Table of Contents
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, 2022
☐ 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. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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, 2022 (the last business day of the
registrant’s most recently completed second fiscal quarter), was $92,955,663.
As of March 28, 2023, the number of shares outstanding of the registrant’s Common Stock, $0.00005 par value per share, was 36,675,251.
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2022
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
2
Page
4
44
77
77
77
77
78
79
79
84
85
112
112
113
113
114
120
126
128
130
132
139
Table of Contents
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 2023
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,
2022. 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, 2022, in addition to the other information set forth herein and elsewhere in our other public filings with
the Securities and Exchange Commission (“SEC”).
3
Table of Contents
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. On August 15, 2022, we announced our decision to submit a
Biologics License Application (“BLA”) to the U.S. Food and Drug Administration (“FDA”) for NurOwn® for the treatment of ALS. On
September 9, 2022, we filed a BLA to the FDA for NurOwn for the treatment of ALS. On November 10, 2022, we announced that we
had received a refusal to file (“RTF”) letter from the FDA regarding our BLA. The FDA indicated that we may request a Type A meeting
to discuss the content of the RTF letter. On December 12, 2022, we announced the submission of a Type A meeting request with FDA to
discuss the contents of the RTF letter previously issued by the FDA regarding the BLA for NurOwn® for the treatment of ALS. On
December 27, 2022, we announced that the FDA granted a Type A meeting to discuss the contents of the RTF letter previously issued
regarding our BLA for NurOwn® for the treatment of ALS. The Type A Meeting was held on January 11, 2023. The perspective shared
by the FDA review team reflected what was in the previously issued RTF letter. Conversations with the FDA on the best pathway to
resolve the outstanding questions that remained continued, following the Type A meeting. During these discussions, BrainStorm was
presented with multiple options to return the BLA to regulatory review, which included the regulatory procedure to File over Protest.
Additionally, within these discussions, FDA committed to review amendments that were filed to address items raised in the RTF letter.
These discussions resulted in BrainStorm requesting the FDA to file our BLA over Protest, as this was the regulatory procedure that
would allow us to reach an ADCOM in the shortest amount of time. BrainStorm notified the FDA on February 6, 2023 of our decision to
request the FDA to file the NurOwn BLA for ALS over Protest. We received confirmation from FDA that the BLA was re-filed on Feb
7, 2023. We received the FDA Type A meeting minutes on February 9, 2023. We submitted an amendment to our BLA on March 7,
2023, in which we responded to the majority of the items included in the RTF letter. Written feedback was received on March 22, 2023,
from the FDA project manager associated with the BLA confirming the FDA’s decision to grant an ADCOM for the NurOwn BLA for
ALS. On March 27, 2023, we announced that the FDA will hold an ADCOM to discuss the company's BLA for NurOwn® for the
treatment of ALS. The BLA for NurOwn to treat ALS is currently under active review by the FDA.
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 FDA and
Orphan Drug status by the FDA and the European Medicines Agency (EMA) for ALS.
Our human capital resource objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing
and new employees, advisors and consultants to accomplish our goal of developing and launching a novel cell therapy for
neurodegenerative diseases. 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 our success by
motivating such individuals to perform to the best of their abilities and achieve our objectives. We currently employ 41 employees in the
United States and in Israel. Most of the senior management team are 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
manufacturing facilities in Jerusalem, Israel at Hadassah Medical Center and in Tel Aviv at the Sourasky Medical Center to manufacture
NurOwn®. These two facilities substantially increase our capacity and expand our ability to manufacture and ship NurOwn® into the EU
and local Israeli markets.
4
Table of Contents
Recent Highlights
● On January 27, 2022, Dr. Ralph Kern, our former President and Chief Medical Officer, gave a presentation titled “NurOwn®
Phase 3 ALS Clinical Trial Update” at the Virtual 12th Annual California ALS Research Summit.
● 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® 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.
5
Table of Contents
● On April 24-26, 2022, 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, Boston MA,
presented a scientific abstract titled “CSF Biomarkers Evaluated by Principal Component Analysis in a NurOwn® Phase 3
Clinical Trial” at the AAN 2022 Virtual Congress.
● On May 4, 2022, Dr. Kim Thacker, Senior Vice President, Medical Affairs and Clinical Innovation at Brainstorm presented a
poster titled “MSC-NTF derived small extracellular vesicles display superior macrophage immunomodulation compared with
vesicles derived from naïve MSCs” at the International Society of Cell & Gene Therapy (ISCT) 2022 Meeting in San Francisco,
CA May 4-7. The presentation highlighted results of a preclinical study undertaken to understand the mechanisms underlying
the superior preclinical efficacy of Exo MSC-NTF versus Exo-MSC in acute lung injury models.
● On May 25, 2022, Dr. Ralph Kern, our former President and Chief Medical Officer at Brainstorm delivered a presentation titled
“Advancing novel CSF biomarkers to evaluate ALS target engagement & improve therapeutic outcomes” at the ALS Drug
Development Summit, Boston MA. Dr. Kern also acted as Conference Chair on Day One of the ALS Drug Development
Summit.
● On May 26, 2022, Dr. Haggai Kaspi PhD presented a poster titled “Therapeutic effect of MSC-NTF exosomes in experimental
bleomycin-induced lung injury” at the ISEV 2022 Annual Meeting, Lyon France. Results from a preclinical study
demonstrating superior outcomes of exosomes derived from MSC-NTF cells compared to exosomes derived from MSC cells
were presented.
● On June 2, 2022, Jonathan Katz MD, of the California Pacific Medical Center, San Francisco, CA USA, presented insights into
the ALS Phase 3 primary endpoint leveraging ENCALS model patient prognosis trajectories as a scientific poster at the
European Network to Cure ALS (ENCALS) meeting in Edinburgh, Scotland June 1-3, 2022.
● On June 2, 2022, we presented three scientific posters describing NurOwn’s effect on visual outcomes, and inflammatory CSF
biomarkers from a Phase 2 trial, as well as data from an in vitro preclinical study evaluating the impact of concomitant use of
Siponimod, an approved treatment for secondary progressive multiple sclerosis, on NurOwn neuroprotection at the Consortium
of Multiple Sclerosis Centers (CMSC) meeting in National Harbor, Maryland, June 1-4, 2022.
● Ralph Kern MD, MHSc, our former President and Chief Medical Officer, presented a poster titled “NurOwn (MSC-
NTF Cells) Phase 2 Clinical Trial in Progressive MS: Effects on Monocular and Binocular Low Contrast Letter Acuity
(LCLA) Outcomes”. This poster evaluated the impact of NurOwn therapy on visual outcomes (monocular and
binocular LCLA) in progressive MS study participants in an open-label Phase 2 clinical trial in progressive MS
(NCT03799718).
● Christopher Lock, MD PhD, Stanford School of Medicine presented a poster titled “NurOwn (MSC-NTF) Phase 2
Clinical Trial in Progressive MS: Effects on CSF Inflammatory Biomarkers”. In this scientific poster, the effect of
NurOwn treatment on CSF biomarkers in the Phase 2 clinical trial in progressive MS (NCT03799718) was described.
● Sidney Spector MD PhD, Senior Vice President, Medical Affairs and Global Strategy at Brainstorm presented a poster
titled “NurOwn (MSC-NTF) Cells Maintain Neurotrophic and Immunomodulatory Effects with S1P Modulator
Siponimod” describing the results of an in-vitro preclinical experiment evaluating the interaction of the S1P modulator
Siponimod with MSC-NTF cell-induced neurite outgrowth in a human neuroblastoma cell line, and on the
immunomodulatory effect on human activated peripheral blood mononuclear cells (PBMC).
● On August 15, 2022, we announced a correction was made to the data published in Muscle & Nerve in December 2021
describing the results of NurOwn’s® Phase 3 clinical trial in ALS following new clinical analyses which strengthen the
Company’s original conclusions from the trial. The correction was published in an Erratum to the original manuscript and
resulted in a statistically significant treatment difference (p=0.050) of more than 2 points for an important secondary endpoint,
average change from baseline in ALSFRS-R, in the pre-specified efficacy subgroup of participants with a baseline score of at
least 35. Analyses reported in the original publication utilized an efficacy model that unintentionally deviated from the trial’s
pre-specified statistical analysis plan by erroneously incorporating interaction terms between the subgroup and treatment. The
newly published results, which includes supporting information to the publication, employ the efficacy model as pre-specified
6
Table of Contents
in the trial’s statistical analysis plan, correcting the analyses. The correction also relates to the other subgroup analyses
published for this endpoint, demonstrating that all subgroups with ALSFRS-R baseline scores of at least 26 to 35 showed a
statistically significant benefit following treatment with NurOwn® (p≤0.050).
● On August 15, 2022, we announced our decision to submit a BLA to the FDA for NurOwn® for the treatment of ALS. The
BLA was filed on September 9, 2022.
● On September 15, 2022, we announced the peer reviewed publication of data from the Phase 2 trial of NurOwn® in progressive
multiple sclerosis (“MS”) in the Multiple Sclerosis Journal. The publication, entitled “Evaluation of neurotrophic factor
secreting mesenchymal stem cells in progressive multiple sclerosis” summarized results from the Phase 2, single-arm, open-
label study which demonstrated NurOwn®’s tolerability and provided preliminary evidence of its activity in people with
progressive MS. Biomarker analyses confirmed NurOwn®’s proposed mechanism of action by showing consistent treatment
activity in neuroinflammation and neuroprotection pathways.
● On October 7, 2022, we presented new biomarker analyses from NurOwn’s Phase 3 ALS Trial at the ALS ONE Research
Symposium. The presentation was delivered by Dr. Stacy Lindborg, Co-Chief Executive Officer and former Chief Development
Officer at Brainstorm, and entitled, “The Relationship between CSF Biomarkers and Efficacy of Treatment with NurOwn
(MSC-NTF cells).” The new analyses looked at the trajectory of biomarkers for the subgroups of participants with baseline
ALSFRS-R scores >25 and ≤25, those most likely to be impacted by the floor effect of the scale. Decreases in
neuroinflammatory and neurodegenerative markers and increases in neuroprotective markers in NurOwn treated participants
compared to placebo were observed in both subgroups. These results indicate that NurOwn had similar biological effects on
ALS participants regardless of the level of disease progression at baseline.
● On October 20, 2022, we announced that a scientific abstract titled “NurOwn (MSC-NTF) Phase 2 Clinical Trial in Progressive
MS: Effects on CSF Neuroprotective Biomarkers” would be presented at the 38th Congress of the ECTRIMS, held from
October 26-28 in Amsterdam, NL. Cerebrospinal fluid (“CSF”) biomarker analyses from the phase 2 progressive MS clinical
trial demonstrate that intrathecal NurOwn treatment resulted in robust increases in CSF neuroprotective biomarkers, consistent
with the proposed mechanism of action, and provide important biological context for the observed clinical trial outcomes. The
poster was presented by Jeffrey Cohen, MD, Hazel Prior Hostetler Endowed Chair and Professor of Neurology, Cleveland
Clinic Lerner College of Medicine, Director, Experimental Therapeutics, Mellen Center for MS Treatment and Research.
● On November 7, 2022, we announced that a scientific poster titled “Further Analysis of NurOwn Phase 3 Data Based on
Baseline ALSFRS-R Status Clarifies Treatment Outcomes” was presented at the 2022 Northeast Amyotrophic Lateral Sclerosis
Consortium (“NEALS”) Meeting, held November 1-3, 2022 in Clearwater Beach, Florida. The presentation was delivered by
Dr. Stacy Lindborg, Co-Chief Development Officer at Brainstorm, and Merit Cudkowicz, MD, MSC, Chief of Neurology at
Massachusetts General Hospital, Julieanne Dorn Professor of Neurology at Harvard Medical School, and Director of the Sean
M. Healey & AMG Center for ALS at Massachusetts General Hospital. New post hoc analyses were presented that account for
ALSFRS-R floor effects and add to the robust body of evidence supporting a clinically meaningful treatment effect with
NurOwn in ALS. To better understand the true effect of treatment with NurOwn compared to placebo, two post-hoc sensitivity
analysis methods were used to identify and remove participants from analyses that were most likely to be impacted by the floor
effect. These methods were: (1) Total Score Threshold (TST), which removed participants with ALSFRS-R scores ≤ 25; and (2)
Item Level Threshold (ITL), which removed participants with a baseline score of 0 or 1 in at least 5 of 6 of the ALSFRS-R’s
Fine and Gross Motor scale items. Applying the TST and ITL sensitivity analysis methods resulted in the exclusion of 23%
(n=44) and 16% (n=30) of trial participants from analyses, respectively. Both the TST and ILT sensitivity analysis methods
show that, after controlling for the impact of the ALSFRS-R floor effect, participants treated with NurOwn had a higher rate of
clinical response (primary endpoint) and less function lost across 28 weeks (secondary endpoint), compared to placebo.
Additional post-hoc analyses published for the secondary endpoint (average change from baseline in ALSFRS-R), showed a
statistically significant benefit following treatment with NurOwn in all subgroups with ALSFRS-R baseline total score of at
least 26 to 35 (p≤0.050). These analyses were included in a correction made to the Muscle and Nerve publication (December
2021) and were broadly discussed with the ALS community for the first time at the NEALS meeting.
● On November 10, 2022, we announced that we had received an RTF letter from the FDA regarding our BLA for NurOwn® for
the treatment of ALS. The FDA informed the Company that its BLA is not sufficiently complete to enable a substantive review
and that the FDA would therefore not file the BLA.
7
Table of Contents
● On December 12, 2022, we announced the submission of a Type A meeting request with FDA to discuss the contents of the
RTF letter previously issued by the FDA regarding the company’s BLA for NurOwn® for the treatment of ALS.
● On December 27, 2022, we announced that the FDA granted a Type A meeting to discuss the contents of the RTF letter
previously issued regarding the company’s BLA for NurOwn® for the treatment of ALS. The Type A Meeting was held on
January 11, 2023.
● On January 4, 2023, we announced the promotion of Dr. Stacy Lindborg to the role of Co-Chief Executive Officer launching a
targeted capability build which will be led by Dr. Lindborg, to hire and bring expertise inside Brainstorm.
● On January 4, 2023, we announced the presentation of a corporate and clinical overview at the Biotech Showcase™ 2023
(Hilton San Francisco Union Square) on Monday, January 9, 2023, which was co-presented by Chaim Lebovits, President and
Chief Executive Officer, and Stacy Lindborg, Co-Chief Executive Officer.
● On January 10, 2023, we announced we had partnered with NEALS, The ALS Association, and I AM ALS to provide public
access to biospecimens from NurOwn’s Phase 3 ALS Study. Serum and cerebrospinal fluid samples from the Phase 3 study of
NurOwn® in ALS will be donated to the NEALS biorepository for use by the research community. The specimens are being
submitted to the biorepository in connection with a $500,000 grant previously awarded to Brainstorm by The ALS Association
and I AM ALS, to support biomarker research.
● On January 20, 2023, Dr. Stacy Lindborg, Co-Chief Executive Officer at Brainstorm Cell Therapeutics, gave a presentation
titled “The Debamestrocel (NurOwn) Treatment Effect in Phase 3 as accessed by ALSFRS-R and CSF Biomarkers” at the 13th
Annual California ALS Research Summit in San Francisco, California. The presentation demonstrated that NurOwn had
significantly better outcomes in analyses controlling for the floor effect. Outcomes that aligned with historical data and power
calculations of the trial.
● On March 20, 2023, Dr. Stacy Lindborg, Co-Chief Executive Officer at Brainstorm Cell Therapeutics, presented a scientific
poster titled “Measuring the rate of impairment in ALS patients using the Revised-ALS Functional Rating Scale: Key Insights
into the Floor Effect of the Scale” at the 2023 Muscular Dystrophy Association Clinical and Scientific Conference in Dallas,
Texas held March 19-22, 2023. The presentation showed that a floor effect was observed in the PRO-ACT database, and a
pattern of a plateau in ALSFRS-R total score was accompanied by scale items of 0 suggesting measurement challenges in those
with advanced ALS due to the floor effect of the ALSFRS-R in the NurOwn phase 3 trial and historical studies which are
included in the PRO-ACT database. Analyses conducted in those not impacted by the floor effect at baseline of the NurOwn
phase 3 trial revealed statistically significant, clinically meaningful effects with NurOwn on the primary and key secondary
endpoints.
● On March 27, 2023, we announced that the FDA will hold an ADCOM to discuss the company's BLA for NurOwn® for the
treatment of ALS. Given the goal to proceed to an ADCOM as expeditiously as possible, BrainStorm requested that the Center
for Biologics Evaluation and Research (CBER) utilize the FDA’s File Over Protest procedure and has filed an amendment to the
BLA which responds to most of the outstanding questions the FDA has posed.
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”);
hepatocyte growth factor (“HGF”), and Galectin-1 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
8
Table of Contents
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 PMS and 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® Treatment 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 Treatment
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-treatment”. 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 effects. In addition, the use of adult,
autologous 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. On August 15, 2022, we announced our
decision to submit a BLA to the FDA for NurOwn® for the treatment of ALS. The BLA was filed on September 9, 2022. On November
10, 2022, we announced that we had received a RTF letter from the FDA regarding our BLA. The FDA indicated that we could request a
Type A meeting to discuss the content of the RTF letter, and Type A meeting was held on January 11, 2023. On March 27, 2023, we
announced that the FDA will hold an ADCOM to discuss the company's BLA for NurOwn® for the treatment of ALS. Given the goal
9
Table of Contents
to proceed to an ADCOM as expeditiously as possible, BrainStorm requested that the Center for Biologics Evaluation and Research
(CBER) utilize the FDA's File Over Protest procedure and has filed an amendment to the BLA which responds to most of the outstanding
questions the FDA has posed.
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, investigation, and
treatment of ALS.
The first two open-label trials were approved by the Israeli Ministry of Health (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 tolerability of NurOwn® by both routes of administration and showed preliminary signs
of activity.
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 treatment 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 titled “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® treatment was well-tolerated. There were no discontinuations
from the trial due to adverse events (“AEs”) and there were no deaths in the study. The most common AEs of mild or moderate severity,
were transient procedure-related AEs such as headache, back pain, pyrexia arthralgia and injection-site discomfort, which were more
commonly seen in the NurOwn®-treated participants compared to placebo.
NurOwn® 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.
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.
10
Table of Contents
The treatment effects were greater in the rapid progressor subgroup (a pre-specified definition, 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-treatment 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
the proposed combined neuroprotective and
immunomodulatory mechanism of action of NurOwn® in ALS.
in placebo-treated participants, consistent with
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 change in post-treatment vs. pre-treatment ALSFRS-R rate of decline
or slope.
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 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 in the Phase-2 pre-specified sub-group. The study is registered at www.clinicaltrials.gov (ClinicalTrials.gov
Identifier: NCT03280056).
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
did not preclude the Company from proceeding with a BLA submission.
Key findings from the trial were as follows (which include the update to the data published in Muscle & Nerve 65(3):291-302
on August 12, 2022):
● 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 at least 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 response definition for the primary endpoint was met by
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 rate of response in placebo participants
exceeded the placebo response expected based on contemporary ALS trials.
● 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 an ALSFRS-R baseline score of 35 or greater,
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=0.305), and the average change from baseline to
11
Table of Contents
week 28 in ALSFRS-R total score was -1.56 on NurOwn® and -3.65 on Placebo (p=0.050), an improvement of 2.09
ALSFRS-R points favoring NurOwn®.
● Additional sensitivity analyses have demonstrated consistent treatment effects with NurOwn after accounting for the
impact of the ALSFRS-R floor effect. Two methods include: (1) Total Score Threshold (TST), which removed participants
with ALSFRS-R scores ≤ 25; and (2) Item Level Threshold (ITL), which removed participants with a baseline score of 0 or
1 in at least 5 of 6 of the ALSFRS-R’s Fine and Gross Motor scale items. Applying the TST and ITL sensitivity analysis
methods resulted in the exclusion of 23% (n=44) and 16% (n=30) of trial participants from analyses, respectively. Both the
TST and ILT sensitivity analysis methods show that, after controlling for the impact of the ALSFRS-R floor effect,
participants treated with NurOwn had a higher rate of clinical response (primary endpoint) and less function lost across 28
weeks (secondary endpoint), compared to placebo. Additional post-hoc analyses published for the secondary endpoint
(average change from baseline in ALSFRS-R), showed a statistically significant benefit following treatment with NurOwn
in all subgroups with ALSFRS-R baseline total score of at least 26 to 35 (p≤0.050).
● The NurOwn® Phase 3 trial enrolled a broad set of participants, including some with advanced ALS disease (ALSFRS-
R≤25) at baseline, making this trial subject to the impact of floor effects of the ALSFRS-R 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. Additionally analyses focused on the trajectory
of biomarkers for the subgroups of participants with baseline ALSFRS-R scores >25 and ≤25, those most likely to be
impacted by the floor effect of the scale, indicate that NurOwn had similar biological effects on ALS participants
regardless of the level of disease progression at baseline. Specifically, we observe decreases in neuroinflammatory and
neurodegenerative markers and increases in neuroprotective markers in NurOwn treated participants compared to placebo
in both subgroups.
Decision to Submit BLA
New clinical analyses of NurOwn’s® Phase 3 clinical trial in ALS published August 12, 2022, led to a correction of data originally
published in Muscle & Nerve in December 2021 and strengthened the Company’s original conclusions from the trial. The correction
resulted in a statistically significant treatment difference (p=0.050) of more than 2 points for an important secondary endpoint, average
change from baseline in ALSFRS-R, in the pre-specified efficacy subgroup of participants with a baseline score of at least 35. Analyses
reported in the original publication utilized an efficacy model that unintentionally deviated from the trial’s pre-specified statistical
analysis plan by erroneously incorporating interaction terms between the subgroup and treatment. The newly published results employ
the efficacy model as pre-specified in the trial’s statistical analysis plan, correcting the analyses. The correction also relates to the other
subgroup analyses published for this endpoint, demonstrating that all subgroups with ALSFRS-R baseline scores of greater than 26 to 35
showed a statistically significant benefit following treatment with NurOwn® (p≤0.050).
On August 15, 2022, we announced the decision to submit a BLA to the FDA for NurOwn® for the treatment of ALS. The BLA was
filed on September 9, 2022. On November 10, 2022, we announced that we had received a RTF letter from the FDA regarding our BLA
for NurOwn® for the treatment of ALS. The FDA informed us that the BLA is not sufficiently complete to enable a substantive review
and that the FDA would therefore not file the BLA. The RTF letter contained a list of topics the FDA provided to BrainStorm as rationale
for the BLA file being not sufficiently complete to enable a substantive review. According to the FDA, these reasons included one item
related to the trial not meeting the standard for substantial evidence of effectiveness and Chemistry, Manufacturing and Controls
(“CMC”) related items. The FDA indicated that we may request a Type A meeting to discuss the content of the RTF letter. On December
12, 2022, we announced the submission of a Type A meeting request with FDA to discuss the contents of the RTF letter previously
issued by the FDA regarding the BLA for NurOwn® for the treatment of ALS. On December 27, 2022, we announced that the FDA
granted a Type A meeting to discuss the contents of the RTF letter previously issued regarding our BLA for NurOwn® for the treatment
of ALS. The Type A Meeting was held on January 11, 2023.
12
Table of Contents
The perspective shared by the FDA review team reflected what was in the previously issued RTF letter. Conversations on the best
pathway to resolve the outstanding questions that remained continued, following the Type A meeting. During these discussions,
BrainStorm was presented with multiple options to return the BLA to regulatory review, which included the regulatory procedure to File
over Protest. Additionally within these discussions, FDA committed to review amendments that were filed to address items raised in the
FTF letter. These discussions resulted in BrainStorm requesting the FDA to file our BLA over Protest, as this was the regulatory
procedure that would allow us to reach an ADCOM in the shortest amount of time. BrainStorm notified the FDA on February 6, 2023 of
our decision to request the FDA to file the NurOwn BLA for ALS over Protest. We received confirmation from FDA that the BLA was
re-filed on Feb 7, 2023.
We received the FDA Type A meeting minutes on February 9, 2023. We submitted an amendment to our BLA on March 7, 2023, in
which we responded to the majority of the items included in the RTF letter. Written feedback was received on March 22, 2023, from the
FDA project manager associated with the BLA confirming the FDA’s decision to grant an ADCOM for the NurOwn BLA for ALS. The
BLA for NurOwn to treat ALS is currently under active review by the FDA.
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 receive FDA approval for
NurOwn in ALS, Catalent will be our partner for manufacturing commercial quantities of NurOwn® to treat patients with ALS. Our
technology transfer to Catalent Houston was successfully completed and enabled continuous supply of NurOwn® for the Expanded
Access program. We are also working with Rapid Reshore & Development (“RR&D”) to help us establish in-house manufacturing
capabilities, and our partnership with RR&D will accelerate once a regulatory pathway is clear.
We currently lease two cleanroom manufacturing facilities in Jerusalem, Israel at the Hadassah Medical Center and in Tel Aviv at the
Sourasky Medical Center to manufacture NurOwn®. These two facilities substantially increase our capacity and expand our ability to
manufacture and ship NurOwn® into the EU and local Israeli markets. 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 participants 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.
Catalent Houston manufactured NurOwn® for the Expanded Access Program. As of December 31, 2022, seven participants have
completed treatment with NurOwn® that was manufactured at the Catalent facility as well as all Expanded Access protocol follow-up
visits.
13
Table of Contents
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. Following extensive consultations with principal investigators, ALS experts, expert statisticians, regulatory advisors, and
ALS advocacy groups to discuss the best path forward to provide NurOwn® for ALS patients, Brainstorm filed a BLA on September 9,
2022. On November 10, 2022, we announced that we had received a RTF letter from the FDA regarding our BLA, which informed us
that the BLA was not sufficiently complete to enable a substantive review and that the FDA. The RTF letter contained a list of topics the
FDA provided to BrainStorm as rationale for the BLA file being not sufficiently complete to enable a substantive review. According to
the FDA, these reasons included one item related to the trial not meeting the standard for substantial evidence of effectiveness and
Chemistry, Manufacturing and Controls (“CMC”) related items. The FDA indicated that we could request a Type A meeting to discuss
the content of the RTF letter, and the Type A meeting was held on January 11, 2023. We notified the FDA on February 6, 2023 of our
decision to request the FDA to file the NurOwn BLA for ALS over Protest. Written feedback was received on March 22, 2023 from the
FDA project manager associated with the BLA confirming the FDA’s decision to grant an ADCOM for the NurOwn BLA for ALS. We
submitted an amendment to our BLA on March 7, 2023, in which we responded to the majority of the items included in the RTF letter.
The BLA for NurOwn to treat ALS is currently under active review by the FDA.
On March 27, 2023, we announced that the FDA will hold an ADCOM to discuss the company's BLA for NurOwn® for the treatment of
ALS. Given the goal to proceed to an ADCOM as expeditiously as possible, BrainStorm requested that the Center for Biologics
Evaluation and Research (CBER) utilize the FDA's File Over Protest procedure and has filed an amendment to the BLA which responds
to most of the outstanding questions the FDA has posed.
ALS Expanded Access Program
On December 14, 2020, we announced the NurOwn® Expanded Access Program (EAP) through which NurOwn® would be made
available for ALS patients who completed all Phase 3 scheduled treatments and follow-up assessments and meet specific eligibility
criteria.
14
Table of Contents
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, participants less severely affected by ALS, as measured by ALSFRS-R, were
the first to receive treatment. This approach is informed by recently announced top-line data from the Company’s Phase 3 clinical trial.
According 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 participants
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
participants who have completed the Phase 3 clinical trial did 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. As of January 2023, seven participants have completed treatment with NurOwn® manufactured
at the Catalent Houston manufacturing site and all follow-up visits.
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 the first quarter of 2019 and the fourth quarter of 2020, 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 titled “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.
15
Table of Contents
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 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 published our findings in the peer reviewed
journal Multiple Sclerosis Journal in September 15, 2022. We are currently considering 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, 2022, 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 to grant accelerated approval of Aducanumab and pending regulatory reviews of other
investigational anti-amyloid therapies.
16
Table of Contents
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.
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, 2022, 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, 2022, 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, 2022, we have received $400,000 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
17
Table of Contents
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,
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 December 22, 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).
On February 15, 2022, we announced that the Brazilian Patent Office granted patent application 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 Israel.
Recent Scientific and Industry Presentations
On January 27, 2022, Dr. Ralph Kern, former President and Chief Medical Officer at Brainstorm, gave a presentation titled “NurOwn®
Phase 3 ALS Clinical Trial Update” at the virtual 12th Annual California ALS Research Summit”.
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® 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.
On April 24-26, 2022, 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, Boston MA, presented a scientific
abstract titled “CSF Biomarkers Evaluated by Principal Component Analysis in a NurOwn® Phase 3 Clinical Trial” at the AAN 2022
Virtual Congress.
On May 4, 2022, Dr. Kim Thacker, Senior Vice President, Medical Affairs and Clinical Innovation at Brainstorm presented a poster titled
“MSC-NTF derived small extracellular vesicles display superior macrophage immunomodulation compared with vesicles derived from
naïve MSCs” at the International Society of Cell & Gene Therapy (ISCT) 2022 Meeting in San Francisco, CA May 4-7. The presentation
highlighted results of a preclinical study undertaken to understand the mechanisms underlying the superior preclinical efficacy of Exo
MSC-NTF versus Exo-MSC in acute lung injury models.
On May 25, 2022, Dr. Ralph Kern, our former President and Chief Medical Officer delivered a presentation titled “Advancing novel CSF
biomarkers to evaluate ALS target engagement & improve therapeutic outcomes” at the ALS Drug Development Summit, Boston MA.
Dr. Kern also acted as Conference Chair on Day One of the ALS Drug Development Summit.
18
Table of Contents
On May 26, 2022, Dr. Haggai Kaspi PhD presented a poster titled “Therapeutic effect of MSC-NTF exosomes in experimental
bleomycin-induced lung injury” at the ISEV 2022 Annual Meeting, Lyon France. Results from a preclinical study demonstrating superior
outcomes of exosomes derived from MSC-NTF cells compared to exosomes derived from MSC cells were presented.
On June 2, 2022, Jonathan Katz MD, of the California Pacific Medical Center, San Francisco, CA USA, presented insights into the ALS
Phase 3 primary endpoint leveraging ENCALS model patient prognosis trajectories as a scientific poster at the European Network to
Cure ALS (ENCALS) meeting in Edinburgh, Scotland June 1-3, 2022.
On June 2, 2022, we presented three scientific posters describing NurOwn’s effect on visual outcomes, and inflammatory CSF
biomarkers from a Phase 2 trial, as well as data from an in vitro preclinical study evaluating the impact of concomitant use of Siponimod,
an approved treatment for secondary progressive multiple sclerosis, on NurOwn neuroprotection at the Consortium of Multiple
Sclerosis Centers (CMSC) meeting in National Harbor, Maryland, June 1-4, 2022.
● Ralph Kern MD, MHSc, our former President and Chief Medical Officer, presented a poster titled “NurOwn (MSC-NTF
Cells) Phase 2 Clinical Trial in Progressive MS: Effects on Monocular and Binocular Low Contrast Letter Acuity (LCLA)
Outcomes”. This poster evaluated the impact of NurOwn therapy on visual outcomes (monocular and binocular LCLA) in
progressive MS study participants in an open-label Phase 2 clinical trial in progressive MS (NCT03799718).
● Christopher Lock, MD PhD, Stanford School of Medicine presented a poster titled “NurOwn (MSC-NTF) Phase 2 Clinical
Trial in Progressive MS: Effects on CSF Inflammatory Biomarkers”. In this scientific poster, the effect of NurOwn
treatment on CSF biomarkers in the Phase 2 clinical trial in progressive MS (NCT03799718) was described.
● Sidney Spector MD PhD, Senior Vice President, Medical Affairs and Global Strategy at Brainstorm presented a poster
titled “NurOwn (MSC-NTF) Cells Maintain Neurotrophic and Immunomodulatory Effects with S1P Modulator
Siponimod” describing the results of an in-vitro preclinical experiment evaluating the interaction of the S1P modulator
Siponimod with MSC-NTF cell-induced neurite outgrowth in a human neuroblastoma cell line, and on the
immunomodulatory effect on human activated peripheral blood mononuclear cells (PBMC).
On October 7, 2022, Dr. Stacy Lindborg, our Co-Chief Executive Officer and former Chief Development Officer presented new
biomarker analyses from NurOwn’s Phase 3 ALS Trial at the ALS ONE Research Symposium. The presentation was entitled, “The
Relationship between CSF Biomarkers and Efficacy of Treatment with NurOwn (MSC-NTF cells).” The new analyses looked at the
trajectory of biomarkers for the subgroups of participants with baseline ALSFRS-R scores >25 and ≤25, those most likely to be impacted
by the floor effect of the scale. Decreases in neuroinflammatory and neurodegenerative markers and increases in neuroprotective markers
in NurOwn treated participants compared to placebo were observed in both subgroups. These results indicate that NurOwn had similar
biological effects on ALS participants regardless of the level of disease progression at baseline.
On October 27, 2022, Jeffrey Cohen, MD, Hazel Prior Hostetler Endowed Chair and Professor of Neurology, Cleveland Clinic Lerner
College of Medicine, Director, Experimental Therapeutics, Mellen Center for MS Treatment and Research presented a scientific poster
titled ‘NurOwn (MSC-NTF) Phase 2 Clinical Trial in Progressive MS: Effects on CSF Neuroprotective Biomarkers” at the 38th
Congress of the ECTRIMS, held from October 26-28 in Amsterdam, NL. Cerebrospinal fluid (CSF) biomarker analyses from the phase 2
progressive MS clinical trial demonstrate that intrathecal NurOwn treatment resulted in robust increases in CSF neuroprotective
biomarkers, consistent with the proposed mechanism of action, and provide important biological context for the observed clinical trial
outcomes.
On November 7, 2022, Dr. Stacy Lindborg, our Co-Chief Executive Officer and former Chief Development Officer, and Merit
Cudkowicz, MD, MSC, Chief of Neurology at Massachusetts General Hospital, Julieanne Dorn Professor of Neurology at Harvard
Medical School, and Director of the Sean M. Healey & AMG Center for ALS at Massachusetts General Hospital presented a scientific
poster titled “Further Analysis of NurOwn Phase 3 Data Based on Baseline ALSFRS-R Status Clarifies Treatment Outcomes” at the
2022 NEALS Meeting, held November 1-3, 2022 in Clearwater Beach, Florida. New post hoc analyses were presented that account for
ALSFRS-R floor effects and add to the robust body of evidence supporting a clinically meaningful treatment effect with NurOwn in
ALS. To better understand the true effect of treatment with NurOwn compared to placebo, two post-hoc sensitivity analysis methods
were used to identify and remove participants from analyses that were most likely to be impacted by the floor effect. These methods
were: (1) Total Score Threshold (TST), which removed participants with ALSFRS-R scores ≤ 25; and (2) Item Level Threshold (ILT),
which removed participants with a baseline score of 0 or 1 in at least 5 of 6 of the ALSFRS-R’s Fine and Gross Motor scale items.
Applying the TST and ITL sensitivity analysis methods resulted in the exclusion of 23% (n=44) and 16% (n=30) of trial participants
19
Table of Contents
from analyses, respectively. Both the TST and ILT sensitivity analysis methods show that, after controlling for the impact of the
ALSFRS-R floor effect, participants treated with NurOwn had a higher rate of clinical response (primary endpoint) and less function lost
across 28 weeks (secondary endpoint), compared to placebo. Additional post-hoc analyses published for the secondary endpoint (average
change from baseline in ALSFRS-R), showed a statistically significant benefit following treatment with NurOwn in all subgroups with
ALSFRS-R baseline total score of at least 26 to 35 (p≤0.050). These analyses were included in a correction made to the Muscle and
Nerve publication (December 2021) and were broadly discussed with the ALS community for the first time at the 2022 NEALS meeting.
On January 10, 2023, Chaim Lebovits, President and Co-Chief Executive Officer, and Stacy Lindborg, Chief Executive Officer, jointly
presented a corporate and clinical overview at the Biotech Showcase™ 2023 (Hilton San Francisco Union Square).
On January 20, 2023, Dr. Stacy Lindborg, Co-Chief Executive Officer at Brainstorm Cell Therapeutics, gave a presentation titled “The
Debamestrocel (NurOwn) Treatment Effect in Phase 3 as accessed by ALSFRS-R and CSF Biomarkers” at the 13th Annual California
ALS Research Summit in San Francisco, California. The presentation demonstrated that NurOwn had significantly better outcomes in
analyses controlling for the floor effect. Outcomes that aligned with historical data and power calculations of the trial.
On March 20, 2023, Dr. Stacy Lindborg, Co-Chief Executive Officer at Brainstorm Cell Therapeutics, presented a scientific poster titled
“Measuring the rate of impairment in ALS patients using the Revised-ALS Functional Rating Scale: Key Insights into the Floor Effect of
the Scale” at the 2023 Muscular Dystrophy Association Clinical and Scientific Conference in Dallas, Texas held March 19-22, 2023. The
presentation showed that a floor effect was observed in the PRO-ACT database, and a pattern of a plateau in ALSFRS-R total score was
accompanied by scale items of 0 suggesting measurement challenges in those with advanced ALS due to the floor effect of the ALSFRS-
R in the NurOwn phase 3 trial and historical studies which are included in the PRO-ACT database. Analyses conducted in those not
impacted by the floor effect at baseline of the NurOwn phase 3 trial revealed statistically significant, clinically meaningful effects with
NurOwn on the primary and key secondary endpoints.
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.
20
Table of Contents
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 4, 2022, we made a presentation titled “MSC-NTF derived small extracellular vesicles display superior macrophage
immunomodulation compared with vesicles derived from naïve MSCs” at the International Society of Cell & Gene Therapy (ISCT) 2022
Meeting in San Francisco, CA May 4-7. The presentation highlighted results of a preclinical study undertaken to understand the
mechanisms underlying the superior preclinical efficacy of Exo MSC-NTF versus Exo-MSC in acute lung injury models.
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).
On May 26, 2022, we presented a poster titled “Therapeutic effect of MSC-NTF exosomes in experimental bleomycin-induced lung
injury” at the ISEV 2022 Annual Meeting, Lyon France. Results from a preclinical study demonstrating superior outcomes of exosomes
derived from MSC-NTF cells compared to exosomes derived from MSC cells were presented.
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.
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.
21
Table of Contents
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. The technology transfer to Catalent Houston was
successfully completed, with technology transfer to Catalent Princeton underway. This partnership 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. 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 are 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
22
Table of Contents
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 in 1995. 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- originally approved by FDA (May 2017) as an intravenous (IV) infusion
based on a single Phase 3 study carried out in Japan. In 2022, Radicava ORS, an oral suspension, was approved by FDA. The
effectiveness of Radicava ORS was based on a study demonstrating comparable levels of Radicava ORS in the bloodstream to the
levels from the IV formulation of Radicava.
* Relyvrio (sodium phenylbutyrate and taurursodiol)-approved by FDA in September of 2022. Relyvrio is taken orally. The
efficacy of Relyvrio for the treatment of ALS was demonstrated in a 24-week, multicenter, randomized, double-blind, placebo-
controlled, parallel-group study.
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 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.
23
Table of Contents
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.
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.
24
Table of Contents
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’.
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.
25
Table of Contents
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.
26
Table of Contents
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
2026-2030
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
US, Israel,
Europe, Hong
Kong
US, Canada,
Japan, Israel,
Europe Hong
Kong
Brazil
2029-2030
2033
2033
2035
2035
2035
2037
2037
2039
2041
Europe, Hong
Kong, Brazil
US, Japan,
Israel
US
Canada
US, Israel,
Japan, S.
Korea,
Australia,
Canada
Europe,
US, Europe,
Israel, Japan,
S. Korea,
Australia,
Canada
US, Australia,
Canada,
Israel, Japan
and Europe
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
27
Table of Contents
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.
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.
Non-Proprietary (generic) name
In June 2022, the United States Adopted Names (USAN) Council adopted ‘Demabestrocel’ as the non-proprietary (generic) name for the
MSC-NTF cells for the treatment of neurodegenerative diseases with unmet need, such as Amyotrophic Lateral Sclerosis (ALS),
Multiple Sclerosis (MS) and Alzheimer’s Disease (AD). The name was approved by the International Nonproprietary Names (INN) of
https://searchusan.ama-
published
(WHO) And
the World Health Organization
assn.org/finder/usan/search/DEBAMESTROCEL/relevant/1/
on USAN’s website
at
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 treatment 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.
28
Table of Contents
U.S. Biological Products Development Process
The FDA regulates drugs and biological products under the Federal Food, Drug, and Cosmetic Act, or 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 Biologics 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 Practice (“cGTP”) requirements 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 cGTP 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 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
GLP, requirements or other regulations;
*
*
*
*
Submission to the FDA of an Investigational New Drug, or IND, application 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 for its intended use;
Submission to the FDA of a BLA 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 current Good Manufacturing Practice, or cGMP, requirements to assure that the facilities, methods and
controls are adequate to preserve the drug’s or biologic’s identity, strength, quality and purity; and
*
FDA review and approval of the BLA.
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.
29
Table of Contents
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
*
*
*
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
a BLA, requesting approval to market the product. The submission of a 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 if the applicable regulatory criteria are not
satisfied or may require additional clinical data or other data and information. The FDA has 60 days from its receipt of a BLA to
determine whether the application will be accepted for filing based on the FDA’s threshold determination that it is sufficiently complete
to permit a substantive review. If the FDA determines that the BLA is incomplete, the FDA may refuse to file the application. If the FDA
refuses to file a BLA, the applicant may refile the application with information addressing the FDA identified deficiencies, which refiling
would be subject to FDA review before it is accepted for filing, or the applicant may request an informal meeting with the FDA about
whether the application should be filed. After the meeting, the applicant may request that the application be Filed over Protest. When an
application is Filed over Protest, the FDA is required to review the application as filed. Generally, the FDA does not favor the File over
Protest procedure. There may also certain consequences of filing an application over Protest. For example, such an application would not
be eligible for certain FDA communications over the course of the review cycle.
In addition, an applicant that receives an RTF can, in some circumstances, appeal the decision using the FDA’s dispute resolution
procedures. After the BLA submission is accepted for filing, the FDA reviews the BLA to determine, among other things, whether a
product meets FDA’s approval standards and whether the product is being manufactured in accordance with cGMP to assure and preserve
the product’s identity, strength, quality and purity. Under the performance goals and policies implemented by the FDA under the
Prescription Drug User Fee Act, or PDUFA, for standard applications for original BLAs, the FDA targets ten months from the date FDA
files the application (i.e., the filing date) in which to complete its initial review of a standard application and respond to the
30
Table of Contents
applicant, and six months from the filing date for an application granted priority review by FDA. The FDA does not always meet its
PDUFA goal dates. The review process and the PDUFA goal date may be extended by an additional three-month review period when a
major amendment, such as a major new clinical safety/efficacy study report or a major re-analysis of a previously submitted study, is
submitted. However, when an application is filed with the FDA over Protest, the FDA generally will not review amendments to the
application during any review cycle and will not issue information requests to the applicant during the agency’s review.
Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to
determine, among other things, whether the proposed product is safe, pure and potent, for its intended use, and whether the product is
being manufactured in accordance with cGMP to ensure its continued safety, purity and potency. The FDA may refer applications for
novel biological products or biological products that present difficult or novel questions of safety, efficacy, or quality to an advisory
committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the
application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee,
but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA also
will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product.
If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA
without a REMS, if required.
Before approving a BLA, the FDA typically will inspect the facilities at which the product is manufactured. The FDA will not approve
the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate
to assure consistent production of the product within required specifications. Where applicable, the FDA also will not approve the
product if the manufacturer is not in compliance with the cGTPs. Additionally, before approving a BLA, the FDA will typically inspect
one or more clinical sites to assure that the clinical trials were conducted in compliance with IND study requirements and GCP
requirements. To assure cGMP, cGTP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in
the areas of training, record keeping, production and quality control.
Under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA for a novel product (e.g., new active ingredient, new
indication, etc.) must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all
relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe
and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation,
PREA does not apply to any biological product for an indication for which orphan designation has been granted.
After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the drug product will be produced, the FDA
may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the product with
specific prescribing information for specific indications. A Complete Response Letter will describe all of the deficiencies that the FDA
has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support
approval, the FDA may issue the Complete Response Letter without first conducting required inspections, testing submitted product lots,
and/or reviewing proposed labeling. In issuing the Complete Response Letter, the FDA may recommend actions that the applicant might
take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or
refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-
marketing testing and surveillance to monitor safety or efficacy of a product. When an application is Filed over Protest, the performance
goals implemented by the FDA under PDUFA do not apply to any resubmission of the application following an FDA complete response
action, and any such resubmission is reviewed as available resources permit.
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 biologic’s safety and effectiveness after BLA approval and may require testing and
surveillance programs to monitor the safety of approved products that have been commercialized.
31
Table of Contents
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or 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 a 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 drug or 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.
Fast Track Designation
To be eligible for Fast Track designation, new biological product candidates must be intended to treat a serious or life-threatening
condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the
combination of the product and the specific indication for which it is being studied. The sponsor of a biologic may request the FDA to
designate the biologic as a Fast Track product at any time during the clinical development of the product. One benefit of Fast Track
designation, for example, is that the FDA may consider for review sections of the marketing application on a rolling basis before the
complete application is submitted if certain conditions are satisfied, including an agreement with the FDA on the proposed schedule for
submission of portions of the application and the payment of applicable user fees before the FDA may initiate a review.
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, the National Institutes of Health, or 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.”
32
Table of Contents
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 Tofersen (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 NIH,
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.
On June 23, 2022, FDA released its Action Plan for Rare Neurogenerative Diseases including ALS. The action plan contains FDA’s five-
year strategy for bolstering scientific achievement and promoting innovation for rare neurodegenerative diseases by engaging in targeted
activities including establishing the FDA Rare Neurodegenerative Diseases Task Force, establishing the public-private partnership for
rare neurodegenerative diseases, developing disease-specific science strategies, and leveraging ongoing FDA regulatory science efforts.
The action plan also includes a science strategy developed for ALS, which outlines activities that FDA will conduct between June 2022
and June 2027 to address current challenges to ALS drug development. Further, on September 14, 2022, FDA and NIH announced the
launch of the Critical Path for Rare Neurodegenerative Diseases (CP-RND), a public-private partnership aimed at advancing the
understanding of neurodegenerative diseases and fostering the development of treatments for ALS and other rare neurodegenerative
diseases. The Critical Path Institute (C-Path) was selected as the convener of this partnership.
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.
33
Table of Contents
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 plus (b) the time
between the submission date of a BLA 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 biological products 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
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. Biologics may be promoted only for the approved indications and in accordance with the provisions of the
approved label. Further, manufacturers of 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.
Biological product manufacturers and other entities involved in the manufacturing and distribution of approved biological products, and
those supplying products, ingredients, and components of them, 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,
cGTP 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 biological product. 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.
Regulation of Combination Products in the United States
34
Table of Contents
Certain products that we develop may be comprised of components that are regulated under separate regulatory authorities and by
different centers at the FDA. These products are known as combination products. A combination product is comprised of a combination
of a drug and a device; a biological product and a device; a drug and a biological product; or a drug, a device, and a biological product.
A combination product with a biological primary mode of action generally would be reviewed and approved pursuant to the biological
product approval processes under the FDCA and PHSA. Under FDA regulations, combination products are subject to cGMP
requirements applicable to both biological products and devices, including the requirements of the Quality System Regulation, or QSR,
applicable to medical devices.
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:
*
a covered benefit under its health plan;
35
Table of Contents
*
*
*
*
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
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.
36
Table of Contents
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:
*
*
*
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;
37
Table of Contents
*
*
*
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
38
Table of Contents
Further, should we begin trials in or otherwise have operations in or collect data from individuals in 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.
39
Table of Contents
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. On June 17, 2021, the U.S. Supreme
Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the
constitutionality of the ACA. Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special
enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the
ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and
rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that
include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through
Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to
challenge, repeal or replace the ACA will impact 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 occurred beginning April 1, 2022 through June 30,
2022, and the 2% payment reduction resumed on July 1, 2022. The American Taxpayer Relief Act of 2012, among other things, further
reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations
period for the government to recover overpayments to providers from three to five years. Due to the Statutory Pay-As-You-Go Act of
2010, estimated budget deficit increases resulting from the American Rescue Plan Act of 2021, and subsequent legislation, Medicare
payments to providers will be further reduced starting in 2025 absent further legislation. These laws and regulations may result in
additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product
candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.
40
Table of Contents
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, 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.
In addition, there have been several changes to the 340B drug pricing program, which imposes ceilings on prices that drug manufacturers
can charge for medications sold to certain health care facilities. On December 27, 2018, the District Court for the District of Columbia
invalidated a reimbursement formula change under the 340B drug pricing program, and CMS subsequently altered the FYs 2019 and
2018 reimbursement formula on specified covered outpatient drugs (“SCODs”). The court ruled this change was not an “adjustment”
which was within the Secretary’s discretion to make but was instead a fundamental change in the reimbursement calculation. However,
most recently, on July 31, 2020, the U.S. Court of Appeals for the District of Columbia Circuit overturned the district court’s decision
and found that the changes were within the Secretary’s authority. On September 14, 2020, the plaintiffs-appellees filed a Petition for
Rehearing En Banc (i.e., before the full court), but was denied on October 16, 2020. Plaintiffs-appellees filed a petition for a writ of
certiorari at the Supreme Court on February 10, 2021 and the petition was granted on July 2, 2021. On June 15, 2022, the Supreme Court
unanimously reversed the Court of Appeals’ decision, holding that HHS’s 2018 and 2019 reimbursement rates for 340B hospitals were
contrary to the statute and unlawful. We continue to review developments impacting the 340B program.
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. President Biden has issued multiple executive orders that have sought
to reduce prescription drug costs. 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.
The Inflation Reduction Act of 2022, or IRA includes several provisions that may impact our business to varying degrees, including
provisions that reduce the out-of-pocket cap for Medicare Part D beneficiaries to $2,000 starting in 2025; impose new manufacturer
financial liability on certain drugs under Medicare Part D, allow the U.S. government to negotiate Medicare Part B and Part D price caps
for certain high-cost drugs and biologics without generic or biosimilar competition, require companies to pay rebates to Medicare for
certain drug prices that increase faster than inflation, and delay the rebate rule that would limit the fees that pharmacy benefit managers
can charge. Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have
one rare disease designation and for which the only approved indication is for that disease or condition. If a product receives multiple
rare disease designations or has multiple approved indications, it may not qualify for the orphan drug exemption. The effects of the IRA
on our business and the healthcare industry in general is not yet known.
41
Table of Contents
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.
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. A technology transfer to Catalent Houston was completed, with a second technology
transfer to Catalent Princeton underway, which will allow for continuous supply of NurOwn® for future clinical trials and initial
commercialization. Our partnership with R&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. Kadimastem
completed a Ph1/2 trial of AstroRx, a therapy comprised of astrocytes derived from human embryonic stem cells and is planning a Ph 2
study to evaluate repeat dosing. There are 2 companies evaluating Tregs in ALS, Coya and Rapa Therapeutics in Phase 2 and Phase 1/2,
respectively. Phase 3 trials underway include Cytokinetics (Reldesemtiv), AB Science (masitinib as add on to riluzole), and Ionis/Biogen
(Ionis 363) in FUS-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. The Healy
platform trial includes 5 ALS therapies: Zilucoplan; Pridopidine; Trehalose; Verdiperstat; and CNM-Au8. The Zilucoplan arm was
stopped after futility analysis and only the Trehalose arm is actively enrolling. A 6th product, ABBV-CLS-7262 is not yet enrolling.
Therapies specifically targeting genetic mutations in a small subset of ALS patients, such as SOD1 and C9ORF72, are being evaluated
using antisense oligonucleotide technology (Biogen, IONIS, and WAVE Therapeutics). Biogen’s has submitted an NDA for tofersen for
ALS patients with the SOD1 mutation and an Advisory Committee meeting is scheduled for March 22, 2023.
Currently, there are three FDA-approved ALS therapies, Riluzole, Radicava (available as IV and oral formulations) and Relyvrio, that
have demonstrated modest improvements in survival or 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.
Edaravone oral formulation (Radicava ORS) was approved in 2022. Relyvrio demonstrated slowing of disease progression versus
placebo and in a post hoc exploratory analysis, a longer median survival was observed in participants originally randomized to Relyvrio.
42
Table of Contents
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, we 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 our
success 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.
43
Table of Contents
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.
* We have 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.
44
Table of Contents
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.
During a public health emergency, certain manufacturing facilities and materials may be commandeered under the Defense Production
Act of 1950, or equivalent foreign legislation, which 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. Further, during a public health emergency, the FDA and
other foreign regulatory authorities may be unable to ensure timely reviews of applications for medical products. 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.
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.
We will 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
45
Table of Contents
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.
We have 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, 2020, December 31, 2021 or December 31, 2022. 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.
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 conduct 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
46
Table of Contents
substantial evidence that FDA is seeking to support a BLA. On November 10, 2022, we announced that we had received a RTF letter
from the FDA regarding our BLA. The FDA indicated that we could request a Type A meeting to discuss the content of the RTF letter,
and the Type A meeting was held on January 11, 2023. We notified the FDA on February 6, 2023 of our decision to request the FDA to
file the NurOwn BLA for ALS over Protest. We submitted an amendment to our BLA on March 7, 2023, in which we responded to the
majority of the items included in the RTF letter. Written notification was received on March 22, 2023 from the FDA project manager
associated with the BLA confirming the FDA’s decision to grant an ADCOM for the NurOwn BLA for ALS. The BLA for NurOwn to
treat ALS is currently under active review by the FDA. 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.
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 autologous stem cell therapy creates significant challenges with regard to product development and optimization,
manufacturing, government regulations, and market acceptance. For example, although cell therapy has been available in oncology, the
FDA’s experience with mesenchymal stem cell therapies is limited. None have been approved by the FDA for commercial sale in the US,
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.
47
Table of Contents
Despite our experience conducting and managing clinical trials, we may not be able to 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 clinical trials, we may not be able to 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.
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.
48
Table of Contents
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.
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 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.
49
Table of Contents
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. For our product candidates that are biologic-device combination products, third-party
manufacturers may not be able to comply with cGMP regulatory requirements applicable to biologic-device combination products,
including applicable provisions of the FDA’s drug product cGMP regulations, device cGMP requirements embodied in the FDA’s Quality
System Regulation, or QSR, or similar regulatory requirements outside the United States. 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 contract manufacturing organization, or 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 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. 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 or future epidemics 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 and cGTP regulations 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
50
Table of Contents
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;
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.
51
Table of Contents
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.
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.
52
Table of Contents
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
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,
53
Table of Contents
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
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 Privacy Act (the “CCPA”), as amended by the California
Privacy Rights Act (the “CPRA”), which went into effect on January 1, 2023, created a new privacy framework for covered
businesses by creating an expanded definition of personal information, established new data privacy rights for consumers in the
State of California, imposed special rules on the collection of consumer data from minors, and created a new and potentially
54
Table of Contents
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. The CCPA and the CPRA also created a new state agency that is vested with
authority to implement and enforce the CCPA and the CPRA. 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. 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
January 1, 2023, the Virginia Consumer Data Protection Act (the “CDPA”) became effective. Further, many additional U.S.
state privacy laws will go into effect throughout 2023: the Colorado Privacy Act (the “CPA”) (July 1, 2023); the Connecticut
Data Privacy Act (the “CTDPA”) (July 1, 2023); and the Utah Consumer Privacy Act (the “UCPA”) (December 31, 2023). The
CDPA, CPA, CTDPA, and UCPA are substantially similar in scope and contain many of the same requirements and exceptions
as the CCPA, including a general exemption for clinical trial data and limited obligations for entities regulated by HIPAA. 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
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.
55
Table of Contents
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;
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.
56
Table of Contents
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.
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. On June 17, 2021, the U.S. Supreme
Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the
constitutionality of the ACA. Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special
enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the
ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and
rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that
include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through
Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to
challenge, repeal or replace the ACA will impact our business.
57
Table of Contents
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 occurred beginning April 1, 2022 through June 30, 2022, and the 2% payment reduction resumed 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.
58
Table of Contents
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.
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. Further, on December 31, 2020,
CMS published a new rule, effective January 1, 2023, requiring manufacturers to ensure the full value of co-pay assistance is passed on
to the patient or these dollars will count toward the Average Manufacturer Price and Best Price calculation of the drug (“Accumulator
Rule”). On May 17, 2022, the U.S. District Court for the District of Columbia granted the Pharmaceutical Research and Manufacturers of
America’s (PhRMA) motion for summary judgement invalidating the Accumulator Rule. We cannot predict how the implementation of
and any further changes to this rule will affect our business. Although a number of these and other proposed measures may require
authorization through additional legislation to become effective, and the current U.S. presidential administration may reverse or
otherwise change these measures, both the current U.S. presidential administration and Congress have indicated that they will continue to
seek new legislative measures to control drug costs.
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 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.
We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts
that the U.S. Federal Government will pay for healthcare drugs and services, which could result in reduced demand for our drug
candidates or additional pricing pressures.
59
Table of Contents
Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed
to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on
certain drug access and marketing cost disclosure and transparency measures, and designed to encourage importation from other
countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could
harm our business, financial condition, results of operations and prospects. In addition, regional healthcare authorities and individual
hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in
their prescription drug and other healthcare programs. This could reduce the ultimate demand for our drugs or put pressure on our drug
pricing, which could negatively affect our business, financial condition, results of operations and prospects.
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.
The Israeli government is currently pursuing extensive reforms to Israel’s judicial system. In response to the foregoing developments,
many individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed reforms may
negatively impact the business environment in Israel including due to increased currency fluctuations, downgrades in credit rating,
increased interest rates, increased volatility in securities markets, and other changes in macroeconomic conditions. To the extent that any
of these negative developments do occur, they may have an adverse effect on our business, our results of operations and our ability to
raise additional funds, if deemed necessary by our management and board of directors.
60
Table of Contents
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.
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 .
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;
61
Table of Contents
● 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;
● 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® 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® and that the FDA would continue to provide advice to us on our development program.
On August 15, 2022, we announced our decision to submit a BLA to the FDA for NurOwn® for the treatment of ALS. The BLA was
filed on September 9, 2022. On November 10, 2022, we announced that we had received a RTF letter from the FDA regarding our BLA
for NurOwn® for the treatment of ALS. The FDA informed us that the BLA is not sufficiently complete to enable a substantive review
and that the FDA would therefore not file the BLA. The RTF letter contained a list of topics the FDA provided to BrainStorm as rationale
for the BLA file being not sufficiently complete to enable a substantive review. According to the FDA, these reasons included one item
related to the trial not meeting the standard for substantial evidence of effectiveness and Chemistry, Manufacturing and Controls
(“CMC”) related items. The FDA indicated that we may request a Type A meeting to discuss the content of the RTF letter. On December
12, 2022, we announced the submission of a Type A meeting request with FDA to discuss the contents of the RTF letter previously
issued by the FDA regarding our BLA for NurOwn® for the treatment of ALS. On December 27, 2022, we announced that the FDA
granted a Type A meeting to discuss the contents of the RTF letter previously issued regarding our BLA for NurOwn® for the treatment
of ALS. The Type A Meeting was held on January 11, 2023.
The perspective shared by the FDA review team reflected what was in the previously issued RTF letter. Conversations on the best
pathway to resolve the outstanding questions that remained continued following the Type A meeting. During these discussions, we were
presented with multiple options to return the BLA to regulatory review, which included the regulatory procedure to File over Protest.
These discussions resulted in our requesting the FDA to file our BLA over Protest, as this was the regulatory procedure that would allow
us to reach an ADCOM in the shortest amount of time. We notified the FDA on February 6, 2023 of our decision to request the FDA to
file the NurOwn BLA for ALS over protest.
We received the FDA Type A meeting minutes on February 9, 2023. We submitted an amendment to our BLA on March 7, 2023, in
which we responded to the majority of the items included in the RTF letter. Written feedback was received on March 22, 2023 from the
FDA project manager associated with the BLA confirming the FDA’s decision to grant an ADCOM for the NurOwn BLA for ALS. The
BLA for NurOwn to treat ALS is currently under active review by the FDA.
The approval process is lengthy and difficult and the FDA, Israeli MoH, or other regulatory authorities may refuse to approve a BLA or
equivalent marketing application if the applicable regulatory criteria are not satisfied. Generally, the FDA does not favor the File over
Protest procedure. There are also certain consequences of filing an application over Protest. For example, such an application would not
be eligible for certain FDA communications over the course of the review cycle. When an application is filed with the FDA over Protest,
the FDA generally will not review amendments to the application during any review cycle and will not issue information requests to the
applicant during the agency’s review. When an application is Filed over Protest, the performance goals implemented by the FDA under
PDUFA do not apply to any resubmission of the application following an FDA complete response action, and any such resubmission is
reviewed as available resources permit.
The FDA may have difficulties scheduling an advisory committee meeting in a timely manner. Further, an advisory committee may
recommend against approval of our BLA or may recommend that the FDA require, as a condition of approval, additional preclinical
62
Table of Contents
studies, clinical trials or investigations, limitations on approved labeling or distribution and use restrictions. Even if an advisory
committee, if convened, makes a favorable recommendation, the FDA may still not approve our product candidate.
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.
Additional time may be required to obtain regulatory approval for our product candidates because they are combination products.
NurOwn® is being developed, and future product candidates may be developed, as combination products that require coordination
within the FDA and similar foreign regulatory agencies for review of their device and drug/biologic components. Medical products
containing a combination of new drugs, biological products or medical devices may be regulated as “combination products.” In the
United States, a combination product generally is defined as a product comprised of components from two or more regulatory categories
(e.g., drug/device, device/biologic, drug/biologic). Each component of a combination product is subject to the requirements established
by the FDA for that type of component, whether a new drug, biologic or device. In order to facilitate premarket review of combination
products, the FDA designates one of its centers to have primary jurisdiction for the premarket review and regulation of the overall
product based upon a determination by the FDA of the primary mode of action of the combination product. Where approval of the drug
or biologic and device is sought under a single application, there could be delays in the approval process due to the increased complexity
of the review process.
Even though we have obtained Fast Track designation for NurOwn® for the treatment of ALS in the United States, Fast Track
designation by the FDA may not lead to a faster development or regulatory review or approval process and does not increase the
likelihood that our product candidates will receive marketing approval.
If a biologic is intended for the treatment of a serious or life-threatening condition and the product demonstrates the potential to address
unmet medical needs for this condition, the sponsor may apply for FDA Fast Track designation for a particular indication. The FDA has
granted Fast Track designation for NurOwn® for the treatment of ALS and we may seek Fast Track designation for certain other of our
current or future product candidates, but there is no assurance that the FDA will grant this status to any of our proposed product
candidates. If granted, Fast Track designation makes a product eligible for more frequent interactions with FDA to discuss the
development plan and clinical trial design, as well as rolling review of the application, which means that the company can submit
completed sections of its marketing application for review prior to completion of the entire submission. Marketing applications of
products candidates with Fast Track designation may qualify for priority review under the policies and procedures offered by the FDA,
but the Fast Track designation does not assure any such qualification or ultimate marketing approval by the FDA. The FDA has broad
discretion whether or not to grant Fast Track designation, so even if we believe a particular product candidate is eligible for this
designation, there can be no assurance that the FDA would decide to grant it. Even if we do receive Fast Track designation, we may not
experience a faster development process, review or approval compared to conventional FDA procedures, and receiving a Fast Track
designation does not provide any assurance of ultimate FDA approval. In addition, the FDA may withdraw Fast Track designation if it
believes that the designation is no longer supported by data from our clinical development program. In addition, the FDA may withdraw
any Fast Track designation at any time.
Even though we have obtained Orphan Drug Designation for NurOwn for [the treatment of ALS] in the United States and EU, and
we may apply for Orphan Drug Designation for other product candidates, we may not be able to obtain such designations or maintain
the benefits associated with orphan drug status, including orphan drug marketing exclusivity.
Regulatory authorities in some jurisdictions, including the United States and European Union, may designate drugs or biologics for
relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it
is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals
annually in the United States, or a patient population of 200,000 or more in the United States where there is no reasonable expectation
that the cost of developing the drug will be recovered from sales in the United States. In order to obtain Orphan Drug Designation, the
request must be made before submitting a BLA. In the United States, orphan drug designation entitles a party to financial incentives such
as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. After the FDA grants orphan drug
designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation
does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
63
Table of Contents
If a product that has Orphan Drug Designation subsequently receives the first FDA approval of that particular product for the disease 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 biologic for the same indication for seven years, except in limited circumstances such as a showing of
clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not
shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or
condition for which the drug was designated. As a result, even if one of our product candidates receives orphan exclusivity, the FDA can
still approve other biologics for use in treating the same indication or disease or the same biologic for a different indication or disease
during the exclusivity period. Furthermore, the FDA can waive orphan exclusivity if we are unable to manufacture sufficient supply of
our product or orphan drug exclusivity can be overcome if a subsequent applicant demonstrates clinical superiority over our product.
In the European Union, the Committee for Orphan Medicinal Products of the EMA grants orphan designation to promote the
development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating
condition, which either affects not more than five in 10,000 persons in the European Union, or products intended for the diagnosis,
prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is
unlikely that the medicine would generate sufficient return to justify the necessary investment in its development. In each case, there
must be no satisfactory method of diagnosis, prevention, or treatment which is authorized for marketing in the European Union, or, if a
method exists, the product would be of significant benefit to those affected by the condition.
We have obtained from the FDA and EMA Orphan Drug Designations for NurOwn® for the treatment of ALS. We may seek Orphan
Drug Designation for other product candidates. Even if we obtain Orphan Drug Designation, exclusive marketing rights in the United
States may be limited if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA
later determines that the request for designation was materially defective, if we are unable to assure sufficient quantities of the product to
meet the needs of patients with the rare disease or condition, or if a subsequent applicant demonstrates clinical superiority over our
products. In addition, although we may seek Orphan Drug Designation for other product candidates, we may never receive such
designations. Any failure to obtain, maintain or otherwise recognize the benefits of orphan drug designation for our products or product
candidates could have a material adverse effect on our prospects.
On August 3, 2017, Congress passed the FDA Reauthorization Act of 2017, or FDARA. FDARA, among other things, codified the
FDA’s pre-existing regulatory interpretation to require that a sponsor demonstrate the clinical superiority of an orphan drug that is
otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity. The legislation
reverses prior precedent holding that the Orphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period
regardless of a showing of clinical superiority. The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We
do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any
changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our
business could be adversely impacted.
Inadequate funding for the FDA, the SEC and other government agencies, including from government shut downs, or other
disruptions to these agencies’ operations, could hinder their ability to hire and retain key leadership and other personnel, prevent new
products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from
performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and
funding levels, the ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy
changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and
other government agencies on which our operations may rely, including those that fund research and development activities, is subject to
the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved
by necessary government agencies, which would adversely affect our business. If a prolonged government shutdown occurs, it could
significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse
effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary
capital in order to properly capitalize and continue our operations.
64
Table of Contents
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.
Even if we obtain regulatory approval for a product candidate, it would be subject to ongoing requirements by the FDA and comparable
foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution,
adverse event reporting, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-
marketing information. These requirements include submissions of safety and other post-marketing information and reports,
establishment registration and product listing, as well as continued compliance by us and/or any future CMOs and contract research
organizations (“CROs”) for any post-approval clinical trials that we conduct. The safety profile of any product will continue to be closely
monitored by the FDA and comparable foreign regulatory authorities after approval. If the FDA or comparable foreign regulatory
authorities become aware of new safety information after approval of any of our product candidates, they may require labeling changes
or establishment of a REMS, impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements
for potentially costly post-approval studies or post-market surveillance.
In addition, manufacturers of cell therapies and their facilities are subject to initial and continual review and periodic inspections by the
FDA and other regulatory authorities for compliance with cGMP, GCP, cGTP, and other regulations. For certain commercial prescription
and 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. If we or a regulatory
agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or
problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the
manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If
we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory
requirements, a regulatory agency may:
● issue warning letters or untitled letters;
● mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners, or
require other restrictions on the labeling or marketing of such products;
● require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs,
required due dates for specific actions and penalties for noncompliance;
● seek an injunction or impose civil or criminal penalties or monetary fines;
● suspend, withdraw or modify regulatory approval;
● suspend or modify any ongoing clinical trials;
● refuse to approve pending applications or supplements to applications filed by us;
● suspend or impose restrictions on operations, including costly new manufacturing requirements; or
● seize or detain products, refuse to permit the import or export of products, or require us to initiate a product recall.
The occurrence of any event or penalty described above may inhibit our ability to successfully commercialize our products.
Advertising and promotion of any product candidate that obtains approval in the United States will be heavily scrutinized by the FDA,
the U.S. Federal Trade Commission, the Department of Justice (“DOJ”), the Office of Inspector General (“OIG”) of the U.S. Department
of Health and Human Services (“HHS”), state attorneys general, members of the U.S. Congress and the public. Additionally, advertising
and promotion of any product candidate that obtains approval outside of the United States will be heavily scrutinized by comparable
foreign entities and stakeholders. Violations, including actual or alleged promotion of our products for unapproved or off-label uses, are
subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by the
65
Table of Contents
FDA or comparable foreign bodies. Any actual or alleged failure to comply with labeling and promotion requirements may result in
fines, warning letters, mandates to corrective information to healthcare practitioners, injunctions, or civil or criminal penalties.
The FDA and other regulatory authorities’ policies may change and additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of any current or future product candidate. We cannot predict the likelihood, nature or extent
of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are
slow or unable to adapt to changes in existing requirements or to the adoption of new requirements or policies, or if we are not able to
maintain regulatory compliance, we may lose any marketing approval that we may have obtained. Non-compliance by us or any future
collaborator with regulatory requirements, including safety monitoring or pharmacovigilance, and with requirements related to the
development of products for the pediatric population can also result in significant financial penalties.
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 cGTP 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.
66
Table of Contents
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for any products we develop and for our technology, or if the scope of the
patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology
similar or identical to ours, and our ability to commercialize any product candidates we may develop, and our technology may be
adversely affected.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with
respect to our product candidates, their respective components, formulations, combination therapies, methods used to manufacture them
and methods of treatment and development that are important to our business. If we do not adequately protect our intellectual property
rights, competitors may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to
achieve profitability. To protect our proprietary position, we file patent applications in the United States and abroad related to our novel
product candidates that are important to our business; we may in the future also license or purchase patent applications filed by others. If
we are unable to secure or maintain patent protection with respect to our technology and any proprietary products and technology we
develop, our business, financial condition, results of operations, and prospects could be materially harmed.
If the scope of the patent protection we or our potential licensors obtain is not sufficiently broad, we may not be able to prevent others
from developing and commercializing technology and products similar or identical to ours. The degree of patent protection we require to
successfully compete in the marketplace may be unavailable or severely limited in some cases and may not adequately protect our rights
or permit us to gain or keep any competitive advantage. We cannot provide any assurances that any of our patents have, or that any of our
pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our current and future
product candidates or otherwise provide any competitive advantage. In addition, to the extent that we license intellectual property in the
future, we cannot assure you that those licenses will remain in force. In addition, the laws of foreign countries may not protect our rights
to the same extent as the laws of the United States. Furthermore, patents have a limited lifespan. In the United States, the natural
expiration of a patent is generally 20 years after it is filed (21 years if first filed as a provisional application). Various extensions may be
available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development,
testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such
candidates are commercialized.
Even if they are unchallenged, our patents and pending patent applications, if issued, may not provide us with any meaningful protection
or prevent competitors from designing around our patent claims to circumvent our patents by developing similar or alternative
technologies or therapeutics in a non-infringing manner. For example, a third party may develop a competitive therapy that provides
benefits similar to one or more of our product candidates but that uses a formulation and/or a device that falls outside the scope of our
patent protection. If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product
candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product candidates could
be negatively affected, which would harm our business. We currently own or have exclusively in-licensed all of our patents or patent
applications. Similar risks would apply to any patents or patent applications that we may own and those which we may license in the
future. In many cases, in-licensed intellectual property is at greater risk, as we may not have access to all information or to prosecution
and other aspects of the acquisition, maintenance and enforcement of the in-licensed intellectual property.
Patent positions of life sciences companies can be uncertain and involve complex factual and legal questions. No consistent policy
governing the scope of claims allowable in the fields of antibodies and radiopharmaceuticals has emerged in the United States. The scope
of patent protection in jurisdictions outside of the United States is also uncertain. Changes in either the patent laws or their interpretation
in any jurisdiction that we seek patent protection may diminish our ability to protect our inventions, maintain and enforce our intellectual
property rights; and, more generally, may affect the value of our intellectual property, including the narrowing of the scope of our patents
and any that we may license.
67
Table of Contents
The patent prosecution process is complex, expensive, time-consuming and inconsistent across jurisdictions. We may not be able to file,
prosecute, maintain, enforce, or license all necessary or desirable patent rights at a commercially reasonable cost or in a timely manner.
In addition, we may not pursue or obtain patent protection in all relevant markets. It is possible that we will fail to identify important
patentable aspects of our research and development efforts in time to obtain appropriate or any patent protection. While we enter into
non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and
development efforts, including for example, our employees, corporate collaborators, external academic scientific collaborators, CROs,
contract manufacturers, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such
output before a patent application is filed, thereby endangering our ability to seek patent protection. In addition, publications of
discoveries in the scientific and scholarly literature often lag behind the actual discoveries, and patent applications in the United States
and other jurisdictions are typically not published until 18 months after filing, or in some cases not until issuance as a patent.
Consequently, we cannot be certain that we were the first to file for patent protection on the inventions claimed in our patents or pending
patent applications.
The issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Further, the scope of the
invention claimed in a patent application can be significantly reduced before the patent is issued, and this scope can be reinterpreted after
issuance. Even where patent applications we currently own, license, or that we may license in the future issue as patents, they may not
issue in a form that will provide us with adequate protection to prevent competitors or other third parties from competing with us, or
otherwise provide us with a competitive advantage. Any patents that eventually issue may be challenged, narrowed or invalidated by
third parties. Consequently, we do not know whether any of our product candidates will be protectable or remain protected by valid and
enforceable patent rights. Our competitors or other third parties may be able to evade our patent rights by developing alternative
technologies or products in a non-infringing manner.
The issuance or grant of a patent is not irrefutable as to its inventorship, scope, validity or enforceability, and our patents may be
challenged in the courts or patent offices in the United States and abroad. There may be prior art of which we are not aware that may
affect the validity or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe
affects the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a
claim. We may in the future, become subject to a third-party pre-issuance submission of prior art or opposition, derivation, revocation,
re-examination, post-grant and inter partes review, or interference proceeding and other similar proceedings challenging our patent rights
or the patent rights of others in the U.S. Patent and Trademark Office, or the USPTO, or other foreign patent office. An unfavorable
determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third
parties to commercialize our technology or products and compete directly with us, without payment to us, or extinguish our ability to
manufacture or commercialize products without infringing third-party patent rights.
In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents
protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property
may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Moreover, some
of our owned and in-licensed patents and patent applications are, and may in the future be, co-owned with third parties. If we are unable
to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be
able to license their rights to other third parties, including our competitors, and our competitors could market competing products and
technology. In addition, we or our licensors may need the cooperation of any such co-owners of our owned and in-licensed patents in
order to enforce such patents against third parties, and such cooperation may not be provided to us or our licensors. Any of the foregoing
could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.
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.
These existing licenses impose various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply
with these obligations, the licensors may have the right to terminate the licenses, in which event we would not be able to develop or
market the products covered by such licensed intellectual property.
68
Table of Contents
These agreements impose numerous obligations, such as diligence and payment obligations. Any termination of these licenses could
result in the loss of significant rights and could harm our ability to commercialize our product candidates. These licenses do and future
licenses may include provisions that impose obligations and restrictions on us. This could delay or otherwise negatively impact a
transaction that we may wish to enter into.
Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including disputes
concerning:
● the scope of rights granted under the license agreement and other interpretation-related issues;
● whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not
subject to the licensing agreement;
● our right to sublicense patent and other rights to third parties under collaborative development relationships;
● our diligence obligations with respect to the use of the licensed technology in relation to our development and
commercialization of our product candidates, and what activities satisfy those diligence obligations; and
● the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors
and us and our partners.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements
on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates. We are generally also
subject to all of the same risks with respect to protection of intellectual property that we license, as we are for intellectual property that
we own, which are described below. If we or our licensors fail to adequately protect this intellectual property, our ability to
commercialize products could suffer.
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 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.
69
Table of Contents
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.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
We generally enter into confidentiality and intellectual property assignment agreements with our employees, consultants, and contractors.
These agreements generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive
property. However, those agreements may not be honored and may not effectively assign intellectual property rights to us. Moreover,
there may be some circumstances, where we are unable to negotiate for such ownership rights. Disputes regarding ownership or
inventorship of intellectual property can also arise in other contexts, such as collaborations and sponsored research. If we are subject to a
dispute challenging our rights in or to patents or other intellectual property, such a dispute could be expensive and time-consuming. If we
were unsuccessful, we could lose valuable rights in intellectual property that we regard as our own.The intellectual property landscape
around our product candidates is crowded, and third parties may initiate legal proceedings alleging that we are infringing,
misappropriating, or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a
material adverse effect on the success of our business.
Third-party claims of intellectual property infringement may prevent or delay our product discovery and development efforts.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a
substantial amount of litigation involving the infringement of patents and other intellectual property rights in the biotechnology and
pharmaceutical industries. We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual
property rights and who allege that our product candidates, uses and/or other proprietary technologies infringe their intellectual property
rights. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in
which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are
issued, the risk that our product candidates may give rise to claims of infringement of the patent rights of others increases. Moreover, it is
not always clear to industry participants, including us, which patents exist which may be found to cover various types of drugs, products
or their methods of use or manufacture. Thus, because of the large number of patents issued and patent applications currently pending in
our fields, there may be a risk that third parties may allege they have patent rights which are infringed by our product candidates,
technologies or methods.
If a third party alleges that we infringe its intellectual property rights, we may face a number of issues, including, but not limited to:
● infringement and other intellectual property misappropriation which, regardless of merit, may be expensive and time-
consuming to litigate and may divert our management’s attention from our core business;
● substantial damages for infringement or misappropriation, which we may have to pay if a court decides that the product
candidate or technology at issue infringes on or violates the third-party’s rights, and, if the court finds we have willfully
infringed intellectual property rights, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees;
● an injunction prohibiting us from manufacturing, marketing or selling our product candidates, or from using our proprietary
technologies, unless the third party agrees to license its patent rights to us;
● even if a license is available from a third party, we may have to pay substantial royalties, upfront fees and other amounts,
and/or grant cross-licenses to intellectual property rights protecting our products; and
70
Table of Contents
● we may be forced to try to redesign our product candidates or processes so they do not infringe third-party intellectual
property rights, an undertaking which may not be possible or which may require substantial monetary expenditures and
time.
Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have
substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a
material adverse effect on our ability to raise the funds necessary to continue our operations or could otherwise have a material adverse
effect on our business, results of operations, financial condition and prospects.
Third parties may assert that we are employing their proprietary technology without authorization. Generally, conducting preclinical and
clinical trials and other development activities in the United States is not considered an act of infringement. If any of our product
candidates are approved by the FDA, a third party may then seek to enforce its patent by filing a patent infringement lawsuit against us.
While we may believe that patent claims or other intellectual property rights of a third party would not have a materially adverse effect
on the commercialization of our product candidates, we may be incorrect in this belief, or we may not be able to prove it in litigation. In
this regard, patents issued in the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is
“clear and convincing,” a heightened standard of proof. There may be issued third-party patents of which we are currently unaware with
claims to compositions, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product
candidates. Patent applications can take many years to issue. There may be currently pending patent applications which may later result
in issued patents that may be infringed by our product candidates. Moreover, we may fail to identify relevant patents or incorrectly
conclude that a patent is invalid, not enforceable, exhausted, or not infringed by our activities. If any third-party patents, held now or
obtained in the future by a third party, were found by a court of competent jurisdiction to cover the manufacturing process of our product
candidates, constructs or molecules used in or formed during the manufacturing process, or any final product or methods use of the
product, the holders of any such patents may be able to block our ability to commercialize the product candidate unless we obtained a
license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable.
Similarly, if any third-party patent were held by a court of competent jurisdiction to cover any aspect of our formulations, any
combination therapies or patient selection methods, the holders of any such patent may be able to block our ability to develop and
commercialize the product candidate unless we obtained a license or until such patent expires or is finally determined to be held invalid
or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If we are unable to
obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize our product
candidates may be impaired or delayed, which could in turn significantly harm our business. Even if we obtain a license, it may be non-
exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, if the breadth or strength of
protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to
license, develop or commercialize current or future product candidates.
Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to
further develop and commercialize our product candidates. Defense of these claims, regardless of their merit, could involve substantial
litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of
infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement,
obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require
substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be
available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need or may choose to obtain
licenses from third parties to advance our research or allow commercialization of our product candidates. We may fail to obtain any of
these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and
commercialize our product candidates, which could harm our business significantly.
71
Table of Contents
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-
consuming and unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to
take legal action to enforce our patents or our licensors’ patents against such infringing activity. Such enforcement proceedings against
infringers can be expensive and time-consuming.
In addition, in an infringement proceeding, a court may decide that one or more of our patents is not valid or is unenforceable, or may
refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the compositions or
activities in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being
invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing. Defense against these
assertions, non-infringement, invalidity or unenforceability regardless of their merit, would involve substantial litigation expense and
would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us,
we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more
licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and
monetary expenditure.
Post-grant proceedings provoked by third parties or brought by the USPTO may be brought to determine the validity or priority of
inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of
our current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing
party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or
post-grant proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and
distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our trade
secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as those within the
United States.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk
that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be
public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors
perceive these results to be negative, it could have a substantial adverse effect on the price of our common shares.
Issued patents covering our products and product candidates could be found invalid or unenforceable if challenged in court or the
USPTO.
If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our product
candidates, the defendant could counterclaim that the patent covering our product candidate, as applicable, is invalid and/or
unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are
commonplace, and there are various grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties
may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such
mechanisms include re-examination, inter partes review, post grant review and equivalent proceedings in foreign jurisdictions (such as
opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer
cover our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to
the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and the
patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or
unenforceability, or if we are otherwise unable to adequately protect our rights, we would lose at least part, and perhaps all, of the patent
protection on our product candidates. Such a loss of patent protection could have a material adverse impact on our business and our
ability to commercialize or license our technology and product candidates.
72
Table of Contents
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment
and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-
compliance with these requirements.
Some of our pending patent applications may not be allowed in the future. We cannot be certain that an allowed patent application will
become an issued patent. There may be events that cause withdrawal of the allowance of a patent application. For example, after a patent
application has been allowed, but prior to being issued, material that could be relevant to patentability may be identified. In such
circumstances, the applicant may pull the application from allowance in order for the USPTO to review the application in view of the
new material. We cannot be certain that the USPTO will issue the application in view of the new material. Further, periodic maintenance
fees on any issued patent are due to be paid to the USPTO and foreign countries may require the payment of maintenance fees or patent
annuities during the lifetime of a patent application and/or any subsequent patent that issues from the application. The USPTO and
various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other
similar provisions during the patent application process and following the issuance of a patent. While an inadvertent lapse can in many
cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which
noncompliance can result in abandonment or lapse of the patent or patent application. Such noncompliance can result in partial or
complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or
patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees
and failure to properly legalize and submit formal documents. Such an event could have a material adverse effect on our business.
Changes to patent law in the United States and in foreign jurisdictions could diminish the value of patents in general, thereby
impairing our ability to protect our products.
As is the case with other drug and biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly
patents. Obtaining and enforcing patents in the drug and biopharmaceutical industry involves both technological and legal complexity,
and is therefore costly, time-consuming and inherently uncertain. In addition, the United States has passed wide-ranging patent reform
legislation under the AIA. Moreover, recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain
circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our
ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once
obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents
could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents
that we might obtain in the future. We cannot predict how future decisions by the courts, Congress or the USPTO may impact the value
of our patents. Similarly, any adverse changes in the patent laws of other jurisdictions could have a material adverse effect on our
business and financial condition. Changes in the laws and regulations governing patents in other jurisdictions could similarly have an
adverse effect on our ability to obtain and effectively enforce our patent rights.
Our European patents and patent applications could be challenged in the recently created Unified Patent Court (UPC) for the European
Union, that is expected to be fully ratified in 2023. We may decide to opt out our European patents and patent applications from the UPC.
However, if certain formalities and requirements are not met, our European patents and patent applications could be challenged for non-
compliance and brought under the jurisdiction of the UPC. We cannot be certain that our European patents and patent applications will
avoid falling under the jurisdiction of the UPC, if we decide to opt out of the UPC. Under the UPC, a granted European patent would be
valid and enforceable in numerous European countries. A successful invalidity challenge to a European patent under the UPC would
result in loss of patent protection in those European countries. Accordingly, a single proceeding under the UPC could result in the partial
or complete loss of patent protection in numerous European countries, rather than in each validated European country separately as such
patents always have been adjudicated. Such a loss of patent protection could have a material adverse impact on our business and our
ability to commercialize our technology and product candidates and, resultantly, on our business, financial condition, prospects and
results of operations. We have limited foreign intellectual property rights and may not be able to protect our intellectual property
rights throughout the world.
73
Table of Contents
Certain of our key patent families have been filed in the United States; however, we have less robust intellectual property rights outside
the United States, and, in particular, we may not be able to pursue patent coverage of our product candidates in certain countries outside
of the United States. Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be
prohibitively expensive, and our intellectual property rights in some countries outside the United States may be less extensive than those
in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as
federal and state laws in the United States. The breadth and strength of our patents issued in foreign jurisdictions or regions may not be
the same as the corresponding patents issued in the United States. Consequently, we may not be able to prevent third parties from
practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in
and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained
patent protection to develop their own products and further, may export otherwise infringing products to certain territories where we have
patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our
patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Most of our patent
portfolio is at the very early stage. We will need to decide whether and in which jurisdictions to pursue protection for the various
inventions in our portfolio prior to applicable deadlines.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets
and other intellectual property protections, particularly those relating to drug and biopharmaceutical products. This difficulty with
enforcing patents could make it difficult for us to stop the infringement of our patents or marketing of competing products otherwise
generally in violation of our proprietary rights. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial
costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or
interpreted narrowly, put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may
not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial
advantage from the intellectual property that we develop or license.
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.
74
Table of Contents
We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets
of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.
Many of our employees were previously employed at other biotechnology companies, including our competitors or potential competitors,
in some cases until recently. We may be subject to claims that we or our employees have inadvertently or otherwise used or disclosed
trade secrets or other proprietary information of these former employers or competitors. In addition, we may in the future be subject to
claims that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement. Litigation may be
necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial
costs and could be a distraction to management. If our defense to those claims fails, in addition to paying monetary damages, we may
lose valuable intellectual property rights or personnel. Any litigation or the threat thereof may adversely affect our ability to hire
employees. A loss of key personnel or their work product could hamper or prevent our ability to commercialize product candidates,
which could have an adverse effect on our business, financial condition and results of operations. If we do not obtain patent term
extension and data exclusivity for any of our current or future product candidates, our business may be materially harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of any of our current or future product candidates,
one or more of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Amendments. The Hatch-
Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory
review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product
approval, only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for
manufacturing it may be extended. However, we may not be granted an extension because of, for example, failing to exercise due
diligence during the testing phase or regulatory review process, failing to apply for a patent extension within applicable deadlines, failing
to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time
period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the
term of any such extension is less than we believe we are entitled to, our competitors may obtain approval of competing products sooner
than we would expect, and our business, financial condition, results of operations, and prospects could be materially harmed.
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.
75
Table of Contents
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
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.
76
Table of Contents
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.
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
950 square meters of office and laboratory space.
In addition, we lease a manufacturing facility with two cleanrooms in Jerusalem, Israel, and have leased a 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 applicable.
77
Table of Contents
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, 2023, 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.
78
Table of Contents
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.
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, 2022, we did not generate any revenues from operations. In
addition, we incurred operating costs and expenses of approximately $24,277,000 during the year ended December 31, 2022.
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, 2022 were $13,956,000, a decrease of $1,279,000 compared to $15,235,000 for the year ended December 31,
2021.
This decrease is due to: (i) a decrease of $2,074,000 in connection with costs related to the Phase 3 Clinical Trials and (ii) a decrease of
$334,000 in connection with materials, patents, costs related to preclinical R&D activities and consultants. This decrease was partially
offset by (i) an increase of $478,000 for costs related to payroll and stock-based compensation expenses; (ii) a decrease of $504,000 in
participation of the Israel Innovation Authority (“IIA”) and under various awarded grants in 2022 and (iii) an increase of $147,000 for
costs related to travel, 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 $1,784,000 from $15,940,000 in 2021 to
$14,156,000 in 2022.
79
Table of Contents
General and Administrative
General and administrative expenses for the years ended December 31, 2022 and 2021 were $10,866,000 and $9,304,000, respectively.
The increase of $1,562,000 in general and administrative expenses is mainly due to: (i) an increase of $635,000 in payroll and stock-
based compensation expenses and (ii) an increase of $955,000 in the travel costs, rent costs, consultants, costs of our investor relations
and public relations activities. This increase was partially offset by a decrease of $28,000 in our stock and various other expenses.
Financial Expenses
Financial income for the year ended December 31, 2022 was $545,000 as compared to financial income of $82,000 for the year ended
December 31, 2021 due to interest earned on our cash, cash equivalents and short-term deposits.
Net Loss
Net loss for the year ended December 31, 2022 was $24,277,000, as compared to a net loss of $24,457,000 for the year ended December
31, 2021. Net loss per share for the year ended December 31, 2022 and December 31, 2021 was $0.66 and $0.68, 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, 2022 was 36,509,060 compared to 36,181,753 for the year ended December 31, 2021.
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, 2022 was due to: (i) the issuance of shares to employees and directors and (ii) issuance and sale of shares of Common
Stock pursuant to the Distribution Agreement.
Since its inception, the Company has devoted substantially all 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.
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. 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.
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, 2022 cash, cash equivalents and short-term bank deposits amounted to $2,983,000.
Net cash used in operating activities for the year ended December 31, 2022 was $19,320,000. 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.
80
Table of Contents
Net cash provided by investing activities for the year ended December 31, 2022 was $998,000 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, 2022 was $238,000 from sales of common stock under the
August 9, 2021 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 year ended December 31, 2022, the
Company has sold 152,299 shares of Common Stock for gross proceeds of approximately $245,000 under 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.
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.
81
Table of Contents
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,
2022, the Company has sold 152,299 shares of Common Stock for gross proceeds of approximately $245,000 under 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 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.
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.
82
Table of Contents
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;
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.
83
Table of Contents
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.
84
Table of Contents
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2022
U.S. DOLLARS IN THOUSANDS
(Except share data and exercise prices)
85
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2022
U.S. DOLLARS IN THOUSANDS
(Except share data and exercise prices)
INDEX
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1197)
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Loss
Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
86
Page
87
89
90
91
93
95
Table of Contents
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, 2022 and 2021 and the related consolidated statements of comprehensive loss, Stockholders’ equity (deficit) and cash
flows for each of the two years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December
31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company’s lack of sufficient resources and substantial operating losses raise substantial doubt
about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1 to the
financial statements. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
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.
87
Table of Contents
Stock-Based Compensation to Employees and Directors – Stock Options — Refer to Note 9 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, 2022, the Company
issued stock options for 245,700 shares and recorded stock option related compensation expense of $969 thousand. 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.
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 30, 2023
We have served as the Company’s auditor since 2008.
88
Table of Contents
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 8)
Other accounts receivable
Prepaid expenses and other current assets (Note 4)
Total current assets
Long-Term Assets:
Prepaid expenses and other long-term assets
Operating lease right of use asset (Note 5)
Property and Equipment, Net (Note 6)
Total Long-Term Assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payables
Accrued expenses
Operating lease liability (Note 5)
Other accounts payables
Total current liabilities
Long-Term Liabilities:
Operating lease liability (Note 5)
Total long-term liabilities
Total liabilities
Stockholders’ Equity (deficit):
Stock capital: (Note 9)
Common Stock of $0.00005 par value - Authorized: 100,000,000 shares at December 31, 2022 and December 31, 2021
respectively; Issued and outstanding: 36,694,078 and 36,401,413 shares at December 31, 2022 and December 31, 2021
respectively.
Additional paid-in-capital
Treasury stocks
Accumulated deficit
Total stockholders’ equity (deficit)
Total liabilities and stockholders’ equity (deficit)
The accompanying notes are an integral part of the consolidated financial statements.
89
December 31,
2022
2021
U.S. $ in thousands
$
$
$
$
$
$
$
$
$
$
$
772
2,211
91
32
3,106
23
4,389
933
5,345
8,451
6,224
84
1,427
1,065
8,800
2,666
2,666
11,466
12
194,910
(116)
(197,821)
(3,015)
8,451
$
$
$
$
$
$
$
$
$
$
$
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
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
U.S. dollars in thousands
(Except share data)
Operating expenses:
Research and development, net (Note 10)
General and administrative
Operating loss
Financial income, net
Net loss
Basic and diluted net loss per share
Year ended
December 31,
2022
2021
U.S. $ in thousands
$
$
$
13,956
10,866
(24,822)
545
(24,277)
(0.66)
$
$
$
15,235
9,304
(24,539)
82
(24,457)
(0.68)
Weighted average number of shares outstanding used in computing basic and diluted net loss per
share
36,509,060
36,181,753
The accompanying notes are an integral part of the consolidated financial statements.
90
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
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 9)
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.
91
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
U.S. dollars in thousands
(Except share data)
Common stock
Number
36,401,413
Amount
$
12
Additional
paid-in
capital
$ 192,990
Balance as of January 1, 2022
Treasury Accumulated
stocks
deficit
(116) $ (173,544) $
Total
stockholders’
Equity (deficit)
19,342
Stock-based compensation related to stock and options
granted to directors and employees
Issuance of shares in at-the-market (ATM) offering (Note 9)
Net loss
140,366
152,299
*
*
— —
—
—
1,682
238
— —
—
—
(24,277)
1,682
238
(24,277)
Balance as of December 31, 2022
36,694,078
12
194,910
(116)
(197,821)
(3,015)
* Represents an amount less than $1.
The accompanying notes are an integral part of the consolidated financial statements.
92
Table of Contents
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
Increase (decrease) in accounts payables
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.
93
December 31,
2022
2021
U.S. $ in thousands
$
(24,277)
$
(24,457)
285
1,682
(594)
1,067
2,524
(7)
(19,320)
$
260
1,366
(47)
335
(1,717)
(2,005)
(26,265)
$
Table of Contents
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 short-term deposit
Total net cash provided by investing activities
Cash flows from financing activities:
Proceeds from exercise of options
Proceeds from issuance of shares in at-the-market (ATM) offering (Note 9)
Total net cash provided by financing activities
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.
94
Year ended
December 31,
2022
2021
U.S. $ in thousands
(29)
1,027
998
$
—
238
238
(18,084)
$
18,856
772
$
$
$
$
$
$
(330)
653
323
5
6,964
6,969
(18,973)
37,829
18,856
Table of Contents
NOTE 1 - GENERAL
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
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 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, 2022, the Company had an accumulated deficit of approximately $198 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 several 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.
Such conditions raise substantial doubts about the Company’s ability to continue as a going concern.
Management’s plan includes raising funds from outside potential investors via its ATM program and other
potential funds as mentioned. However, as mentioned above, there is no assurance such funding will be available
to the Company or that it will be obtained on terms favorable to the Company or will provide the Company with
sufficient funds to meet its objectives. These financial statements do not include any adjustments relating to the
recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may
be required should the Company be unable to continue as a going concern.
95
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
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. The Company’s
management believes that the estimates, judgments and assumptions used are reasonable based upon information
available at the time they are made. These estimates, judgments and assumptions can affect reported amounts and
disclosures made. 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.
96
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
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.
97
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
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, 2022 and December 31, 2021, 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.
98
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
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, 2022, 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.
99
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
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 - PREPAID EXPENSES
As of December 31, 2021, prepaid expenses include directors’ insurance of $1,086.
100
Table of Contents
NOTE 5 - LEASES
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
As of December 31, 2022, and 2021, total right-of-use assets was approximately $4,389 and $4,781 and the operating lease
liabilities for remaining long term lease was approximately $4,093 and $5,079, respectively. In the year ended December
31, 2022 and 2021, the Company recognized approximately $2,710 and $2,767, respectively in total lease costs for the
leases. Variable lease costs for the year ended December 31, 2022 were immaterial. For a new lease agreement that became
effective since January 1, 2022, refer to note 8C.
Supplemental cash flow information related to operating leases was as follows:
Cash payments for operating leases
Twelve Months
Ended
December 31,
2022
2,710
As of December 31, 2022, the Company’s operating leases had a weighted average remaining lease term of 3.10 years and
a weighted average discount rate of 6.75%. Future lease payments under operating leases as of December 31, 2022 were as
follows:
2023
2024
2025
2026
Total future lease payments
Less imputed interest
Total lease liability balance
NOTE 6 - 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
Operating
Leases
1,468
1,456
1,351
194
4,469
(376)
4,093
December 31,
2022
2021
U.S. $ in thousands
75
246
2,273
837
3,431
48
237
1,442
771
2,498
933
75
240
2,273
814
3,402
43
223
1,192
755
2,213
1,189
Depreciation expenses for the years ended December 31, 2022 and December 31, 2021 were $285 and $260, respectively.
101
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
NOTE 7 - COMMITMENTS AND CONTINGENCIES
A.
Commitments to pay royalties to the IIA:
BCT obtained from the Chief Scientist of 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, 2022, 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, 2022, there are no outstanding obligations owed to Ramot in
connection with the above.
During November 2021, BCT entered into a new lease agreement, which replaced the previous agreement that
was valid until December 31, 2021, in 12 Basel Street, Petach Tikva, Israel. The rental area is approximately
1,000 square meters of office and laboratory space, including an animal research facility. The new lease
agreement came into force on January 1, 2022 and is valid for 60 months and includes an extension option for an
additional 60 months. The monthly lease payments under this lease agreement will be $18. As a result, the
Company recognized a new ROU asset from January 2022 in the amount of $1,576.
NOTE 8 - SHORT TERM DEPOSITS
Short term investments include bank deposits bearing annual interest rates varying from 0.05% to 1.66%, with maturities
of up to 1 year as of December 31, 2022 and 2021.
102
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
NOTE 9 - 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 the ACCBT Warrants were expired in November
2022. 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).
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”).
103
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
NOTE 9 - STOCK CAPITAL (Cont.)
Private placements and public offerings: (Cont.)
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.
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.
104
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
NOTE 9 - STOCK CAPITAL (Cont.)
Warrants:
The following table sets forth the number, exercise price and expiration date of Company warrants outstanding as of
December 31, 2022:
Issuance Date
March 2020
Total
At-the-market (ATM) Offering:
Outstanding
As Of
December 31,
2022
250,000
250,000
Exercise
price
15
Exercisable
Through
March‑2023
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, 2022, the Company has
sold 152,299 shares of Common Stock for gross proceeds of approximately $245,000 under 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 and as of December 31, 2022, 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.
105
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
NOTE 9 - STOCK CAPITAL (Cont.)
Stock Plans:
During the fiscal year ended December 31, 2022, the Company has 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,
2022, 2,802,063 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.
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 245,700 and 127,332 shares in 2022 and 2021, 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,
2021
2022
81
79-81 %
1.26
1.42-3.61 %
0
%
5.04-5.15
$ 2.336-$3.075
0
5.5-6.03
$ 2.055-$3.146
%
%
%
106
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
NOTE 9 - STOCK CAPITAL (Cont.)
Stock-based compensation to employees and directors: (Cont.)
A summary of the Company’s option activity related to options to employees and directors, and related information is as
follows:
For the year ended December 31,
2022
Weighted
average
exercise
Amount
Of
Aggregate
Intrinsic
Amount
Of
2021
Weighted
average
exercise
options* price
Value
options* price
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).
1,310,417
245,700
—
(46,000)
1,510,117
1,152,850
4.1734
3.2975
—
6.3965
3.9632
3.2355
$
$
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
Aggregate
intrinsic
value
$
—
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, 2022, 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.
As of December 31, 2022, there was $875 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 1.85 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, 2022 and 2021 amounted to $969 and $825, respectively.
107
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
NOTE 9 - STOCK CAPITAL (Cont.)
Stock-based compensation to employees and directors: (Cont.)
The options outstanding as of December 31, 2022 and December 31, 2021, have been separated into exercise prices, as
follows:
Options outstanding
As of December 31,
2021
2022
438,831
488,831
12,000
24,000
369,619
369,619
56,667
56,667
26,400
—
—
10,000
169,300
80,000
100,000
127,300
80,000
1,510,117
—
80,000
100,000
151,300
80,000
1,310,417
Weighted average
remaining
contractual
Life - Years
As of December 31,
2022
2021
6.30
0.30
2.75
1.25
9.18
—
9.72
7.19
7.42
7.81
7.75
5.95
6.96
0.94
3.75
2.25
—
1.59
—
8.19
8.42
8.81
9.75
6.21
Options
exercisable as of
As of December 31,
2022
472,164
12,000
369,619
56,667
—
—
—
40,000
93,750
63,650
45,000
1,152,850
2021
383,498
24,000
369,619
56,667
—
10,000
—
20,000
68,750
37,825
25,000
995,359
Exercise
price
$
0.75
2.25
2.45
2.70
3.04
3.90
4.09
7.33
7.67
9.51
14.95
Restricted Stock:
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.
108
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
NOTE 9 - STOCK CAPITAL (Cont.)
Stock-based compensation to employees and directors: (Cont.)
Restricted Stock:(Cont.)
Nonvested as of December 31, 2020
Granted
Vested
Forfeited
Nonvested as of December 31, 2021
Granted
Vested
Nonvested as of December 31, 2022
Number of
Restricted
Stock
288,081
168,460
148,945
35,000
272,596
95,366
150,935
217,027
Weighted
Average Grant
Weighted
Average
Remaining
Contractual
Date Fair Value Term (Years)
1.10
7.71
3.41
5.66
13.02
5.49
3.66
5.03
5.01
1.23
1.40
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, 2022 and 2021 amounted to $713 and $541,
respectively.
As of December 31, 2022, there was $597 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 1.92 years.
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,
2022
2021
U.S. $ in thousands
444
1,238
1,682
407
959
1,366
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. As of December 31, 2022, the Company repurchased 25,000 shares of its common stock for $116 thousands.
109
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
NOTE 10 - RESEARCH AND DEVELOPMENT, NET
Composition:
Research and development
Less: Participation by the Israel Innovation Authorities
Less: Participation by other grants
NOTE 11 - TAXES ON INCOME
Year ended
December 31,
2022
2021
U.S. $ in thousands
14,156
—
(200)
13,956
15,940
(141)
(564)
15,235
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%.
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,
2022
2021
U.S. $ in thousands
155,310
126,800
42,683
(42,683)
—
33,641
(33,641)
—
As of December 31, 2022, the Company has provided a full valuation allowance of $42,683 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.
110
Table of Contents
BRAINSTORM CELL THERAPEUTICS INC.
U.S. dollars in thousands
(Except share data and exercise prices)
Notes to Consolidated Financial Statements
NOTE 11 - TAXES ON INCOME (Cont.)
D.
Available carryforward tax losses:
As of December 31, 2022, the Company has an accumulated tax loss carryforward of approximately $155,310.
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 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.
E.
Loss from continuing operations, before taxes on income, consists of the following:
United States
Israel
Year ended
December 31,
2022
2021
U.S. $ in thousands
(9,989)
(14,288)
(24,277)
(8,357)
(16,100)
(24,457)
F.
Due to the Company’s cumulative losses, the effect of ASC 740 as codified from ASC 740-10 is not material.
NOTE 12 - 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 2022 and 2021.
NOTE 13 - SUBSEQUENT EVENTS
As of March 30, 2023, the Company has raised aggregate gross proceeds of approximately $3.3 million under the ATM
Distribution Agreement.
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.
111
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, 2022 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.
112
Table of Contents
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, 2022. 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, 2022, 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.
Item 9B. OTHER INFORMATION.
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not Applicable.
113
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 next annual
meeting. There are no family relationships among any of our directors or executive officers.
Name
Chaim Lebovits
Stacy Lindborg, PhD
David Setboun, PharmD, MBA
Alla Patlis, CPA, MBA
Uri Yablonka
Prof. Jacob Frenkel, PhD, MA
Irit Arbel, PhD
June S. Almenoff, MD, PhD
Anthony Polverino, PhD
Malcolm Taub
Dr. Menghisteab Bairu
Age
52
52
48
36
46
80
63
66
60
77
62
Position
President and Chief Executive Officer
Co-Chief Executive Officer
EVP, Chief Operating Officer
Interim Chief Financial Officer and Controller
EVP, Chief Business Officer, Secretary and Director
Chairperson and Director
Director
Director
Director
Director
Director
Chaim Lebovits has served as our Chief Executive Officer since September of 2015, and has been serving as our President and Chief
Executive Officer since January 2023. 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. Stacy Lindborg has been serving as our Co-Chief Executive Officer since January 2023. Prior to this, from June 2020 to January
2023, Dr. Lindborg served as our Executive Vice President and Chief Development Officer. She currently serves on the board of directors
of Imunon, Inc. (formerly 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. 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
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.
114
Table of Contents
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. Mr. Yablonka holds an LL.B from Ono Academic College and an LL.M from Bar-Ilan
University, and is a member of the Israeli Bar Association. 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. Jacob Frenkel joined the Company in March 2020 as a director and Chairperson. Dr. Frenkel serves as 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 him 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. She previously served as CEO of Neurochords, a biotechnology firm developing graphene-based scaffolds for
nerve reconstruction in the 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, a 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
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 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
115
Table of Contents
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 is currently an independent consultant to
corporate executives and board members. 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 (2014-2019). 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, a Fellow of the American College of Physicians (FACP), and has more than 65
publications. 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
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.
116
Table of Contents
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.
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;
117
Table of Contents
● 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.
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, 2022.
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 one meeting during the fiscal year ended December 31,
2022.
118
Table of Contents
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.
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 2022, 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.
119
Table of Contents
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, 2022 and 2021 earned by our Chief Executive Officer, Former President & Former Chief Medical Officer, and Co-Chief
Executive 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.
Summary Compensation Table
Name and Principal Position
Chaim Lebovits (*), President & Chief Executive
Officer
Ralph Kern, Former President & Former Chief Medical
Officer
Stacy Lindborg, Co-Chief Executive Officer (7)
Year
Salary
($)
Bonus
($)
Stock
Awards
($) (1)
All Other
Compensation
($)(2)
Total ($)
2022
2021
500,000
500,000
250,000 (3) 127,547
250,000 (4) 110,395
240,419
267,954
1,117,966
1,128,349
2022
2021
2022
2021
500,000
500,000
469,000
469,000
150,000 (5) 106,220
250,000 (6) 125,971
164,150 (8) 143,150
—
189,150 (9)
56,339
62,862
75,243
78,530
812,559
938,833
851,543
736,680
(*)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Mr. Lebovits was paid in NIS; the amounts above are the U.S. dollar equivalent. The conversion rate used was the average of
the 2022 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 “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 2021 and
fiscal 2022. 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.
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 2022, 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 2022.
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 2022, the Company paid Dr. Kern a discretionary cash bonus payment of $150,000 in recognition of his contributions to
the Company’s performance in fiscal year 2022.
During 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.
Ms. Lindborg’s employment with the Company began on June 1, 2020. Ms. Lindborg served as EVP,Chief Development Officer
through January 3, 2023, when she was promoted to Co-Chief Executive Officer.
During 2022, the Company paid Dr. Lindborg a discretionary cash bonus payment of $164,150 in recognition of her
contributions to the Company’s performance in fiscal year 2022.
120
Table of Contents
(9)
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.
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 Sarah Company, without the payment of any consideration to Mr. Lebovits.
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.
121
Table of Contents
Dr. Ralph Kern
On February 28, 2017, the Company and Dr. Ralph Kern entered into an employment agreement, effective March 6, 2017, which set
forth the terms of Dr. Kern’s employment, which was amended on March 3, 2017 (as amended, the “Kern Employment Agreement”),
which governed the compensation terms and conditions of Dr. Kern’s employment.
On January 3, 2023, the Company and Dr. Kern entered into a separation agreement (the “Kern Separation Agreement”). Effective as of
January 3, 2023, the Kern Separation Agreement terminated the Kern Employment Agreement. The Kern Separation Agreement
provides, among other things, that Dr. Kern shall be eligible to receive, in exchange for agreeing and complying with the terms of the
Kern Separation Agreement, including the release it contains, (i) a payment of $250,000, payable within 90 days of January 20, 2023 (the
“Kern Separation Date”), (ii) a grant of 150,000 non-restricted shares of Common Stock, which shall be granted 90 days after the Kern
Separation Date, and (iii) a payment of $125,000 as prorated annual bonus compensation, payable within 30 days of the Kern Separation
Date. In addition, all unvested equity and/or equity-based awards that would have vested during the six months following the Kern
Separation Date shall vest immediately upon the Kern Separation Date and be treated as described in the preceding sentence.
Effective as of the Kern Separation Date, Dr. Kern became a member of the Company’s Scientific Advisory Board, which advises the
management team on scientific matters such as research, clinical trials and drug development. In connection with Dr. Kern’s appointment
to the Scientific Advisory Board, the Company and Dr. Kern entered into a consulting agreement (the “Kern Consulting Agreement”),
effective as of the Kern Separation Date. Pursuant to the Kern Consulting Agreement, Dr. Kern will provide scientific advisory board
consulting services to the Company for $450 per hour for up to ten hours each month, for an initial term of two years, unless earlier
terminated in accordance with the terms of the Kern Consulting Agreement.
Stacy Lindborg
Dr. Stacy Lindborg, PhD, the Company’s Co-Chief Executive Officer, is party to a May 26, 2020 employment agreement with the
Company, as amended on January 10, 2021, September 21, 2022 and January 3, 2023 (as amended, the “Lindborg Employment
Agreement”). Pursuant to the Lindborg Employment Agreement, Dr. Lindborg initially received an annual base compensation of
$375,000, which was increased to $469,000 in January 2021 and $500,000 in January 2023. Dr. Lindborg’s base salary is subject to an
annual increase of 5% effective each January 1. Dr. Lindborg is eligible to receive an annual cash bonus equal to 450 of her base salary,
subject to satisfaction of pre-established performance goals.
Pursuant to the Lindborg Employment Agreement, Dr. Lindborg also received a one-time grant of an option (the “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 vested and became exercisable on February 28, 2021 (the “First Vesting Date”) 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 through each applicable vesting
date. The Option has a ten (10) year term. Any unvested shares underlying the Option as of the date of Dr. Lindborg’s employment
termination shall automatically terminate.
Pursuant to the Lindborg Employment Agreement, at the first GNC Committee meeting that occurs on or after each anniversary of Dr.
Lindborg’s start date, Dr. Lindborg is entitled to receive a grant of up to 35,000 shares of restricted stock. 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.
Lindborg remains continuously employed by the Company from the date of grant through each applicable vesting date. In addition,
pursuant to the Lindborg Employment Agreement, Dr. Lindborg is entitled to receive a one-time bonus in the form of an equity grant of
up to 250,000 shares of restricted stock, which shall vest as to twenty-five percent (25)% of the award on each of the first, second, third
and fourth anniversary of the date of grant, provided Dr. Lindborg 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 Lindborg Employment Agreement) of the
Company. In the event of Dr. Lindborg’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. Lindborg.
122
Table of Contents
Pursuant to the Lindborg Employment Agreement, in the event that the Company terminates the Lindborg Employment Agreement or
the Executive’s employment without cause or if Dr. Lindborg terminates the Agreement or employment with good reason, the Company
shall pay Dr. Lindborg an amount equal to six months of the Base Salary, subject to delivery and execution of a full and general waiver
and release to the Company. If within six months of a Change in Control Dr. Lindborg’s employment is terminated by the Company other
than for cause or due to disability or death, the Company shall provide an amount equal to 12 months of the Base Salary, any portion of
bonus compensation that Dr. Lindborg would otherwise be entitled to receive, and accelerated vesting of the equity grant as described
above, subject to delivery and execution of a full and general waiver and release to the Company.
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, 2022. 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, 2022
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
40,000
40,000 (10)
7.33
03/09/2030
Stacy Lindborg
93,750
6,250 (11)
7.67
01/06/2030
(1) Based on the fair market value of our Common Stock on December 31, 2022 ($1.64 per share).
Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)
—
7,796 (2)
15,593 (3)
23,389 (4)
31,185 (5)
—
8,971 (6)
17,943 (7)
26,914 (8)
35,885 (9)
35,000 (12)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)
—
12,785
25,573
38,358
51,143
—
14,712
29,427
44,139
58,851
57,400
(2) 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.
(3) 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.
(4) 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.
(5) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (July 26, 2022), 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, 2019), provided that
Ralph Kern remains continuously employed by the Company from the date of grant through each applicable vesting date.
123
Table of Contents
(7) 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.
(8) 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.
(9) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (March 6, 2022), 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.
(12) Restricted stock award vests 25% on each of the 1st, 2nd, 3rd and 4th anniversary of date of grant (June 1, 2022), provided that Stacy
Lindborg remains continuously employed by the Company from the date of grant through each applicable vesting date.
Stock Incentive Plans
During the fiscal year ended December 31, 2022, 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, 2022 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.
124
Table of Contents
Name
Dr. Jacob Frenkel
Dr. Irit Arbel
Dr. June S. Almenoff (4)
Dr. Anthony Polverino
Dr. Menghisteab Bairu (6)
Mr. Malcolm Taub
Uri Yablonka
Director Compensation Table for Fiscal 2022
Fees
Earned or
Paid in
Cash ($)
Stock
Awards
($)(1)
—
—
30,000
12,500
—
—
—
—
—
—
12,112 (5)
—
— (7)
—
Option
Awards
($)
(1)
152,811 (2)
— (3)
—
—
—
—
— (8)
Total
($)
152,811
—
30,000
24,612
—
—
—
(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 2022. 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 9 – Share-based
compensation to employees and to directors to Consolidated Financial Statements.
(2) At December 31, 2022, Dr. Frenkel held unexercised options (vested and unvested) to purchase 150,000 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, 2022, Dr. Arbel held unexercised options (vested and unvested) to purchase 239,999 shares of Common Stock and
no unvested shares of restricted Common Stock.
(4) At December 31, 2022, Dr. Almenoff held no unvested shares of restricted Common Stock and no unexercised options to purchase
shares of Common Stock.
(5) At December 31, 2022, Dr. Polverino held 647 unvested shares of restricted Common Stock and no unexercised options to purchase
shares of Common Stock.
(6) As of December 31, 2022, Dr. Bairu held no unvested shares of restricted common stock or unexercised option to purchase shares of
Common Stock.
(7) At December 31, 2022, Mr. Taub held no unvested shares of restricted Common Stock.
(8) At December 31, 2022, Mr. Yablonka held options (vested and unvested) to purchase 139,997 shares of Common Stock and no
unvested shares of restricted 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
125
Table of Contents
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 to 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.
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, 2023 (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, 2023 (“Presently Exercisable
Options”) or under warrants that are exercisable on or within 60 days after March 1, 2023 (“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.
126
Table of Contents
The percentage of the Common Stock beneficially owned by each person or entity named in the following table is based on 36,675,251
shares of Common Stock outstanding as of March 1, 2023, 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
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 (11 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)
#
%
2,557,576 (1)
160,000 (2)
157,540 (3)
13,175 (4)
395,831 (5)
25,960 (6)
77,332 (7)
206,667 (8)
—
3,657,881 (9)
2,175,853 (10)
3,300,000 (11)
6.9 %
*
*
*
1.07 %
*
*
*
*
9.7 %
5.93 %
9.0 %
* Less than 1%.
(1) Consists of (i)1,933,794 shares of Common Stock owned by ACCBT Corp. acquired through an investment into the Company and
(ii) 67,053 shares of Common Stock owned by ACC International Holdings Ltd., (iii) 369,619 shares of Common Stock issuable to
Chaim Lebovits upon the exercise of Presently Exercisable Options and (iv) 187,110 shares of restricted stock. 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) Dr. Lindborg’s employment with the Company commenced on June 1, 2020. Consists of 60,000 shares of restricted stock and
100,000 issuable upon the exercise of Presently Exercisable Options.
(3) Consists of 139,997 of shares of Common Stock issuable upon the exercise of Presently Exercisable Options and 17,543 shares of
restricted stock.
(4) Consists of 7,175 shares owned by Meadowlark Management LLC and 6,000 shares of restricted stock. Dr. Almenoff disclaims
beneficial ownership of the shares owned by Meadowlark Management LLC except to the extent of any pecuniary interest therein.
(5) Consists of 239,998 shares of Common Stock issuable upon the exercise of Presently Exercisable Options and 155,833 shares of
restricted stock. Dr. Arbel’s address is 6 Hadishon Street, Jerusalem, Israel.
(6) Consists of 25,960 shares of restricted stock.
(7) Consists of 77,332 shares of restricted stock.
(8) Dr. Frenkel joined the board of directors of the Company on March 31, 2020. Consists of 56,667 shares of Common Stock owned
prior to joining the board and 150,000 issuable upon the exercise of Presently Exercisable Options.
(9) Includes 1,008,414 shares of Common Stock issuable upon the exercise of Presently Exercisable Options.
127
Table of Contents
(10) This information is based on a Schedule 13G filed with the Securities and Exchange Commission by entities affiliated with Sankesh
Abbhi on February 14, 2022. Consists of (i) 2,164,530 shares of Common Stock owned by Abbhi Investments, LLC and (ii) 11,323
shares of restricted stock. 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 a Schedule 13G filed with the Securities and Exchange Commission by Kevin D. Ness on February 4,
2022. Consists of 3,300,000 shares of Common Stock owned by Kevin D. Ness. Mr. Ness’s address is 2121 N. California Blvd.,
Suite 610, Walnut Creek, CA 94596.
Equity Compensation Plan Information
The following table summarizes certain information regarding our equity compensation plans as of December 31, 2022:
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
1,510,117 (2)$
—
$
1,510,117
Weighted-
Average
Exercise
price of
Outstanding
options,
warrants
and rights
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
3.9632 (3) 2,802,063 (3)
—
3.9632
—
2,802,063 (1)
(1) Includes 1,510,117 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 4,312,180 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.
128
Table of Contents
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
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.
129
Table of Contents
● Consent Right: ACCBT’s written consent is required for Brainstorm transactions greater than $500,000.
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, 2022 and 2021 and fees billed for other services rendered by Deloitte during
those periods.
Audit Fees (1)
Audit-Related Fees (2)
Tax Fees (3)
Total Fees
December 31,
2022
90,750 $
$
60,000
$
12,000
$
162,750
2021
85,500
40,000
12,000
137,500
$
$
$
$
(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.
130
Table of Contents
(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.
131
Table of Contents
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
2.1
3.1
3.2
3.3
3.4
3.5
4.1
Description
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.
ByLaws of Brainstorm Cell Therapeutics Inc.
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.
Incorporated by
Reference Herein
Filed
(or
Furnished)
with
this
Form 10-K Form
Exhibit
& File
No.
Appendix
A File
No. 333-
61610
Definitive
Schedule
14A
Definitive
Schedule
14A
Appendix
B File
No. 333-
61610
Form 8-K Exhibit
3.1 File
No. 000-
54365
Form 8-K Exhibit
3.1 File
No. 001-
366641
Appendix
C File
No. 333-
61610
Form 8-K Exhibit
3.1 File
No. 333-
61610
Definitive
Schedule
14A
Date
Filed
November 20, 2006
November 20, 2006
September 16, 2014
September 4, 2015
November 20, 2006
March 27, 2007
September 16, 2014
Form 8-K Exhibit
4.1 File
No. 000-
54365
4.2
Description of the Company’s Securities.
‡
132
Table of Contents
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
Research and License Agreement, dated as of July 8,
2004, by and between the Company and Ramot at Tel
Aviv University Ltd.
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.
133
Form 8-K Exhibit
July 16, 2004
10.1 File
No. 333-
61610
Form 8-K Exhibit
10.1 File
No. 333-
61610
Exhibit
10.1 File
No. 333-
61610
Form 8-K Exhibit
Form 8-
K/A
April 4, 2006
May 30, 2006
April 4, 2006
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
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
December 31, 2009
Form S-1 Exhibit
February 3, 2012
Form 10-
K
Form 10-
K
10.12
File No.
333-
179331
Exhibit
10.11
File No.
001-
36641
Exhibit
10.12
File No.
001-
36641
March 9, 2016
March 9, 2016
August 15, 2014
May 11, 2016
10.1 File
No. 000-
54365
Appendix
A File
No. 001-
36641
10.1 File
No. 001-
36641
Appendix
A File
No. 001-
36641
October 1, 2020
Table of Contents
10.13
10.14*
10.15*
Consulting Agreement, dated as of April 30, 2014, by
and between Brainstorm Cell Therapeutics Ltd. and
Dr. Daniel Offen.
Brainstorm Cell Therapeutics Inc. 2014 Stock
Incentive Plan.
Form S-1 Exhibit
June 29, 2012
10.15
File No.
333-
179331
Form 8-K Exhibit
Amendment No. 1 to the Brainstorm Cell
Therapeutics Inc. 2014 Stock Incentive Plan.
Schedule
14A
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*
10.19*
10.20*
10.21
10.21*
10.22*
10.23*
Brainstorm Cell Therapeutics Inc. 2014 Global Share
Option Plan.
Amendment No. 1 to the Brainstorm Cell
Therapeutics Inc. 2014 Global Share Option Plan.
Amendment No. 2 to the Brainstorm Cell
Therapeutics Inc. 2014 Global Share Option Plan.
Amendment No. 3 to the Brainstorm Cell
Therapeutics Inc. 2014 Global Share Option Plan.
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.
134
Form 8-K Exhibit
August 15, 2014
Schedule
14A
8-K
10.2 File
No. 000-
54365
Appendix
B File
No. 001-
36641
Exhibit
10.2 File
No. 001-
36641
May 11, 2016
November 30, 2018
October 1, 2020
November 4, 2014
November 4, 2014
Schedule
14A
Appendix
B File
No. 001-
36641
Form 8-K Exhibit
10.1 File
No. 001-
36641
Form 8-K Exhibit
10.2 File
No. 001-
36641
Form 8-K Exhibit
November 4, 2014
10.3 File
No. 001-
36641
Table of Contents
10.24*
Form of Option Agreement under the Brainstorm
Cell Therapeutics Inc. 2014 Global Share Option
Plan.
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35*
Subscription Agreement, dated July 2, 2007, by and
between the Company and ACCBT Corp.
Amendment to Subscription Agreement, dated as of
July 31, 2009, by and between the Company and
ACCBT Corp.
Form of Common Stock Purchase Warrant issued by
the Company to ACCBT Corp.
Form of Registration Rights Agreement by and
between the Company and ACCBT Corp.
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.
135
Form 8-K Exhibit
November 4, 2014
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
Form 8-K Exhibit
10.2 File
No. 333-
61610
Form 8-K Exhibit
10.3 File
No. 333-
61610
Form 8-K Exhibit
Form 10-
Q
Form 10-
Q
10.4 File
No. 333-
61610
Exhibit
10.1 File
No. 000-
54365
Exhibit
10.4 File
No. 000-
54365
July 5, 2007
August 24, 2009
July 5, 2007
July 5, 2007
July 5, 2007
May 11, 2012
August 12, 2014
Form 8-K Exhibit
November 3, 2017
Form 10-
Q
Form 10-
Q
10.1 File
No. 001-
36641
Exhibit
10.1 File
No. 000-
54365
Exhibit
10.2 File
No. 000-
54365
August 15, 2011
August 15, 2011
Form 8-K Exhibit
June 9, 2014
10.1 File
No. 000-
54365
Table of Contents
10.36*
10.37
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.
October 17, 2017
June 13, 2014
June 13, 2014
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
10.39
Form of Registration Rights Agreement.
Form 8-K Exhibit
June 13, 2014
10.40
Form of Warrant.
10.41
Warrant Exercise Agreement, dated as of January 8,
2015.
10.42
Form of Warrant.
10.43
Warrant Exercise Agreement.
10.44
Leak-Out Agreement.
10.45
Share Cap Agreement.
Employment Agreement dated September 28, 2015
between Brainstorm Cell Therapeutics Inc. and
Chaim Lebovits.
10.46*
10.47*
First Amendment to Employment Agreement dated
March 7, 2016 between Brainstorm Cell Therapeutics
Inc. and Chaim Lebovits.
Form 10-
K
136
10.3 File
No. 000-
54365
Form 8-K Exhibit
4.1 File
No. 001-
36641
Form 8-K Exhibit
10.2 File
No. 001-
36641
Form 8-K Exhibit
4.1 File
No. 001-
36641
Form 8-K Exhibit
10.1 File
No. 001-
36641
Form 8-K Exhibit
Form 10-
Q
10.2 File
No. 001-
36641
Exhibit
10.4 File
No. 001-
36641
January 8, 2015
January 8, 2015
June 7, 2018
June 7, 2018
June 7, 2018
July 23, 2018
Form 8-K Exhibit
September 28, 2015
10.1 File
No. 001-
36641
Exhibit
10.53
File No.
001-
36641
March 9, 2016
Table of Contents
10.48*
10.49*
10.50*
10.51*
10.52*
10.53*
10.54
10.55
10.56
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.
Brainstorm Cell Therapeutics Inc. Second
Amendment to the Second Amended and Restated
Director Compensation Plan dated February 26,
2017.
Brainstorm Cell Therapeutics Inc. Third Amendment
to the Second Amended and Restated Director
Compensation Plan.
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.
October 17, 2017
March 6, 2017
July 10, 2014
May 14, 2015
March 29, 2017
October 17, 2017
March 28, 2022
March 8, 2018
Form 10-
Q
Exhibit
10.3 File
No. 001-
36641
Form 8-K Exhibit
10.1 File
No. 001-
36641
Form 8-K Exhibit
Form 10-
Q
Form 10-
K
Form 10-
Q
Form 10-
K
Form 10-
K
10.1 File
No. 001-
36641
Exhibit
10.2 File
No. 001-
36641
Exhibit
10.54
File No.
001-
36641
Exhibit
10.1 File
No. 001-
36641
Exhibit
10.54
File No.
001-
36641
Exhibit
10.50
File No.
001-
36641
Distribution Agreement, dated June 11, 2019, by and
between Brainstorm Cell Therapeutics Inc. and
Raymond James & Associates, Inc.
Form 8-K Exhibit
June 11, 2019
1.1
10.57
Form of Warrant
Form 8-K Exhibit
August 2, 2019
4.1
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
137
Table of Contents
10.60*
10.61*
10.62*
10.63
10.64*
10.65*
10.66*
21
23.1
31.1
31.2
32.1
32.2
Offer letter, dated May 26, 2020, by and between
Brainstorm Cell Therapeutics Inc. and Stacy
Lindborg
Third Amendment to Employment Agreement dated
June 23, 2020 between the Company and Chaim
Lebovits.
Form 10-
K
Exhibit
10.63
February 4, 2021
Form 10-
Q
Exhibit
10.1
August 5, 2020
Amendment to Employment Agreement dated June
23, 2020 between the Company and Uri Yablonka.
Form 10-
Q
Exhibit
10.2
August 5, 2020
Distribution Agreement, dated August 9, 2021, by
and among Brainstorm Cell Therapeutics, Inc., SVB
Leerink LLC and Raymond James & Associates, Inc.
Form S-3 Exhibit
August 9, 2021
1.2
Amendment No. 2 to Offer Letter Agreement dated
September 18, 2022 between Brainstorm Cell
Therapeutics Inc. and Dr. Stacy Lindborg
Amendment No. 3 to Offer Letter Agreement dated
January 3, 2023 between Brainstorm Cell
Therapeutics Inc. and Dr. Stacy Lindborg
Separation Agreement, effective January 20, 2023,
between Brainstorm Cell Therapeutics Inc. and Dr.
Ralph Kern
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.
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.
Form 8-K Exhibit
September 22, 2022
10.1
Form 8-K Exhibit
January 4, 2023
10.1
Form 8-K Exhibit
January 4, 2023
10.2
‡
‡
‡
‡
‡‡
‡‡
‡
‡
‡
101.SCH
101.CAL
101.LAB
Inline XBRL Taxonomy Extension Document.
Inline XBRL Taxonomy Extension Calculation
Linkbase.
Inline XBRL Taxonomy Extension Label Linkbase
Document.
138
Table of Contents
101.PRE
101 DEF
104
*
‡
‡‡
‡
‡
Inline XBRL Taxonomy Extension Presentation
Label Linkbase Document.
Inline XBRL Taxonomy Extension Definition
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.
139
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 30, 2023
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 30, 2023
March 30, 2023
March 30, 2023
March 30, 2023
March 30, 2023
March 30, 2023
March 30, 2023
March 30, 2023
March 30, 2023
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
140
DESCRIPTION OF CAPITAL STOCK
Exhibit 4.2
The following description of the capital stock of Brainstorm Cell Therapeutics Inc., a Delaware corporation, is a summary of certain
provisions of our securities that are registered under Section 12 of the Securities and Exchange Act of 1934, as amended (the “Exchange
Act”), and does not purport to be complete. It is subject to and qualified in its entirety by reference to our Certificate of Incorporation
(the “Certificate of Incorporation”) and our Bylaws (the “Bylaws”), each of which is incorporated by reference as an exhibit to the
Annual Report on Form 10-K of which this Exhibit 4.2 is a part, and by applicable law. This description also summarizes relevant
provisions of the General Corporation Law of the State of Delaware (the “DGCL”). We encourage you to read our Certificate of
Incorporation, our Bylaws and the applicable provisions of the DGCL for additional information.
General
Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.00005 per share.
Common Stock
The holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The
holders of our common stock do not have any cumulative voting rights. Holders of our common stock are entitled to receive ratably any
dividends declared by our board of directors out of funds legally available for that purpose. Our common stock has no preemptive rights,
conversion rights or other subscription rights or redemption or sinking fund provisions.
In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in all assets
remaining after payment of all debts and other liabilities. All outstanding shares of common stock are fully paid and nonassessable.
Exchange Listing
Our common stock is listed on The Nasdaq Capital Market under the trading symbol “BCLI.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Co LLC. The transfer agent and registrar’s
address is 6201 15th Avenue, Brooklyn, New York 11219, and its telephone number is (877) 248-6417.
Anti-Takeover Effects of our Certificate of Incorporation and Bylaws and Delaware Law
Our certificate of incorporation and bylaws include a number of provisions that may have the effect of delaying, deferring or preventing
another party from acquiring control of us and encouraging persons considering unsolicited tender offers or other unilateral takeover
proposals to negotiate with our board of directors rather than pursue non-negotiated takeover attempts. These provisions include the
items described below.
Board Composition and Filling Vacancies
Our bylaws provide that directors may be removed with or without cause at an annual meeting or at a special meeting called for that
purpose, by a majority vote of the shares then entitled to vote at an election of directors. Furthermore, any vacancy on our board of
directors, however occurring, including a vacancy resulting from an increase in the size of our board, may only be filled by the
affirmative vote of a majority of our directors then in office even if less than a quorum. The limitations on removal of directors, together
with the treatment of vacancies, has the effect of making it more difficult for stockholders to change the composition of our board of
directors.
Meetings of Stockholders
Our certificate of incorporation provide that the President, the Chairman of the Board, if any, or any two members of the board of
directors, or by the Secretary or any other officer upon the written request of one or more stockholders holding of record at least a
majority of the outstanding shares of stock of the corporation entitled to vote at such meeting may call special meetings of stockholders
and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders.
Our bylaws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the
meeting.
Amendment to Certificate of Incorporation and Bylaws
Any amendment of our certificate of incorporation must first be approved by a majority of our board of directors and must thereafter be
approved by the affirmative vote of the holders of a majority of the outstanding shares of our common stock. Our bylaws may be
amended by the affirmative vote of a majority of the directors present at any regular or special meeting of the board of directors at which
a quorum is present; and may also be amended by the affirmative vote of the holders of a majority of the shares of our capital stock
issued and outstanding and entitled to vote at any regular meeting of stockholders, or at any special meeting of stockholders provided
notice of such alteration, amendment, repeal or adoption of new by-laws shall have been stated in the notice of such special meeting.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly
held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following
the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner.
Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the
following conditions:
● before the stockholder became interested, our board of directors approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder;
● upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the voting
● stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances,
but not the outstanding voting stock owned by the interested stockholder; or
● at or after the time the stockholder became interested, the business combination was approved by our board of directors and
authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding
voting stock which is not owned by the interested stockholder.
Section 203 defines a business combination to include:
● any merger or consolidation involving the corporation and the interested stockholder;
● any sale, transfer, lease, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the
corporation;
● subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder;
● subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the
stock of any class or series of the corporation beneficially owned by the interested stockholder; and
● the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding
voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
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 30, 2023, 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, 2022.
Exhibit 23.1
/s/ Brightman Almagor Zohar & Co.
Brightman Almagor Zohar & Co.
Certified Public Accountants
A Firm in the Deloitte Global Network
Tel Aviv, Israel
March 30, 2023
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 30, 2023
/s/ Chaim Lebovits
Name:Chaim Lebovits
Title: President and Chief Executive Officer (Principal
Executive Officer)
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 30, 2023
/s/ Alla Patlis
Name: Alla Patlis
Title:
Interim Chief Financial Officer and Controller
(Principal Financial and Accounting Officer)
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, 2022, 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, 2022 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, 2022 fairly presents, in all material
respects, the financial condition and results of operations of the Company.
March 30, 2023
/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, 2022 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, 2022 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, 2022 fairly presents, in all material
respects, the financial condition and results of operations of the Company.
March 30, 2023
/s/ Alla Patlis
Name: Alla Patlis
Title:
Interim Chief Financial Officer and Controller
(Principal Financial and Accounting Officer)