would continue to provide advice to us on our development program.
Even if a stem cell therapy is approved by the Israeli MoH, the FDA or any other regulatory authority, we may not obtain approval for an
indication whose market is large enough to recoup our investment in that stem cell therapy. We may never obtain the required regulatory
approvals for any of our stem cell therapies. Later discovery of previously unknown problems with a product, manufacturer or facility
may result in restrictions on the product or manufacturer, including a withdrawal of the product from the market.
Even if regulatory approvals are obtained for our stem cell therapies, we will be subject to ongoing government regulation. If we or
one or more of our partners or collaborators fail to comply with applicable current and future laws and government regulations, our
business and financial results could be adversely affected.
The healthcare industry is one of the most highly regulated industries in the United States. The federal government, individual state and
local governments and private accreditation organizations all oversee and monitor the activities of individuals and businesses engaged in
the delivery of health care products and services. Even if regulatory authorities approve any of our human stem cell therapies, current
laws, rules and regulations that could directly or indirectly affect our ability and the ability of our strategic partners and customers to
operate each of their businesses could include, without limitation, the following:
*
*
*
*
*
State and local licensing, registration and regulation of laboratories, the collection, processing and storage of human cells and
tissue, and the development and manufacture of pharmaceuticals and biologics;
The federal Clinical Laboratory Improvement Act and amendments of 1988;
Laws and regulations administered by the FDA, including the Federal Food Drug and Cosmetic Act and related laws and
regulations;
The Public Health Service Act and related laws and regulations;
Laws and regulations administered by the United States Department of Health and Human Services, including the Office for
Human Research Protections;
*
State laws and regulations governing human subject research;
* Occupational Safety and Health requirements; and
*
State and local laws and regulations dealing with the handling and disposal of medical waste.
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Compliance with such regulation may be expensive and consume substantial financial and management resources. If we, or any future
marketing collaborators or contract manufacturers, fail to comply with applicable regulatory requirements, we may be subject to
sanctions including fines, product recalls or seizures, injunctions, total or partial suspension of production, civil penalties, withdrawal of
regulatory approvals and criminal prosecution. Any of these sanctions could delay or prevent the promotion, marketing or sale of our
products.
We are subject to environmental, health and safety laws.
We are subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices, the
experimental use of animals and humans, emissions and wastewater discharges, and the use and disposal of hazardous or potentially
hazardous substances used in connection with our research. We also cannot accurately predict the extent of regulations that might result
from any future legislative or administrative action. Any of these laws or regulations could cause us to incur additional expense or
restrict our operations.
Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our
research, development or production efforts.
We are subject to significant regulation with respect to manufacturing of our NurOwn® stem cell therapy.
All entities involved in the preparation of a therapeutic biological for clinical trials or commercial sale are subject to extensive regulation.
Our NurOwn® stem cell therapy must be manufactured in accordance with cGMP and GTP before it can be used in our clinical trials or
approved for commercial sale. These regulations govern manufacturing processes and procedures and the implementation and operation
of quality systems to control and assure the quality of investigational stem cell therapies and treatments, including treatment component
characterization and process validation, approved for sale. Our facilities and quality systems and the facilities and quality systems of
some or all of our third party suppliers must pass a pre-approval inspection for compliance with the applicable regulations as a condition
of regulatory approval of our NurOwn® stem cell therapy. If any inspection or audit of our manufacturing facilities identifies a failure to
comply with applicable regulations, or if a violation of applicable regulations occurs independent of an inspection or audit, we or the
relevant regulatory authority may require remedial measures that may be costly and/or time consuming for us or a third party to
implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or
permanent closure of a facility. Any such remedial measures imposed on us or third parties with whom we contract could materially harm
our business.
For certain commercial prescription biologic products, manufacturers and other parties involved in the supply chain must also meet chain
of distribution requirements and build electronic, interoperable systems for product tracking and tracing and for notifying the FDA of
counterfeit, diverted, stolen and intentionally adulterated products or other products that are otherwise unfit for distribution in the United
States.
Our long-term business plan is to develop our NurOwn® stem cell therapy for the treatment of neurodegenerative diseases, such as ALS,
PMS and AD. Even if we successfully develop our NurOwn® stem cell therapy for use in one indication, we may not be successful in
our efforts to identify or discover additional indications for it. Clinical programs to develop new indications for our NurOwn® stem cell
therapy will require substantial technical, financial and human resources. These development programs may initially show promise in
identifying potential treatment indications, yet fail to obtain regulatory approval for commercial sale.
If we do not accurately evaluate the commercial potential or target market for our NurOwn® stem cell therapy, we may relinquish
valuable rights to that treatment through collaboration, licensing or other royalty arrangements in cases in which it would have been more
advantageous for us to retain sole development and commercialization rights.
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Risks Related to Our Intellectual Property
Part of our business in the foreseeable future will be based on technology licensed from Ramot and if this license were to be
terminated upon failure to make required royalty payments in the future, we would need to change our business strategy and we may
be forced to cease our operations.
Agreements we and our Israeli Subsidiary have with Ramot impose on us royalty payment obligations. If we fail to comply with these
obligations, Ramot may have the right to terminate the license under certain circumstances. If Ramot elects to terminate our license, we
would need to change our business strategy and we may be forced to cease our operations. We currently do not owe Ramot any overdue
payments. Royalties are due upon commencement of revenues by the Company.
If Ramot is unable to obtain patents on the patent applications and technology licensed to our Israeli Subsidiary or if patents are
obtained but do not provide meaningful protection, we may not be able to successfully market our proposed products.
We rely upon the patent applications filed by Ramot, the technology licensing company of Tel Aviv University, and the license granted to
us by Ramot, all in accordance with the Second Ramot Agreement dated as of July 26, 2007. We further agreed under the Second Ramot
Agreement that Ramot, in consultation with us, is responsible for obtaining patent protection for technology owned by Ramot and
licensed to us. No assurance can be given that any of our pending or future patent applications will be approved, that the scope of any
patent protection granted will exclude competitors or provide us with competitive advantages, that any of the patents that may be issued
to us will be held valid if subsequently challenged, or that other parties will not claim rights to or ownership of our patents or other
proprietary rights that we hold license to. Furthermore, there can be no assurance that others have not developed or will not develop
similar products, duplicate any of our technology or products or design around any patents that have been or may be issued to us or any
future licensors. Since patent applications in the United States and in Europe are not disclosed until applications are published, there can
be no assurance that others did not first file applications for products covered by our pending patent applications, nor can we be certain
that we will not infringe any patents that may be issued to others. Also, we have abandoned our rights to certain patents of Ramot in
certain countries in connection with the Letter Agreement by and between us and Ramot dated December 24, 2009, which may limit our
ability to fully market our proposed products. All granted patents related to NurOwn® (MSC-NTF cells) manufacturing process are fully
assigned to or owned by BrainStorm Cell Therapeutics Ltd.
We also rely upon unpatented proprietary technology, know-how and trade secrets and seek to protect them through confidentiality
agreements with employees, consultants and advisors. If these confidentiality agreements are breached, we may not have adequate
remedies for the breach. In addition, others may independently develop or otherwise acquire substantially the same proprietary
technology as our technology and trade secrets.
We may be unable to protect our intellectual property from infringement by third parties.
Despite our efforts to protect our intellectual property, third parties may infringe or misappropriate our intellectual property. Our
competitors may also independently develop similar technology, duplicate our processes or services or design around our intellectual
property rights. We may have to litigate to enforce and protect our intellectual property rights to determine their scope, validity or
enforceability. Intellectual property litigation is costly, time-consuming, diverts the attention of management and technical personnel and
could result in substantial uncertainty regarding our future viability. The loss of intellectual property protection or the inability to secure
or enforce intellectual property protection would limit our ability to develop or market our services in the future. This would also likely
have an adverse effect on the revenues generated by any sale or license of such intellectual property. Furthermore, any public
announcements related to such litigation or regulatory proceedings could adversely affect the price of our Common Stock.
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Third parties may claim that we infringe on their intellectual property.
We may be subject to costly litigation in the event our technology is claimed to infringe upon the proprietary rights of others. Third
parties may have, or may eventually be issued, patents that would be infringed by our technology. Any of these third parties could make a
claim of infringement against us with respect to our technology. We may also be subject to claims by third parties for breach of
copyright, trademark or license usage rights. Litigation and patent interference proceedings could result in substantial expense to us and
significant diversion of efforts by our technical and management personnel. An adverse determination in any such proceeding or in
patent litigation could subject us to significant liabilities to third parties or require us to seek licenses from third parties. Such licenses
may not be available on acceptable terms or at all. Adverse determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent us from commercializing our products, which would have a material adverse effect on our business,
results of operations and financial condition.
As a result of our reliance on consultants, we may not be able to protect the confidentiality of our technology, which, if disseminated,
could negatively impact our plan of operations.
We currently have relationships with academic and industry consultants and subcontractors who are not directly employed by us, and we
may enter into additional relationships of such nature in the future. We have limited control over the activities of these consultants and
can expect only limited amounts of their time to be dedicated to our activities. These persons may have consulting, employment or
advisory arrangements with other entities that may conflict with or compete with their obligations to us. Our consultants typically sign
agreements that provide for confidentiality of our proprietary information and results of studies. However, in connection with every
relationship, we may not be able to maintain the confidentiality of our technology, the dissemination of which could hurt our competitive
position and results of operations. To the extent that our scientific consultants develop inventions or processes independently that may be
applicable to our proposed products, disputes may arise as to the ownership of the proprietary rights to such information, we may expend
significant resources in such disputes and we may not win those disputes.
We received grants from the Israel Innovation Authority, or IIA, we are subject to on-going restrictions.
We have received royalty-bearing grants from the IIA, for research and development programs that meet specified criteria. The terms of
the IIA’s grants may limit various technology transfer know-how developed under an approved research and development program
outside of Israel.
Risks related to our Common Stock
The price and trading volume of our stock is expected to be volatile.
The market price and trading volume of our Common Stock has fluctuated significantly over time, and is likely to continue to be highly
volatile. To date, the trading volume and price of our stock has seen significant fluctuations. We expect such fluctuations could occur in
the future. Investors should be aware of the risks of trading in our Common Stock due to such volatility.
Your percentage ownership will be diluted by future issuances of our securities.
In order to meet our financing needs, we may issue additional significant amounts of our Common Stock and warrants to purchase shares
of our Common Stock. The precise terms of any future financings will be determined by us and potential investors and such future
financings may also significantly dilute your percentage ownership in the Company.
ACCBT holds equity participation rights and other rights that could affect our ability to raise funds.
Pursuant to the Subscription Agreement with ACCBT Corp. (“ACCBT”), a company under the control of Mr. Chaim Lebovits, our
President and Chief Executive Officer, we granted ACCBT the right to acquire additional shares of our Common Stock whenever we
issue additional shares of Common Stock or other securities of the Company, or options or rights to purchase shares of the Company or
other securities directly or indirectly convertible into or exercisable for shares of the Company (including shares of any newly created
class or series). This participation right could limit our ability to enter into equity financings and to raise funds from third parties.
ACCBT is entitled to purchase its pro rata share of any additional securities we offer, so that its percentage ownership of the Company
remains the same after any such issuance of additional securities. Such additional securities will be offered to ACCBT at the same price
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and on the same terms as the other investors in the transaction. ACCBT will have 30 days from the date of our notice to ACCBT of any
intended transaction, to decide whether it wishes to exercise its participation rights in the transaction. We also are prohibited from taking
certain corporate actions without the consent of ACCBT, including entering into transactions greater than $500,000. Further, ACCBT
also has the right to appoint 30% of our Board. In connection with the Subscription Agreement, we entered into a registration rights
agreement with ACCBT pursuant to which we granted piggyback registration rights to ACCBT. In addition, we issued ACCBT warrants
to purchase up to 2,016,666 shares of Common Stock, of which 2,016,666 warrants are presently outstanding. The outstanding warrants
contain cashless exercise provisions, which permit the cashless exercise of up to 50% of the underlying shares of Common Stock.
672,222 of such warrants have an exercise price of $3.00 and the remainder have an exercise price of $4.35. We registered 1,920,461
shares of Common Stock and 2,016,666 shares of Common Stock underlying the ACCBT Warrants on registration statement No. 333-
201705 dated January 26, 2015 pursuant to ACCBT’s registration rights. ACCBT has waived its participation rights and anti-dilution
rights with respect to issuances that were made on or prior to November 2, 2017. In March 2014, we entered into an agreement with
ACCBT according to which ACCBT waived certain anti-dilution rights. On November 2, 2017, the Company entered into a Warrant
Amendment Agreement with ACCBT, pursuant to which the expiration date of each Warrant held by ACCBT was extended until
November 5, 2022, in consideration of ACCBT having provided a series of waivers of their rights and reduction of rights.
You may experience difficulties in attempting to enforce liabilities based upon U.S. federal securities laws against us and our non-
U.S. resident directors and officers.
Our principal operations are located through our subsidiary in Israel and our principal assets are located outside the U.S. Our Chief
Executive Officer and Chief Business Officer and some of our directors are foreign citizens and do not reside in the U.S. It may be
difficult for courts in the U.S. to obtain jurisdiction over our foreign assets or these persons and as a result, it may be difficult or
impossible for you to enforce judgments rendered against us or our directors or executive officers in U.S. courts. Thus, should any
situation arise in the future in which you have a cause of action against these persons or entities, you are at greater risk in investing in our
Company rather than a domestic company because of greater potential difficulties in bringing lawsuits or, if successful, collecting
judgments against these persons or entities as opposed to domestic persons or entities.
If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of
operations or prevent fraud, and investor confidence and the market price of our Common Stock may be materially and adversely
affected.
As a public company in the United States, we are subject to the reporting obligations under the U.S. securities laws. The SEC, as
required under Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring every public company to include a report of
management on the effectiveness of such company’s internal control over financial reporting in its annual report. In prior years,
management has identified material weaknesses in our internal control over financial reporting. If any of our prior material weaknesses
recurs, or if we identify additional weaknesses or fail to timely and successfully implement new or improved controls, our ability to
assure timely and accurate financial reporting may be adversely affected, and we could suffer a loss of investor confidence in the
reliability of our financial statements, which in turn could negatively impact the trading price of our shares of Common Stock, result in
lawsuits being filed against us by our stockholders, or otherwise harm our reputation. If material weaknesses are identified in the future,
it could be costly to remediate such material weaknesses, which may adversely affect our results of operations. In addition, our auditor is
not required to attest to the effectiveness of our internal controls over financial reporting due to our status of qualifying as a smaller
reporting company. As a result, current and potential investors could lose confidence in our financial reporting, which could harm our
business and have an adverse effect on our share price.
Delaware law could discourage a change in control, or an acquisition of us by a third party, even if the acquisition would be
favorable to you, and thereby adversely affect existing stockholders.
The Delaware General Corporation Law contain provisions that may have the effect of making more difficult or delaying attempts by
others to obtain control of our Company, even when these attempts may be in the best interests of stockholders. Delaware law imposes
conditions on certain business combination transactions with “interested stockholders.” These provisions and others that could be
adopted in the future could deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions
in which stockholders might otherwise receive a premium for their shares over then current market prices. These provisions may also
limit the ability of stockholders to approve transactions that they may deem to be in their best interests.
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We do not expect to pay dividends in the foreseeable future, and accordingly you must rely on stock appreciation for any return on
your investment.
We have paid no cash dividends on our Common Stock to date, and we currently intend to retain our future earnings, if any, to fund the
continued development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future.
Further, any payment of cash dividends will also depend on our financial condition, results of operations, capital requirements and other
factors, including contractual restrictions to which we may be subject, and will be at the discretion of our Board.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
Corporate Headquarters and other office space
Our United States corporate headquarters are located at 1325 Avenue of Americas, 28th Floor, New York, NY 10019. Our Israeli
Subsidiary is party to a lease agreement for the lease of premises in 12 Basel Street, Petach Tikva, Israel, which include approximately
600 square meters of office and laboratory space, including an animal research facility.
In addition, we lease a GMP certified manufacturing facility with two cleanrooms in Jerusalem, Israel, and have recently leased a new
GMP certified facility, which includes three state-of-the-art cleanrooms, at the Tel Aviv Sourasky Medical Center.
We believe that the current office, laboratory space, and cleanrooms are adequate to meet our needs for research and development,
clinicals trials and administrative operations.
Item 3. LEGAL PROCEEDINGS
From time to time, we may become involved in litigation relating to claims arising out of operations in the normal course of business,
which we consider routine and incidental to our business. We currently are not a party to any legal proceedings the adverse outcome of
which, in management’s opinion, would have a material adverse effect on our business, results of operation or financial condition.
Item 4. MINE SAFETY DISCLOSURES.
Not required.
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Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
PART II
Market Information
Our Common Stock is currently traded on the Nasdaq Capital Market under the symbol “BCLI”.
Record Holders
As of March 21, 2022, there were approximately 30 holders of record of our Common Stock.
Dividends
We have not paid or declared any cash or other dividends on our Common Stock within the last two fiscal years. Any future
determination as to the payment of dividends will depend upon our results of operations, and on our capital requirements, financial
condition and other factors relevant at the time.
Equity Compensation Plans
Information regarding our equity compensation plans and the securities authorized under the plans is included in Item 12 below.
Recent Sales of Unregistered Securities
Exercises of 2018 Amended Warrants:
On June 6, 2018, the Company entered into Warrant Exercise Agreements with certain holders (“2018 Warrant Holders”), pursuant to
which holders were issued warrants to purchase an aggregate 2,458,201 unregistered shares of Common Stock, at an exercise price of $9
per share, with an expiration date of December 31, 2020 (the “2018 Warrants”). In connection with the issuance of the 2019 Warrants
(described below), certain 2018 Warrants were amended on August 2, 2019 to reduce the exercise price to $7.00 per share and to extend
the expiration date to December 31, 2021 (the “Amended 2018 Warrants”).
Between July 20, 2020 and July 24, 2020, 2018 Warrant Holders exercised an aggregate of 280,000 shares of the Amended 2018
Warrants (the “2018 Exercised Shares”), which exercises generated gross cash proceeds to the Company of $1.96 million.
The 2018 Warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), or state securities laws.
The 2018 Exercised Shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995).
The issuance of the 2018 Exercised Shares and 2018 Warrants was exempt from the registration requirements of the Securities Act
pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and
Rule 506 of Regulation D promulgated under the Securities Act. The Company made this determination based on the representations that
each party is an “accredited investor” within the meaning of Rule 501 of Regulation D. The Company expects to use cash received from
exercises for general corporate and working capital purposes.
Exercises of 2019 Warrants:
On August 2, 2019, the Company entered into Warrant Exercise Agreements with certain 2018 Warrant Holders (“2019 Warrant
Holders”), pursuant to which holders were issued warrants to purchase an aggregate 842,000 shares of Common Stock (the “2019
Warrants”), at an exercise price of $7.00, with an expiration date of December 31, 2021 (the “2019 Warrants”).
Between July 15, 2020 and July 24, 2020, 2019 Warrant Holders exercised an aggregate of 620,000 shares of the 2019 Warrants (the
“2019 Exercised Shares”), which exercises generated gross cash proceeds to the Company of $4.34 million.
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The 2019 Warrants have not been registered under the Securities Act, or state securities laws. The 2019 Exercised Shares have been
registered for resale on the Company’s registration statement on Form S-3 (File No. 333-233349). The issuance of the 2019 Exercised
Shares and 2019 Warrants is exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions
by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated
under the Securities Act. The Company made this determination based on the representations that each party is an “accredited investor”
within the meaning of Rule 501 of Regulation D. The Company expects to use cash received from exercises for general corporate and
working capital purposes.
Item 6. RESERVED
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the related
notes that appear elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our
current expectations that involve risks and uncertainties. Actual results may differ materially from those discussed in these forward-
looking statements due to a number of factors, including those set forth in the section entitled “Risk Factors” and elsewhere in this
Annual Report on Form 10-K. For further information regarding forward-looking statements, please refer to the “Special Note
Regarding Forward-Looking Statements” at the beginning of Part I of this Annual Report on Form 10-K.
Company Overview
We are a leading biotechnology company engaged in the development of best-in-class autologous cellular therapies derived from a
patient’s own bone marrow cells for the treatment of neurodegenerative diseases. We hold the rights to clinical development and
commercialization of the NurOwn® technology platform through an exclusive, worldwide licensing agreement (see details herein).
NurOwn® has received Fast Track designation from the FDA in ALS and has additionally been granted Orphan Drug Status by the FDA
and the EMA. For more information, visit our website at www.brainstorm-cell.com.
We are committed to bring innovative central nervous system (“CNS”) adult stem cell therapies to the market to improve the lives of
patients with debilitating neurodegenerative diseases. As a leader in CNS regenerative cellular medicines, we are leveraging NurOwn®,
its proprietary autologous mesenchymal stem cell platform technology, a strong and expanded intellectual property portfolio, as well as
manufacturing and commercialization capabilities, to address growing unmet medical needs across a broad range of neurodegenerative
disorders, such as ALS, PMS, AD and other neurodegenerative diseases. NurOwn® uses proprietary cell culture conditions to induce
MSCs to secrete high levels of multiple neurotrophic factors to modulate neuroinflammatory and neurodegenerative disease processes,
promote neuronal survival and improve neurological function.
Results of Operations
For the period from inception (September 22, 2000) until December 31, 2021, we did not generate any revenues from operations. In
addition, we incurred operating costs and expenses of approximately $24,457,000 during the year ended December 31, 2021.
Research and Development, net
Our business model calls for significant investments in research and development. Our research and development expenditures, net in the
year ended December 31, 2021 were $15,235,000, a decrease of $7,094,000 compared to $22,329,000 for the year ended December 31,
2020.
This decrease is due to: (i) a decrease of $9,878,000 in connection with costs related to the Phase 3 and Phase 2 Clinical Trials and (ii) a
decrease of $738,000 in connection with materials, patents, payroll and stock-based compensation expenses and other activities. This
decrease was partially offset by (i) a decrease of $1,972,000 in participation of the Israel Innovation Authority (“IIA”), CIRM and under
various awarded grants in 2021 and (ii) an increase of $1,550,000 for costs related to preclinical R&D activities, travel, consultants,
depreciation, rent and other costs. Excluding participation from IIA and other grants and proceeds received under the hospital exemption
regulatory pathway, research and development expenses decreased by $8,724,000 from $24,608,000 in 2020 to $15,884,000 in 2021.
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General and Administrative
General and administrative expenses for the years ended December 31, 2021 and 2020 were $9,304,000 and $9,355,000, respectively.
The decrease of $51,000 in general and administrative expenses is mainly due to: (i) a decrease of $437,000 in payroll and stock-based
compensation expenses; (ii) a decrease of $331,000 in the travel costs, costs of our stock costs, consultants, costs of our investor relations
and public relations activities. This decrease was partially offset by an increase of $717,000 in our rent and various other expenses.
Financial Expenses
Financial income for the year ended December 31, 2021 was $82,000 as compared to financial expense of $127,000 for the year ended
December 31, 2020 due to interest earned on our cash, cash equivalents and short-term deposits.
Net Loss
Net loss for the year ended December 31, 2021 was $24,457,000, as compared to a net loss of $31,811,000 for the year ended December
31, 2020. Net loss per share for the year ended December 31, 2021 and December 31, 2020 was $0.68 and $1.07, respectively.
The weighted average number of shares of Common Stock used in computing basic and diluted net loss per share for the year ended
December 31, 2021 was 36,181,753 compared to 29,848,217 for the year ended December 31, 2020.
The increase in the weighted average number of shares of Common Stock used in computing basic loss per share for the year ended
December 31, 2021 was due to: (i) the issuance of shares to employees and directors, (ii) issuance and sale of shares of Common Stock
pursuant to the Distribution Agreement and (iii) the exercise of options.
Since its inception, the Company has devoted substantially all of its efforts to research and development. The Company is still in its
development and clinical stage and has not yet generated revenues. The extent of the Company's future operating losses and the timing of
becoming profitable are uncertain.
Additional funding will be required to begin the commercialization efforts and to achieve a level of sales adequate to support the
Company's cost structure.
To meet its capital needs, the Company is considering multiple alternatives, including, but not limited to, additional public and private
sales of its Common Stock and warrants, the exercise of warrants, the issuance of convertible promissory notes, sales of Common Stock
via its August 9, 2021 ATM program and other funding transactions. While the Company has been successful in raising financing
recently and in the past, there can be no assurance that it will be able to do so in the future on a timely basis on terms acceptable to the
Company, or at all.
Continuing concerns resulting from the COVID-19 pandemic, including the emergence of new variants, may continue to adversely
disrupt the Company's operations, including the ability to complete the ongoing clinical trials and may have other adverse effects on
Company's business and operations. In addition, this pandemic has caused substantial disruption in the financial markets and may
adversely impact economies worldwide, both of which could result in adverse effects on Company's business, operations and ability to
raise capital.
Management expects that the Company will continue to generate losses from the clinical development and regulatory activities, which
will result in a negative cash flow from operating activity. The Company has recently completed its Phase 3 ALS clinical trial. The
Company currently has sufficient cash to complete its ongoing activities. Over the longer term, if the Company is granted a BLA
approval, additional capital raise will be needed in connection with strategic partnerships and to commercialize NurOwn® for ALS, and
to conduct additional trials for other indications. If the Company is not able to raise additional capital for these purposes, management
may need to slow the pace of commercialization or the Company may not be able to continue to function as a going concern. The
Company's consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty.
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Liquidity and Capital Resources
Since inception, the Company has financed its operations primarily through public and private sales of its Common Stock and warrants,
the exercise of warrants, the issuance of convertible promissory notes, sales via the ATM programs and through various grants. At
December 31, 2021 cash, cash equivalents and short-term bank deposits amounted to $22,094,000.
Net cash used in operating activities for the year ended December 31, 2021 was $26,265,000. Cash used for operating activities was
primarily attributed to cost of clinical trials, rent of clean rooms and materials for clinical trials, payroll costs, rent, outside legal fee
expenses and public relations expenses.
Net cash provided by investing activities for the year ended December 31, 2021 was $323,000 representing primarily a net decrease in
short-term deposits and purchase of property and equipment.
Net cash provided by financing activities for the year ended December 31, 2021 was $ 6,969,000 from the exercises of options during the
year, sales of common stock under ring and sales of common stock under the September 25, 2020 ATM programs.
On August 9, 2021, the Company entered into an Amended and Restated Distribution Agreement (the "New Distribution Agreement")
with the Agents pursuant to which the Company may sell from time to time, through the Agents, shares of Common Stock, having an
aggregate offering price of up to $100,000,000 (the "August 9, 2021, ATM"). Sales under the August 9, 2021, ATM are to be made by
any method permitted by law that is deemed to be an "at the market" offering as defined in Rule 415 promulgated under the Securities
Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Shares,
through a market maker or as otherwise agreed by the Company and the Agents. During the quarter ended December 31, 2021, the
Company did not sell any shares of its Common Stock pursuant to the August 9, 2021, ATM.
At-the-market (ATM) Offerings:
On June 11, 2019, the Company entered into a distribution agreement with Raymond James & Associates, Inc. ("Raymond James"),
pursuant to which the Company sold, through the Raymond James, shares of Common Stock having an aggregate offering amount of
$20,000,000 (the “June 11, 2019 ATM”) in an “at the market” offering as defined in Rule 415 promulgated under the Securities Act,
including, without limitation, by sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Shares,
through a market maker or as otherwise agreed by the Company and Raymond James.
On March 6, 2020, the Company entered into a new distribution agreement with Raymond James (the “Agent”), pursuant to which the
Company was able to sell from time to time, through the Agent, shares of Common Stock, having an aggregate offering price of up to
$50,000,000 (the “March 6, 2020, ATM”). Sales under the March 6, 2020. ATM were made by any method permitted by law that is
deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation,
sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Shares, through a market maker or as
otherwise agreed by the Company and Raymond James. Under the March 6, 2020, ATM, the Company sold an aggregate of 2,446,641
shares of Common Stock at an average price of $9.45 per share, raising gross proceeds of approximately $23.11 million.
On September 25, 2020, the Company entered into an Amended and Restated Distribution Agreement (the “Distribution Agreement”)
with SVB Leerink LLC (“Leerink”) and Raymond James & Associates (together with Leerink, the “Agents”) pursuant to which the
Company may sell from time to time, through the Agents, shares of Common Stock, having an aggregate offering price of up to
$45,000,000, which aggregate amount includes amount unsold pursuant to the March 6, 2020, ATM (the “September 25, 2020, ATM”).
Sales under the September 25, 2020, ATM are to be made by any method permitted by law that is deemed to be an “at the market”
offering as defined in Rule 415 promulgated under the Securities Act, including, without limitation, sales made directly on the Nasdaq
Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and
the Agents. The Distribution Agreement amends and restates in its entirety the Company’s prior agreement with Raymond James entered
into on March 6, 2020 (the “March 6, 2020, ATM”). The Company previously sold 2,446,641 shares of Common Stock for gross
proceeds of approximately $23.11 million of Common Stock under the March 6, 2020, ATM. During the quarter ended September 30,
2021, the Company did not sell any additional shares of its Common Stock pursuant to the September 25, 2020, ATM. Since inception
and as of September 30, 2021, the Company has sold 4,721,282 shares of Common Stock for gross proceeds of approximately $29.1
million under the September 25, 2020, ATM.
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The Company has no obligation under the September 25, 2020, ATM to sell any shares and may at any time suspend sales or terminate
the September 25, 2020, ATM in accordance with its terms. Subject to the terms and conditions of the Distribution Agreement, the
Agents will use their commercially reasonable efforts to sell on the Company’s behalf, from time to time consistent with its normal sales
and trading practices, such Shares based upon instructions from the Company (including any price, time or size limits or other customary
parameters or conditions the Company may impose). The Company has provided the Agents with customary indemnification rights, and
the Agents will be entitled to a fixed commission of 3.0% of the aggregate gross proceeds from the Shares sold. The Distribution
Agreement contains customary representations and warranties, and the Company is required to deliver customary closing documents and
certificates in connection with sales of the Shares. Shares sold under the ATMs are issued pursuant to the Company’s existing Shelf
Registration Statement, and the Prospectus Supplement to the Registration Statements filed June 11, 2019, March 6, 2020, and
September 25, 2020, respectively.
On August 9, 2021, the Company entered into an Amended and Restated Distribution Agreement (the “New Distribution Agreement”)
with the Agents pursuant to which the Company may sell from time to time, through the Agents, shares of Common Stock, having an
aggregate offering price of up to $100,000,000 (the “August 9, 2021, ATM”). Sales under the August 9, 2021, ATM are to be made by
any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities
Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Shares,
through a market maker or as otherwise agreed by the Company and the Agents. In connection with the New Distribution Agreement, the
Company terminated the previous Distribution Agreement and the September 25, 2020, ATM. During the year ended December 31,
2021, the Company did not sell any shares of its Common Stock pursuant to the August 9, 2021, ATM.
Registered Direct Offering:
On March 6, 2020, the Company entered into and closed a $10.0 million registered direct offering of 1,250,000 shares of Common Stock
at a per share purchase price equal to $8.00. Purchaser also received a three-year warrant to purchase up to 250,000 shares of Common
Stock at an exercise price of $15.00 per share.
Recent Sales of Unregistered Securities:
Exercises of 2018 Amended Warrants: On June 6, 2018 the Company entered into Warrant Exercise Agreements with certain holders
(“2018 Warrant Holders”), pursuant to which holders were issued warrants to purchase an aggregate 2,458,201 unregistered shares of
Common Stock, at an exercise price of $9 per share, with an expiration date of December 31, 2020 (the “2018 Warrants”). In connection
with the issuance of the 2019 Warrants (described below), certain 2018 Warrants were amended on August 2, 2019 to reduce the exercise
price to $7.00 per share and to extend the expiration date to December 31, 2021 (the “Amended 2018 Warrants”).
Between July 20, 2020 and July 24, 2020, 2018 Warrant Holders exercised an aggregate of 280,000 shares of the Amended 2018
Warrants (the “2018 Exercised Shares”), which exercises generated gross cash proceeds to the Company of $1.96 million.
The 2018 Warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), or state securities laws.
The 2018 Exercised Shares have been registered for resale on the Company’s registration statement on Form S-3 (File No. 333-225995).
The issuance of the 2018 Exercised Shares and 2018 Warrants was exempt from the registration requirements of the Securities Act
pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and
Rule 506 of Regulation D promulgated under the Securities Act. The Company made this determination based on the representations that
each party is an “accredited investor” within the meaning of Rule 501 of Regulation D. The Company expects to use cash received from
exercises for general corporate and working capital purposes.
Exercises of 2019 Warrants: On August 2, 2019, the Company entered into Warrant Exercise Agreements with certain 2018 Warrant
Holders (“2019 Warrant Holders”), pursuant to which holders were issued warrants to purchase an aggregate 842,000 shares of Common
Stock (the “2019 Warrants”), at an exercise price of $7.00, with an expiration date of December 31, 2021 (the “2019 Warrants”).
Between July 15, 2020 and July 24, 2020, 2019 Warrant Holders exercised an aggregate of 620,000 shares of the 2019 Warrants (the
“2019 Exercised Shares”), which exercises generated gross cash proceeds to the Company of $4.34 million.
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The 2019 Warrants have not been registered under the Securities Act, or state securities laws. The 2019 Exercised Shares have been
registered for resale on the Company’s registration statement on Form S-3 (File No. 333-233349). The issuance of the 2019 Exercised
Shares and 2019 Warrants is exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions
by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated
under the Securities Act. The Company made this determination based on the representations that each party is an “accredited investor”
within the meaning of Rule 501 of Regulation D. The Company expects to use cash received from exercises for general corporate and
working capital purposes.
With the recent warrant exercises in July 2020, the Company has reduced its outstanding warrants shares to non-affiliates by
approximately 37% and reduced its overall warrants shares outstanding by approximately 19%. In total, 900,000 of the 4,724,868
Company warrant shares outstanding were exercised between July 15 and July 24, 2020. 2,266,667 of the remaining 3,824,868
outstanding warrants shares are owned by affiliates of the Company.
Our material cash needs for the next 12 months, assuming we do not expand our clinical trials beyond our completed Phase 2 PMS trial
in the United States, will include (i) costs of the clinical trial in the U.S. and Europe, (ii) employee salaries, (iii) payments for rent and
operation of the GMP facilities and manufacturing of NurOwn®, and (iv) fees to our consultants and legal advisors, patents, and fees for
facilities to be used in our research and development.
We believe our existing cash will be sufficient to fund our anticipated operating cash requirements for at least twelve months following
the date of this filing. We currently have sufficient cash to execute on our operating activities. We expect that we will continue to
generate losses from the clinical development and regulatory activities, which will result in a negative cash flow from operating activity.
If we are granted a BLA approval, additional capital raise will be needed to commercialize NurOwn® for ALS, and to conduct additional
trials that may be needed for other indications. The actual amount of cash that the Company will need to operate is subject to many
factors, including, but not limited to, the timing, design and conduct of clinical trials for our product candidates along with cost to
commercialize these product candidates.
We anticipate that we will need to raise substantial additional financing in the future to fund our operations. In order to meet these
additional cash requirements, we may incur debt, license certain intellectual property, and seek to sell additional equity or convertible
securities that may result in dilution to our stockholders. If we raise additional funds through the issuance of equity or convertible
securities, these securities could have rights or preferences senior to those of our common stock and could contain covenants that restrict
our operations. There can be no assurance that we will be able to obtain additional equity or debt financing on terms acceptable to us, if
at all. Our future capital requirements will depend on many factors, including:
*
*
*
*
*
*
*
*
our ability to obtain funding from third parties, including any future collaborative partners;
the scope, rate of progress and cost of our clinical trials and other research and development programs;
the time and costs required to gain regulatory approvals;
the terms and timing of any collaborative, licensing and other arrangements that we may establish;
the costs of filing, prosecuting, defending and enforcing patents, patent applications, patent claims, trademarks and other
intellectual property rights;
any product liability or other lawsuits related to our product candidates;
the expenses needed to attract and retain skilled personnel;
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution,
for any of our product candidates for which we receive marketing approval;
*
the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
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*
*
*
the general and administrative expenses related to being a public company;
the effect of competition and market developments; and
future pre-clinical and clinical trial results.
The full extent to which continuing concerns resulting from the COVID 19 pandemic will directly or indirectly impact our business,
results of operations, financial condition, liquidity and capital resources will depend on future developments that are highly uncertain and
cannot be accurately predicted at this time, including new information that may emerge concerning COVID 19, the actions taken to
contain it or treat its impact and the economic impact on local, regional, national and international markets. Our management team is
actively monitoring this situation and the possible effects on our financial condition and liquidity.
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. The
preparation of our consolidated financial statements and disclosures requires us to make judgments, estimates, and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported revenue and expenses during the reporting periods. We base our estimates on historical experience,
known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We
evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different
assumptions and conditions.
While our significant accounting policies are described in more detail in the notes to our audited consolidated financial statements
appearing elsewhere in this Annual Report on Form 10-K we believe that the following accounting policies are those most critical to the
judgments and estimates used in the preparation of our consolidated financial statements.
Accounting for stock-based compensation:
We grant equity-based awards under share-based compensation plans. We estimate the fair value of share-based payment awards using
the Black-Scholes option valuation model. This fair value is then amortized over the requisite service periods of the awards. The Black-
Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free
interest rate, dividend yield, and expected life of the option. Share-based compensation expense is based on awards ultimately expected
to vest, and therefore is reduced by expected forfeitures. Changes in assumptions used under the Black-Scholes option valuation model
could materially affect our net loss and net loss per share.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not required.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
U.S. DOLLARS IN THOUSANDS
(Except share data and exercise prices)
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BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
U.S. DOLLARS IN THOUSANDS
(Except share data and exercise prices)
INDEX
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Loss
Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
71
Page
72
74
75
76
78
80
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
BRAINSTORM CELL THERAPEUTICS Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Brainstorm Cell Therapeutics Inc. and subsidiaries (the “Company”)
as of December 31, 2021 and 2020 and the related consolidated statements of comprehensive loss, shareholders' equity and cash flows
for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial
statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December
31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our
audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the
critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Stock-Based Compensation to Employees and Directors – Stock Options — Refer to Note 10 to the financial statements
Critical Audit Matter Description
The Company issues various types of equity awards, including stock options. During the year ended December 31, 2021, the Company
issued stock options for 127,332 shares and recorded stock option related compensation expense of $0.8 million. The Company estimated
the fair value of these stock options granted using the Black-Scholes option pricing model. The option pricing model required the
Company to make a number of assumptions, of which the most significant are expected stock price volatility and the expected option
term. Expected volatility was calculated based upon actual historical stock price movements over the period equal to the expected option
term, which was calculated using the simplified method.
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Auditing the Company's accounting for stock options required auditor judgment due to the subjectivity of assumptions used to estimate
the fair value of stock options granted.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the stock-based compensation included the following, among others:
• We assessed the accuracy and completeness of the awards granted during the year by reading the relevant Board of Directors
minutes and grant documents.
• We evaluated the appropriateness of the valuation method used for the stock option grants and whether the method used for
determining fair value was applied consistently with the valuation of similar grants in prior periods.
• We evaluated the significant assumptions used by management to calculate the fair value of stock options granted. Such
evaluation included independent calculation of the expected volatility based upon actual historical stock price movements over
the period equal to the expected option term and independent calculation of the stock option term using the simplified method.
• We developed an independent estimate of the fair value for all the grants during the year and compared our estimate of fair
value to the fair value used by management.
/s/ Brightman Almagor Zohar & Co.
Brightman Almagor Zohar & Co.
Certified Public Accountants
A Firm in the Deloitte Global Network
Tel Aviv, Israel
March 28, 2022
We have served as the Company's auditor since 2008.
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BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
(Except share data)
ASSETS
Current Assets:
Cash and cash equivalents
Short-term deposit (Note 9)
Other accounts receivable (Note 4)
Prepaid expenses and other current assets (Note 5)
Total current assets
Long-Term Assets:
Prepaid expenses and other long-term assets
Operating lease right of use asset (Note 6)
Property and Equipment, Net (Note 7)
Total Long-Term Assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payables
Accrued expenses
Operating lease liability (Note 6)
Other accounts payables
Total current liabilities
Long-Term Liabilities:
Operating lease liability (Note 6)
Total long-term liabilities
Total liabilities
Stockholders’ Equity:
Stock capital: (Note 10)
Common Stock of $0.00005 par value - Authorized: 100,000,000 shares at December 31, 2021 and December 31, 2020
respectively; Issued and outstanding: 36,401,413 and 35,159,977 shares at December 31, 2021 and December 31, 2020
respectively.
Additional paid-in-capital
Treasury stocks
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of the consolidated financial statements.
74
December 31,
2021
2020
U.S. $ in thousands
$
$
$
$
$
$
$
$
$
$
$
18,856
3,238
86
1,100
23,280
27
4,781
1,189
5,997
29,277
3,700
83
1,461
1,073
6,317
3,618
3,618
9,935
12
192,990
(116)
(173,544)
19,342
29,277
$
$
$
$
$
$
$
$
$
$
$
37,829
4,107
304
1,002
43,242
26
6,872
1,119
8,017
51,259
5,417
1,261
2,655
1,900
11,233
4,562
4,562
15,795
12
184,655
(116)
(149,087)
35,464
51,259
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BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
U.S. dollars in thousands
(Except share data)
Operating expenses:
Research and development, net (Note 11)
General and administrative
Operating loss
Financial expenses (income), net
Net loss
Basic and diluted net loss per share
Weighted average number of shares outstanding used in computing basic and diluted net loss per
share
The accompanying notes are an integral part of the consolidated financial statements.
75
Year ended
December 31,
2021
2020
U.S. $ in thousands
$
$
$
15,235
9,304
(24,539)
(82)
(24,457)
(0.68)
$
$
$
22,329
9,355
(31,684)
127
(31,811)
(1.07)
36,181,753
29,848,217
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BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
U.S. dollars in thousands
(Except share data)
Balance as of January 1, 2020
Stock-based compensation related to stock and options
granted to directors and employees
Issuance of shares and warrants in Registered Direct
Offering (Note 10)
Treasury stocks
Issuance of shares in at-the-market (ATM) offering (Note
10)
Exercise of options
Exercise of warrants
Net loss
Common stock
Number
23,174,228
Amount
$
11
Additional
paid-in
capital
$ 105,042
Treasury Accumulated
stocks
deficit
— $ (117,276) $
Total
stockholders’
equity (deficit)
(12,223)
227,244
1,250,000
(25,000)
9,609,859
23,646
900,000
*
*
*
1
*
*
— —
2,560
—
—
2,560
9,957
—
—
(116)
60,728
68
6,300
—
—
—
— —
—
—
—
—
—
(31,811)
9,957
(116)
60,729
68
6,300
(31,811)
Balance as of December 31, 2020
35,159,977
12
184,655
(116)
(149,087)
35,464
* Represents an amount less than $1.
The accompanying notes are an integral part of the consolidated financial statements.
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BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
U.S. dollars in thousands
(Except share data)
Common stock
Number
35,159,977
Amount
$
12
Additional
paid-in
capital
$ 184,655
Balance as of January 1, 2021
Treasury Accumulated
stocks
deficit
(116) $ (149,087) $
Total
stockholders’
equity
35,464
Stock-based compensation related to stock and options
granted to directors and employees
Issuance of shares in at-the-market (ATM) offering (Note 10)
Exercise of options
Net loss
82,852
1,156,897
1,687
*
*
*
— —
1,366
6,964
5
—
—
—
— —
—
—
—
(24,457)
1,366
6,964
5
(24,457)
Balance as of December 31, 2021
36,401,413
12
192,990
(116)
(173,544)
19,342
* Represents an amount less than $1.
The accompanying notes are an integral part of the consolidated financial statements.
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BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
Stock-based compensation related to options granted to employees and directors
Change in operating lease liability
Decrease in other accounts receivable and prepaid expenses
Decrease in accounts payables
Increase (decrease) in other accounts payable and accrued expenses
Total net cash used in operating activities
The accompanying notes are an integral part of the consolidated financial statements.
78
December 31,
2021
2020
U.S. $ in thousands
$
(24,457)
$
(31,811)
260
1,366
(47)
335
(1,717)
(2,005)
(26,265)
$
219
2,560
161
1,491
(9,260)
1,447
(35,193)
$
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BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Cash flows from investing activities:
Purchase of property and equipment
Proceeds from (Investment in) short-term deposit
Total net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from exercise of options
Proceeds from issuance of shares in at-the-market (ATM) offering (Note 10)
Proceeds from issuance of shares and warrants in Registered Direct Offering (Note 10)
Purchase of treasury stock
Proceeds from exercise of warrants
Total net cash provided by financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at end of the period
The accompanying notes are an integral part of the consolidated financial statements.
79
Year ended
December 31,
2021
2020
U.S. $ in thousands
(330)
653
323
5
6,964
—
—
—
6,969
(18,973)
37,829
18,856
$
$
$
$
$
$
$
$
(378)
(4,074)
(4,452)
68
60,729
9,957
(116)
6,300
76,938
37,293
536
37,829
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 1 - GENERAL
A.
B.
C.
The Company was incorporated in the State of Delaware on November 15, 2006, and previously was incorporated
in the State of Washington. In October 2004, the Company formed its wholly-owned subsidiary, Brainstorm Cell
Therapeutics Ltd. (“BCT”) in Israel, which currently conducts all of the research and development activities of the
Company. BCT formed wholly-owned subsidiaries Brainstorm Cell Therapeutics UK Ltd., in the United Kingdom
on February 19, 2013 (currently inactive), Advanced Cell Therapies Ltd. in Israel on June 21, 2018 and Brainstorm
Cell Therapeutics Limited in Ireland on October 1, 2019.
The Common Stock is publicly traded on the Nasdaq Capital Market under the symbol “BCLI”.
The Company, through BCT, holds rights to commercialize certain stem cell technology developed by Ramot of
Tel Aviv University Ltd. ("Ramot"), (see Note 3). Using this technology, the Company has been developing novel
adult stem cell therapies for debilitating neurodegenerative disorders such as Amytrophic Lateral Scelorosis (ALS,
also known as Lou Gherig Disease), Progressive Multiple Sclerosis (PMS) and Parkinson’s disease. The Company
developed a proprietary process, called NurOwn®, for the propagation of Mesenchymal Stem Cells and their
differentiation into neurotrophic factor secreting cells. These cells are then transplanted at or near the site of
damage, offering the hope of more effectively treating neurodegenerative diseases. The process is currently
autologous, or self-transplanted.
Since its inception, the Company has devoted substantially all of its efforts to research and development. The
Company is still in its development and clinical stage and has not yet generated revenues. The Company has
incurred operating losses since its inception, and expects to continue to incur operating losses for the near-term. As
of December 31, 2021, the Company had an accumulated deficit of approximately $174 million. The extent of the
Company's future operating losses and the timing of becoming profitable are uncertain.
The Company’s primary sources of cash have been proceeds from the issuance and sale of its Common Stock and
warrants, the exercise of warrants, sales of Common Stock via its ATM program and other funding transactions.
While the Company has been successful in raising financing recently and in the past, there can be no assurance that
it will be able to do so in the future on a timely basis on terms acceptable to the Company, or at all. The Company
has not yet commercialized any of its product candidates. Even if the Company commercializes one or more of its
product candidates, it may not become profitable in the near-term. The Company’s ability to achieve profitability
depends on a number of factors, including its ability to obtain regulatory approval for its product candidates,
successfully complete any post-approval regulatory obligations and successfully commercialize its product
candidates alone or in partnership.
The Company believes its existing cash will be sufficient to fund its anticipated operating cash requirements for at
least twelve months following the date of this filing. The Company currently has sufficient cash to execute on its
ongoing operating activities. Management expects that the Company will continue to generate losses from the
clinical development and regulatory activities, which will result in a negative cash flow from operating activity. If
the Company is granted a BLA approval, additional capital raise will be needed to commercialize NurOwn® for
ALS, and to conduct additional trials that may be needed for other indications. The actual amount of cash that the
Company will need to operate is subject to many factors, including, but not limited to, the timing, design and
conduct of clinical trials for its product candidates along with cost to commercialize these product candidates.
80
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 1 - GENERAL (Cont.)
In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a global pandemic.
Since then, the impact of the COVID-19 pandemic continues to evolve as well as the global responses to curb its
spread and to treat its impact, which have caused disruption to certain business sectors globally, resulting in
economic and other difficulties in many regions worldwide, including supply chain shortages, absence of
workforce due to infected and/or quarantined employees and service providers, as well as extended lead times for
ordered equipment and supplies. To date, the COVID-19 pandemic has not had a material adverse effect on the
Company's financial position or its financial stability.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A.
Basis of presentation:
The consolidated financial statements have been prepared in accordance with United States Generally Accepted
Accounting Principles (“GAAP”) applied on a consistent basis.
B.
Use of estimates:
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
C.
Financial statements in U.S. dollars:
The functional currency of the Company is the U.S dollar ("dollar") since the dollar is the currency of the primary
economic environment in which the Company has operated and expects to continue to operate in the foreseeable
future. Part of the transactions of BCT is recorded in new Israeli shekels ("NIS"); however, a substantial portion
of the costs are incurred in dollars or linked to the dollar. Accordingly, management has designated the dollar as
the currency of BCT’s primary economic environment and thus it is their functional and reporting currency.
Transactions and balances denominated in dollars are presented at their original amounts. Non-dollar transactions
and balances have been re-measured to dollars in accordance with the provisions of ASC 830-10 "Foreign
Currency Translation". All transaction gains and losses from re-measurement of monetary balance sheet items
denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses,
as appropriate.
D.
Principles of consolidation:
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries,
Advanced Cell Therapies Ltd, BCT, Brainstorm UK and Brainstorm Cell Therapeutics Limited (Irish Company).
Intercompany balances and transactions have been eliminated upon consolidation.
E.
Cash and cash equivalents:
Cash and cash equivalents include cash in hand and short-term highly liquid investments that are readily
convertible to cash with maturities of three months or less as of the date acquired and that are exposed to
insignificant risk of change in value.
81
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
F.
Short-term deposits:
Short-term deposits are deposits with an original maturity of more than three months from the date of investment
and which do not meet the definition of cash equivalents.
G.
Property and equipment:
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated by the
straight-line method over the estimated useful lives of the assets.
The annual depreciation rates are as follows:
Office furniture and equipment
Computer software and electronic equipment
Laboratory equipment
Leasehold improvements
H.
Accrued post-employment benefit:
%
7
33
15
Over the shorter of the lease term (including
options if any) or useful life
The majority of the Company's employees in Israel have agreed to Section 14 of Israel's Severance Pay Law,
5723-1963 (“Section 14”). Pursuant to Section 14, those of the Company's employees that are covered by this
section are entitled only to an amount of severance pay equal to monthly deposits, at a rate of 8.33% of their
monthly salary, made on their behalf by the Company. Payments in accordance with Section 14 release the
Company from any future severance liabilities in respect of those employees. Neither severance pay liability nor
severance pay funds under Section 14 for such employees is recorded on the Company's balance sheet.
I.
Fair value of financial instruments:
The carrying values of cash and cash equivalents, other accounts receivable, other assets, trade payables and other
accounts payable approximate their fair value due to the short-term maturity of these instruments.
J.
Accounting for stock-based compensation:
In accordance with ASC 718-10 the Company estimates the fair value of equity-based payment awards on the
date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to
vest is recognized as expense over the requisite service periods in the Company's consolidated statement of
operations. The Company recognizes compensation expense for the value of non-employee awards, which have
graded vesting, based on the straight-line method over the requisite service period of each award.
82
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
J.
Accounting for stock-based compensation (Cont.):
The Company estimates the fair value of restricted shares based on the market price of the shares at the grant date
and estimates the fair value of stock options granted using a Black-Scholes options pricing model. The option-
pricing model requires a number of assumptions, of which the most significant are, expected stock price volatility
and the expected option term. Expected volatility was calculated based upon actual historical stock price
movements over the period, equal to the expected option term, which was calculated using the simplified method.
The Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free
interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term.
The Company accounts for shares and warrant grants issued to non-employees using the guidance of ASU No.
2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting.” which expand the scope of Topic 718, Compensation - Stock Compensation (which
currently only includes share-based payments to employees) to include share-based payments issued to
nonemployees for goods or services.
K.
Basic and diluted net loss per share:
Basic net loss per share is computed based on the weighted average number of shares outstanding during
each year. Diluted net loss per share is computed based on the weighted average number of shares outstanding
during each year, plus the dilutive potential of the Common Stock considered outstanding during the year, in
accordance with ASC 260-10 "Earnings per Share".
All outstanding stock options and warrants have been excluded from the calculation of the diluted loss per share
for the years ended December 31, 2021 and December 31, 2020, since all such securities have an anti-dilutive
effect.
L.
Research and development expenses, net:
Research and development expenses are charged to the statement of operations as incurred.
Royalty-bearing grants from the Israel Innovation Authorities (“IIA”) and a non-dilutive, non-royalty-bearing
grant from CIRM for funding approved research and development projects are recognized at the time the
Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction from research
and development expenses.
M.
Income taxes:
The Company accounts for income taxes in accordance with ASC 740-10 "Accounting for Income Taxes". This
Statement requires the use of the liability method of accounting for income taxes, whereby deferred tax asset and
liability account balances are determined based on the differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company and BCT provide a valuation allowance, if necessary, to reduce
deferred tax assets to their estimated realizable value.
83
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
N.
Lease accounting
The Company adopted ASC 842, leases effective January 1, 2019 using the modified retrospective approach. At
the inception of an arrangement, the Company determines whether an arrangement is or contains a lease based on
the facts and circumstances present in the arrangement. An arrangement is or contains a lease if the arrangement
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Arrangements that are determined to be leases at inception are recognized in long-term ROU assets and short and
long-term lease liabilities in the consolidated balance sheet at lease commencement. Operating lease ROU assets
and operating lease liabilities are recognized based on the present value of the future fixed lease payments over
the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the
Company applies its incremental borrowing rate based on the economic environment at commencement date in
determining the present value of future payments. Lease terms may include options to extend or terminate the
lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases
or payments are recognized on a straight-line basis over the lease term.
The Company has elected not to recognize on the balance sheet leases with terms of 12 months or less.
O.
Treasury Stock
The Company records the aggregate purchase price of treasury stock at cost and includes treasury stock as a
reduction to stockholders' equity.
P.
Commitments and Contingencies
The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for
loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded
when it is probable that a liability has been incurred and the amount of the assessment can be reasonably
estimated. As of December 31, 2021, the company didn’t record any commitments and contingencies.
Q.
Recent Accounting Standards Updates Not Yet Effective:
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update
(“ASU”) 2016 -13, “Financial Instruments—Credit Losses,” requiring measurement and recognition of expected
credit losses on certain types of financial instruments. The guidance will be effective for the Company beginning
January 1, 2023, and interim periods therein. Early adoption is permitted. The Company is currently evaluating
the effect that ASU 2016-13 will have on its financial statements.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting
for Income Taxes” (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for
income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies
and amends existing guidance to improve consistent application. This standard is effective for the Company from
January 1, 2021 and must be applied on a modified retrospective basis. The adoption of the standard did not have
a material impact on the Company's financial statements and disclosures.
84
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Q.
Recent Accounting Standards Updates Not Yet Effective (Cont.):
In November 2021, the FASB issued ASU No. 2021- 10, Government Assistance (Topic 832). This ASU requires
business entities to disclose information about government assistance they receive if the transactions were
accounted for by analogy to either a grant or a contribution accounting model. The disclosure
requirements include the nature of the transaction and the related accounting policy used, the line items on the
balance sheets and statements of operations that are affected and the amounts applicable to each financial
statement line item and the significant terms and conditions of the transactions. The ASU is effective for annual
periods beginning after December 15, 2021. The disclosure requirements can be applied either retrospectively or
prospectively to all transactions in the scope of the amendments that are reflected in the financial statements at the
date of initial application and new transactions that are entered into after the date of initial application. The
Company already adopted ASU No. 2021- 10, in its financial statements.
NOTE 3 - RESEARCH AND LICENSE AGREEMENT
The Company entered into a Research and License Agreement, as amended and restated, with Ramot (the “License
Agreement”). Pursuant to the remuneration terms of the License Agreement, the Company has agreed to pay Ramot
royalties on Net Sales of the Licensed Product as follows:
a)
b)
So long as the making, producing, manufacturing, using, marketing, selling, importing or exporting (collectively,
the “Commercialization”) of such Licensed Product is covered by a Valid Claim or is covered by Orphan Drug
Status, the Company shall pay Ramot a royalty of 5% of the Net Sales received by the Company and resulting
from such Commercialization; and
In the event the Commercialization of the Licensed Product is neither covered by a Valid Claim nor by Orphan
Drug status, the Company shall pay Ramot a royalty of 3% of the Net Sales received by the Company resulting
from such Commercialization. This royalty shall be paid from the First Commercial Sale of the Licensed Product
and for a period of fifteen (15) years thereafter.
Capitalized terms set forth above which are not defined shall have the meanings attributed to them under the
License Agreement.
NOTE 4 - OTHER ACCOUNTS RECEIVABLE
Composition:
Grants receivable from IIA
Government institutions and other
NOTE 5 - PREPAID EXPENSES
December 31
2021
2020
U.S. $ in thousands
—
86
86
220
84
304
As of December 31, 2021 and 2020, prepaid expenses include directors’ insurance of $1,086 and $984, respectively.
85
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 6 - LEASES
On January 1, 2019 the Company adopted ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) using the modified
retrospective approach for all lease arrangements at the beginning of the period of adoption. The Company leases facilities,
clinical research rooms, and vehicles under operating leases.
As of December 31, 2021, the Company’s ROU assets and lease liabilities for operating leases totaled $4,781 and $5,079,
respectively. The impact of adopting the new lease standard was not material to the Company’s condensed consolidated
statement of operations for the periods presented.
As of December 31, 2021, and 2020, total right-of-use assets was approximately $4,781 and $6,872 and the operating lease
liabilities for remaining long term lease was approximately $5,079 and $7,217, respectively. In the year ended December
31, 2021 and 2020, the Company recognized approximately $2,767 and $1,423, respectively in total lease costs for the
leases. Variable lease costs for the year ended December 31, 2021 were immaterial.
Supplemental cash flow information related to operating leases was as follows:
Cash payments for operating leases
Twelve Months
Ended
December 31,
2021
2,767
As of December 31, 2021, the Company’s operating leases had a weighted average remaining lease term of 3.62 years and
a weighted average discount rate of 6.74%. Future lease payments under operating leases as of December 31, 2021 were as
follows:
2022
2023
2024
2025
Total future lease payments
Less imputed interest
Total lease liability balance
Operating
Leases
1,459
1,014
1,446
1,334
5,253
(174)
5,079
The future leases payments table does not include leases effective after the balance sheet date. For a renewed lease
effective from January 2022, refer to Note 8C.
86
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 7 - PROPERTY AND EQUIPMENT
Composition:
Cost:
Office furniture and equipment
Computer software and electronic equipment
Laboratory equipment
Leasehold improvements
Accumulated depreciation:
Office furniture and equipment
Computer software and electronic equipment
Laboratory equipment
Leasehold improvements
Depreciated cost
December 31
2021
2020
U.S. $ in thousands
75
240
2,273
814
3,402
43
223
1,192
755
2,213
1,189
75
237
1,949
811
3,072
38
210
964
741
1,953
1,119
Depreciation expenses for the years ended December 31, 2021 and December 31, 2020 were $260 and $219, respectively.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
A.
Commitments to pay royalties to the IIA:
BCT obtained from the Chief Scientist of the Israel Innovation Authority (“IIA”) grants for participation in
research and development for the years 2007 through 2020, and, in return, BCT is obligated to pay royalties
amounting to 3%-3.5% of its future sales up to the amount of the grant. The grant is linked to the exchange rate of
the dollar and bears interest of Libor per annum. Through the year ended December 31, 2021, there were no
grants obtained.
B.
C.
In addition to the royalties which the Company is required to pay to Ramot on its Commercialization of the
Licensed Product as described in Note 3 hereof, the Company has other financial obligations under the License
Agreement, including without limitation, certain research funding commitments as well as a commitment to
reimburse Ramot for all of its documented Licensed Product patent-related expenses. Pursuant to the License
Agreement, in the event the Company elects not to reimburse Ramot for any specific patent expenses, the
Company’s corresponding Commercialization rights will be terminated by Ramot. By way of example, if the
Company elects, in its sole discretion, not to reimburse Ramot’s patent expenses which are incurred in a particular
jurisdiction, the Company’s right to Commercialize the Licensed Product in the same jurisdiction may be
terminated by Ramot. As of December 31, 2021, there are no outstanding obligations owed to Ramot in
connection with the above.
During November 2021, BCT entered into a new lease agreement, which replaces the existing agreement valid
until December 31, 2021, in 12 Basel Street, Petach Tikva, Israel. The rental area is approximately 1000 square
meters of office and laboratory space, including an animal research facility. The new lease agreement
commencement date is January 1, 2022 and is 60 months long with an extension option for an additional 60
months. The monthly lease payments under this lease agreement will be $18. As a result, the Company will
recognize a new ROU asset from January 2022 in the amount of $1,576.
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BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 9 - SHORT TERM DEPOSITS
Short term investments on December 31, 2021 and December 31, 2020 include bank deposits bearing annual interest rates
varying from 0.05% to 1.66%, with maturities of up to 2 years as of December 31, 2021 and 2020.
NOTE 10 - STOCK CAPITAL
The rights of Common Stock:
Holders of Common Stock have the right to receive notice to participate and vote in general meetings of the Company, the
right to a share in the excess of assets upon liquidation of the Company and the right to receive dividends, if declared.
The Common Stock is publicly traded on the Nasdaq Capital Market under the symbol BCLI.
Private placements and public offerings:
The Company is party to a July 2, 2007 subscription agreement and related registration rights agreement and warrants,
amended July 31, 2009, May 10, 2012, May 19, 2014 and November 2, 2017 (together as amended, the “ACCBT
Documents”) with ACCBT Corp. (“ACCBT”), a company under the control of Mr. Chaim Lebovits, the Company’s
President and Chief Executive Officer, pursuant to which, for an aggregate purchase price of approximately $5.0 million,
the Company sold to ACCBT 1,920,461 shares of its Common Stock and warrants to purchase up to 2,016,666 shares of
its Common Stock (the “ACCBT Warrants”). The ACCBT Warrants contain cashless exercise provisions, which permit the
cashless exercise of up to 50% of the underlying shares of Common Stock. 672,222 of the ACCBT Warrants have an
exercise price of $3 and the remainder has an exercise price of $4.35. All of the ACCBT Warrants are presently
outstanding. The Company registered 1,920,461 shares of Common Stock and 2,016,666 shares of Common Stock
underlying the ACCBT Warrants on registration statement No. 333-201705 dated January 26, 2015 pursuant to registration
rights in the ACCBT Documents.
ACCBT has Board appointment rights, preemptive rights and consents rights pursuant to the ACCBT Documents. The
foregoing description reflects the November 2, 2017 Warrant Amendment Agreement between the Company and ACCBT,
pursuant to which the rights and privileges of the ACCBT Entities relating to the management of the Company were
reduced, in exchange for a five (5) year extension of the expiration of the Company warrants held by the ACCBT Entities.
Pursuant to the amendment, the ACCBT Documents were amended as follows: (i) the ACCBT Entities existing right to
appoint 50.1% of the Board of Directors of the Company and its subsidiaries was reduced to 30%; (ii) the ACCBT
Entities’ consent rights regarding Company matters pursuant to the ACCBT Documents were limited to transactions
greater than $500,000 (previous to the amendment the consent right was for transactions of $25,000 or more); and (iii) the
expiration date of each of the ACCBT Warrants was extended until November 5, 2022 (the previous expiration date was
November 5, 2017).
88
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 10 - STOCK CAPITAL (Cont.)
Private placements and public offerings (Cont.):
2018 Warrant Exercise Agreement:
On June 6, 2018, the Company entered into a Warrant Exercise Agreement (the “2018 Warrant Exercise Agreement”) with
certain holders (the “2018 Warrant Holders”) of warrants (the “2015 Warrants”) to purchase Common Stock. The 2015
Warrants were originally issued in the Company’s January 8, 2015 private placement. Pursuant to the 2018 Warrant
Exercise Agreement, the 2018 Warrant Holders exercised their 2015 Warrants for a total of 2,458,201 shares of Common
Stock at an amended exercise price of $5 per share. The warrant exercises generated gross cash proceeds to the Company
of $12.3 million. In addition, the Company issued new warrants to the 2018 Warrant Holders to purchase an aggregate
2,458,201 unregistered shares of Common Stock, at an exercise price of $9.00, with an expiration date of December 31,
2020 (the “2018 Warrants”). In connection with the issuance of the 2019 Warrants (described below), certain 2018
Warrants were amended on August 2, 2019 to reduce the exercise price to $7.00 per share and to extend the expiration date
to December 31, 2021 (the “Amended 2018 Warrants”).
Between July 20, 2020 and July 24, 2020, 2018 Warrant Holders exercised an aggregate of 280,000 shares of the Amended
2018 Warrants (the “2018 Exercised Shares”), which exercises generated gross cash proceeds to the Company of
$1,960,000.
The 2018 Warrants have not been registered under the Securities Act of 1933, as amended (the Securities Act), or state
securities laws. The shares issuable upon exercise of the Amended 2018 Warrants have been registered for resale on the
Company’s registration statement on Form S-3 (File No. 333-225995). The exercised shares have been registered for
resale on the Company’s registration statement on Form S-3 (File No. 333-201704). The issuance of the exercised shares
and 2018 Warrants was exempt from the registration requirements of the Securities Act pursuant to the exemption for
transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of
Regulation D promulgated under the Securities Act. The Company made this determination based on the representations
that each party is an “accredited investor” within the meaning of Rule 501 of Regulation D.
2019 Warrant Exercise Agreement:
On August 2, 2019, the Company entered into a Warrant Exercise Agreement which generated gross cash proceeds to the
Company of approximately $3.3 million. Pursuant to the agreement, certain holders (the “2019 Warrant Holders”) of the
2018 Warrants agreed to exercise 842,000 shares of Common Stock of their 2018 Warrants, at an amended exercise price
of $3.90 per share, and the Company agreed to issue new warrant shares to the Holders to purchase 842,000 shares of
Common Stock (the “2019 Warrants”), at an exercise price of $7.00, with an expiration date of December 31, 2021. The
2018 Warrants held by the 2019 Warrant Holders, to the extent not exercised, were also amended to reduce the exercise
price to $7.00 per share and to extend the expiration date to December 31, 2021 (the “Amended 2018 Warrants”).
Between July 15, 2020 and July 24, 2020, 2019 Warrant Holders exercised an aggregate of 620,000 shares of the 2019
Warrants (the “2019 Exercised Shares”), which exercises generated gross cash proceeds to the Company of $4,340,000.
89
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 10 - STOCK CAPITAL (Cont.)
Private placements and public offerings (Cont.):
The Amended 2018 Warrants and 2019 Warrants have not been registered under the Securities Act of 1933, as amended
(the Securities Act), or state securities laws. The shares issuable upon exercise of the 2019 Warrants have been registered
for resale on the Company’s registration statement on Form S-3 (File No. 333-233349), and the shares issuable upon
exercise of the Amended 2018 Warrants have been registered for resale on the Company’s registration statement on Form
S-3 (File No. 333-225995). The exercised shares have been registered for resale on the Company’s registration statement
on Form S-3 (File No. 333-225995). The issuance of the exercised shares, Amended 2018 Warrants and 2019 Warrants is
exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not
involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under
the Securities Act. The Company made this determination based on the representations that each party is an “accredited
investor” within the meaning of Rule 501 of Regulation D.
Warrants:
The following table sets forth the number, exercise price and expiration date of Company warrants outstanding as of
December 31, 2021:
Issuance Date
Aug 2007‑ Jan 2011
March - 2020
Total
Exercise
price
3 - 4.35
15
Exercisable
Through
Nov‑2022
March‑2023
Outstanding
As Of
December 31,
2021
2,016,666
250,000
2,266,666
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BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 10 - STOCK CAPITAL (Cont.)
At-the-market (ATM) Offering:
On June 11, 2019, the Company entered into a distribution agreement with Raymond James & Associates, Inc. ("Raymond
James"), pursuant to which the Company sold, through the Raymond James, shares of Common Stock having an aggregate
offering amount of $20,000,000 (the "June 11, 2019 ATM") in an "at the market" offering as defined in Rule 415
promulgated under the Securities Act, including, without limitation, by sales made directly on the Nasdaq Capital Market,
on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and
Raymond James.
On March 6, 2020, the Company entered into a new distribution agreement with Raymond James (the “Agent”), pursuant
to which the Company was able to sell from time to time, through the Agent, shares of Common Stock, having an
aggregate offering price of up to $50,000,000 (the “March 6, 2020 ATM”). Sales under the March 6, 2020 ATM were
made by any method permitted by law that is deemed to be an “at the market” offering as defined in Rule 415 promulgated
under the Securities Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other
existing trading market for the Shares, through a market maker or as otherwise agreed by the Company and Raymond
James. Under the March 6, 2020 ATM, the Company sold an aggregate of 2,446,641 shares of Common Stock at an
average price of $9.45 per share, raising gross proceeds of approximately $23.11 million.
On September 25, 2020, the Company entered into an Amended and Restated Distribution Agreement (the “Distribution
Agreement”) with SVB Leerink LLC (“Leerink”) and Raymond James & Associates (together with Leerink, the “Agents”)
pursuant to which the Company may sell from time to time, through the Agents, shares of Common Stock, having an
aggregate offering price of up to $45,000,000, which aggregate amount includes amount unsold pursuant to the March 6,
2020, ATM (the “September 25, 2020, ATM”). Sales under the September 25, 2020, ATM are to be made by any method
permitted by law that is deemed to be an "at the market" offering as defined in Rule 415 promulgated under the Securities
Act, including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market
for the Shares, through a market maker or as otherwise agreed by the Company and the Agents. The Distribution
Agreement amends and restates in its entirety the Company's prior agreement with Raymond James entered into on March
6, 2020 (the "March 6, 2020, ATM"). The Company previously sold 2,446,641 shares of Common Stock for gross
proceeds of approximately $23.11 million of Common Stock under the March 6, 2020, ATM. During the quarter ended
September 30, 2021, the Company did not sell any additional shares of its Common Stock pursuant to the September 25,
2020, ATM. Since inception and as of September 30, 2021, the Company has sold 4,721,282 shares of Common Stock for
gross proceeds of approximately $29.1 million under the September 25, 2020, ATM.
The Company has no obligation under the September 25, 2020, ATM to sell any shares and may at any time suspend sales
or terminate the September 25, 2020, ATM in accordance with its terms. Subject to the terms and conditions of the
Distribution Agreement, the Agents will use their commercially reasonable efforts to sell on the Company's behalf, from
time to time consistent with its normal sales and trading practices, such Shares based upon instructions from the Company
(including any price, time or size limits or other customary parameters or conditions the Company may impose). The
Company has provided the Agents with customary indemnification rights, and the Agents will be entitled to a fixed
commission of 3.0% of the aggregate gross proceeds from the Shares sold. The Distribution Agreement contains
customary representations and warranties, and the Company is required to deliver customary closing documents and
certificates in connection with sales of the Shares. Shares sold under the ATMs are issued pursuant to the Company's
existing Shelf Registration Statement, and the Prospectus Supplement to the Registration Statements filed June 11, 2019,
March 6, 2020, and September 25, 2020, respectively.
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BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 10 - STOCK CAPITAL (Cont.)
At-the-market (ATM) Offering (Cont.):
On August 9, 2021, the Company entered into an Amended and Restated Distribution Agreement (the "New Distribution
Agreement") with the Agents pursuant to which the Company may sell from time to time, through the Agents, shares of
Common Stock, having an aggregate offering price of up to $100,000,000 (the "August 9, 2021, ATM"). Sales under the
August 9, 2021, ATM are to be made by any method permitted by law that is deemed to be an “at the market” offering as
defined in Rule 415 promulgated under the Securities Act, including, without limitation, sales made directly on the Nasdaq
Capital Market, on any other existing trading market for the Shares, through a market maker or as otherwise agreed by the
Company and the Agents. In connection with the New Distribution Agreement, the Company terminated the previous
Distribution Agreement and the September 25, 2020, ATM. During the quarter ended December 31, 2021, the Company
did not sell any shares of its Common Stock pursuant to the August 9, 2021, ATM.
Registered Direct Offering:
On March 6, 2020, the Company entered into and closed a $10.0 million registered direct offering of 1,250,000 shares of
common stock at a per share purchase price equal to $8.00. The purchaser also received a three-year warrant to purchase
up to 250,000 shares of Common Stock at any exercise price of $15.00 per share.
Capital Raised Since Inception:
Since its inception the Company and as of December 31, 2021, the Company has raised approximately $151,000 gross in
cash in consideration for issuances of Common Stock and warrants in private placements and public offerings as well as
proceeds from warrants exercises.
Stock Plans:
During the fiscal year ended December 31, 2021, the Company had outstanding awards for stock options under four
stockholder approved plans: (i) the 2004 Global Stock Option Plan and the Israeli Appendix thereto (the “2004 Global
Plan”) (ii) the 2005 U.S. Stock Option and Incentive Plan (the “2005 U.S. Plan,” and together with the 2004 Global Plan,
the “Prior Plans”); (iii) the 2014 Global Share Option Plan and the Israeli Appendix thereto (which applies solely to
participants who are residents of Israel) (the “2014 Global Plan”); and (iv) the 2014 Stock Incentive Plan (the “2014 U.S.
Plan” and together with the 2014 Global Plan, the “2014 Plans”).
The 2004 Global Plan and 2005 U.S. Plan expired on November 25, 2014 and March 28, 2015, respectively. Grants that
were made under the Prior Plans remain outstanding pursuant to their terms. The 2014 Plans were approved by the
stockholders on August 14, 2014 (at which time the Company ceased to issue awards under each of the 2005 U.S. Plan and
2004 Global Plan) and amended on June 21, 2016 and November 29, 2018. Unless otherwise stated, option grants prior to
August 14, 2014 were made pursuant to the Company’s Prior Plans, and grants issued on or after August 14, 2014 were
made pursuant to the Company’s 2014 Plans, and expire on the tenth anniversary of the grant date.
The 2014 Plans have a shared pool of 5,600,000 shares of Common Stock available for issuance. As of December 31,
2021, 3,199,129 shares were available for future issuances under the 2014 Plans. The exercise price of the options granted
under the 2014 Plans may not be less than the nominal value of the shares into which such options are exercised. Any
options under the 2014 Plans that are canceled or forfeited before expiration become available for future grants. The
Governance, Nominating and Compensation Committee (the “GNC Committee”) of the Board of Directors of the
Company administers the Company’s stock incentive compensation and equity-based plans.
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BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 10 - STOCK CAPITAL (Cont.)
Stock-based compensation to employees and directors:
Stock Options:
Under the 2014 Plans, the Company may award stock options to certain employees, officers, directors, and service
providers. The stock options vest in accordance with such conditions and restrictions determined by the GNC Committee.
These conditions and restrictions may include the achievement of certain performance goals and/or continued employment
with the Company through a specified period. Stock options awarded are valued based upon the Black-Scholes option
pricing model and the Company recognizes this value as stock compensation expense over the periods in which the options
vest. Use of the Black Scholes option-pricing model requires that the Company make certain assumptions, including
expected volatility, risk-free interest rate, expected dividend yield, and the expected life of the options. The Company
granted stock options to purchase 127,332 and 590,866 shares in 2021 and 2020, respectively.
The fair value of the options is estimated at the date of grant using Black-Scholes options pricing model with the following
assumptions used in the calculation:
Expected volatility
Risk-free interest
Dividend yield
Expected life of up to (years)
Fair Value
Year ended December 31,
2020
2021
57-66 %
81
0.31-0.57 %
1.26
%
0
%
%
%
0
5.04-7.0
$ 3.951-$9.183
5.04-5.15
$ 2.336-$3.075
A summary of the Company's option activity related to options to employees and directors, and related information is as
follows:
For the year ended December 31
2021
Weighted
average
exercise
Amount
of
options* price
$
Aggregate
intrinsic
value
$
2020
Weighted
average
exercise
Amount
of
options* price
Aggregate
intrinsic
value
$
2,344,107
2,186,920
$
3.0142
8.7411
2.8692
3.9731
4.8869
2.3859
Outstanding at beginning of period
Granted
Exercised
Forfeited
Outstanding at end of period
Vested at end of period
* Represents Employee Stock Options only (not including RSUs)
1,754,894
127,332
(1,687)
(570,122)
1,310,417
995,359
4.8869
0.7500
2.700
5.6083
4.1734
2.8598
1,293,007
590,866
(23,646)
(105,333)
— 1,754,894
998,527
1,134,867
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market
value of the Company's shares on December 31, 2021, multiplied by the number of in-the-money options on those dates)
that would have been received by the option holders had all option holders exercised their options on those dates.
93
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 10 - STOCK CAPITAL (Cont.)
Stock-based compensation to employees and directors: (Cont.)
As of December 31, 2021, there was $1,278 of total unrecognized compensation cost related to non-vested options under
the Plan. The cost is expected to be recognized over a weighted average period of 1.71 years. Compensation expense
recorded by the Company in respect of its stock-based employees and directors compensation awards in accordance with
ASC 718-10 for the year ended December 31, 2021 and 2020 amounted to $825 and $1,293, respectively.
The options outstanding as of December 31, 2021 and December 31, 2020, have been separated into exercise prices, as
follows:
Exercise
price
$
0.75
2.25
2.45
2.70
3.90
7.33
7.67
9.51
14.95
Options outstanding
As of December 31,
2020
2021
311,499
438,831
24,000
43,222
369,619
369,619
58,354
56,667
10,000
10,000
80,000
80,000
100,000
151,300
80,000
1,310,417
100,000
162,200
80,000
1,754,894
Restricted Stock:
Weighted average
remaining
contractual
Life - Years
As of December 31,
2021
2020
6.96
0.94
3.75
2.25
1.59
8.19
8.42
8.81
9.75
6.21
6.73
1.29
4.75
3.16
2.59
9.19
9.81
9.81
9.75
6.97
Options
exercisable as of
As of December 31,
2021
383,498
24,000
369,619
56,667
10,000
20,000
68,750
37,825
25,000
995,359
2020
294,832
43,222
369,619
58,354
10,000
—
—
—
—
998,527
The Company awards stock and restricted stock to certain employees, officers, directors, and/or service providers. The
restricted stock vests in accordance with such conditions and restrictions determined by the GNC Committee. These
conditions and restrictions may include the achievement of certain performance goals and/or continued employment with
the Company through a specified restricted period. The purchase price (if any) of shares of restricted stock is determined
by the GNC Committee. If the performance goals and other restrictions are not attained, the grantee will automatically
forfeit their unvested awards of restricted stock to the Company. Compensation expense for restricted stock is based on fair
market value at the grant date.
94
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 10 - STOCK CAPITAL (Cont.)
Stock-based compensation to employees and directors: (Cont.)
Restricted Stock:(Cont.)
Nonvested as of December 31, 2019
Granted
Vested
Nonvested as of December 31, 2020
Granted
Vested
Forfeited
Nonvested as of December 31, 2021
Number of
Restricted
Stock
201,385
Weighted
Average Grant
Weighted
Average
Remaining
Contractual
Date Fair Value Term (Years)
1.95
4.00
227,410
140,714
288,081
168,460
148,945
35,000
272,596
9.07
5.09
7.71
3.41
5.66
13.02
5.49
1.10
1.23
The total compensation expense recorded by the Company in respect of its restricted stock awards to certain employees,
officers, directors, and service providers for the year ended December 31, 2021 and 2020 amounted to $541 and $1,267,
respectively.
As of December 31, 2021, there was $810 of total unrecognized compensation cost related to non-vested restricted stock
under the Plan. The cost is expected to be recognized over a weighted average period of 1.52 years.
95
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 10 - STOCK CAPITAL (Cont.)
Share-based compensation to employees, directors and service providers:
Total Stock-Based Compensation Expense:
The total stock-based compensation expense, related to shares, options and warrants granted to employees, directors and
service providers was comprised, at each period, as follows:
Research and development
General and administrative
Total stock-based compensation expense
Treasury Stock
December 31
2021
2020
U.S. $ in thousands
407
959
1,366
1,173
1,387
2,560
The Company may periodically repurchase shares of its common stock from employees for the satisfaction of their
individual payroll tax withholding upon vesting of restricted stock awards in connection with the Company’s incentive
plans. The Company’s repurchases of common stock are recorded at the stock price on the vesting date of the common
stock. The Company repurchased 25,000 shares of its common stock for $116 thousands for the year ended December 31,
2021.
NOTE 11 - RESEARCH AND DEVELOPMENT, NET
Composition:
Year ended
December 31
2021
2020
Research and development
Less : Participation by CIRM
Less: Participation by Israeli Hospital Exemption regulatory pathway
Less : Participation by the Israel Innovation Authorities
Less: Participation by other grants
96
U.S. $ in thousands
15,940
—
—
(141)
(564)
15,235
25,808
(1,162)
(900)
(1,143)
(274)
22,329
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 12 - TAXES ON INCOME
A.
Tax rates applicable to the income of the Israeli subsidiary:
BCT is taxed according to Israeli tax laws.
The Israeli corporate tax rate from the year 2018 and onwards is 23%.
B.
Tax rates applicable to the income of the US company:
BrainStorm Cell Therapeutics Inc. is taxed according to U.S. tax laws.
The U.S. corporate tax rate from the year 2018 and onwards is 21%.
The Company is subject to state tax of 13%.
97
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 12 - TAXES ON INCOME (Cont.)
C.
Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant
components of the Company’s deferred tax assets are as follows:
Operating loss carryforward
Net deferred tax asset before valuation allowance
Valuation allowance
Net deferred tax asset
December 31
2021
2020
U.S. $ in thousands
126,800
99,818
33,641
(33,641)
—
26,664
(26,664)
—
As of December 31, 2021, the Company has provided a full valuation allowance of $33,641 in respect of deferred
tax assets resulting from tax loss carryforward and other temporary differences. Management currently believes
that because the Company has a history of losses, it is more likely than not that the deferred tax regarding the loss
carryforward and other temporary differences will not be realized in the foreseeable future.
D.
Available carryforward tax losses:
As of December 31, 2021, the Company has an accumulated tax loss carryforward of approximately $126,800.
Carryforward tax losses in Israel are of unlimited duration. Under the Tax Cut and Jobs Act of 2017, or the Tax
Act (subject to modifications under the Coronavirus Aid, Relief, and Economic Security Act), federal net
operating losses (NOL) incurred in taxable years ending after December 31, 2017 and in future years may be
carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It is uncertain if
and to what extent various states will conform to the newly enacted federal tax law.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions
of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50
percentage point change, by value, in its equity ownership over a three-year period, the corporation’s ability to
use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income or
taxes may be limited. Such limitations may result in the expiration of net operating losses before utilization.
98
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
Table of Contents
NOTE 12 - TAXES ON INCOME (Cont.)
E.
Loss from continuing operations, before taxes on income, consists of the following:
United States
Israel
Year ended
December 31
2021
2020
U.S. $ in thousands
(8,357)
(16,100)
(24,457)
(8,578)
(23,233)
(31,811)
F.
Due to the Company’s cumulative losses, the effect of ASC 740 as codified from ASC 740-10 is not material.
NOTE 13 - TRANSACTIONS WITH RELATED PARTIES
Other than transactions and balances related to cash and share based compensation to officers and directors, the Company
did not have any transactions and balances with related parties and executive officers during 2021 and 2020.
NOTE 14 - SUBSEQUENT EVENTS
In accordance with ASC 855 “Subsequent Events” the Company evaluated subsequent events through the date the
condensed consolidated financial statements were issued. The Company concluded that no other subsequent events have
occurred that would require recognition or disclosure in the condensed consolidated financial statements.
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Table of Contents
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness
of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act) as of the end of
the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures as of December 31, 2021 were effective in ensuring that information required to be disclosed by us in
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms, and that the information is accumulated and communicated to our management, including our Chief
Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal
control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by,
or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of
directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those
policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets
of the Company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making
this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control—Integrated Framework (2013 Framework).
Based on our assessment, management concluded that, as of December 31, 2021, the Company’s internal control over financial reporting
is effective based on those criteria.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 9B. OTHER INFORMATION.
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not Applicable.
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Table of Contents
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Executive Officers and Directors
PART III
The following table lists our current executive officers and directors. Our executive officers are elected annually by our Board of
Directors (“Board”) and serve at the discretion of the Board. Each current director is serving a term that will expire at our Company’s
next annual meeting. There are no family relationships among any of our directors or executive officers.
Name
Chaim Lebovits
Ralph Kern, MD, MHSc
David Setboun, PharmD, MBA
Alla Patlis, CPA, MBA
Uri Yablonka
Stacy Lindborg, PhD
Prof. Jacob Frenkel, PhD, MA
Irit Arbel, PhD
June S. Almenoff, MD, PhD
Anthony Polverino, PhD
Malcolm Taub
Dr. Menghisteab Bairu
Age
51
64
47
35
45
51
79
62
65
59
76
61
Position
Chief Executive Officer
President and Chief Medical Officer
EVP, Chief Operating Officer
Interim Chief Financial Officer and Controller
EVP, Chief Business Officer, Secretary and Director
EVP, Chief Development Officer
Chairperson and Director
Director
Director
Director
Director
Director
Chaim Lebovits has been serving as our Chief Executive Officer since September of 2015. Mr. Lebovits joined the Company as
President in connection with his arrangement of an equity investment by ACC BioTech in the Company in July 2007. On August 1,
2013, the Company appointed Mr. Lebovits as its Principal Executive Officer, and he assumed the duties and responsibilities of the Chief
Executive Officer on an interim basis until June 2014. During his tenure with the Company, Mr. Lebovits has been instrumental in the
various capital raises undertaken by the Company and in his capacity as President Mr. Lebovits managed relatively low burn rates and
was very instrumental in the major decisions of the Company’s focus and direction, including the decision to focus on Amyotrophic
Lateral Sclerosis (ALS, also known as Lou Gehrig’s Disease) as a first indication. Mr. Lebovits led efforts to attract the clinical sites first
in Israel and later in the United States, building strong relationships for the Company with many leading Key Opinion Leaders and
Centers of Excellence for ALS in the United States. Mr. Lebovits controls ACC Holdings International, and its subsidiaries including
ACC BioTech, which is focused on the biotechnology sector. He has been at the forefront of natural resource management and has spent
years leading the exploration and development of resources in Israel and served as a member of the boards of directors of several
companies in the industry. Mr. Lebovits has also held senior positions for the worldwide Chabad Lubavitch organization, the largest
Jewish organization in the world today.
Dr. Ralph Kern joined the Company on March 6, 2017 as Chief Operating Officer and Chief Medical Officer. He currently serves as
President and Chief Medical Officer since April 2020. Prior to joining the Company, Dr. Kern was Senior Vice President, Head
Worldwide Medical at Biogen Inc. since 2016. Prior positions at Biogen Inc. include Vice President, Head of Global Therapeutic Areas
from 2015 to 2016 and Vice President, Head of Global Medical Neurology in 2015. Dr. Kern has also served Novartis Pharmaceuticals
Corporation as Vice President, Head Neuroscience Medical Unit from 2014 to 2015 and as Vice President, Head MS Medical Unit from
2011 to 2014. He also worked for Genzyme Corporation from 2006 to 2011 where he served as Global Medical Director, Personalized
Genetic Health (2010-2011), Head of Medical Affairs, Canada (2006-2008), General Manager, Fabry Disease (2008-2010) and Head of
Medical Affairs, Canada (2006-2008). He also served as University Neurology Program Director at the University of Toronto (2003-
2006), Consultant Neurologist at Mount Sinai Hospital (2001-2006) and Director, EMG, EEG and Evoked Potential Laboratory at The
Credit Valley Hospital (1988-2001).
Dr. David Setboun joined the Company on April 7, 2020 at Executive Vice President, Chief Operating Officer. Most recently, Dr.
Setboun served as VP Corporate Development, Strategy & Business at Life Biosciences from July 2018 to April 2020. From June 2015
to June 2018, he served as President of Biogen (France) where he launched Biogen’s rare disease franchise. Prior to his tenure at Biogen,
Dr. Setboun, served as President of AstraZeneca (Portugal) from 2012 to 2015. Prior to this role, Dr. Setboun led the European Sales &
Marketing function as AstraZeneca’s VP of Europe from 2002 to 2009. Dr. Setboun directed national and international teams and
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projects for Eli Lilly & Company in France and the US. Dr. Setboun received his Pharmaceutical Doctorate (Pharm.D.) from University
Paris XI in 1997 and his MBA from H.E.C Paris in 2001.
Ms. Alla Patlis joined the Company in December 2012 as Controller. From May 2015 to July 2015, November 2016 to November 2017,
July 2019 to September 2019 and September 2021 to present, the Company appointed Ms. Patlis as its Interim Chief Financial Officer
during the search for a new Chief Financial Officer, and she currently serves in that capacity. Prior to joining the Company, from 2010 to
December 2012, Ms. Patlis was Audit Senior of technology, media and telecommunications industries at Brightman Almagor Zohar &
Co. (Certified Public Accountants, A Member of Deloitte Touche Tohmatsu Limited). Ms. Patlis holds an MBA and a Bachelor’s degree
in Accounting & Economics from Tel Aviv University.
Uri Yablonka joined the Company on June 6, 2014 as Chief Operating Officer and as a member of the Board. On March 6, 2017 he was
appointed Executive Vice President, Chief Business Officer and ceased to serve as the Company’s Chief Operating Officer. Prior to
joining the Company, beginning in 2010, Mr. Yablonka served as owner and General Manager of Uri Yablonka Ltd., a business
consulting firm. From January 2011 to May 2014, he served as Vice President, Business Development at ACC International Holdings
Ltd. (“ACC International”), an affiliate of ACCBT Corp. Prior to his role in ACC International, Mr. Yablonka served as Senior Partner of
PM-PR Media Consulting Ltd. from 2008 to January 2011, where he led public relations and strategy consulting for a wide range of
governmental and private organizations. From 2002 to 2008, he served as a correspondent at the Maariv Daily News Paper, including
extensive service as a Diplomatic Correspondent. We believe that Mr. Yablonka’s skills and experience provide the variety and depth of
knowledge, judgment and vision necessary for the effective oversight of the Company. His experience in business consulting and
development and media experience are expected to be valuable to the Company in its current stage of growth and beyond, and his
governmental experience can provide valuable insight into issues faced by companies in regulated industries such as ours. We believe
that these skills and experiences qualify Mr. Yablonka to serve as a director and secretary of the Company.
Dr. Stacy Lindborg joined the Company on June 1, 2020 and serves as Executive Vice President and Chief Development Officer. She
currently serves on the board of directors of Celsion Corporation, a publicly-traded clinical stage biotechnology company. Dr. Lindborg
previously served at Biogen Inc. from 2012 to 2020, where she was most recently Vice President, Analytics and Data Science. She also
served on the R&D governance team during a time of significant growth for Biogen, and was active in guiding the firm's long-term
vision for growth through analytics and by stimulating innovative development platforms to increase productivity. Prior to her role at
Biogen, Dr. Lindborg worked at Eli Lilly & Company, where she held positions of increasing responsibility. In her role as the Head of
R&D strategy, she was responsible for characterizing the productivity of the portfolio and driving key R&D strategy projects including
the annual R&D Long-Range Plan. Additionally, she was Leader of Zyprexa Product Management in which she was responsible for
R&D, Commercial and Manufacturing plans. Dr. Lindborg holds a Ph.D. in statistics from Baylor University.
Dr. Jacob Frenkel joined the Company in March 2020 as a director and Chairperson. Dr. Frenkel serves Chairman of the Board of
Trustees of the Group of Thirty, which is a private, nonprofit, Consultative Group on International Economic and Monetary Affairs. Dr.
Frenkel served as Chairman of JPMorgan Chase International from 2009 to 2020 and is currently serving as a Senior Advisor to
JPMorgan Chase. From 2001 to 2011, he served as Chairman and CEO of the G-30, from 2004 to 2009 as Vice Chairman of American
International Group, Inc., and from 2000 to 2004 as Chairman of Merrill Lynch International. Between 1991 and 2000 he served two
terms as the Governor of the Bank of Israel. Dr. Frenkel serves as Chairman of the Board of Governors of Tel Aviv University, where he
is also Chairman of the Frenkel-Zuckerman Institute for Global Economics. He holds a B.A. in economics and political science from the
Hebrew University of Jerusalem, and an M.A. and Ph.D. in economics from the University of Chicago. We believe Dr. Frenkel possesses
specific attributes that qualify her to serve on our Board, including his valuable leadership skills and his deep knowledge of the financial
industry.
Dr. Irit Arbel, one of the Company's co-founders, joined the Company in May 2004 as a director and served as President of the
Company for six months. Currently, Dr. Arbel is the Vice-Chairperson of the Board and the Chair of the Governance, Nominating and
Compensation Committee. Dr. Arbel serves as director of Curatio DL, a biotechnology company developing cancer management
solutions, since January 2021. She previously served as CEO of Neurochords, a biotechnology firm developing graphene-based scaffold
for nerve reconstruction in acute spinal cord and peripheral nerve injury, from August 2018 to 2020. Prior to Neurochords, Dr. Arbel
served as Executive Vice President, Research and Development at Savicell Diagnostic Ltd from July 2012 until August 2018. From 2009
through 2011, Dr. Arbel served as Chairperson of Real Aesthetics Ltd., a company specializing in cellulite ultrasound treatment, and
BRH Medical, developer of medical devices for wound healing. She was also Director of M&A at RFB Investment House, a private
investment firm focusing on early stage technology related companies. Previously, Dr. Arbel was President and Chief Executive Officer
of Pluristem Life Systems, a biotechnology company, and prior to that, Israeli Sales Manager of Merck, Sharp & Dohme, a
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pharmaceutical company. Dr. Arbel earned her Post Doctorate degree in 1997 in Neurobiology, after performing research in the area of
Multiple Sclerosis. Dr. Arbel also holds a Chemical Engineering degree from the Technion, Israel's Institute of Technology. We believe
Dr. Arbel possesses specific attributes that qualify her to serve on our Board including Dr. Arbel’s extensive experience in the
biotechnology field and significant leadership skills as a chief executive officer. Dr. Arbel previously served as our President, which
service has given her a deep knowledge of the Company and its business and directly relevant management experience.
Dr. Menghisteab Bairu joined the Company in October 2021 as a director. Since December 2016, Dr. Bairu has served as the founder,
chairman and Chief Executive Officer of Proxenia Venture Partners, which focuses on companies in late preclinical and early-stage
clinical development in biotechnology. Dr. Bairu has also served as Chairman and Chief Executive Officer of Bairex, an international
medical education and market research organization focused on Africa and the Middle East since December 2018. Dr. Bairu also served
as Executive Chairman of Treos Bio Limited from 2016 to 2019, a start-up company that uses computational biology to develop
precision cancer immunotherapies tailored to patients' genetics. In addition, he is Founder and Chairman Emeritus of Serenus
Biotherapeutics, Inc., an emerging market focused specialty biopharmaceutical company, and has served on its board since 2013. Dr.
Bairu received his M.D. from Università degli Studi di Milano and currently serves as Adjunct Professor at the University of California,
San Francisco School of Medicine, where he lectures on global clinical trials’ design, development, and conduct. We believe that Dr.
Bairu possesses specific attributes that qualify him to serve on our Board including his valuable leadership skills and his deep knowledge
of pharmaceutical product development.
Dr. Anthony Polverino joined the Company on February 5, 2018 as a director. Dr. Polverino was an Executive Vice President Early
Development and Chief Scientific Officer of Zymeworks Inc., from September of 2018 to January 2022, and where he was responsible
for establishing the vision, strategy, and general management of the organization and overseeing the advancement of products from
discovery research through translational research/early development to create a seamless link to clinical development. Prior to
Zymeworks, Dr. Polverino was the interim chief scientific officer of Kite (now a wholly-owned subsidiary of Gilead Sciences), which he
joined in 2015, and where he was responsible for establishing Kite's strategic non-clinical R&D roadmap to support its current and future
portfolio. Prior to this, he was the Vice President of research at Kite, where his responsibilities included corporate goal setting, budget
allocation, scientific and investor interactions, business development in-licensing and partnership deals. Dr. Polverino spent 20 years in
positions of increasing responsibilities at Amgen, Inc., most recently as executive director of its Therapeutic Innovation Unit, where he
managed research programs in oncology, metabolic disease, inflammatory disease and schizophrenia. Prior to Amgen, he was a
postdoctoral scientist at Cold Spring Harbor Laboratory, where he worked primarily on oncology research. He earned a B.Sc. in
Biochemistry/Physiology and a B.Sc. (Honors) in Pharmacology, both from Adelaide University in Adelaide, Australia and a Ph.D. in
Biochemistry from Flinders University, also in Adelaide. We believe that Dr. Polverino possesses specific attributes that qualify him to
serve on our Board including his deep knowledge of the pharmaceutical industry.
Dr. June S. Almenoff joined the Company on February 26, 2017 as a director. Dr. Almenoff currently serves as the Chief Medical
Officer at RedHill Biopharma Inc. (Nasdaq: RDHL), where she focuses on medical-commercial strategy and serves on the commercial
executive team. She is on the investment advisory board of the Harrington Discovery Institute, a private venture philanthropy, Board
Director to Avalo Therapeutics (Nasdaq: ATVX) and Tenax (Nasdaq: TENX). She previously served as a Board Director to Tigenix
(Nasdaq: TIG, acquired by Takeda), Ohr Pharmaceuticals (Nasdaq: OHRP, merged with Neubase Pharmaceutical), Kurome, RDD
Pharma, Furiex Pharmaceuticals. Dr. Almenoff previously served as Chief Medical Officer (CMO) and Chief Operating Officer of
Innovate Biopharmaceuticals in 2018 and as President and CMO of Furiex Pharmaceuticals (acquired by Actavis plc) from 2010 to 2014.
Prior to joining Furiex, Dr. Almenoff was at GlaxoSmithKline for 12 years, where she was a Vice President in the Clinical Safety
organization, chaired a PhRMA-FDA working group, and worked in scientific licensing. Dr. Almenoff has also served as an advisor to
numerous biopharma and venture capital organizations, and as a consultant to biopharma hedge funds. Dr. Almenoff received her B.A.
from Smith College and graduated from the M.D.-Ph.D. program at the Icahn (Mt. Sinai) School of Medicine. She completed post-
graduate medical training at Stanford University Medical Center and served on the faculty of Duke University School of Medicine. She
is an adjunct Professor at Duke and a Fellow of the American College of Physicians (FACP). We believe Dr. Almenoff possesses specific
attributes that qualify her to serve on our Board including her valuable leadership skills and her deep knowledge of pharmaceutical
product development.
Malcolm Taub joined the Company in March 2009 as a director. Mr. Taub currently serves as the Managing Partner of Taub & Lewis
LLP, a full-service law firm in New York. From October 2010 to December 2019, Mr. Taub has been a Partner at Davidoff Malito &
Hutcher LLP, a full-service law and government relations firm. From 2001 to September 30, 2010, Mr. Taub was the Managing Member
of Malcolm S. Taub LLP, a law firm which practiced in the areas of commercial litigation, among other practice areas. Mr. Taub also
works on art transactions, in the capacity as an attorney and a consultant. Mr. Taub has also served as a principal of a firm which provides
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consulting services to private companies going public in the United States. Mr. Taub has acted as a consultant to the New York Stock
Exchange in its Market Surveillance Department. Mr. Taub acts as a Trustee of The Gateway Schools of New York and The Devereux
Glenholme School in Washington, Connecticut. Mr. Taub has served as an adjunct professor at Long Island University, Manhattan
Marymount College and New York University Real Estate Institute. Mr. Taub holds a B.A. from Brooklyn College and a J.D. from
Brooklyn Law School. Mr. Taub formerly served on the Board of Directors of Safer Shot, Inc. (formerly known as Monumental
Marketing Inc.). We believe that Mr. Taub possesses specific attributes that qualify him to serve on our Board including Mr. Taub’s vast
law experience and his demonstrated leadership skills as a managing member of a law firm.
Qualifications of Directors
The Board believes that each director has valuable individual skills and experiences that, taken together, provide the variety and depth of
knowledge, judgment and vision necessary for the effective oversight of the Company. As indicated in the foregoing biographies, the
directors have extensive experience in a variety of fields, including biotechnology (Drs. Arbel, Almenoff, Menghisteab Bairu and
Polverino), financial markets and accounting (Dr. Frenkel, Mr. Taub), business consulting and development (Dr. Polverino and Mr.
Yablonka), media (Mr. Yablonka) and law (Mr. Taub and Mr. Yablonka), each of which the Board believes provides valuable knowledge
about important elements of our business. Most of our directors have leadership experience at major companies or firms with operations
inside and outside the United States and/or experience on other companies’ boards, which provides an understanding of ways other
companies address various business matters, strategies and issues. As indicated in the foregoing biographies, the directors have each
demonstrated significant leadership skills, including as Chairman (Dr. Frenkel), a chief executive officer (Drs. Arbel, Dr. Frenkel),
executive officer (Drs. Almenoff and Polverino and Mr. Yablonka), as a managing member of a law firm (Mr. Taub), as general manager
of a business consulting firm (Mr. Yablonka) or as a valuable leader with deep knowledge of the financial industry and capital markets
(Dr. Frenkel). A number of the directors have extensive public policy, government or regulatory experience, which can provide valuable
insight into issues faced by companies in regulated industries such as the Company. One of the directors (Dr. Arbel) has served as the
President of the Company and one is currently serving as Chief Business Officer (Mr. Yablonka), which service has given each a deep
knowledge of the Company and its business and directly relevant management experience. The Board believes that these skills and
experiences qualify each individual to serve as a director of the Company.
Certain Arrangements
On June 1, 2015 pursuant to the Company’s First Amendment to the Second Amended and Restated Director Compensation Plan, we
granted a stock option to Irit Arbel, the Company’s Vice Chairperson of the Board of Directors, to purchase up to 6,667 shares of
Common Stock at a purchase price of $0.75 per share. On February 26, 2017 pursuant to the Company’s Second Amendment to the
Second Amended and Restated Director Compensation Plan, we granted a stock option to Dr. Arbel to purchase up to 6,667 shares of
Common Stock at a purchase price of $0.75 per share. On July 13, 2017 pursuant to the Company’s Third Amendment to the Second
Amended and Restated Director Compensation Plan, we granted a stock option to Dr. Arbel to purchase up to 12,000 shares of Common
Stock at a purchase price of $0.75 per share. Each option was fully vested and exercisable on the date of grant.
Pursuant to a February 26, 2017 resolution of the Board, Dr. Almenoff receives the following compensation for her service on the Board:
an annual cash award in the amount of $30,000, paid in biannual installments. Dr. Almenoff will not receive annual director awards
under the Director Compensation Plan, but in the event that Dr. Almenoff serves as a member of any committee of the Board she will be
entitled to committee compensation under the Director Compensation Plan. Dr. Almenoff is a member of the Audit Committee.
Pursuant to an October 28, 2021 resolution of the Board, Dr. Bairu receives the following compensation for his service on the Board: an
annual cash award in the amount of $30,000, paid in biannual installments. Dr. Bairu will not receive annual director awards under the
Director Compensation Plan, but in the event that Dr. Bairu serves as a member of any committee of the Board he will be entitled to
committee compensation under the Director Compensation Plan.
Uri Yablonka serves as the Company’s EVP, Chief Business Officer, Director and Secretary and is compensated for all services as an
officer and director of the Company pursuant to an employment agreement with the Company and related compensation described under
“Executive Employment Agreements” in the Executive Compensation section below.
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Involvement in Certain Legal Proceedings
None of our directors or executive officers has during the past ten years:
● been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and
other minor offenses);
● had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or
within two years prior to that time;
● been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting,
his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or
insurance activities, or to be associated with persons engaged in any such activity;
● been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the
Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated;
● been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants),
relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation
respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction,
order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or
prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
● been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-
regulatory organization (as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or persons associated with a member.
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Committees of the Board of Directors
Audit Committee
On February 7, 2008, the Board of Directors (“Board”) established a standing Audit Committee in accordance with Section 3(a)(58)(A)
of the Securities Exchange Act of 1934, which assists the Board in fulfilling its responsibilities to stockholders concerning our financial
reporting and internal controls, and facilitates open communication among the Audit Committee, Board, outside auditors and
management. The Audit Committee discusses with management and our outside auditors the financial information developed by us, our
systems of internal controls and our audit process. The Audit Committee is solely and directly responsible for appointing, evaluating,
retaining and, when necessary, terminating the engagement of the independent auditor. The independent auditors meet with the Audit
Committee (both with and without the presence of management) to review and discuss various matters pertaining to the audit, including
our financial statements, the report of the independent auditors on the results, scope and terms of their work, and their recommendations
concerning the financial practices, controls, procedures and policies employed by us. The Audit Committee preapproves all audit
services to be provided to us, whether provided by the principal auditor or other firms, and all other services (review, attest and non-
audit) to be provided to us by the independent auditor. The Audit Committee coordinates the Board’s oversight of our internal control
over financial reporting, disclosure controls and procedures and code of conduct. The Audit Committee is charged with establishing
procedures for (i) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or
auditing matters; and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable
accounting or auditing matters. The Audit Committee reviews all related party transactions on an ongoing basis, and all such transactions
must be approved by the Audit Committee. The Audit Committee is authorized, without further action by the Board, to engage such
independent legal, accounting and other advisors as it deems necessary or appropriate to carry out its responsibilities. The Board has
adopted a written charter for the Audit Committee, which is available in the corporate governance section of our website at
www.brainstorm-cell.com. The Audit Committee currently consists of Mr. Taub (Chair), Dr. Arbel and Dr Almenoff, each of whom is
independent within the meaning of The Nasdaq Marketplace Rules and Rule 10A-3 under the Exchange Act. Dr. Almenoff joined the
Audit Committee November 14, 2019. The Board of Directors has determined that Dr. Arbel is an “audit committee financial expert” as
defined in Item 407(d)(5) of Regulation S-K. The Audit Committee held four meetings during the fiscal year ended December 31, 2021.
GNC Committee
On June 27, 2011, the Board established a standing Governance, Nominating and Compensation Committee (the “GNC Committee”),
which assists the Board in fulfilling its responsibilities relating to (i) compensation of the Company’s executive officers, (ii) the director
nomination process and (iii) reviewing the Company’s compliance with SEC corporate governance requirements. The Board has adopted
a written charter for the GNC Committee, which is available in the corporate governance section of our website at www.brainstorm-
cell.com. The GNC Committee currently consists of Dr. Arbel (Chair), Dr. Polverino and Mr. Taub, each of whom is independent as
defined under applicable Nasdaq listing standards. The GNC Committee held two meetings during the fiscal year ended December 31,
2021.
The GNC Committee determines salaries, incentives and other forms of compensation for the Chief Executive Officer and the executive
officers of the Company and reviews and makes recommendations to the Board with respect to director compensation. The GNC
Committee meets without the presence of executive officers when approving or deliberating on executive officer compensation but may
invite the Chief Executive Officer to be present during the approval of, or deliberations with respect to, other executive officer
compensation. In addition, the GNC Committee administers the Company’s stock incentive compensation and equity-based plans.
The GNC Committee makes recommendations to the Board concerning all facets of the director nominee selection process. Generally,
the GNC Committee identifies candidates for director nominees in consultation with management and the independent members of the
Board, through the use of search firms or other advisers, through the recommendations submitted by stockholders or through such other
methods as the GNC Committee deems to be helpful to identify candidates. Once candidates have been identified, the GNC Committee
confirms that the candidates meet the independence requirements and qualifications for director nominees established by the Board. The
GNC Committee may gather information about the candidates through interviews, questionnaires, background checks, or any other
means that the GNC Committee deems to be helpful in the evaluation process. The GNC Committee meets to discuss and evaluate the
qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the Board.
Upon selection of a qualified candidate, the GNC Committee would recommend the candidate for consideration by the full Board.
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In considering whether to include any particular candidate in the Board’s slate of recommended director nominees, the Board will
consider the candidate’s integrity, education, business acumen, knowledge of the Company’s business and industry, age, experience,
diligence, conflicts of interest and the ability to act in the interests of all stockholders. The Board believes that experience as a leader of a
business or institution, sound judgment, effective interpersonal and communication skills, strong character and integrity, and expertise in
areas relevant to our business are important attributes in maintaining the effectiveness of the Board. As a matter of practice, the Board
considers the diversity of the backgrounds and experience of prospective directors as well as their personal characteristics (e.g., gender,
ethnicity, age) in evaluating, and making decisions regarding, Board composition, in order to facilitate Board deliberations that reflect a
broad range of perspectives. The Board does not assign specific weights to particular criteria and no particular criterion is a prerequisite
for each prospective nominee. The Company believes that the backgrounds and qualifications of its directors, considered as a group,
should provide a significant breadth of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.
Stockholder Nominations
During the fourth quarter of fiscal year 2021, we made no material changes to the procedures by which stockholders may recommend
nominees to our Board, as described in our most recent proxy statement.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our
Common Stock (collectively, the “Reporting Persons”), to file reports regarding ownership of, and transactions in, our securities with the
Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such
forms received by us, or written representations from the Reporting Persons, we believe that during the fiscal year ended December 31,
2021 all Reporting Persons complied with the applicable requirements of Section 16(a) of the Exchange Act. There are no known failures
to file a required Form 3, Form 4 or Form 5.
Code of Ethics
On May 27, 2005, our Board adopted a Code of Ethics that applies to, among other persons, members of our Board, officers and
employees. A copy of our Code of Ethics is posted on our website at www.brainstorm-cell.com. We intend to satisfy the disclosure
requirement regarding any amendment to, or waiver of, a provision of the Code of Ethics applicable to our Principal Executive Officer or
our senior financial officers (Principal Financial Officer and Controller or Principal Accounting Officer, or persons performing similar
functions) by posting such information on our website.
Item 11. EXECUTIVE COMPENSATION.
Summary Compensation
The following table sets forth certain summary information with respect to the compensation paid during the fiscal years ended
December 31, 2021 and 2020 earned by Chief Executive Officer, President and Chief Medical Officer, and our EVP and Chief
Development Officer (the “Named Executive Officers”). In the table below, columns required by the regulations of the SEC have been
omitted where no information was required to be disclosed under those columns.
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Summary Compensation Table
Name and Principal Position
Chaim Lebovits (*), Chief Executive Officer
Ralph Kern, President & Chief Medical Officer
Stacy Lindborg, EVP, Chief Development Officer
(8)
Year
2021
2020
2021
2020
Salary
($)
500,000
500,000
500,000
500,000
Bonus
($)
Option
Awards
($) (1) (2)
Stock
All Other
Awards Compensation
($) (1)
250,000 (4)
860,000 (5)
250,000 (6)
290,000 (7)
— 110,395
— 486,174
— 125,971
410,621 273,444
($)(3)
267,954
279,680
62,862
54,216
Total ($)
1,128,349
2,125,854
938,833
1,528,281
2021
2020
469,000
218,750
189,150 (9)
—
10,000 (10) 404,358 186,250
—
78,530
48,147
736,680
867,505
(*)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
These Named Executive Officers were paid in NIS; the amounts above are the U.S. dollar equivalent. The conversion rate used
was the average of the 2020 and 2021 daily rates between the U.S. dollar and the NIS as published by the Bank of Israel, the
central bank of Israel.
The amounts shown in the "Option Awards" and "Stock Awards" columns represent the aggregate grant date fair value of
awards computed in accordance with ASC 718, not the actual amounts paid to or realized by the Named Executive Officer
during fiscal 2020 and fiscal 2021. ASC 718 fair value amount as of the grant date for stock options generally is spread over the
number of months of service required for the grant to vest.
The fair value of each stock option award is estimated as of the date of grant using the Black-Scholes valuation model.
Additional information regarding the assumptions used to estimate the fair value of all stock option awards is included in Note
10 to Consolidated Financial Statements.
Includes management insurance (which includes pension, disability insurance and severance pay), payments towards such
employee’s education fund, Israeli social security and amounts paid for use of a Company car. Each Named Executive Officer
also receives gross-up payments for the taxes on these benefits.
During 2021, the Company paid Mr. Lebovits a discretionary cash bonus payment of $250,000 in recognition of his
contributions to the Company’s performance in fiscal year 2021.
During 2020, the Company paid Mr. Lebovits a discretionary cash bonus payment of $860,000 in recognition of his
contributions to the Company’s performance in fiscal year 2020.
In June 2021, the Company paid Dr. Kern a discretionary cash bonus payment of $250,000 in recognition of his contributions to
the Company’s performance in fiscal year 2021.
During 2020, the Company paid Dr. Kern a discretionary cash bonus payment of $290,000 in recognition of his contributions to
the Company’s performance in fiscal year 2020.
Ms. Lindborg's employment with the Company began on June 1, 2020.
In June 2021, the Company paid Dr. Lindborg a discretionary cash bonus payment of $189,150 in recognition of her
contributions to the Company’s performance in fiscal year 2021.
(10)
In December 2020, the Company paid Dr. Lindborg a discretionary cash bonus payment of $10,000 in recognition of her
contributions to the Company’s performance in fiscal year 2020.
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Executive Employment Agreements
Chaim Lebovits
On September 28, 2015, Chaim Lebovits, the Company’s Chief Executive Officer and President, and the Company’s wholly owned
subsidiary Brainstorm Cell Therapeutics Ltd. (the “Subsidiary”), entered into an employment agreement, which was amended on March
7, 2016, July 26, 2017 and June 23, 2020 (as amended, the “Lebovits Employment Agreement”). Pursuant to the Lebovits Employment
Agreement, Chaim Lebovits is paid a salary at the annual rate of $500,000 (the “Base Salary”). Mr. Lebovits also receives other benefits
that are generally made available to the Subsidiary’s employees. In addition, he is provided with a cellular phone and a company car,
with all costs including taxes borne by the Subsidiary.
Pursuant to the Lebovits Employment Agreement, Mr. Lebovits was granted a stock option under the Company’s 2014 Global Share
Option Plan on September 28, 2015 for the purchase of up to 369,619 shares of the Company’s Common Stock at a per share exercise
price of $2.45, which grant is fully vested and exercisable and shall be exercisable for a period of two years after termination of
employment. Pursuant to the Lebovits Employment Agreement, Mr. Lebovits will receive an annual cash bonus equal to 50% of his base
salary.
Pursuant to the Lebovits Employment Agreement, Mr. Lebovits received on July 26, 2017, and is entitled to receive on each anniversary
thereafter (provided he remains Chief Executive Officer), a grant of restricted stock under the Company’s 2014 Global Share Option Plan
(or any successor or other equity plan then maintained by the Company) comprised of a number of shares of Common Stock with a fair
market value (determined based on the price of the Common Stock at the end of normal trading hours on the business day immediately
preceding the Effective Date according to Nasdaq) equal to 30% of Mr. Lebovits’ Base Salary. Each grant shall vest as to twenty-five
percent (25%) of the award on each of the first, second, third and fourth anniversary of the date of grant, provided Mr. Lebovits remains
continuously employed by the Company from the date of grant through each applicable vesting date. Each grant shall be subject to
accelerated vesting upon a Change of Control (as defined in the Lebovits Employment Agreement) of the Company. In the event of Mr.
Lebovits’ termination of employment, any portion of a grant that is not yet vested (after taking into account any accelerated vesting) shall
automatically be immediately forfeited to the Company, without the payment of any consideration to Mr. Lebovits.
Pursuant to the Lebovits Employment Agreement, on July 26, 2017, Mr. Lebovits also received a fully vested and exercisable option to
purchase up to 41,580 shares of Common Stock, with an exercise price per share of $4.81. The option was fully-vested and exercisable
until the 2nd anniversary of the date of grant, when it expired unexercised.
The Lebovits Employment Agreement contains termination provisions, pursuant to which if the Company terminates the Employment
Agreement or Mr. Lebovits’ employment without Cause (as defined in the agreement) or if Mr. Lebovits terminates the employment
agreement or his employment thereunder with Good Reason (as defined in the agreement), the Company shall: (i) within 90 days pay Mr.
Lebovits, as severance pay, a lump sum equal to six (6) months of Base Salary (which shall increase to nine (9) months after July 26,
2019 and twelve (12) months after July 26, 2020) (provided Mr. Lebovits is actively employed by the Company on such dates) (the
“Payment Period”); (ii) pay Mr. Lebovits within 30 days of his termination of employment any bonus compensation that Mr. Lebovits
would be entitled to receive during the Payment Period in the absence of his termination without Cause or for Good Reason; (iii)
immediately vest such number of equity or equity based awards that would have vested during the six (6) months following the date of
termination of employment; and (iv) shall continue to provide to Mr. Lebovits health insurance benefits during the Payment Period,
unless otherwise provided by a subsequent employer. The foregoing severance payments are conditional upon Mr. Lebovits executing a
waiver and release in favor of the Company in a form reasonably acceptable to the Company.
Dr. Ralph Kern
On February 28, 2017, the Company and Dr. Ralph Kern entered into an employment agreement, effective March 6, 2017, which sets
forth the terms of Dr. Kern’s employment (as amended by Amendment No. 1 dated March 3, 2017, the “Agreement”). Pursuant to the
Agreement, Dr. Kern is paid an annual salary of $500,000 (the “Base Salary”), which may be increased (but not decreased) at the sole
discretion of the Board. Dr. Kern is also eligible to receive an annual cash bonus equal to 30% of his base salary, subject to his
satisfaction of pre-established performance goals to be mutually agreed upon by the Board and Dr. Kern. Performance is evaluated
through a performance management framework and a bonus range based on the target bonus. Dr. Kern also receives other benefits that
are generally made available to the Company’s employees.
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Pursuant to the Agreement, Dr. Kern received on March 6, 2017, and is entitled to receive on each anniversary thereafter (provided he
remains employed by the Company), a grant of restricted stock under the Company’s 2014 Stock Incentive Plan (or any successor or
other equity plan then maintained by the Company) comprised of a number of shares of common stock of the Company, $0.00005 par
value (“Common Stock”) with a fair market value (determined based on the price of the Common Stock at the end of normal trading
hours on the business day immediately preceding March 6, 2017 according to Nasdaq) equal to 30% of Dr. Kern’s Base Salary. Each
equity grant vests as to twenty-five percent (25%) of the award on each of the first, second, third and fourth anniversary of the date of
grant, provided Dr. Kern remains continuously employed by the Company from the date of grant through each applicable vesting date.
Each equity grant is subject to accelerated vesting upon a Change of Control (as defined in the Agreement) of the Company. In the event
of Dr. Kern’s termination of employment, any portion of an equity grant that is not yet vested (after taking into account any accelerated
vesting) shall automatically be immediately forfeited to the Company, without the payment of any consideration to Dr. Kern.
Pursuant to the Agreement, on March 6, 2017, Dr. Kern also received an option under the 2014 U.S. Plan to purchase up to 47,847 shares
of Common Stock with an exercise price per share of $4.18. The option was fully vested and exercisable until the 2nd anniversary of the
date of grant, when it expired unexercised.
Pursuant to the Agreement, on March 9, 2020, Dr. Kern also received an option under the 2014 U.S. Plan to purchase up to 80,000 shares
of Common Stock with an exercise price per share of $7.33. The option was fully vested and exercisable This option will vest and
become exercisable as to 25% of the number of Shares on each of the first four anniversaries of the grant date until fully vested and
exercisable on the fourth anniversary of the grant date.
The Agreement contains termination provisions, pursuant to which if the Company terminates the Agreement or Dr. Kern’s employment
without Cause (as defined in the Agreement) or if Dr. Kern terminates the Agreement or his employment thereunder with Good Reason
(as defined in the Agreement), the Company shall: (i) within 90 days pay Dr. Kern, as severance pay, a lump sum equal to six (6) months
of Base Salary (which shall increase to nine (9) months after the second anniversary of March 6, 2017 and twelve (12) months after the
third anniversary of March 6, 2017) (provided Dr. Kern is actively employed by the Company on such dates) (the “Payment Period”); (ii)
pay Dr. Kern within 30 days of his termination of employment any bonus compensation that Dr. Kern would be entitled to receive during
the Payment Period in the absence of his termination without Cause or for Good Reason; (iii) immediately vest such number of equity or
equity based awards that would have vested during the six (6) months following the date of termination of employment; and (iv) shall
continue to provide to Dr. Kern health insurance benefits during the Payment Period, unless otherwise provided by a subsequent
employer. The foregoing severance payments are conditional upon Dr. Kern executing a waiver and release in favor of the Company in a
form reasonably acceptable to the Company.
Stacy Lindborg
Dr. Stacy Lindborg, PhD, the Company’s EVP and Chief Development Officer is party to a May 26, 2020 employment agreement with
the Company, pursuant to which Dr. Lindborg initially received an annual base compensation of $375,000 and is eligible to receive an
annual cash bonus equal to 35% of her base salary, subject to satisfaction of pre-established performance goals. Pursuant to the
agreement, she received on June 1 2020, a one-time grant under the 2014 Stock Incentive Plan of 25,000 shares of restricted common
stock of the Company, which shall vest as to 100% of the award on December 31, 2020, provided Dr. Lindborg remains continuously
employed by the Company from the date of grant through the vesting date. In the event of Dr. Lindborg’s termination of employment is
prior to the vesting date, the restricted stock grant shall automatically be immediately forfeited to the Company, without the payment of
any consideration to Dr. Lindborg.
Pursuant to the agreement, Dr. Lindborg also received a one-time grant of an option to purchase 100,000 shares of Common Stock under
the Company’s 2014 Stock Incentive Plan, at an exercise price of $7.67 per share. 50% of the grant shall vest and become exercisable on
February 28, 2021 and the remaining 50,000 shares underlying the Option shall vest and become exercisable in equal quarterly
installments thereafter until fully vested and exercisable on the second anniversary of the First Vesting Date, provided that she remains
continuously employed by the Company from the date of grant through each applicable vesting date. Each option shall have a ten (10)
year term. Any unvested shares underlying the options as of the date of Dr. Lindborg’s employment termination shall automatically
terminate.
This agreement was further amended in January 2021 under which Dr. Stacy Lindborg is paid an annual base compensation of $469,000.
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Outstanding Equity Awards
The following table sets forth information regarding equity awards granted to the Named Executive Officers that are outstanding as of
December 31, 2021. All equity awards in the following table were granted pursuant to the 2014 Global Share Option Plan (solely to
participants who are residents of Israel) (the “2014 Global Plan”) or the 2014 Stock Incentive Plan (the “2014 U.S. Plan” and together
with the 2014 Global Plan, the “2014 Plans”). In the table below, columns required by the regulations of the SEC have been omitted
where no information was required to be disclosed under those columns.
Outstanding Equity Awards at December 31, 2021
Option Awards
Stock Awards
Name
Chaim Lebovits
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Option
Exercise
Price
($)
Option
Expiration
Date
369,619
—
2.45 9/28/2025
Ralph Kern
20,000
60,000 (10)
7.33
03/09/2030
Stacy Lindborg
68,750
31,250 (11)
7.67
01/06/2030
(1) Based on the fair market value of our Common Stock on December 31, 2021 ($4.00 per share).
Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)
—
7,796 (2)
15,593 (3)
23,389 (4)
31,185 (5)
—
8,971 (6)
17,943 (7)
26,914 (8)
35,885 (9)
—
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)
—
31,184
62,372
93,556
124,740
—
35,884
71,772
107,656
143,540
—
(2) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (July 26, 2018), provided that Chaim
Lebovits remains continuously employed by the Company from the date of grant through each applicable vesting date.
(3) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (July 26, 2019), provided that Chaim
Lebovits remains continuously employed by the Company from the date of grant through each applicable vesting date.
(4) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (July 26, 2020), provided that Chaim
Lebovits remains continuously employed by the Company from the date of grant through each applicable vesting date.
(5) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (July 26, 2021), provided that
Chaim Lebovits remains continuously employed by the Company from the date of grant through each applicable vesting date.
(6) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (March 6, 2018), provided that
Ralph Kern remains continuously employed by the Company from the date of grant through each applicable vesting date.
(7) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (March 6, 2019), provided that
Ralph Kern remains continuously employed by the Company from the date of grant through each applicable vesting date.
(8) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (March 6, 2020), provided that
Ralph Kern remains continuously employed by the Company from the date of grant through each applicable vesting date.
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(9) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (March 6, 2021), provided that
Ralph Kern remains continuously employed by the Company from the date of grant through each applicable vesting date.
(10) The shares subject to this stock option vest in installments of 20,000 shares on each of the 2nd, 3rd and 4th anniversary of date of
grant (March 9, 2020), provided that Ralph Kern remains continuously employed by the Company from the date of grant through
each applicable vesting date.
(11) The shares subject to this stock option vest in equal quarterly installments following a grant date of February 28, 2021, thereafter,
until fully vested and exercisable on the second anniversary of February 28, 2021.
Stock Incentive Plans
During the fiscal year ended December 31, 2021, the Company had outstanding awards for stock options under four plans: (i) the 2004
Global Stock Option Plan and the Israeli Appendix thereto (the “2004 Global Plan”) (ii) the 2005 U.S. Stock Option and Incentive Plan
(the “2005 U.S. Plan,” and together with the 2004 Global Plan, the “Prior Plans”); (iii) the 2014 Global Share Option Plan and the Israeli
Appendix thereto (which applies solely to participants who are residents of Israel) (the “2014 Global Plan”); and (iv) the 2014 Stock
Incentive Plan (the “2014 U.S. Plan” and together with the 2014 Global Plan, the 2014 Plans).
The 2004 Global Plan and 2005 U.S. Plan expired on November 25, 2014 and March 28, 2015, respectively. Grants that were made
under the Prior Plans remain outstanding pursuant to their terms. The 2014 Plans were approved by the stockholders on August 14, 2014
(at which time the Company ceased to issue awards under each of the 2005 U.S. Plan and 2004 Global Plan) and amended on June 21,
2016 and November 29, 2018. Unless otherwise stated, option grants prior to August 14, 2014 were made pursuant to the Company’s
Prior Plans, and grants issued on or after August 14, 2014 were made pursuant to the Company’s 2014 Plans, and expire on the tenth
anniversary of the grant date.
The 2014 Plans have a shared pool of 5,600,000 shares of common stock available for issuance. The exercise price of the options granted
under the 2014 Plans may not be less than the nominal value of the shares into which such options are exercised. Any options under the
2014 Plans that are canceled or forfeited before expiration become available for future grants.
Compensation of Directors
The following table sets forth certain summary information with respect to the compensation paid during the fiscal year ended December
31, 2021 earned by each of the directors of the Company. In the table below, columns required by the regulations of the SEC have been
omitted where no information was required to be disclosed under those columns.
Director Compensation Table for Fiscal 2021
Name
Dr. Jacob Frenkel
Dr. Irit Arbel
Dr. June S. Almenoff
Dr. Anthony Polverino
Dr. Menghisteab Bairu (7)
Mr. Malcolm Taub
Uri Yablonka
Sankesh Abbhi
Fees
Earned or
Paid in
Cash ($)
Stock
Awards
($)(1)
—
—
30,000 (4)
12,500
—
—
—
—
—
—
13,560 (5)
21,405 (6)
—
81,360 (8)
—
23,598 (10)
Option
Awards
($)
(1)
153,167 (2)
148,012 (3)
—
—
—
—
77,900 (9)
—
Total
($)
153,167
148,012
43,560
33,905
—
81,360
77,900
23,598
(1) The amounts shown in the “Stock Awards” and “Option Awards” columns represent the aggregate grant date fair value of awards
computed in accordance with ASC 718, not the actual amounts paid to or realized by the directors during fiscal 2021. The fair value
of each stock option award is estimated as of the date of grant using the Black-Scholes valuation model. Additional information
regarding the assumptions used to estimate the fair value of all stock option awards is included in Note 10 – Share-based
compensation to employees and to directors to Consolidated Financial Statements.
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(2) At December 31, 2021, Dr. Frenkel held unexercised options (vested and unvested) to purchase 100,000 shares of Common Stock
and no unvested shares of restricted Common Stock. Stock and no unvested shares of restricted Common Stock.
(3) At December 31, 2021, Dr. Arbel held unexercised options (vested and unvested) to purchase 251,998 shares of Common Stock and
no unvested shares of restricted Common Stock.
(4) Represents the amount paid to Dr. Almenoff for her services as a director.
(5) At December 31, 2021, Dr. Almenoff held 6,000 unvested shares of restricted Common Stock and no unexercised options to
purchase shares of Common Stock.
(6) At December 31, 2021, Dr. Polverino held 9,287 unvested shares of restricted Common Stock and no unexercised options to
purchase shares of Common Stock.
(7) Dr. Bairu serves as a member of the Board, effective October 28, 2021. As of December 31, 2021, Dr. Bairu held no unvested shares
of restricted common stock or unexercised option to purchase shares of Common Stock.
(8) At December 31, 2021, Mr. Taub held 77,332 unvested shares of restricted Common Stock.
(9) At December 31, 2021, Mr. Yablonka held options (vested and unvested) to purchase 139,997 shares of Common Stock and no
unvested shares of restricted Common Stock.
(10) At December 31, 2021, Mr. Sankesh Abbhi held 11,323 unvested shares of restricted Common Stock and no unexercised options to
purchase shares of Common Stock.
Director Compensation Plan
We review the level of compensation of our non-employee directors on a periodic basis. To determine how appropriate the current level
of compensation for our non-employee directors is, we have historically obtained data from a number of different sources, including
publicly available data describing director compensation in peer companies and survey data collected by an independent compensation
consultant. Those of our directors who are not employees of Brainstorm receive compensation for their services as directors as follows:
The Company’s Second Amended and Restated Director Compensation Plan was approved July 9, 2014 and amended on April 29, 2015,
February 26, 2017 and July 13, 2017 (as amended, the “Director Compensation Plan”). Under the Director Compensation Plan, each
eligible director is granted an annual award immediately following each annual meeting of stockholders. For non-U.S. directors, this
annual award consists of a nonqualified stock option to purchase 13,333 shares of Common Stock. For U.S. directors, at their option, this
annual award is either (i) a nonqualified stock option to purchase 6,666 shares of Common Stock or (ii) 6,666 shares of restricted stock.
Additionally, each member of the GNC Committee or Audit Committee of the Board receives (i) a nonqualified stock option to purchase
2,000 shares of Common Stock or (ii) in the case of U.S. directors and at their option, 2,000 shares of restricted stock. The chair of the
GNC Committee or Audit Committee will instead of the above committee award receive (i) a nonqualified stock option to purchase
3,333 shares of Common Stock or (ii) in the case of U.S. directors and at their option, 3,333 shares of restricted stock. Any eligible
participant who is serving as chairperson of the Board shall also receive (i) a nonqualified stock option to purchase 6,666 shares of
Common Stock or (ii) in the case of U.S. directors and at their option, 6,666 shares of restricted stock. Awards are granted on a pro rata
basis for directors serving less than a year at the time of grant. All awards granted to non-U.S. directors shall be made under the 2014
Global Plan, and all awards granted to U.S. directors shall be made under the 2014 U.S. Plan. The exercise price for options for U.S.
directors will be equal to the closing price per share of the Common Stock on the grant date as reported on the Over-the-Counter Bulletin
Board or the national securities exchange on which the Common Stock is then traded. The exercise price for options for non-U.S.
directors is $0.75. Every option and restricted stock award will vest monthly as to 1/12 the number of shares subject to the award over a
period of twelve months, provided that the recipient remains a member of the Board on each such vesting date, or, in the case of a
committee award, remains a member of the committee on each such vesting date. Every non-employee director of the Company is
eligible to participate in the Director Compensation Plan, except that Dr. June S. Almenoff, Dr. Menghisteab Bairu, and Dr. Anthony
Polverino are not entitled receive annual director awards under the Director Compensation Plan, but are entitled to committee
compensation under the Director Compensation Plan in the event that they qualify for and serve as a member of any committee of the
Board. Dr. Almenoff, Dr. Menghisteab Bairu and Dr. Polverino’s director compensation is further discussed below.
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Pursuant to a February 26, 2017 resolution of the Board, Dr. Almenoff receives the following compensation for her service on the Board:
an annual cash award in the amount of $30,000, paid in biannual installments. Dr. Almenoff will not receive annual director awards
under the Director Compensation Plan, but in the event that Dr. Almenoff serves as a member of any committee of the Board she will be
entitled to committee compensation under the Director Compensation Plan. Dr. Almenoff serves as a member of the Audit Committee.
Pursuant to an October 28, 2021 resolution of the Board, Dr. Bairu receives the following compensation for his service on the Board: an
annual cash award in the amount of $30,000, paid in biannual installments. Dr. Bairu will not receive annual director awards under the
Director Compensation Plan, but in the event that Dr. Bairu serves as a member of any committee of the Board he will be entitled to
committee compensation under the Director Compensation Plan.
Pursuant to resolution of the Board, Dr. Polverino receives the following compensation for his service on the Board: an annual cash
award in the amount of $12,500, paid in biannual installments, and an annual restricted stock award valued at $12,500 on the date of
grant, as determined based on the closing price of the Company’s common stock at the end of normal trading hours on the date of grant,
or the previous closing price in the event the grant date does not fall on a business day. The grant vests in 12 consecutive, equal monthly
installments commencing on the one-month anniversary of the date of grant, until fully vested on the first anniversary of the date of
grant. Dr. Polverino does not receive annual director awards under the Director Compensation Plan, but in the event that he serves as a
member of any committee of the Board he is entitled to committee compensation under the Director Compensation Plan. Dr. Polverino
serves on the GNC Committee.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 1, 2022 (unless otherwise indicated) with respect to the beneficial
ownership of our Common Stock by the following: (i) each of our current directors; (ii) the Named Executive Officers; (iii) all of the
current executive officers and directors as a group; and (iv) each person known by the Company to own beneficially more than five
percent (5%) of the outstanding shares of our Common Stock.
For purposes of the following table, beneficial ownership is determined in accordance with the rules of the SEC and the information is
not necessarily indicative of beneficial ownership for any other purpose. Except as otherwise noted in the footnotes to the table, we
believe that each person or entity named in the table has sole voting and investment power with respect to all shares of our Common
Stock shown as beneficially owned by that person or entity (or shares such power with his or her spouse). Under the SEC’s rules, shares
of our Common Stock issuable under options that are exercisable on or within 60 days after March 1, 2022 (“Presently Exercisable
Options”) or under warrants that are exercisable on or within 60 days after March 1, 2022 (“Presently Exercisable Warrants”) are deemed
outstanding and therefore included in the number of shares reported as beneficially owned by a person or entity named in the table and
are used to compute the percentage of the Common Stock beneficially owned by that person or entity. These shares are not, however,
deemed outstanding for computing the percentage of the Common Stock beneficially owned by any other person or entity. Unless
otherwise indicated, the address of each person listed in the table is c/o Brainstorm Cell Therapeutics Inc., 1325 Avenue of Americas,
28th Floor, New York, NY 10019.
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The percentage of the Common Stock beneficially owned by each person or entity named in the following table is based on 36,450,295
shares of Common Stock outstanding as of March 1, 2022, plus any shares issuable upon exercise of Presently Exercisable Options and
Presently Exercisable Warrants held by such person or entity.
Name of Beneficial Owner
Directors and Named Executive Officers
Chaim Lebovits
Ralph Kern
Stacy Lindborg
Uri Yablonka
June Almenoff
Irit Arbel
Anthony Polverino
Malcolm Taub
Jacob Frenkel
Menghisteab Bairu
All current directors and executive officers as a group (12 persons)
5% Shareholders (other than listed above)
Sankesh Abbhi
Kevin D. Ness
Shares Beneficially Owned
(Includes Common Stock, Presently
Exercisable Options and Presently
Exercisable Warrants)
#
%
4,543,057 (1)
227,425 (2)
100,000 (3)
148,651 (4)
13,175 (5)
390,942 (6)
25,960
77,332
156,667 (7)
— (8)
5,744,609 (9)
2,425,853 (10)
3,300,000 (11)
11.7 %
*
*
*
*
1.1
*
*
*
—
14.6
6.6
9.1
* Less than 1%.
(1) Includes (i) 1,933,794 shares of Common Stock owned by ACCBT Corp. acquired through an investment into the Company and (ii)
2,016,666 shares of Common Stock issuable to ACCBT Corp. upon the exercise of Presently Exercisable Warrants acquired through
an investment into the Company, (iii) 67,053 shares of Common Stock owned by ACC International Holdings Ltd. and (iv) 369,619
shares of Common Stock issuable to Chaim Lebovits upon the exercise of Presently Exercisable Options. Chaim Lebovits, our Chief
Executive Officer, may be deemed the beneficial owner of these shares. The address of ACCBT Corp. and ACC International
Holdings Ltd.is Morgan & Morgan Building, Pasea Estate, Road Town, Tortola, British Virgin Islands.
(2) Includes 40,000 shares of Common Stock issuable upon the exercise of Presently Exercisable Options.
(3) Includes 75,000 shares of Common Stock issuable upon the exercise of Presently Exercisable Options.
(4) Includes 131,108 of shares of Common Stock issuable upon the exercise of Presently Exercisable Options.
(5) Consists of 7,175 shares owned by Meadowlark Management LLC. Dr. Almenoff disclaims beneficial ownership of the shares
owned by Meadowlark Management LLC except to the extent of any pecuniary interest therein.
(6) Includes 235,109 shares of Common Stock issuable upon the exercise of Presently Exercisable Options. Dr. Arbel’s address is 6
Hadishon Street, Jerusalem, Israel.
(7) Includes 56,667 shares of Common Stock owned prior to joining the board and 100,000 shares of Common Stock issuable upon the
exercise of Presently Exercisable Options.
(8) Dr. Bairu joined the board of directors of the Company on October 28, 2021.
(9) Includes (i) 2,016,666 shares of Common Stock issuable upon the exercise of Presently Exercisable Warrants and (ii) 957,236 shares
of Common Stock issuable upon the exercise of Presently Exercisable Options.
(10) This information is based on the Schedule 13G filed with the Securities and Exchange Commission by entities affiliated with
Sankesh Abbhi on February 14, 2022. Includes (i) 2,164,530 shares of Common Stock owned by Abbhi Investments, LLC and (ii)
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250,000 shares of Common Stock issuable to Abbhi Investments, LLC upon the exercise of Presently Exercisable Warrants. Sankesh
Abbhi is the manager of Abbhi Investments, LLC and maintains sole voting and investment power with respect to the Common
Stock and Presently Exercisable Warrants held by Abbhi Investments, LLC. The address of Abbhi Investments, LLC is 2821 S
Bayshore Drive, Miami FL 33133.
(11) This information is based on the Schedule 13G filed with the Securities and Exchange Commission by Kevin D. Ness on February 4,
2022. Includes 3,300,000 shares of Common Stock owned by Kevin D. Ness.
Equity Compensation Plan Information
The following table summarizes certain information regarding our equity compensation plans as of December 31, 2021:
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
Number of
securities
to be
issued upon
exercise of
outstanding
options,
warrants
and rights
1,310,417 (2)$
—
$
1,310,417
Weighted-
Average
Exercise
price of
Outstanding
options,
warrants
and rights
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
4.1734 (3) 3,199,129 (3)
—
4.1734
—
3,199,129 (1)
(1) Includes 1,310,417 shares of common stock issuable upon the exercise of outstanding options only.
(2) Since restricted stock units do not have any exercise price, such units are not included in the weighted average exercise price
calculation.
(3) A total of 4,509,546 shares of our Common Stock are reserved for issuance in aggregate under the Equity Plans and the Prior Plans.
Any awards granted under either the 2014 Global Plan or the 2014 U.S. Plan will reduce the total number of shares available for
future issuance under the other plan.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Certain Relationships and Related Transactions
The Audit Committee of our Board reviews and approves all related-party transactions. A “related-party transaction” is a transaction that
meets the minimum threshold for disclosure under the relevant SEC rules (transactions involving amounts exceeding the lesser of
$120,000 or one (1) percent of the average of the smaller reporting company's total assets at year-end for the last two fiscal years in
which a “related person” or entity has a direct or indirect material interest). “Related persons” include our executive officers, directors,
5% or more beneficial owners of our Common Stock, immediate family members of these persons and entities in which one of these
persons has a direct or indirect material interest. When a potential related-party transaction is identified, management presents it to the
Audit Committee to determine whether to approve or ratify it.
The Audit Committee reviews the material facts of any related-party transaction and either approves or disapproves of the entry into the
transaction. If advance approval of a related-party transaction is not feasible, then the transaction will be considered and, if the Audit
Committee determines it to be appropriate, ratified by the Audit Committee. No director may participate in the approval of a transaction
for which he or she is a related party.
Research and License Agreement with Ramot
The Company has maintained a commercial relationship with Ramot, the technology transfer group within Tel Aviv University, since
July 2004, when the Company and Ramot entered into a Research and License Agreement (the “Original Agreement”). The Original
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Agreement was amended in both March and May of 2006, when the parties signed, respectively, an Amended and Restated Research and
License Agreement (the “Amended and Restated Agreement”) and Amendment Number 1 to the Amended and Restated Agreement.
Thereafter, the Company and Ramot entered into a Letter Agreement in December 2009 which further amended the Amended and
Restated Agreement by releasing the Company from various duties and obligations (including the Company’s commitment to fund three
(3) years of additional Ramot research - a financial commitment of $1,140,000), while converting other payments due and owing to
Ramot by the Company into shares of Common Stock. In December 2011, the Company assigned the Amended and Restated Agreement
(as amended) to its Israeli Subsidiary with the consent of Ramot, provided the Company agreed to guaranty the performance obligations
of its Israeli Subsidiary thereunder. The Amended and Restated Agreement was amended in both April 2014 (Amendment Number 2)
and March 2016 (Amendment Number 3).
In addition to the foregoing, on April 30, 2014, the Israeli Subsidiary executed a consulting agreement (the “Offen Consulting
Agreement”) with Professor Offen of Tel Aviv University, which expressly replaced their previous agreement (signed in July 2004).
Pursuant to the Offen Consulting Agreement, Professor Offen granted our Israeli Subsidiary exclusive rights, title and interest in and to
all work product and deliverables resulting from the provision of his services thereunder, except that any new intellectual property arising
from this agreement would be deemed a joint invention that is jointly owned by both our Israeli Subsidiary and Ramot. No such joint
inventions have resulted from this consulting agreement and it was terminated on January 18, 2018.
The primary focus of our agreements (and subsequent amendments) with Ramot has and continues to be the commissioning of a group of
scientists within Tel Aviv University to carry out research in the area of the stem-cell technology referenced above, and the granting of
rights to the Company (and later our Israeli Subsidiary, after the assignment referenced above) in the inventions, know-how and results
procured from such research (the “Ramot IP”).
In consideration for the rights granted to our Israeli Subsidiary in and to the Ramot IP, our Israeli Subsidiary is required to pay Ramot
royalties ranging between three percent (3%) and five percent (5%) of all net sales realized from the exploitation of the Ramot IP, as well
as remittances of between twenty percent (20%) and twenty-five percent (25%) on revenues received from the sub-licensing of the
Ramot IP.
Pursuant to the third amendment of the Amended and Restated Agreement referenced above, Ramot agreed to convert the exclusive
licenses then-existing, to outright transfers and assignments of the Ramot IP, thereby granting our Israeli Subsidiary ownership thereof.
Investment Agreement with ACCBT Corp.
We are party to a July 2, 2007 subscription agreement and related registration rights agreement and warrants, amended July 31, 2009,
May 10, 2012, May 19, 2014 and November 2, 2017 (together as amended, the “ACCBT Documents”) with ACCBT, a company under
the control of Mr. Chaim Lebovits, our President and Chief Executive Officer, pursuant to which, for an aggregate purchase price of
approximately $5.0 million, we sold to ACCBT 1,920,461 shares of our Common Stock (the “Subscription Shares”) and warrants to
purchase up to 2,016,666 shares of our Common Stock (the “ACCBT Warrants”). The ACCBT Warrants contain cashless exercise
provisions, which permit the cashless exercise of up to 50% of the underlying shares of Common Stock. 672,222 of the ACCBT
Warrants have an exercise price of $3.00 and the remainder have an exercise price of $4.35. All of the ACCBT Warrants are presently
outstanding.
Pursuant to the terms of the ACCBT Documents, ACCBT has the following rights for so long as ACCBT or its affiliates hold at least 5%
of our issued and outstanding share capital:
● Board Appointment Right: ACCBT has the right to appoint 30% of the members of our Board and any of our committees
and the Board of Directors of our subsidiaries.
● Preemptive Right: ACCBT has the right to receive thirty days’ notice of, and to purchase a pro rata portion (or greater
under certain circumstances where offered shares are not purchased by other subscribers) of, securities issued by us,
including options and rights to purchase shares. This preemptive right does not include issuances under our equity
incentive plans.
● Consent Right: ACCBT’s written consent is required for Brainstorm transactions greater than $500,000.
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In addition, ACCBT is entitled to demand and piggyback registration rights, whereby ACCBT may request, upon 15 days’ written notice,
that we file, or include within a registration statement to be filed, with the Securities and Exchange Commission for ACCBT’s resale of
the Subscription Shares, as adjusted, and the shares of our Common Stock issuable upon exercise of the ACCBT Warrants.
We registered 1,920,461 shares of Common Stock and 2,016,666 shares of Common Stock underlying the ACCBT Warrants on
registration statement No. 333-201705 dated January 26, 2015 pursuant to ACCBT’s registration rights.
The foregoing description reflects the November 2, 2017 Warrant Amendment Agreement between the Company and ACCBT, pursuant
to which the rights and privileges of the ACCBT Entities relating to the management of the Company were reduced, in exchange for a
five (5) year extension of the expiration of the Company warrants held by the ACCBT Entities. Pursuant to the amendment, the ACCBT
Documents were amended as follows: (i) the ACCBT Entities existing right to appoint 50.1% of the Board of Directors of the Company
and its subsidiaries was reduced to 30%; (ii) the ACCBT Entities’ consent rights regarding Company matters pursuant to the ACCBT
Documents were limited to transactions greater than $500,000 (previous to the amendment the consent right was for transactions of
$25,000 or more); and (iii) the expiration date of each of the ACCBT Warrants was extended until November 5, 2022 (the previous
expiration date was November 5, 2017).
Mr. Lebovits, the Company’s Chief Executive Officer, is deemed to control ACCBT. Mr. Lebovits employment agreement with the
Company and related employee compensation are described under “Executive Employment Agreements” in the Executive Compensation
section above.
Independence of the Board of Directors
The Board of Directors of the Company (the “Board”) has determined that each of Dr. Frenkel, Dr. Arbel, Dr. Almenoff, Dr. Polverino,
Mr. Abbhi and Mr. Taub satisfies the criteria for being an “independent director” under the standards of the Nasdaq Stock Market, Inc.
(“Nasdaq”) and has no material relationship with the Company other than by virtue of service on the Board. Mr. Yablonka is not
considered an “independent director.”
The Board of Directors is comprised of a majority of independent directors and the Audit and GNC Committees are comprised entirely
of independent directors.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Independent Registered Public Accounting Firm
Principal Accountant Fees and Services
Our independent public accounting firm is Brightman Almagor Zohar & Co., a Firm in the Deloitte Global Network (“Deloitte”),
PCAOB Auditor ID 1197. The following table presents fees for professional audit services rendered by Deloitte for the audit of our
financial statements for the fiscal years ended December 31, 2021 and 20120 and fees billed for other services rendered by Deloitte
during those periods.
Audit Fees (1)
Audit-Related Fees (2)
Tax Fees (3)
All Other Fees
Total Fees
December 31,
2021
85,500 $
$
40,000
$
12,000
— $
$
137,500
2020
75,000
30,000
11,000
—
116,000
$
$
$
$
$
(1) Audit fees are comprised of fees for professional services performed by Deloitte for the audit of our annual financial statements and
the review of our quarterly financial statements, as well as other services provided by Deloitte in connection with statutory and
regulatory filings or engagements.
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(2) Audit-related fees are comprised of fees for professional services performed by Deloitte in connection with comfort letters and
consents.
(3) Tax fees are comprised of tax compliance services to the Company performed by Deloitte.
We did not use Deloitte for financial information system design and implementation. These services, which include designing or
implementing a system that aggregates source data underlying the financial statements and generates information that is significant to our
financial statements, are provided internally or by other service providers. We did not engage Deloitte to provide compliance outsourcing
services.
Pre-approval Policies
Our Audit Committee is responsible for pre-approving all services provided by our independent auditors. All of the above services and
fees were reviewed and approved by the Audit Committee before the services were rendered.
The Board of Directors has considered the nature and amount of fees billed by Deloitte and believes that the provision of services for
activities unrelated to the audit is compatible with maintaining Deloitte’s independence.
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Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(1) Financial Statements.
PART IV
The financial statements listed in the Index to Consolidated Financial Statements are filed as part of this report.
(2) Financial Statement Schedules.
All financial statement schedules have been omitted as they are either not required, not applicable, or the information is otherwise
included.
(3) Exhibits.
Exhibit
Number Description
2.1
Agreement and Plan of Merger, dated as of November
28, 2006, by and between Brainstorm Cell
Therapeutics Inc., a Washington corporation, and
Brainstorm Cell Therapeutics Inc., a Delaware
corporation.
Certificate of Incorporation of Brainstorm Cell
Therapeutics Inc.
Certificate of Amendment of Certificate of
Incorporation of Brainstorm Cell Therapeutics
Inc. dated September 15, 2014.
Certificate of Amendment of Certificate of
Incorporation of Brainstorm Cell Therapeutics Inc.
dated August 31, 2015.
3.1
3.2
3.3
3.4
ByLaws of Brainstorm Cell Therapeutics Inc.
3.5
4.1
10.1
Amendment No. 1 to ByLaws of Brainstorm Cell
Therapeutics Inc., dated as of March 21, 2007.
Specimen Certificate of Common Stock of Brainstorm
Cell Therapeutics Inc.
Research and License Agreement, dated as of July 8,
2004, by and between the Company and Ramot at Tel
Aviv University Ltd.
121
Incorporated by
Reference Herein
Filed
(or
Furnished)
with
this
Form 10-K Form
Date
Filed
November 20, 2006
Exhibit
& File No.
Appendix
A File No.
333-61610
Definitive
Schedule
14A
Appendix
Definitive
B File No.
Schedule
14A
333-61610
Form 8-K Exhibit 3.1
File No.
000-54365
Form 8-K Exhibit 3.1
File No.
001-
366641
Appendix
Definitive
C File No.
Schedule
14A
333-61610
Form 8-K Exhibit 3.1
File No.
333-61610
November 20, 2006
September 16, 2014
September 4, 2015
November 20, 2006
March 27, 2007
Form 8-K Exhibit 4.1
September 16, 2014
File No.
000-54365
Form 8-K Exhibit
July 16, 2004
10.1 File
No. 333-
61610
Table of Contents
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
Research and License Agreement, dated as of March
30, 2006, by and between the Company and Ramot at
Tel Aviv University Ltd.
Amendment Agreement, dated as of May 23, 2006, to
Research and License Agreement, by and between the
Company and Ramot at Tel Aviv University Ltd.
Amendment Agreement, dated as of March 31, 2006,
among the Company, Ramot at Tel Aviv University
Ltd. and certain warrantholders.
Second Amended and Restated Research and License
Agreement, dated July 26, 2007, by and between the
Company and Ramot at Tel Aviv University Ltd.
Second Amended and Restated Registration Rights
Agreement, dated August 1, 2007, by and between the
Company and Ramot at Tel Aviv University Ltd.
Waiver and Release, dated August 1, 2007, executed
by Ramot at Tel Aviv University Ltd. in favor of the
Company.
Letter Agreement, dated December 24, 2009, by and
between the Company and Ramot at Tel Aviv
University Ltd.
Amendment No. 1, dated December 24, 2009, to the
Second Amended and Restated Research and License
Agreement dated July 26, 2007 by and between
Brainstorm Cell Therapeutics Ltd. and Ramot at Tel
Aviv University Ltd.
Assignment Agreement, dated December 20, 2011, by
and between the Company and Brainstorm Cell
Therapeutics Ltd.
Amendment No. 2, dated April 30, 2014, to the
Second Amended and Restated Research and License
Agreement dated July 26, 2007 by and between
Brainstorm Cell Therapeutics Ltd. and Ramot at Tel
Aviv University Ltd.
Amendment No. 3, effective February 18, 2016, to the
Second Amended and Restated Research and License
Agreement dated July 26, 2007 by and between
Brainstorm Cell Therapeutics Ltd. and Ramot at Tel
Aviv University Ltd.
Consulting Agreement, dated as of April 30, 2014, by
and between Brainstorm Cell Therapeutics Ltd. and
Dr. Daniel Offen.
122
Form 8-K Exhibit
April 4, 2006
10.1 File
No. 333-
61610
Exhibit
10.1 File
No. 333-
61610
Form 8-K Exhibit
Form 8-
K/A
Form 10-
QSB
Form 10-
QSB
Form 10-
QSB
10.2 File
No. 333-
61610
Exhibit
10.4 File
No. 333-
61610
Exhibit
10.5 File
No. 333-
61610
Exhibit
10.6 File
No. 333-
61610
May 30, 2006
April 4, 2006
August 20, 2007
August 20, 2007
August 20, 2007
Form 8-K Exhibit
December 31, 2009
10.1 File
No. 333-
61610
Form 8-K Exhibit
10.2 File
No. 333-
61610
Form S-1
Exhibit
10.12 File
No. 333-
179331
Form 10-K Exhibit
10.11 File
No. 001-
36641
December 31, 2009
February 3, 2012
March 9, 2016
Form 10-K Exhibit
March 9, 2016
Form S-1
10.12 File
No. 001-
36641
Exhibit
10.15 File
No. 333-
179331
June 29, 2012
Table of Contents
10.14*
Brainstorm Cell Therapeutics Inc. 2014 Stock
Incentive Plan.
Form 8-K Exhibit
August 15, 2014
10.1 File
No. 000-
54365
Appendix
A File No.
001-36641
May 11, 2016
10.1 File
No. 001-
36641
Appendix
A File No.
001-36641
October 1, 2020
Amendment No. 1 to the Brainstorm Cell
Therapeutics Inc. 2014 Stock Incentive Plan.
Schedule
14A
10.15*
10.16*
Amendment No. 2 to the Brainstorm Cell
Therapeutics Inc. 2014 Stock Incentive Plan.
Form 8-K Exhibit
November 30, 2018
10.17
Amendment No. 3 to the Brainstorm Cell
Therapeutics Inc. 2014 Stock Incentive Plan.
Schedule
14A
10.18*
Brainstorm Cell Therapeutics Inc. 2014 Global Share
Option Plan.
10.19*
Amendment No. 1 to the Brainstorm Cell
Therapeutics Inc. 2014 Global Share Option Plan.
10.20*
Amendment No. 2 to the Brainstorm Cell
Therapeutics Inc. 2014 Global Share Option Plan.
10.21
Amendment No. 3 to the Brainstorm Cell
Therapeutics Inc. 2014 Global Share Option Plan.
10.21*
10.22*
10.23*
Form of Incentive Stock Option Agreement under the
Brainstorm Cell Therapeutics Inc. 2014 Stock
Incentive Plan.
Form of Nonstatutory Stock Option Agreement under
the Brainstorm Cell Therapeutics Inc. 2014 Stock
Incentive Plan.
Form of Restricted Stock Agreement under the
Brainstorm Cell Therapeutics Inc. 2014 Stock
Incentive Plan.
10.24*
Form of Option Agreement under the Brainstorm Cell
Therapeutics Inc. 2014 Global Share Option Plan.
10.25
Subscription Agreement, dated July 2, 2007, by and
between the Company and ACCBT Corp.
10.26
Amendment to Subscription Agreement, dated as of
July 31, 2009, by and between the Company and
ACCBT Corp.
123
Form 8-K Exhibit
August 15, 2014
10.2 File
No. 000-
54365
Appendix
B File No.
001-36641
Exhibit
10.2 File
No. 001-
36641
Appendix
B File No.
001-36641
Schedule
14A
8-K
Schedule
14A
May 11, 2016
November 30, 2018
October 1, 2020
Form 8-K Exhibit
November 4, 2014
10.1 File
No. 001-
36641
Form 8-K Exhibit
10.2 File
No. 001-
36641
Form 8-K Exhibit
10.3 File
No. 001-
36641
Form 8-K Exhibit
10.4 File
No. 001-
36641
Form 8-K Exhibit
10.1 File
No. 333-
61610
Form 8-K Exhibit
10.1 File
No. 333-
61610
November 4, 2014
November 4, 2014
November 4, 2014
July 5, 2007
August 24, 2009
Table of Contents
10.27
Form of Common Stock Purchase Warrant issued by
the Company to ACCBT Corp.
10.28
Form of Registration Rights Agreement by and
between the Company and ACCBT Corp.
10.29
10.30
10.31
10.32
10.33
10.34
10.35*
10.36*
10.37
Form of Security Holders Agreement, by and between
ACCBT Corp. and certain security holders of the
Company.
Warrant Amendment Agreement, dated as of May 10,
2012, by and between Brainstorm Cell Therapeutics
Inc. and ACCBT Corp.
Amendment of Warrants dated May 19, 2014 by and
among Brainstorm Cell Therapeutics Inc., ACCBT
Corp. and ACC International Holdings Ltd.
2017 Amendment of Warrants and Subscription
Agreement dated November 2, 2017 by and among
Brainstorm Cell Therapeutics Inc., ACCBT Corp. and
ACC International Holdings Ltd.
Clinical Trial Agreement, entered into as of February
17, 2010, among Brainstorm Cell Therapeutics Ltd.,
Prof. Dimitrios Karousis and Hadasit Medical
Research Services and Development Ltd.
Amendment to the Clinical Trial Agreement, entered
into as of June 27, 2011, among Brainstorm Cell
Therapeutics Ltd., Prof. Dimitrios Karousis and
Hadasit Medical Research Services and Development
Ltd.
Employment Agreement dated June 6, 2014 between
Brainstorm Cell Therapeutics Ltd. and Uri Yablonka.
Restricted Stock Award Agreement under the
Brainstorm Cell Therapeutics Inc. 2014 Global Share
Option Plan, regarding July 26, 2017 grant to Chaim
Lebovits.
Form of Securities Purchase Agreement.
10.38
Form of Warrant.
10.39
Form of Registration Rights Agreement.
124
Form 8-K Exhibit
July 5, 2007
10.2 File
No. 333-
61610
Form 8-K Exhibit
10.3 File
No. 333-
61610
Form 8-K Exhibit
10.4 File
No. 333-
61610
Form 10-Q Exhibit
10.1 File
No. 000-
54365
Form 10-Q Exhibit
10.4 File
No. 000-
54365
Form 8-K Exhibit
10.1 File
No. 001-
36641
Form 10-Q Exhibit
10.1 File
No. 000-
54365
Form 10-Q Exhibit
10.2 File
No. 000-
54365
July 5, 2007
July 5, 2007
May 11, 2012
August 12, 2014
November 3, 2017
August 15, 2011
August 15, 2011
Form 8-K Exhibit
June 9, 2014
10.1 File
No. 000-
54365
Form 10-Q Exhibit
10.2 File
No. 001-
36641
Form 8-K Exhibit
10.1 File
No. 000-
54365
Form 8-K Exhibit
10.2 File
No. 000-
54365
Form 8-K Exhibit
10.3 File
No. 000-
54365
October 17, 2017
June 13, 2014
June 13, 2014
June 13, 2014
Table of Contents
10.40
Form of Warrant.
Form 8-K Exhibit 4.1
January 8, 2015
10.41
Warrant Exercise Agreement, dated as of January 8,
2015.
File No.
001-36641
Form 8-K Exhibit
January 8, 2015
10.2 File
No. 001-
36641
10.42
Form of Warrant.
Form 8-K Exhibit 4.1
June 7, 2018
File No.
001-36641
10.43
Warrant Exercise Agreement.
Form 8-K Exhibit
June 7, 2018
10.44
Leak-Out Agreement.
10.45
Share Cap Agreement.
10.46*
10.47*
10.48*
10.49*
10.50*
10.51*
Employment Agreement dated September 28, 2015
between Brainstorm Cell Therapeutics Inc. and Chaim
Lebovits.
First Amendment to Employment Agreement dated
March 7, 2016 between Brainstorm Cell Therapeutics
Inc. and Chaim Lebovits.
Second Amendment to Employment Agreement dated
July 26, 2017 between the Company and Chaim
Lebovits.
Employment Agreement dated February 28, 2017
between Brainstorm Cell Therapeutics Inc. and Dr.
Ralph Kern, as amended by Amendment No. 1 dated
March 3, 2017.
Brainstorm Cell Therapeutics Inc. Second Amended
and Restated Director Compensation Plan.
Brainstorm Cell Therapeutics Inc. First Amendment to
the Second Amended and Restated Director
Compensation Plan.
10.1 File
No. 001-
36641
Form 8-K Exhibit
10.2 File
No. 001-
36641
Form 10-Q Exhibit
10.4 File
No. 001-
36641
Form 8-K Exhibit
10.1 File
No. 001-
36641
Form 10-K Exhibit
10.53 File
No. 001-
36641
Form 10-Q Exhibit
10.3 File
No. 001-
36641
Form 8-K Exhibit
10.1 File
No. 001-
36641
Form 8-K Exhibit
10.1 File
No. 001-
36641
Form 10-Q Exhibit
10.2 File
No. 001-
36641
June 7, 2018
July 23, 2018
September 28, 2015
March 9, 2016
October 17, 2017
March 6, 2017
July 10, 2014
May 14, 2015
10.52*
Brainstorm Cell Therapeutics Inc. Second
Amendment to the Second Amended and Restated
Director Compensation Plan dated February 26, 2017.
Form 10-K Exhibit
March 29, 2017
10.54 File
No. 001-
36641
125
Table of Contents
10.53*
Brainstorm Cell Therapeutics Inc. Third Amendment
to the Second Amended and Restated Director
Compensation Plan.
10.54
10.55
10.56
Brainstorm Cell Therapeutics Inc. Fourth Amendment
to the Second Amended and Restated Director
Compensation Plan.
Notice of Award - CLIN2: Partnering Opportunity for
Clinical Trial Stage Projects California Institute for
Regenerative Medicine, August 25, 2017.
Distribution Agreement, dated June 11, 2019, by and
between Brainstorm Cell Therapeutics Inc. and
Raymond James & Associates, Inc.
Form 10-Q Exhibit
October 17, 2017
10.1 File
No. 001-
36641
‡
Form 10-K Exhibit
March 8, 2018
10.50 File
No. 001-
36641
Form 8-K Exhibit 1.1 June 11, 2019
10.57
Form of Warrant
Form 8-K Exhibit 4.1 August 2, 2019
10.58
Warrant Exercise Agreement
Form 8-K Exhibit
August 2, 2019
10.1
10.59*
Offer letter, dated April 1, 2020, by and between
Brainstorm Cell Therapeutics Inc. and David Setboun
Form 8-K Exhibit
April 3, 2020
10.1
10.60*‡ Offer letter, dated May 26, 2020, by and between
Form 10-K Exhibit
February 4, 2021
Brainstorm Cell Therapeutics Inc. and Stacey
Lindborg
10.63
10.61*
Third Amendment to Employment Agreement dated
June 23, 2020 between the Company and Chaim
Lebovits.
Form 10-Q Exhibit
August 5, 2020
10.1
10.62*
Amendment to Employment Agreement dated June
23, 2020 between the Company and Uri Yablonka.
Form 10-Q Exhibit
August 5, 2020
10.2
Form S-3
Exhibit 1.2 August 9, 2021
10.63*
Distribution Agreement, dated August 9, 2021, by and
among Brainstorm Cell Therapeutics, Inc., SVB
Leerink LLC and Raymond James & Associates, Inc.
21
23.1
31.1
31.2
Subsidiaries of the Company.
Consent of Brightman Almagor Zohar & Co., a Firm
in the Deloitte Global Network.
Certification by the Principal Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification by the Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
‡
‡
‡
‡
126
Table of Contents
32.1
32.2
Certification of Principal Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
‡‡
Certification of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
‡‡
101.SCH Inline XBRL Taxonomy Extension Document.
101.CAL Inline XBRL Taxonomy Extension Calculation
Linkbase.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase
Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Label
Linkbase Document.
101 DEF Inline XBRL Taxonomy Extension Definition
‡
‡
‡
‡
‡
104
*
‡
‡‡
Linkbase Document.
Cover Page Interactive Data File (formatted in inline
XBRL with applicable taxonomy extension
information contained in Exhibits 101)
Management contract or compensatory plan or
arrangement filed in response to Item 15(a)(3) of
Form 10-K.
Filed herewith.
Furnished herewith.
Item 16. FORM 10-K SUMMARY.
Not required.
127
Table of Contents
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 28, 2022
BRAINSTORM CELL THERAPEUTICS INC.
By: /s/ Chaim Lebovits
Name: Chaim Lebovits
Title: Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature
/s/ Chaim Lebovits
Chaim Lebovits
/s/ Alla Patlis
Alla Patlis
/s/ Irit Arbel
Irit Arbel
/s/ June S. Almenoff
June S. Almenoff
/s/ Jacob Frenkel
Jacob Frenkel
/s/ Anthony Polverino
Anthony Polverino
/s/ Malcolm Taub
Malcolm Taub
/s/ Uri Yablonka
Uri Yablonka
/s/ Menghisteab Bairu
Menghisteab Bairu
Date
March 28, 2022
March 28, 2022
March 28, 2022
March 28, 2022
March 28, 2022
March 28, 2022
March 28, 2022
March 28, 2022
March 28, 2022
Title
Chief Executive Officer
(Principal Executive Officer)
Interim Chief Financial Officer and Controller
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
128
Exhibit 10.54
Brainstorm Cell Therapeutics Inc.
4th Amendment to the Second Amended and Restated Director Compensation Plan
(adopted October 28, 2021)
This 4th Amendment to the Second Amended and Restated Director Compensation Plan is hereby adopted
by the Board of Directors (the “Board”) of Brainstorm Cell Therapeutics Inc. (the “Corporation”) and amends
the Second Amended and Restated Director Compensation Plan of the Corporation dated July 9, 2014, as
amended by the 1st Amendment to the Second Amended and Restated Director Compensation Plan dated April 29,
2015, the 2nd Amendment to the Second Amended and Restated Director Compensation Plan dated February 26,
2017 and the 3rd Amendment to the Second Amended and Restated Director Compensation Plan dated July 13,
2017 (as amended, the “Plan”), with effect from the date of adoption by the Board, as follows:
Section 2 of the Plan be amended and restated in its entirety as follows:
2. Eligible Participants. Any director of the Corporation who is not an employee of the Corporation or any
of its subsidiaries or affiliates (an “Independent Director”) is an eligible participant. However, Dr. June S.
Almenoff and Dr. Menghisteab Bairu shall not be entitled to receive annual director awards under the Plan, but are
entitled to committee compensation under the Plan in the event that they qualify for and serve as a member of any
committee of the Board.
Section 13 of the Plan be amended and restated in its entirety as follows:
13. No Right to Any Other Compensation. Other than with respect to Dr. June S. Almenoff and Dr.
Menghisteab Bairu, this Plan constitutes the full and complete compensation to an Independent Director for all
services as a director of the Corporation, whether as a member of the Board of Directors, a member of a
committee of the Board of Directors, or as Chairperson of the Board of Directors.
Subsidiaries of Brainstorm Cell Therapeutics Inc.
Subsidiary
BrainStorm Cell Therapeutics Ltd.
Advanced Cell Therapies Ltd.*
BrainStorm Cell Therapeutics UK Ltd.*
Brainstorm Cell Therapeutics Limited*
Jurisdiction of Incorporation
Israel
Israel
United Kingdom
Ireland
* Wholly owned subsidiary of BrainStorm Cell Therapeutics Ltd.
EXHIBIT 21
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-201704, 333-201705, 333-225995, 333-233349 and
333-258640 on Form S-3 and Registration Statement Nos. 333-131880, 333-168763, 333-175460, 333-182546, 333-198391, 333-
213714, 333-228981 and 333-261598 on Form S-8 of our report dated March 28, 2022, relating to the financial statements of Brainstorm
Cell Therapeutics Inc. appearing in this Annual Report on Form 10-K for the year ended December 31, 2021.
Exhibit 23.1
Brightman Almagor Zohar & Co.
Certified Public Accountants
A Firm in the Deloitte Global Network
Tel Aviv, Israel
March 28, 2022
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULE 13a-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
EXHIBIT 31.1
I, Chaim Lebovits, certify that:
1. I have reviewed this Annual Report on Form 10-K of Brainstorm Cell Therapeutics Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
March 28, 2022
/s/ Chaim Lebovits
Name: Chaim Lebovits
President and Chief Executive Officer (Principal
Executive Officer)
Title:
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULE 13a-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
EXHIBIT 31.2
I, Alla Patlis, certify that:
1. I have reviewed this Annual Report on Form 10-K of Brainstorm Cell Therapeutics Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
March 28, 2022
/s/ Alla Patlis
Name: Alla Patlis
Interim Chief Financial Officer and Controller
(Principal Financial and Accounting Officer)
Title:
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
In connection with the accompanying Annual Report on Form 10-K of Brainstorm Cell Therapeutics Inc.(the “Company”) for the year
ended December 31, 2021, the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) such Annual Report on Form 10-K for the year ended December 31, 2021 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in such Annual Report on Form 10-K for the year ended December 31, 2021 fairly presents, in all material
respects, the financial condition and results of operations of the Company.
March 28, 2022
/s/ Chaim Lebovits
Name:Chaim Lebovits
Title: President and Chief Executive Officer (Principal Executive
Officer)
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
In connection with the accompanying Annual Report on Form 10-K of Brainstorm Cell Therapeutics Inc.(the “Company”) for the year
ended December 31, 2021 the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) such Annual Report on Form 10-K for the year ended December 31, 2021 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in such Annual Report on Form 10-K for the year ended December 31, 2021 fairly presents, in all material
respects, the financial condition and results of operations of the Company.
March 28, 2022
/s/ Alla Patlis
Name:Alla Patlis
Title: Interim Chief Financial Officer and Controller (Principal
Financial and Accounting Officer)