S-1/A 1 tm2111005-11_s1a.htm S-1/A tm2111005-11_s1a - none - 21.9219049s
As filed with the Securities and Exchange Commission on June 16, 2021.
Registration No. 333-256649
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to    
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Miromatrix Medical Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
2836
(Primary Standard Industrial
Classification Code Number)
27-1285782
(I.R.S. Employer
Identification Number)
10399 West 70th Street
Eden Prairie, MN 55344
(952) 942-6000
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Jeff Ross
Chief Executive Officer
Miromatrix Medical Inc.
10399 West 70th Street
Eden Prairie, MN 55344
(952) 942-6000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Steven Kennedy
Jonathan Zimmerman
Faegre Drinker Biddle & Reath LLP
2200 Wells Fargo Center
90 S. Seventh Street
Minneapolis, Minnesota 55402
(612) 776-7000
Ryan Brauer
Joseph Schauer
Fredrikson & Byron, P.A.
200 S. Sixth Street
Suite 4000
Minneapolis, Minnesota 55402
(612) 492-7000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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.
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth 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 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of each class of securities
to be registered
Amount to be
Registered(1)
Proposed Maximum
Offering Price Per
Share(2)
Proposed Maximum
Aggregate Offering
Price(1)(2)
Amount of
registration fee(2)(3)
Common stock, $0.00001 par value per share
4,600,000
$ 9.00 $ 41,400,000 $ 4,516.74
(1)
Includes 600,000 shares of common stock that the underwriter has the option to purchase.
(2)
Estimated solely for the purpose of computing the amount of registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
(3)
The registrant previously paid $2,182.00 in connection with the initial filing of this registration statement.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JUNE 16, 2021
PRELIMINARY PROSPECTUS
4,000,000 Shares
[MISSING IMAGE: lg_miromatrixtm-4clr.jpg]
Miromatrix Medical Inc.
Common Stock
We are offering 4,000,000 shares of our common stock. This is our initial public offering and no public market currently exists for our common stock. We expect the initial public offering price to be between $7.00 and $9.00 per share. We have applied to list our common stock on the Nasdaq Capital Market under the symbol “MIRO”.
Investing in our common stock involves a high degree of risk. Please read “Risk Factors” beginning on page 13 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements for this prospectus and future filings.
PER SHARE
TOTAL
Initial public offering price
$ $
Underwriting discounts and commissions(1)
$ $
Proceeds, before expenses, to us
$       $      
(1)
We refer you to “Underwriting” beginning on page 148 for additional information regarding underwriter compensation.
We have granted the underwriter an option for a period of 30 days to purchase an additional 600,000 shares of our common stock at the initial public offering price, less discounts and commissions. If the underwriter exercises the option in full, the total underwriting discounts and commissions payable by us will be $2,576,000, and the total proceeds to us, before expenses, will be $34,224,000 based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on this cover page of the prospectus.
Delivery of the shares of common stock is expected to be made on or about                 , 2021.
Craig-Hallum
Prospectus dated                 , 2021

 
Table of Contents
Page
1
13
54
55
56
57
58
60
63
65
81
120
126
141
145
147
152
155
159
167
167
167
F-1
 
i

 
Neither we nor the underwriter have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We and the underwriter take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
Neither we nor the underwriter have done anything that would permit this offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any such free writing prospectus outside of the United States.
TRADEMARKS
“Miromatrix,” the Miromatrix logo and other trademarks, trade names or service marks of Miromatrix Medical Inc. appearing in this prospectus are the property of Miromatrix Medical Inc. All other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus may be referred to without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the rights of the applicable licensor to these trademarks and tradenames.
INVESTORS OUTSIDE THE UNITED STATES
For investors outside of the United States: neither we nor the underwriter have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.
 
ii

 
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, especially the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus. Unless the context otherwise requires, the terms “Miromatrix,” “the Company,” “we,” “us,” “our” and similar references in this prospectus refer to Miromatrix Medical Inc.
Overview
Our mission: Eliminate the organ transplant waiting list
We are a life sciences company pioneering a novel technology for bioengineering fully transplantable human organs to help save and improve patients’ lives. Organ disease is a major public health issue. According to the American Transplant Foundation there are an estimated 114,000 people in the United States waiting for a lifesaving organ transplant, and on average 20 people die daily due to lack of available organs. We have developed a proprietary perfusion technology platform for bioengineering organs that we believe will efficiently scale to address the shortage of available human organs. Our initial development focus is on human livers and kidneys, and we have demonstrated the ability to bioengineer these organs with functional vasculature and important organ function in preclinical studies. In addition, we believe our technology platform will be able to develop other organs, including lungs, pancreas, and hearts. We have collaborations with the Mayo Clinic, Mount Sinai and the Texas Heart Institute, and our strategic investors include DaVita, Baxter and CareDx.
Our proprietary perfusion decellularization and recellulariziation technology harnesses the powerful evolutionary forces shaping complex organ development and the regenerative capabilities of living human cells. We believe the organs we are developing could have significant functional and immunological advantages compared to other organ development techniques which rely on the genetic modification of animals cells, such as xenotransplantation. Our perfusion decellularization and recellularization technology platform includes 118 issued and 35 pending patent applications, with protection in the United States and major markets worldwide.

Decellularization.   The anatomical structure of organs is highly complex and enormously challenging to reproduce synthetically. We utilize porcine organs as the scaffold for creating human organs because significant anatomical and vascular similarities exist between the two species’ scaffolding. Using our proprietary perfusion decellularization process we remove the porcine cells from harvested porcine organs leaving behind a scaffold of extracellular matrix (“ECM”) that retains the architecture, mechanical properties, and vascular network of the original organ structure. Porcine ECM is estimated to be over 93% homologous to human ECM which significantly reduces potential for antibody formation and adverse reaction. In addition, we have generated human clinical data demonstrating the safety of our decellularized porcine liver scaffold in clinical trials of two products we previously developed, commercialized and spun out, Miromesh® and Miroderm®.

Recellularization.   Recellularization is the process of growing new functional organs starting with the ECM that remains after the decellularization process is completed. We currently use living human cells harvested from organ donors to re-seed the ECM, and in the future intend to develop new techniques using patient-derived stem cells. Living human cells are adaptive, and when introduced into the decellularized ECM display unique regenerative, plasticity, and adhesion properties. The process of recellularization occurs in a bioreactor where media and living human cells are perfused into the ECM in the appropriate sequence in order to facilitate cellular regeneration and organ functionality.
We hope to initiate our first Phase 1 clinical trial in late 2022 with our External Liver Assist Product (“ELAP System”), which we believe will be the first-ever study to assess the function of a bioengineered liver in humans. This study will utilize external liver assist devices in combination with our bioengineered
 
1

 
livers to provide external temporary liver support to human participants with acute liver failure. We hope to report interim results in early 2023. We plan to engage the Food and Drug Administration (“FDA”) to open separate Investigational New Drug Applications (“IND”) for bioengineered livers and kidneys. We would then proceed with additional Phase 1 clinical studies with full transplants of our bioengineered livers and kidneys to treat participants with liver failure and end-stage renal disease, respectively. We could potentially begin these additional studies in late 2023 or early 2024.
We previously developed and commercialized two medical device products using our proprietary perfusion decellularization technology: Miromesh®, primarily utilized for hernia repair applications, and, Miroderm®, indicated for a variety of advanced wound care applications. Miromesh and Miroderm received 510(k) clearances in 2014 with Miroderm receiving an additional 510(k) clearance in 2015. In order to focus all of our efforts on bioengineered human organs, which we believe is a much larger opportunity, we spun out the commercial acellular business as Reprise Biomedical, Inc. (“Reprise”) in June 2019 and subsequently divested our minority ownership stake in March 2021. We are entitled to a 6.5% royalty for sales of acellular products by Reprise through 2028. Thousands of patients have been implanted with Miromesh and Miroderm, demonstrating the safety of the base porcine liver scaffold and our perfusion decellularization technology. We believe this real-world use helps de-risk the development of our bioengineered organs and will accelerate our clinical development timetable.
Our Market Opportunity — Lead Liver and Kidney Programs
We estimate the price of our bioengineered livers and kidneys to be between $350,000 – $750,000 based on our expectations for (i) high transplant success rates, (ii) significantly improved patient outcomes and quality of life over a period of many years, and (iii) substantial healthcare economic benefits. Transplantation is the only potentially curative therapy for end-stage liver disease (“ESLD”) and end‑stage renal disease (“ESRD”), as patients with total liver failure die and the only treatment for renal failure is dialysis.
Implantable Bioengineered Liver
According to 2018 data from the Centers for Disease Control (“CDC”), in the U.S. there are approximately 4.5 million adults diagnosed with chronic liver disease and the primary causes are alcohol, nonalcoholic steatohepatitis, and viral hepatitis. Liver disease is the 12th leading cause of death in the U.S. with 44,358 deaths in 2019, according to the CDC. There are only approximately 8,000 livers available for transplant in the U.S. annually.
We estimate an initial $8.8 billion annual market for our bioengineered livers in the U.S. based on a $350,000 selling price (low end of our estimated price range) and an initial addressable population of 25,000 patients annually with severe forms of liver disease that can be treated with a bioengineered liver, and that are not otherwise able to be treated with a transplant given the limited supply of livers available for transplant. Over time we believe that our bioengineered livers will expand into less severe forms of chronic liver disease that are progressing and potentially causing comorbidities but are not yet life threatening.
Implantable Bioengineered Kidney
ESRD, which is the final stage of chronic kidney disease and 9th leading cause of death in the United States, affects an estimated 100,000 people each year in the U.S. These patients join the over 550,000 patients in the U.S. that either require chronic dialysis or dialysis while waiting for a kidney transplant. In 2018, there were more than 100,000 patients on the kidney transplant waitlist in the U.S. but only 21,000 received a transplant.
Medicare spending for both chronic kidney disease and ESRD was over $114 billion in 2018, representing approximately 23% of total Medicare spending. A commercially available bioengineered kidney could save the healthcare system billions of dollars annually.
We estimate an initial $26.3 billion annual market in the U.S. for our bioengineered kidneys based on a $350,000 selling price (low end of our estimated price range) and an initial addressable population
 
2

 
of 75,000 patients annually. Our initial addressable population is based on the current shortfall of waitlist kidneys, but we believe over time that we will expand into the broader dialysis population to improve patient quality of life. We believe this population of dialysis patients who opt for early transplant could be significant because the risk/benefit associated with our bioengineered kidney is potentially favorable. This is because our bioengineered kidneys are heterotopically implanted, and if the new graft is not successful the patient still has their existing organs and can continue dialysis for therapy.
Our Strengths
Our novel technology is supported by the following strengths, and driven by the expertise and vision of our experienced management team:

Our Decellularization Technology is Used for Two FDA-Cleared Medical Device Tissue Products.   We previously commercialized and spun out two FDA 510(k) medical device tissue products using our perfusion decellularization technology, which we believe are informative as to the safety risks associated with our base organ scaffold. Thousands of patients have been implanted with these medical device products to date, some with implants now exceeding five years in duration. We believe this real-word safety evidence will benefit the development of our bioengineered organ programs, but since we are pursuing a marketing approval pathway that is different than a medical device we cannot be assured that the FDA will deem our organ scaffold to be safe and effective in a bioengineered organ with living cells.

Our Recellularized Grafts Have Demonstrated Critical Organ Function.   Our preclinical studies have demonstrated patency and hepatocyte survival in heterotopic implants of our bioengineered livers in animal models and early function of our bioengineered kidneys in bench testing. In late 2020, we completed what we believe is the final major scientific milestone that was necessary to advance our first human study when we bioengineered livers with greater than 10 billion hepatocytes.

Our Technology Harnesses the Powerful Evolutionary Biology Shaping Complex Organ Development.   We use a hybrid approach for bioengineering organs that we believe is superior to competing technologies and will yield organs with high functionality and similar immunogenicity comparable to the current standard of care in human organ transplantation. We leverage the similarities between porcine and human organs to create a decellularized scaffold from a porcine organ and repopulate it with organ-specific human cells. We believe living human cells are functionally superior to cells produced by extensively modifying the pig genome, and significantly reduce the risk of severe immune reactions and organ rejection.

Scalable, Multi-Organ Technology.   Our processes and technology are modular, and we believe scalable with increased square footage and additional qualified manufacturing technicians. In addition to livers and kidneys, we also believe our technology platform can be utilized to bioengineer lungs, pancreas, hearts, and potentially other internal organs or vascularized tissues.

Pursuing an Efficient Regulatory Pathway.   The regulatory process associated with xenotransplantation requires extensive preclinical testing, safety studies, and long-term patient monitoring and follow-up. We do not believe our bioengineered organs will be classified as xenotransplants and believe they will be classified as biologics or potentially combination products, and we believe that either classification will lead to a more efficient regulatory pathway than if they were to be classified as xenotransplants. The FDA defines xenotransplantation as any procedure that involves the transplantation, implantation or infusion into a human recipient of either (a) live cells, tissues, or organs from a nonhuman animal source, or (b) human body fluids, cells, tissues or organs that have had ex vivo contact with live nonhuman animal cells, tissues or organs. The guidance also specifically states that xenotransplantation does not include transplantation, implantation, or other use of acellular animal tissues. During our decellularization process we remove all animal cells and the acellular scaffold is recellularized with living human cells, which we believe will lead regulators to determine that our bioengineered organs are not xenotransplants. However, neither the FDA nor any other regulator has provided us with feedback indicating what classification our product candicates will be classified as. Further, as
 
3

 
part of our regulatory pathway we will need to seek an exemption from the FDA for the cGTP prohibition against pooling cells from two or more donors during manufacturing.

We Are Targeting an Established Market in Need of More Organs.   The organ transplant market is mature and the infrastructure today for transporting organs, transplanting organs, and caring for transplant patients can support more procedures, but the limiting factor is the availability of donor organs. This year there are over 110,000 patients on the organ transplant waiting list, and by the end of the year, as many as 70,000 patients in the U.S. who were prescreened and listed for an organ, will still not have received one.

Potential Cost-Savings to Healthcare Systems.   We believe our bioengineered organs will eventually help the healthcare system realize billions of cost savings annually. For example, according to the American Journal of Transplantation, an estimated $1.5 million dollars is saved by the health care system for each kidney transplant compared to hemodialysis therapy.

Collaborations with World-Class Medical Institutions.   We have active collaboration and pre-clinical research programs with the Mayo Clinic, Mount Sinai and the Texas Heart Institute. These organizations are highly regarded in the field of transplantation and regenerative medicine with significant resources.

Robust IP Portfolio Including Foundational Patents.   We have 118 issued patents worldwide, with seven issued patents in the U.S. market covering our core technology and applications, which are expected to expire from about 2026 through about 2036 without taking into account any possible extensions. In addition, we have over 35 patent applications at various stages.

Experienced Leaders and Talented Workforce.   Our management includes experienced leaders with demonstrated records of success at Miromatrix and other highly regarded industry participants. We believe the quality of our team positions us well to execute on our mission and commercialize our bioengineered organs.
Our Growth Strategy
Our goal is to develop high-quality bioengineered organs and be first to market with an alternative to organ donation. The key elements of our strategy include:

Build upon our strong technology position

Advance clinical development of our lead bioengineered kidney and liver products

Expand our organ development pipeline

Form and grow our collaborations and partnerships

Maintain excellence in manufacturing and quality control

Scale our teams and facilities to meet future demands

Expand our IP portfolio
Clinical Development Strategy
We believe that our bioengineered organs have the potential for significant functional and immunological advantages compared to other emerging technologies for bioengineering organs. Importantly, we believe regulators will likely determine that our bioengineered organs will not be considered xenotransplants because all animal cells are removed and the organ is re-seeded with living human cells, and we believe this will shorten our regulatory pathway and overall development timetable.
We have approached our clinical development in a stepwise manner and are building towards our first human study with our implanted bioengineered human organ:

Our first step was to demonstrate our decellularization technology and the ability to reproducibly create acellular organ matrices devoid of cellular and other unwanted biologic materials, which was completed when we launched Miromesh and Miroderm;
 
4

 

Our next step is to demonstrate function of our bioengineered organs in humans. We believe it is important to first demonstrate this function outside of the patient’s body, and if successful it will expedite our clinical pathway to full organ transplantation. We are intending to file an IND submission in late 2022 for the use of our ELAP System to treat acute liver failure. Currently there are no approved device or pharmacological interventions for acute liver failure and approximately 30% of adults with this disease die within seven days of presenting. We are hopeful that the FDA will agree to a pathway for our ELAP System that will result in us being able to begin this study soon given the great unmet medical need and because our bioengineered livers will be used outside the body (potentially lowers risk to the patient);

We intend to use the data from our first human study using the ELAP System, as well as additional preclinical data we intend to generate, to file INDs and begin Phase 1 studies for transplant of our bioengineered livers and kidneys in humans, which could potentially begin in late 2023 or early 2024.
We believe FDA registrational trials for conditional marketing approval of our bioengineered organs will be manageable in size with 100 patients or less and for ethical reasons will not include a control group. In the case of an orthotopic liver transplant, the clinical efficacy endpoint will be measured based on the survival of patients, who will be in the advanced stages of liver disease and will need a functioning liver to survive. Similarly, the endpoint in a heterotopic kidney implant will be measured by whether or not the patient requires continued hemodialysis, and as such, results will be known soon after the procedures.
Risks Associated with Our Business
Our business is subject to numerous risks, as more fully described in the section titled “Risk Factors” immediately following this prospectus summary. You should read these risks before you invest in our common stock. In particular, risks associated with our business include, but are not limited to, the following:

we have incurred significant net losses since inception and we expect to incur net losses in the future;

the development and commercialization of biopharmaceutical products is subject to extensive regulation, and the regulatory approval processes of the FDA are lengthy, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates on a timely basis if at all, our business will be substantially harmed;

we currently do not have, and may never develop, any FDA-approved, licensed or commercialized products and we may never be able to commercialize our technology. Our business depends entirely on the successful development of our product candidates, which are still in the pre-clinical phase of development and have never been tested on humans, with our recellularized kidney product candidate having only been subject to bench testing;

we may experience delays in commencing and successfully completing our clinical trials;

if we are able to commercialize any of our product candidates, their commercial success will largely depend upon attaining significant market acceptance;

our current product candidates utilize biological components obtained from animals that could prevent or restrict the development and commercialization of those product candidates;

our product candidates may be considered combination products, which may result in additional regulatory and other risks;

if we are unable to obtain and maintain patent and other intellectual property protection for any of our new organ candidates we develop, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop may be adversely affected;
 
5

 

current and future legislation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize our product candidates and affect the prices we, or they, may obtain;

even if we are able to commercialize any product candidate, coverage and adequate reimbursement may not be available or such product candidate may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, which would harm our business;

we may not be able to scale our manufacturing to support our future plans;

the sizes of the markets for our future products may be smaller than we estimate. Our results of operations could be materially harmed if we are unable to accurately forecast addressable markets for our product candidates and manage our inventory;

we have limited cash resources and will likely require additional financing to achieve commercialization of our products;

we currently have no marketing and sales organization. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our products, we may not be able to generate future product revenue; and

our business may be adversely affected by global health epidemics, including the COVID-19 pandemic.
Recent Developments
On May 3, 2021, we entered into a stock purchase agreement with certain investors (together, the “Investors”), under which we agreed to sell an aggregate of 2,666,667 shares of Series C Convertible Preferred Stock to the Investors, at a price per share of $7.50, for an aggregate purchase price, before fees and expenses, of $20.0 million (the “Private Placement”). The Private Placement closed on May 21, 2021. As part of the Private Placement, we sold 2,000,000 shares of Series C Preferred Stock to Baxter Healthcare Corporation, an affiliate of Baxter International Inc. (“Baxter”), for an aggregate purchase price of $15.0 million and 666,667 shares of Series C Preferred Stock to CareDx, Inc. (“CareDx”) for an aggregate purchase price of approximately $5.0 million. In connection with the Private Placement, we also entered into a side letter with each of the Investors, which provide customary piggyback and demand registration rights. See “Description of Capital Stock — Registration Rights” for a further description of such registration rights.
On May 21, 2021, we entered into a memorandum of understanding with CareDx related to future collaboration on certain research and development activities and the sourcing of certain CareDx materials and technology.
Baxter is a leading global medical products company that specializes in the treatment of kidney disease, among other chronic and acute medical conditions. CareDx is a leading precision medicine company focused on the discovery, development, and commercialization of clinically differentiated, high-value healthcare solutions for transplant patients and caregivers.
Corporate Information
We were incorporated in Delaware in 2009. Our principal executive offices are located at 10399 West 70th Street, Eden Prairie, MN 55344, and our telephone number is (952) 942-6000. Our website address is www.miromatrix.com. The information contained on, or accessible through, our website is not incorporated by reference into this prospectus, and you should not consider any information contained in, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock.
Implications of Being an Emerging Growth Company
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, as amended. We will remain an emerging growth company until the earliest to occur of: the last
 
6

 
day of the fiscal year in which we have more than $1.07 billion in annual revenue; the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; the issuance, in any three-year period, by us of more than $1 billion in non-convertible debt securities; and the last day of the fiscal year ending after the fifth anniversary of our initial public offering. We refer to the Jumpstart Our Business Startups Act of 2012 herein as the “JOBS Act,” and any reference herein to “emerging growth company” has the meaning ascribed to it in the JOBS Act.
As an emerging growth company, we may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus;

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;

reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We have elected to take advantage of certain of the reduced disclosure obligations in this prospectus and may elect to take advantage of other reduced reporting requirements in our future filings with the U.S. Securities and Exchange Commission, (the “SEC”). The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected to avail ourselves of this exemption. As a result of these elections the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
 
7

 
THE OFFERING
Common stock offered by us
4,000,000 shares
Common stock to be outstanding immediately after this offering
17,769,108 shares (18,369,108 shares if the underwriter exercises its option to purchase additional shares) based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus.
Underwriter’s option to purchase additional shares
600,000 shares
Use of proceeds
We estimate that the net proceeds from this offering will be approximately $28.2 million (or approximately $32.6 million if the underwriter exercises in full its option to purchase up to 600,000 additional shares of common stock), based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We currently intend to use the net proceeds from this offering for: (i) research and development activities, which may include clinical trials for our bioengineered organs, (ii) expenditures related to a new facility, (iii) repayment of the Cheshire Note to the extent not converted prior to the completion of this offering and (iv) the remaining funds, if any, for working capital and general corporate purposes.
See “Use of Proceeds” for additional information.
Risk factors
You should read the section titled “Risk Factors” for a discussion of factors to consider carefully, together with all the other information included in this prospectus, before deciding to invest in our common stock.
Proposed Nasdaq Capital Market
symbol
“MIRO”
The number of shares of our common stock to be outstanding immediately after this offering is based on 13,769,108 shares of common stock outstanding as of June 1, 2021, after giving effect to the automatic conversion of all our convertible preferred stock into an aggregate of 11,439,536 shares of our common stock immediately prior to the completion of this offering based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus and excludes:

3,503,755 shares of our common stock issuable upon the exercise of stock options as of June 1, 2021, at a weighted-average exercise price of $3.28 per share;

559,191 shares of our common stock issuable upon the exercise of warrants as of June 1, 2021, at a weighted average exercise price of $2.30 per share;

1,559,500 shares of our common stock that remain available for issuance as of June 1, 2021 under our 2021 Plan, from which we expect to grant equity awards relating to up to 198,750 shares of common stock in connection with this offering based on an assumed initial offering price of $8.00 per share, which is the midpoint of the price range shown on the cover page of this
 
8

 
prospectus, with grant date fair values based on the initial public offering price as determined on the effective date of the registration statement of which this prospectus forms a part, as further described in the section entitled “Executive and Director Compensation”;

300,000 shares of our common stock available for issuance as of June 1, 2021 under our 2021 Employee Stock Purchase Plan;

the optional conversion of $7,104,329 outstanding under our convertible promissory note (the “Cheshire Note”) issued to Cheshire MD Holdings LLC (“Cheshire”),which is the aggregate amount of principal and accrued interest on the Cheshire Note as of June 1, 2021, into an aggregate of 947,243 shares of our Series C Preferred Stock, that would be convertible into 1,110,051 shares of our common stock immediately prior to the completion of the offering based on an assumed initial offering price of $8.00 per share, which is the midpoint of the price range shown on the cover page of this prospectus. The number of shares of Series C Preferred Stock Cheshire will receive upon conversion of the Cheshire Note is calculated by dividing the aggregate amount of principal and accrued interest outstanding under the Cheshire Note by $7.50, which is the lowest price paid for shares of Series C Preferred Stock in the Private Placement, and the number of shares of common stock Cheshire will receive upon conversion of these shares of Series C Preferred Stock into common stock is calculated by multiplying the assumed initial offering price by 80% and dividing such price by $7,104,329, which is the aggregate amount of principal and accrued interest on the Cheshire Note aggregate price as of June 1, 2021. The Cheshire Note bears interest at a rate of 20% per annum. For each day subsequent to June 1, 2021 the Cheshire Note is outstanding, the interest on the Cheshire Note increases by $3,287.67, increasing the number of shares of common stock issuable to Cheshire upon conversion of the Cheshire Note by 513, based on an assumed initial offering price of $8.00 per share, which is the midpoint of the price range shown on the cover page of this prospectus. A $1.00 increase in the assumed initial public offering price would decrease the number of shares of common stock Cheshire would receive by 160,707 and a $1.00 decrease in the assumed initial public offering price would increase the number of shares of common stock Cheshire would receive by 160,707, assuming a closing of this offering of June 30, 2021, and the conversion of the Cheshire Note immediately prior to such closing; and

the automatic conversion of our warrants issued to Cheshire (the “Cheshire Warrants”) into warrants to purchase shares of common stock. Pursuant to the terms of the Cheshire Warrants, in the event Cheshire converts the Cheshire Note into shares of Series C Preferred Stock, the Cheshire Warrants become exercisable for shares of Series C Preferred Stock. In connection with the closing of this offering, the shares of Series C Preferred Stock issuable upon exercise of the Cheshire Warrants would convert into shares of common stock calculated by multiplying the assumed initial offering price by 80% and dividing such price by $1,800,000, which is the face amount of the Cheshire Warrants as of June 1, 2021. In the event this offering is not completed by June 30, 2021, we would issue Cheshire an additional warrant with a face value of $75,000, thereby increasing the number of shares of common stock ultimately issuable upon exercise of the Cheshire Warrants by 11,719, based on an assumed initial offering price of $8.00 per share, which is the midpoint of the price range shown on the cover page of this prospectus. A $1.00 increase in the assumed initial public offering price would decrease the number of shares of common stock Cheshire would receive upon exercise of the Cheshire Warrants, assuming the closing of this offering on or before June 30, 2021, by 31,250, and a $1.00 decrease in the assumed initial public offering price would increase the number of shares of common stock Cheshire would receive upon exercise of the Cheshire Warrants by 31,250, assuming the closing of this offering on or before June 30, 2021. In the event the Cheshire Warrants become exercisable, they would have an exercise price of $7.50 per share of Series C Preferred Stock. Because the Cheshire Warrants expire if they are not exercised prior to closing, they cannot be exercised for common stock, however, the Series C Preferred Stock that Cheshire would receive upon exercise prior to closing will convert into common stock immediately prior to closing as set forth in the formula described above.
 
9

 
Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:

the automatic conversion of all our preferred stock outstanding into an aggregate of 11,439,536 shares of our common stock immediately prior to the completion of the offering based on an assumed initial offering price of $8.00 per share, which is the midpoint of the price range shown on the cover page of this prospectus;

such automatic conversion includes 3,125,000 shares of common stock our Series C Preferred stockholders (“Series C Holders”) will receive upon the automatic conversion, based on an assumed initial offering price of $8.00 per share, which is the midpoint of the price range shown on the cover page of this prospectus. The number of shares such Series C Holders will receive upon automatic conversion is calculated by multiplying the assumed initial offering price by 80% and dividing such price by $20.0 million, which is the aggregate price the issued and outstanding Series C Preferred Stock were purchased for. A $1.00 increase in the assumed initial public offering price would decrease the number of shares of common stock the Series C Holders would receive by 347,222 and a $1.00 decrease in the assumed initial public offering price would increase the number of shares of common stock the Series C Holders would receive by 446,429;    

such automatic conversion also includes 8,314,536 shares of common stock our Series A, B and B-2 Preferred stockholders (“Non-Series C Holders”) will receive upon the automatic conversion, based on an assumed initial offering price of $8.00 per share, which is the midpoint of the price range shown on the cover page of this prospectus. The number of shares such Non-Series C Holders will receive is based upon a 1:1 conversion ratio. A $1.00 increase or decrease in the assumed initial public offering price would not effect on the number of shares that Non-Series C Holders would receive;

no exercise of the outstanding options or warrants described above, including the Cheshire Warrants; and

no exercise by the underwriter of its (i) option to purchase up to 600,000 additional shares of our common stock or (ii) the warrants to purchase shares of our common stock at an exercise price per share equal to 110% of the initial public offering price per share or $8.80, based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, that will be issued to the underwriter in connection with this offering (the “Underwriter’s Warrants”).
 
10

 
SUMMARY FINANCIAL DATA
The following tables set forth our summary statements of operations data for the years ended December 31, 2020 and 2019, which we have derived from the financial data from our audited financial statements included elsewhere in this prospectus. The summary statements of operations data for the three months ended March 31, 2021 and 2020 and the summary balance sheet data as of March 31, 2021 are derived from our unaudited interim financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. The following summary financial data should be read with the sections titled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus.
Year ended December 31,
Three Months Ended March 31,
2019
2020
2020
2021
Statement of Operations:
Licensing revenue
$ 250,000 $ 46,530 $ 11,088 $ 6,108
Cost of goods sold
250,000 500,000 125,000 125,000
Gross margin
(453,470) (113,912) (118,892)
Operating expenses:
Research and development
6,266,670 7,280,798 1,801,378 1,868,001
Regulatory and clinical
289,020 265,885 73,106 83,705
Quality
149,199 85,787
General and administrative
2,435,974 2,109,196 465,663 562,874
Total operating expenses
8,991,664 9,805,078 2,340,147 2,600,367
Operating loss from continuing operations
(8,991,664) (10,258,548) (2,454,059) (2,719,259)
Other income (expense):
Interest income
106,428 8,733 5,863 40
Interest expense
(48,385) (656,552) (37,175) (305,374)
Amortization of discount on note
(108,620) (10,862) (32,586)
Change in fair value of derivative
(51,446) 193,971
Research grants
431,880 992,144 180,000 150,537
Loss from continuing operations
(8,501,741) (10,074,289) (2,316,233) (2,712,671)
Gain on equity investment
4,495,500
Equity loss in affiliate
(1,025,000) (2,358,392) (640,000) (223,633)
Gain on sale of equity investment
2,123,113 1,983,912
Gain on debt extinguishment
518,050
Gain on disposal of discontinued operations
1,802,555
Loss from discontinued operations
(818,113)
Net loss
$ (4,046,799) $ (10,309,568) $ (2,956,233) $ (434,342)
Net loss per common share
Basic and diluted
$ (1.98) $ (4.76) $ (1.40) $ (0.19)
Weighted average common shares outstanding, basic and diluted
2,043,356 2,165,105 2,108,981 2,255,378
Pro forma net loss per common share basic and diluted (unaudited)
$ (0.98) $ (0.04)
 
11

 
Year ended December 31,
Three Months Ended March 31,
2019
2020
2020
2021
Pro forma weighted average shares outstanding, basic and diluted (unaudited)
10,479,641 10,569,914
As of March 31, 2021
Actual
Pro Forma(2)
Pro Forma As
Adjusted(3)(4)
Balance Sheet Data:
Cash and cash equivalents
$ 4,263,528 $ 24,263,530 $ 52,413,530
Working capital (deficit)(1)
(3,538,077) 16,461,925 44,611,925
Total assets
5,364,528 25,364,530 53,514,530
Total liabilities
10,009,372 10,009,372 10,009,372
Convertible preferred stock
46,661,490 0 0
Total stockholders’ deficit
(51,306,334) 15,355,158 43,505,158
(1)
Working capital is calculated as current assets minus current liabilities.
(2)
The pro forma balance sheet gives effect to (i) the receipt by us of $20.0 million in the Private Placement and (ii) the automatic conversion of all our preferred stock outstanding into an aggregate of 11,439,536 shares of our common stock immediately prior to the completion of this offering based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus.
(3)
Reflects the pro forma adjustments set forth above and the issuance and sale of shares of 4,000,000 shares of common stock in this offering at an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(4)
Each $1.00 increase (decrease) in the assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders’ (deficit) equity, by approximately $3.7 million, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders’ (deficit) equity, by approximately $7.4 million, assuming the assumed initial public offering price of $8.00 per share remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
 
12

 
RISK FACTORS
Investing in our common stock involves a high degree of risk. These risks include, but are not limited to, those described below, each of which may be relevant to an investment decision. You should carefully consider the risks described below, together with all of the other information in this prospectus, including our financial statements and related notes, before investing in our common stock. While we believe that the risks and uncertainties described below are the material risks facing our business, additional risks that we do not know of or that we currently think are immaterial may also arise and materially affect our business. The realization of any of these risks could have a material adverse effect on our business, financial condition, results of operations, and our ability to accomplish our strategic objectives. In that event, the trading price of our common stock could decline, and you may lose part or all of your investment.
Risks Related to Our Limited Operating History, Financial Position and Capital Requirements
We have incurred significant net losses since inception and we expect to incur net losses in the future.
We have incurred significant net losses since our incorporation and expect to incur losses for the foreseeable future. We continue to incur significant research and development and other expenses related to our ongoing operations. For the years ended December 31, 2019 and 2020, we had net losses of $4.0 million and $10.3 million, respectively, and $3.0 million and $0.4 million for the three months ended March 31, 2020 and 2021, respectively. As of March 31, 2021, we had an accumulated deficit of $59.8 million. We have devoted substantially all of our resources and efforts to research and development and we expect that it will be many years before we generate revenue from product sales from our whole organ program, and we may never generate revenue. Even if we receive marketing approval for and commercialize one or more of our whole organ product candidates, we expect that we will continue to incur substantial research and development and other expenses in order to develop and market additional potential product candidates, and as a result, we may never achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on an ongoing basis. If we do achieve or sustain profitability, it will be more difficult for us to finance our business and accomplish our strategic objectives, either of which would have a material adverse effect on our business, financial condition and results of operations and may cause the market price of our common stock to decline.
We have a limited operating history, which may make it difficult to evaluate our prospects.
We are a life science company with a limited operating history. Although we previously commercialized the Miromesh and Miroderm products in 2014 and 2015, respectively, we do not have a long history as a company with commercialized products. We are now focusing our research and development efforts on our whole organ programs. We have not yet submitted a Biologics License Application (“BLA”) for approval, nor an IND to begin investigational studies on humans, and further we have not yet achieved approval for commercial sale for any whole organ product candidate. As a result, we have no meaningful history of operations upon which to evaluate our business, and predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing products that are comparable to our historical product candidates. Investing in biologic product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate an adequate safety, purity and potency profile, gain regulatory approval and become commercially viable. We do not know whether we will be able to achieve approval for or commercialize any of our whole organ or other product candidates. All of our current and future product candidates, if any, will require substantial additional development, clinical research time and resources before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales, if we are able to generate revenue at all. As a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced by early-stage life science companies in rapidly evolving fields.
 
13

 
We have limited cash resources and will likely require additional financing to achieve commercialization of our products.
We believe that in order to be successful, we must grow and expand our operations. We will likely require substantial additional capital in the future to further our research and development efforts and other operating activities to develop products that can be commercialized to generate revenue. Delays in obtaining additional funding could adversely affect our ability to move forward with additional studies.
We have historically relied upon proceeds from the private placements of our equity securities to fund our business and operations. In the future, we may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. If we raise additional funds through the issuance of equity or debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates or grant licenses on terms that are not favorable to us.
Our ability to obtain additional financing will be subject to many factors, including market conditions, our operating performance and investor sentiment. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates, restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, financial condition, results of operations and may cause the market price of our common stock to decline.
The report of our independent registered public accounting firm includes a “going concern” explanatory paragraph.
The report of our independent registered public accounting firm on our consolidated financial statements as of and for the year ended December 31, 2020 includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern. If we are unable to raise sufficient capital in this offering or otherwise when needed, our business, financial condition and results of operations will be materially and adversely affected, and we will need to significantly modify our operational plans to continue as a going concern. If we are unable to continue as a going concern, we might have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our consolidated financial statements. The inclusion of a going concern explanatory paragraph by our auditors, our lack of cash resources and our potential inability to continue as a going concern may materially adversely affect our share price and our ability to raise new capital or to enter into critical contractual relations with third parties.
Risks Related to the Development and Commercialization of our Products
We currently do not have, and may never develop, any FDA-approved, licensed or commercialized products and we may never be able to commercialize our technology. Our business depends entirely on the successful development of our product candidates, which are still in the pre-clinical phase of development and have never been tested on humans, with our recellularized kidney product candidates having only been subject to bench testing.
We do not currently have any FDA-approved, licensed or commercialized products. We have not yet sought regulatory approvals for any of our whole organ product candidates in the United States or in any foreign market. Our lead product candidates are still in pre-clinical development and have never been tested in humans, with our recellularized kidney product candidate having only been subject to bench testing. Our interpretation of data and results from the studies we have completed to date do not
 
14

 
ensure that we will be able to initiate human clinical trials or achieve positive results in future clinical trials. In addition, pre-clinical data are often susceptible to various interpretations and analyses, and many companies that have believed their products performed satisfactorily in pre-clinical studies have nonetheless failed to replicate results in clinical trials. Significant additional research and development activity and clinical testing are required before we will have a chance to achieve a viable product for commercialization from such candidates. Our research and development efforts remain subject to all the risks associated with the development of new biopharmaceutical products and treatments, including but not limited to unanticipated technical or other problems and the possible insufficiency of funds needed in order to complete development of these product candidates. As further described below, safety, regulatory and efficacy issues, clinical hurdles or other challenges may result in delays and cause us to incur additional expenses that would increase our losses. If we cannot complete, or if we experience significant delays in developing, our products for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail, and investors may lose the entirety of their investment.
Moreover, our business currently depends entirely on the successful development, regulatory approval, and licensing or commercialization of our product candidates, which is subject to various risks more fully described below, and may never occur. To develop any products that might be licensed or commercialized in the future, we will have to invest further time and capital in research and product development, regulatory compliance and market development, and we may never develop any additional products that can be approved, licensed or commercialized. Further, although we have achieved significant milestones with regards to our bioengineered kidney and liver, we still need to complete additional research and development in order to have products that are ready to be used as organ transplants in human clinical trials. Most biologic candidates never reach the clinical development stage and even those that do commence clinical development have only a small chance of successfully completing clinical development and gaining regulatory approval.
The successful discovery, development, manufacturing, and sale of biologics is a long, expensive, and uncertain process and carries unique risks and uncertainties.
The successful development, manufacturing, and sale of biologics is a long, expensive, and uncertain process and the process has unique risks and uncertainties. We are not permitted to market our product candidates in the United States until we receive approval of a BLA from the FDA, or in any foreign countries until we receive the requisite approval from such countries. Biological products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country. For example, access to and supply of necessary biological materials, such as cell lines, may be limited and governmental regulations restrict access to and govern the transport and use of such materials. In addition, the testing, development, approval, manufacturing, distribution, and sale of biologics is subject to applicable provisions of the Federal Food, Drug, and Cosmetic Act (“FFDCA”), the Public Health Service Act (“PHSA”) and regulations issued thereunder that are often more complex and extensive than the regulations applicable to other pharmaceutical products or to medical devices. Manufacturing biologics, especially in large quantities, is often complicated and may require the use of innovative technologies. Such manufacturing also requires specifically designed and validated facilities and sophisticated quality assurance and quality control procedures. Biologics are also frequently costly to manufacture because production inputs are derived from living animal or plant material, and some biologics cannot be made synthetically. Failure to successfully discover, develop, manufacture, and sell biologics could adversely impact our business, operating results, and financial condition.
Further, to successfully commercialize our product candidates, we also will be required to expand, train and manage our employee base, particularly skilled technical, management and marketing personnel within a short time period. We will also be required to scale our manufacturing capabilities, and eventually, once our product candidates are cleared for commercial use, our sales and marketing capabilities. Rapid growth also would require an increase in the level of responsibility for both existing and new management and would require us to implement and improve operational, financial and management information procedures and controls. Our inability to adequately manage growth could have a material adverse effect on our business and prospects.
 
15

 
We may experience delays in commencing and successfully completing our clinical trials.
We may experience delays in initiating our clinical trials, which could significantly increase our product development costs and delay product commercialization. The commencement of clinical trials may be delayed for a variety of reasons, including the delays in:

demonstrating sufficient safety, purity and potency to be permitted to commence a clinical trial;

developing a stable formulation of a product candidate;

manufacturing sufficient quantities of a product candidate;

securing and maintaining relationships with third parties for preclinical and clinical development studies;

our or third-party compliance with good clinical practices (“GCPs”) and current Good Tissue Practices (“cGTPs”);

obtaining institutional review board approval to conduct a clinical trial at a prospective site;

being permitted by the FDA or other regulatory authorities to initiate our clinical trials due to questions regarding the scope or design of our clinical trials,

imposition of a clinical hold as a result of inspection of the clinical operations or study sites or nonclinical or clinical safety operations; and

funding shortages or other disruptions within the FDA and other regulatory agencies that affect their ability to perform routine functions and review biologics.
In addition, because our bioengineered liver will contain human cells from more than one donor, if we are unable to obtain an exemption from the FDA for the cGTP prohibition against pooling cells from two or more donors during manufacturing, we would be unable to initiate clinical trials of our bioengineered liver. Further, given that our clinical trials will be conducted with patients in advanced disease states, there is a risk that unexpected deaths could halt the clinical trial process. Even if we are able to commence clinical trials and our initial clinical trials are successful, we are required to conduct additional clinical trials to establish our product candidates’ safety, purity and potency before submitting a BLA. Success in early phases of pre-clinical and clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial do not necessarily predict final results. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates. Moreover, there is no guarantee that our clinical trials will be successful or that we will continue clinical development in support of such approvals.
Our current product candidates utilize biological components obtained from animals that could prevent or restrict the development and commercialization of those product candidates.
Our current product candidates use biological components obtained from animals, including our decellularized porcine scaffold. As a result, our product candidates could be deemed to involve xenotransplantation (transplantation from animals to humans). No xenotransplantation clinical trials have occurred to date and based on FDA guidance as of the date of this prospectus, we believe the regulatory approval process for xenotransplantation would be extremely complex and difficult. There are also regulatory and safety concerns surrounding the risk of infectious agents and possible transmission to the general population through xenotransplantation. Although we believe our technology overcomes the primary challenges associated with genetically modified xenotransplants, mainly because our product candidates are revascularized using living human cells as opposed to genetically modifying the genome of a pig, the FDA and other regulatory authorities may find our product candidates are xenotransplants and are thus subject to regulations and other laws regarding xenotransplantation. The additional regulations governing xenotransplantation could delay or prevent our ability to receive regulatory approval or commercialize our product candidates.
 
16

 
Our product candidates may be considered combination products, which may result in additional regulatory and other risks.
The FDA may view a bioengineered organ as a combination product comprised of a human cell, tissue, and cellular and tissue-based product (“HCT/P”) and a medical device. In this case, each component of the product candidate would be subject to FDA requirements for that type of component. As a result, FDA approval of a product candidate classified as a combination product may require multiple marketing applications, such application determination determined on a case-by-case basis. Although a single marketing application may be sufficient for the approval of a combination product, the FDA may determine that separate marketing applications are necessary. If we are required to submit multiple marketing applications, we could experience delays due to regulatory timing constraints and uncertainties in the product development and approval process, as well as coordination between two different centers within the FDA responsible for review of the different components of the combination product.
If we encounter difficulties enrolling patients in our future clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
Even if we are permitted to begin clinical trials, we may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. The timely completion of clinical trials in accordance with their protocols will depend, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. The enrollment of patients depends on many factors, including:

the patient eligibility and exclusion criteria defined in the protocol;

the willingness or availability (including legality under applicable COVID-19 regulations, if applicable) of patients to participate in our trials;

the size of the patient population required for analysis of the trial’s primary endpoints and the process for identifying patients;

the proximity of patients to trial sites;

our ability to recruit clinical trial investigators with the appropriate competencies and experience;

the design of the trial;

clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new products that may be approved for the indications we are investigating;

the availability of competing commercially available therapies and other competing product candidates’ clinical trials; and

the risk that patients enrolled in clinical trials will drop out of the trials before completion whether due to medical complications from advance disease states or otherwise.
We may encounter difficulties enrolling subjects in our future clinical trials due, in part, to defined inclusion and exclusion criteria, effect on their transplant list status, and reluctance to try an unproven therapy, among others. Additionally, any future clinical trials for our organ program will necessarily involve major surgeries, which some members of the relevant patient populations may be hesitant to undertake.
If we are unable to enroll patients in any clinical trials we conduct in the future, in accordance with our planned timelines, it could constitute a significant setback to our product development and path to commercializing our product candidates.
We may be unable to process organ products in quantities sufficient for clinical trials or a commercial launch.
We may encounter difficulties in producing our organ products. Processing of tissue and organs involves strict adherence to complex manufacturing and storage protocols and procedures. Future difficulties may arise which limit our production capability and delay progress in our clinical trials.
 
17

 
Moreover, we have no current experience in manufacturing our fully recellularized whole organs for human patients and we are not aware of any party that manufactures products similar to ours. As a result, if we are not able to successfully manufacture our products, it would have a material adverse effect on our business and cause us to cease operations.
Our supply of raw materials for use in preclinical activities and manufacturing our product candidates may be vulnerable to disruption.
Our process includes cellular and acellular components. Disruptions from suppliers for the starting porcine materials, decellularization chemicals, cell culture media, cell culture supplies, laboratory supplies, cell culture media components, release testing analytical components or other raw materials utilized in our development and manufacturing could constitute a significant setback to our product development and path to commercializing our product candidates.
Even if we obtain approval of our product candidates, our biologic products may be subject to competition from biosimilars. Further, we may be unable to compete successfully with larger competitors in our highly competitive industries.
Even if we are able to successfully develop biologics in the future, the Biologics Price Competition and Innovation Act, (“BPCIA”), created a framework for the approval of biosimilars in the United States that could allow competitors to reference data from any future biologic products for which we receive marketing approvals and otherwise increase the risk that any product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
In addition, there is a risk that any of our product candidates regulated as a biologic and licensed under a full BLA, would not qualify for FDA exclusivity or that such exclusivity could be shortened due to congressional action or otherwise, potentially creating the opportunity for competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
In Europe, the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years. In addition, companies are developing biosimilars in other countries that could compete with any biologic products that we develop. If competitors are able to obtain marketing approval for biosimilars referencing any biologic products that we develop, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.
While we are not aware of any other company developing bioengineered whole organs based on perfusion decellularization and recellularization, we believe our technology will compete with other technologies including xenografts, immersion decellularization, 3D printing and direct implantation of animal organs, as well as other therapeutic (i.e., non-transplant) options for the indications which we attempt to address. Certain companies with these products and technologies are significantly larger than us and have much greater financial, marketing and other resources than we do. Accordingly, we may not be able to compete successfully against existing or new competitors which would have a material adverse effect on our business.
Our competitors with greater financial resources could also acquire other companies to gain enhanced name recognition and market share, as well as new technologies or products that could effectively compete with our future products, which may harm our business. Our competitors also compete with us in recruiting and retaining qualified scientific, management and commercial personnel, as well as in acquiring technologies complementary to, or necessary for, our product candidates. Because of the complex and technical nature of our product candidates and the dynamic markets in which we will compete, any failure to attract and retain a sufficient number of qualified employees could materially harm our ability to develop and commercialize our products, which would have a material adverse effect on our business, financial condition and results of operations. See “Business — Competition.”
 
18

 
While we are not aware of any other company developing bioengineered whole organs based on perfusion decellularization and recellularization, we believe our technology will compete with other technologies including xenografts, immersion decellularization, 3D printing and direct implantation of animal organs, as well as other therapeutic (i.e., non-transplant) options for the indications which we attempt to address. See “Business — Competition.” If we are unable to compete successfully with these alternative companies or technologies, our results will suffer.
Moreover, the biologics industry is characterized by rapid and significant change. There can be no assurance that other companies will not succeed in developing or marketing devices and products that are more effective than any products that we may offer in the future or that would render any such products obsolete or noncompetitive. Additionally, new surgical procedures, medications and other therapies could be developed that replace or reduce the importance of our future products. Accordingly, our success will depend in part on our ability to respond quickly to medical and other changes through the development and introduction of new products. Product development involves a high degree of risk, and there can be no assurance that our new product development efforts will result in any commercially successful products.
If we are able to commercialize any of our product candidates, their commercial success will largely depend upon attaining significant market acceptance.
Even if we are able to receive regulatory approval for one or more of our product candidates, our ability to execute our growth strategy, achieve commercial success and become profitable will depend upon the adoption by hospitals, surgeons and patients of our bioengineered organs. We cannot predict how quickly, if at all, our products will be accepted or, if accepted, how frequently they will be used. Our bioengineered organs may never gain broad market acceptance among the medical community for some or all of our indications. The market for regenerative medicine technology is relatively new, subject to rapid innovation and remains uncertain. Further, our perfusion technology is a new approach for processing and developing organs. The degree of market acceptance of any of our products will depend on a number of factors, including:

the prevalence and severity of any complications associated with our products;

the competitive pricing of our products;

the quality of our products meeting patient and surgeon expectations;

the results of clinical trials and post-market clinical studies relating to the use of our products; and

our ability to provide incremental clinical and economic data that show the safety, clinical efficacy and cost effectiveness, and patient benefits from, our products.
Failure to achieve or maintain market acceptance and/or market share would limit our ability to generate revenue and would have a material adverse effect on our business, financial condition and results of operations. Further, if we cannot build and maintain strong working relationships with these professionals and seek their advice and input on our product candidates, the development and marketing of our future products could suffer, which could have a material adverse effect on our business, financial condition and results of operations.
We rely on third parties to conduct certain preclinical development activities and will rely on third parties for certain clinical development activities.
We rely on third parties to conduct certain preclinical development activities and we intend, in the future, to rely on third parties to conduct any clinical trials we undertake. We may not be able to secure and maintain relationships with these third parties for preclinical and clinical development studies on acceptable terms and our reliance on these third parties reduces our control over these activities. We are responsible for ensuring that each of our preclinical development activities and our clinical trials are conducted in accordance with the applicable U.S. federal and state laws and foreign regulations, general investigational plan and protocols. However, other than any contracts with these third parties, we have no direct control over these researchers or contractors, as they are not our employees. Moreover, the FDA
 
19

 
requires us to comply with standards, commonly referred to as GCP, for conducting, recording and reporting the results of our preclinical and clinical trials to assure that data and reported results are credible and accurate and that the rights, safety and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. These third parties also may have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our preclinical development activities or our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our products and will not be able to, or may be delayed in our efforts to, successfully commercialize our products. These third parties may be subject to various types of sanctions by the FDA or other government or regulatory authorities for failing to meet the applicable requirements imposed on such third parties. As a result, the third parties may not be able to fulfill their contractual obligations, and the results obtained from such third parties regarding preclinical and clinical research may not be accepted by the FDA to support the marketing approval of our product candidates. If the third parties or their employees become debarred by the FDA, we cannot use the research data derived from their services to support the marketing approval of our products. Finally, these third parties may be acquired by other entities, change their business plans or strategies or go out of business, thereby preventing them from meeting their contractual obligations to us. Our success depends on conducting preclinical and clinical trials successfully through commercialization, and therefore, any failure by a third party in this regard would have a material adverse effect on our business.
Risks Related to Intellectual Property and Information Technology Matters
If we are unable to obtain and maintain patent and other intellectual property protection for any of our new organ candidates we develop, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop may be adversely affected.
Our commercial success will depend in large part on our ability to obtain and maintain patent, trademark, trade secret and other intellectual property protection of our new organ candidates and other technology, methods used to manufacture them and methods of treatment, as well as successfully defending our patent and other intellectual property rights against third-party challenges. It is difficult and costly to protect and enforce intellectual property rights, and we may not be able to ensure the same for every product. Our ability to stop unauthorized third parties from making, using, selling, offering to sell, importing or otherwise commercializing our new organ candidates is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.
We seek to protect our proprietary position by developing a comprehensive intellectual property portfolio including filing patent applications and obtaining granted patents in the United States and abroad related to our new organ candidates that are important to our business. If we are unable to obtain or maintain patent protection with respect to a product candidate we may develop, or if the scope of the patent protection secured is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours and our ability to commercialize that product candidate may be adversely affected.
The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, we may not pursue or obtain patent protection in all relevant markets. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside 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 jeopardizing our ability to seek patent protection. In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior
 
20

 
art allow our inventions to be patentable over the prior art. Furthermore, publications of discoveries in the scientific 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 at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions.
The patent position of biotechnology companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are uncertain and we may become involved in complex and costly litigation. Our pending and future patent applications may not result in patents being issued which protect new organ candidates or effectively prevent others from commercializing competitive technologies and new organ candidates.
We also cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will be valid and enforceable and provide sufficient protection from competitors. Any patents that we own or in-license may be challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether any new organ candidates we may develop will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.
In addition, given the amount of time required for the development, testing, and regulatory review of new organ 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 patents and patent applications may in the future be, co-owned by us with third parties. If we are unable to obtain an exclusive license to 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 may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
Our patents and patent applications contain claims directed to new organ candidates, as well as methods directed to making new organ candidates, intermediates in the making of new organ candidates, the use of such new organ candidates, and other technologies. Method-of-use patents do not prevent a competitor or other third party from developing or marketing an identical product for an indication that is outside the scope of the patented method. Moreover, with respect to method-of-use patents, even if competitors or other third parties do not actively promote their product for our eventual targeted indications or uses for which we may obtain patents, providers may recommend that patients use these products off-label, or patients may do so themselves.
The strength of patents in the biotechnology field involves complex legal and scientific questions and can be uncertain. The patent applications that we own may fail to result in issued patents with claims that cover our new organ candidates or uses thereof in the United States or in other foreign countries. For example, while our patent applications are pending, we may be subject to a third-party pre-issuance submission of prior art to the United States Patent and Trademark Office, or USPTO, or become involved in interference or derivation proceedings, or equivalent proceedings in foreign jurisdictions. Even if patents do successfully issue, third parties may challenge their inventorship, validity, enforceability or scope, including through opposition, revocation, reexamination, post-grant and inter partes review proceedings. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable certain patent rights, allow third parties to commercialize our technology or new organ candidates and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as
 
21

 
oppositions in a foreign patent office, that challenge features of patentability with respect to one or more patents and patent applications. Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and new organ candidates. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. 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 develop, and threaten our ability to commercialize, our new organ candidates. Further, if we encounter delays in development, testing, and regulatory review of new organ candidates, the period of time during which we could market our new organ candidates under patent protection would be reduced.
Given that patent applications in the United States and other countries are confidential for a period of time after filing, at any moment in time, we cannot be certain that we were in the past or will be in the future the first to file any patent application related to our new organ candidates. In addition, some patent applications in the United States may be maintained in secrecy until the patents are issued. As a result, there may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim, and we may be subject to priority disputes. We may in the future become a party to proceedings or priority disputes in Europe or other foreign jurisdictions. The loss of priority for, or the loss of, these patents could have a material adverse effect on the conduct of our business.
We may be required to disclaim part or all of the term of certain patents or patent applications. 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 or potential future licensors are aware, but which we or those licensors 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. No assurance can be given that, if challenged, our patents would be declared by a court, patent office or other governmental authority to be valid or enforceable or that even if found valid and enforceable, a competitor’s technology or product would be found by a court to infringe our patents. We may analyze patents or patent applications of our competitors that we believe are relevant to our activities, and consider that we are free to operate in relation to our new organ candidates or if applicable challenge the validity of any issued patents, but our competitors may achieve issued claims, including in patents we consider to be unrelated, that block our efforts or potentially result in our new organ candidates or our activities infringing such claims. It is possible that our competitors may have filed, and may in the future file, patent applications covering our products or technology similar to ours. Those patent applications may have priority over our patent applications or patents, which could require us to obtain rights to issued patents covering such technologies. The possibility also exists that others will develop products that have the same effect as our new organ candidates on an independent basis that do not infringe our patents or other intellectual property rights, or will design around the claims of our patent applications or our in-licensed patents or patent applications that cover our new organ candidates.
Likewise, our current patents in the US are expected to expire from about 2026 through about 2036 without taking into account any possible extensions. We have in-force patents and pending patent applications in the US and foreign jurisdictions. Our patents may expire before, or soon after, our first new organ candidate is licensed in the United States or foreign jurisdictions. Additionally, no assurance can be given that the USPTO or relevant foreign patent offices will grant any of the pending patent applications we own or in-license currently or in the future. Upon the expiration of our current patents, we may lose the right to exclude others from practicing these inventions. The expiration of these patents could also have a similar material adverse effect on our business, financial condition, results of operations and prospects.
We may also be subject to claims that former employees, collaborators, or other third parties have an interest in our patents or patent applications or other intellectual property as an inventor or co-inventor. If we are unable to obtain an exclusive license to any such third party co-owners’ interest in such patent applications, such co-owners may be able to license their rights to other third parties, including
 
22

 
our competitors. In addition, we may need the cooperation of any such co-owners to enforce any patents that issue from such patent applications against third parties, and such cooperation may not be provided to us.
If we are unsuccessful in any interference proceedings or other priority, validity (including any patent oppositions), or inventorship disputes to which we maybe subject, we may lose valuable intellectual property rights through the loss of one or more of our owned, licensed, or optioned patents, or such patent claims may be narrowed, invalidated, or held unenforceable, or through loss of exclusive ownership of or the exclusive right to use our patents. In the event of loss of patent rights as a result of any of these disputes, we may be required to obtain and maintain licenses from third parties, including parties involved in any such interference proceedings or other priority or inventorship disputes. Such licenses may not be available on commercially reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture, and commercialization of one or more of the new organ candidates we may develop. The loss of exclusivity or the narrowing of our patent claims could limit our ability to stop others from using or commercializing similar or identical technology and new organ candidates. Even if we are successful in an interference proceeding or other similar priority or inventorship disputes, it could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could result in a material adverse effect on our business, financial condition, results of operations, or prospects.
We have intellectual property coverage for our new organ candidates in the United States, Europe, and other territories, but our foreign intellectual property rights are not exhaustive.
We have intellectual property for our new organ candidates in many key markets such as the United States and Europe. However, we do not have intellectual property rights in every country throughout the world. Filing, prosecuting, and defending patents on new organ candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States, and Europe can be less extensive than those in the United States. In addition, the laws of foreign countries do not protect intellectual property rights to the same extent as federal and state laws of 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 territories where we have patent protection but where enforcement is not as strong as that in the United States. These products may compete with our new organ candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology and pharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products against third parties in violation of our intellectual property and proprietary rights generally. Proceedings to enforce our patents and intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Moreover, the initiation of proceedings by third parties to challenge the scope or validity of our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business and / or the limitation or loss of key patent rights. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against
 
23

 
government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.
We may enter into license agreements for intellectual property rights in the future and if we fail to comply with our obligations in such agreements or otherwise experience disruptions to our business relationships with our licensors or research and development partners, we could lose license rights that are important to our business.
We cannot provide any assurances that third-party patents do not exist which might be enforced against our current technology, resulting in either an injunction prohibiting our manufacture or future sales, or, with respect to our future sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties, which could be significant. It is possible that our ability to commercialize some new organ candidates in the United States and abroad may be adversely affected if we cannot obtain a license to any potentially relevant third-party patents on commercially-reasonable terms that would allow us to make an appropriate return on our investment. In addition, the licensing or acquisition of third-party intellectual property rights is a highly competitive area, and other, potentially more established companies may pursue strategies to license or acquire third party intellectual property rights that we may, in the future, consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Further, even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. Even if we believe third-party intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions of infringement, validity, enforceability, or priority. In order to successfully challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. As such, we could be forced, including by court order, to cease developing, manufacturing, and commercializing the infringing technology or new organ candidates. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Thus, we may be required to expend significant time and resources to redesign our technology, new organ candidates, or the methods for manufacturing them or to develop or license replacement technology, or we may need to abandon development of the relevant program or product candidate, all of which may not be feasible on a technical or commercial basis and could have a material adverse effect on our business, financial condition, results of operations, and prospects. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect on our business, financial condition, results of operations, and prospects.
The intellectual property landscape pertaining to live new organs is in constant flux.
The field of new organs is still in its infancy. Due to the intense research and development that is taking place by several companies, including us and our competitors, in this field, the intellectual property landscape is evolving and in flux, and it may remain uncertain for the coming years. There may be significant intellectual property related litigation and proceedings relating to intellectual property and proprietary rights in the future.
Our commercial success depends upon our ability and the ability of future collaborators to develop, manufacture, market, and sell any new organ candidates that we may develop and use our proprietary technologies without infringing, misappropriating, or otherwise violating the intellectual property and proprietary rights of third parties. The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights as well as
 
24

 
administrative proceedings for challenging patents, including interference, derivation, inter partes review, post grant review, and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. We may in future be subject to and may in the future become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights including interference proceedings, post-grant review, inter partes review, and derivation proceedings before the USPTO and similar proceedings in foreign jurisdictions such as oppositions before the EPO. Numerous U.S. and foreign issued patents and pending patent applications that are owned by third parties may exist in the fields in which we are developing our new organ candidates and they may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit.
As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our new organ candidates may give rise to claims of infringement of the patent rights of others. Moreover, it is not always clear to industry participants, including us, which patents cover various types of new organ therapies, products or their methods of use or manufacture. There may be third-party patents or patent application with claims to technologies, methods of manufacture or methods for treatment related to the use or manufacture of our new organ candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our new organ candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents.
Defense of third-party claims of infringement of misappropriation, or violation of intellectual property rights involves substantial litigation expense and would be a substantial diversion of management and employee time and resources from our business. Some third-parties 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, financial condition, results of operations and prospects. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Any of the foregoing events could have a material adverse effect on our business, financial condition, results of operations and prospects.
We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming, and unsuccessful and could result in a finding that such patents are unenforceable or invalid.
Competitors may infringe our patents, or we may be required to defend against claims of infringement. In addition, our patents may in the future become involved in inventorship, priority, validity or enforceability disputes. Countering or defending against such claims can be expensive and time consuming. In possible future infringement proceedings, a court may decide that a patent owned by us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our owned or any in-licensed patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly.
In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous 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. These types of mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). These types of proceedings could result in revocation or amendment to our patents such that they no longer cover our new organ candidates. The outcome for any particular patent 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
 
25

 
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 technology and/or new organ candidates. Defense of these types of claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
Conversely, we may choose to challenge the patentability of claims in a third party’s U.S. patent by requesting that the USPTO review the patent claims in re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). If we challenge and subsequently fail to obtain a favorable result at the USPTO, EPO or other patent office then we may be exposed to litigation by a third party alleging that the patent may be infringed by our new organ candidates or other proprietary technologies.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation in the US and certain other jurisdictions, 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, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications are due to be paid to the USPTO and foreign patent agencies outside of the United States over the lifetime of our patents and applications. The USPTO and foreign patent agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process. While an inadvertent lapse can ordinarily be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations, however, in which non-compliance can result a partial or complete loss of patent rights in the relevant jurisdiction. Were a noncompliance event to occur, our competitors might be able to enter the market with similar or identical products or technology, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Changes in patent law in the United States and in non-U.S. jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our new organ candidates.
Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain.
Changes in either the patent laws or interpretation of the patent laws could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of our issued patents. For example, in March 2013, under the Leahy-Smith America Invents Act, or the America Invents Act, the United States transitioned from a “first to invent” to a “first-to-file” patent system. Under a “first-to-file” system, assuming that other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to a patent on an invention regardless of whether another inventor had made the invention earlier. A third party that files a patent
 
26

 
application in the USPTO after March 2013, but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either file any patent application related to our technology or new organ candidates or invent any of the inventions claimed in our or our licensor’s patents or patent applications. The America Invents Act also includes a number of other significant changes to U.S. patent law, including provisions that affect the way patent applications will be prosecuted, allowing third party submission of prior art and establish a new post-grant review system including post-grant review, inter partes review, and derivation proceedings. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. The effects of these changes are currently unclear as the USPTO continues to promulgate new regulations and procedures in connection with the America Invents Act and many of the substantive changes to patent law, including the “first-to-file” provisions, only became effective in March 2013. In addition, the courts have yet to address many of these provisions and the applicability of the act and new regulations on the specific patents discussed in this filing have not been determined and would need to be reviewed. Thus, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
In addition, 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. These cases include Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 12-398 (2013) or Myriad; Alice Corp. v. CLS Bank International, 573 U.S. 13-298 (2014); and Collaborative Services v. Prometheus Laboratories, Inc., or Prometheus, 566 U.S. 10-1150 (2012). 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 validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. For example, in the case, Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to DNA molecules are not patentable, but claims to complementary DNA, or cDNA, molecules, which are not genomic sequences, may be patent eligible because they are not a natural product. The effect of the decision on patents for other isolated natural products is uncertain. However, on March 4, 2014, the USPTO issued a memorandum to patent examiners providing guidance for examining claims that recite laws of nature, natural phenomena or natural products under the Myriad and Prometheus decisions. The guidance did not limit the application of Myriad to DNA but, rather, applied the decision broadly to other natural products, which may include our new organ candidates. The March 4, 2014 memorandum and the USPTO’s subsequent interpretation of the cases and announced examination rubric received widespread criticism from stakeholders during a public comment period and was superseded by interim guidance published on December 15, 2014. Subsequently, the USPTO has issued further guidance on patent subject matter eligibility. We cannot predict how this and future decisions by the courts, the U.S. Congress or the USPTO may impact the value of our patents. Any similar adverse changes in the patent laws of other jurisdictions could also have a material adverse effect on our business, financial condition, results of operations and prospects.
Patent terms may be inadequate to protect our competitive position on our new organ candidates for an adequate amount of time.
Patents have a limited lifespan. The terms of individual patents depends upon the legal term for patents in the countries in which they are granted. In most countries, including the United States, if all
 
27

 
maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest non-provisional filing date in the applicable country. However, the actual protection afforded by a patent varies from country to country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent. Various extensions including patent term extensions (“PTE”) and patent term adjustments, may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our new organ candidates are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics. Given the amount of time required for the development, testing and regulatory review of new organ candidates, patents protecting our new organ candidates might expire before or shortly after we or our partners commercialize those candidates. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If we do not obtain a PTE for a patent, our business may be materially harmed.
Depending upon the timing, duration and specifics of any FDA licensing of any new organ candidates we may develop, one or more of our U.S. patents may be eligible for limited PTE. Analogous extensions of patent term may be available upon marketing approval in other jurisdictions. The PTE term of up to five years is awarded as compensation for patent term lost during the FDA regulatory review process. A PTE cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent per product may be extended and only those claims covering the licensed new organ, a method for using it, or a method for manufacturing it may be extended. However, even if we were to seek a PTE or corresponding extension of patent term in other jurisdictions, it may not be granted because of, for example, the failure to exercise due diligence during the testing phase or regulatory review process, the failure to apply within applicable deadlines, the failure to apply prior to expiration of relevant patents, or any other failure 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 PTE or a corresponding extension of patent term in other jurisdictions, or the term of any such extension is less than we request, our competitors may be able to launch competing products earlier than anticipated following our patent expiration, and our business, financial condition, results of operations, and prospects could be materially harmed.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for our technology and new organ candidates, we also rely on know-how and trade secret protection, as well as confidentiality agreements, non-disclosure agreements and invention assignment agreements with our employees, consultants and third-parties, to protect our confidential and proprietary information, especially where we do not believe patent protection is appropriate or obtainable.
It is our policy to require our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors, and other third parties to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs developed by or made known to the individual or entity during the course of the party’s relationship with us is to be kept confidential and not disclosed to third parties, except in certain specified circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and that are related to our current or planned business or research and development or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property. In the case of consultants and other third parties, the agreements provide that all inventions conceived in connection with the services provided are our exclusive property. However, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Additionally, the assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring
 
28

 
against us, to determine the ownership of what we regard as our intellectual property. Any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable.
In addition to contractual measures, we try to protect the confidential nature of our proprietary information through other appropriate precautions, such as physical and technological security measures. However, trade secrets and know-how can be difficult to protect. These measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and any recourse we might take against this type of misconduct may not provide an adequate remedy to protect our interests fully. In addition, trade secrets may be independently developed by others in a manner that could prevent us from receiving legal recourse. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any of that information was independently developed by a competitor, our competitive position could be harmed.
In addition, some courts inside and outside the United States are sometimes less willing or unwilling to protect trade secrets. If we choose to go to court to stop a third party from using any of our trade secrets, we may incur substantial costs. Even if we are successful, these types of lawsuits may consume our time and other resources. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.
Third parties may assert that our employees, consultants, or advisors have wrongfully used or disclosed confidential information or misappropriated trade secrets.
As is common in the biotechnology and pharmaceutical industries, we may employ individuals that are currently or were previously employed at universities, research institutions or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Also, in the future we may be subject to claims that these individuals are violating non-compete agreements with their former employers. We may then have to pursue litigation to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and, if securities analysts or investors perceive these results to be negative, that perception could have a substantial adverse effect on the price of our common stock. This type of litigation or proceeding could substantially increase our operating losses and reduce our resources available for development activities, and we may not have sufficient financial or other resources to adequately conduct this type of litigation or proceedings. For example, some of our competitors may be able to sustain the costs of this type of litigation or proceedings more effectively than we can because of their substantially greater financial resources. In any case, uncertainties resulting from the initiation and continuation of intellectual property litigation or other intellectual property related proceedings could adversely affect our ability to compete in the marketplace.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition
 
29

 
among potential partners or customers in our markets of interest. At times, competitors or other third parties may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our business, financial condition, results of operations and growth prospects.
Intellectual property rights do not necessarily address all potential threats.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

any new organ candidates we may develop will likely eventually become commercially available in biosimilar product forms;

others may be able to make new organ products that are similar to any new organ candidates we may develop but that are not covered by the claims of the patents that we own or may own in the future;

we, or our current or future collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or may own in the future;

we, or our current or future collaborators, might not have been the first to file patent applications covering certain of our or their inventions;

we, or our current or future collaborators, may fail to meet our obligations to the U.S. government regarding any patents and patent applications funded by U.S. government grants, leading to the loss or unenforceability of patent rights;

others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

it is possible that our pending patent applications or those that we may own in the future will not lead to issued patents;

it is possible that there are prior public disclosures that could invalidate our patents, or parts of our patents;

it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our new organ candidates or technology similar to ours

it is possible that our patents or patent applications omit individual(s) that should be listed as inventor(s) or include individual(s) that should not be listed as inventor(s), which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable;

issued patents that we hold rights to may be held invalid, unenforceable, or narrowed in scope, including as a result of legal challenges by our competitors;

the claims of our issued patents or patent applications, if and when issued, may not cover our new organ candidates;

the laws of foreign countries may not protect our proprietary rights or the proprietary rights of current or future collaborators to the same extent as the laws of the United States;

the inventors of our patents or patent applications may become involved with competitors, develop products or processes that design around our patents, or become hostile to us or the patents or patent applications on which they are named as inventors;
 
30

 

our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

we have engaged in scientific collaborations in the past and will continue to do so in the future and our collaborators may develop adjacent or competing products that are outside the scope of our patents;

we may not develop additional proprietary technologies that are patentable;

any new organ candidates we develop may be covered by third parties’ patents or other exclusive rights;

the patents of others may harm our business; or

we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Risks Related to Government Regulation
The development and commercialization of biopharmaceutical products is subject to extensive regulation, and the regulatory approval processes of the FDA are lengthy, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates on a timely basis if at all, our business will be substantially harmed.
The clinical development, manufacturing, labeling, packaging, storage, recordkeeping, advertising, promotion, export, import, marketing, distribution, adverse event reporting, including the submission of safety and other post-marketing information and reports, and other possible activities relating to our product candidates are subject to extensive regulation. In the United States, marketing approval of biologics requires the submission of a BLA to the FDA, and we are not permitted to market any product candidate in the United States until we obtain approval from the FDA of the BLA for that product candidate. A BLA must be supported by extensive clinical and preclinical data, as well as extensive information regarding pharmacology, chemistry, manufacturing, and controls. Outside the United States, many comparable foreign regulatory authorities employ similar approval processes.
We have not previously submitted a BLA to the FDA or similar regulatory approval filings to comparable foreign authorities, for any product candidate, and we cannot be certain that any of our product candidates will receive regulatory approval. We are not permitted to market our product candidates in the United States or in other countries until we receive approval of a BLA from the FDA or marketing approval from applicable regulatory authorities outside the United States. Obtaining approval of a BLA can be a lengthy, expensive, and uncertain process, and we have no experience with the preparation of a BLA submission for marketing approval. Further, the FDA has not yet granted approval for any whole organ using our perfusion technology or any whole organ biologic, and to our knowledge, a clinical trial has never been conducted using a bioengineered organ in humans before, which we believe may increase the complexity, uncertainty and length of the regulatory approval process. Further, if the FDA was to categorize our bioengineered organ products as xenotransplants, the length of the regulatory approval process could be extended. In addition, the FDA has the authority to require a risk evaluation and mitigation strategies, ("REMS"), plan as part of a BLA or after approval, which may impose further requirements or restrictions on the distribution or use of an approved biologic, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria and requiring treated patients to enroll in a registry.
Our product candidates could fail to receive regulatory approval for many reasons, including the following:

the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials, and might therefore not allow an IND to proceed;
 
31

 

we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe, pure and potent for its proposed indication;

the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a BLA or other submission or to obtain regulatory approval in the United States or elsewhere, or regulatory authorities may not accept a submission due to, among other reasons, the content or formatting of the submission;

the FDA or comparable foreign regulatory authorities may fail to approve our manufacturing processes or facilities or those of third-party manufacturers with which we contract for clinical and commercial supplies; and

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations, and prospects. The FDA and comparable foreign regulatory authorities have substantial discretion in the approval process, and determining when or whether regulatory approval will be obtained for any of our product candidates. As a result, we may be required to conduct additional preclinical studies, alter our proposed clinical trial designs, or conduct additional clinical trials to satisfy the regulatory authorities in each of the jurisdictions in which we hope to conduct clinical trials and develop and market our products, if approved. Further, even if we believe the data collected from clinical trials of our product candidates are promising, such data may not be sufficient to support approval by the FDA or any comparable foreign regulatory authority.
In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.
Even if our product candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
If the FDA or a comparable foreign regulatory authority approves any of our product candidates, the manufacturing processes, testing, labeling, packaging, distribution, import, export, adverse event reporting, storage, advertising, promotion, and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current Good Manufacturing Practices (“cGMPs”), current Good Tissue Practices (“cGTPs”) and GCPs for any clinical trials that we conduct post-approval, all of which may result in significant expense and limit our ability to commercialize such products. In addition, any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate.
 
32

 
Manufacturers and manufacturers’ facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations, as well as, for the manufacture of certain of our product candidates, the FDA’s cGTPs for the use of human cellular and tissue products to prevent the introduction, transmission or spread of communicable diseases. As such, we and our contract suppliers and manufacturers, if any, will be subject to continual review and inspections to assess compliance with cGMPs, cGTPs and adherence to commitments made in any approved marketing application. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, quality control, and distribution.
If there are changes in the application of legislation or regulatory policies, or if problems are discovered with a product or our manufacture of a product, or if we or one of our distributors, licensees or co-marketers fails to comply with regulatory requirements, the regulators could take various actions. These include issuing warning letters or untitled letters, imposing fines on us, imposing restrictions on the product or its manufacture, and requiring us to recall or remove the product from the market. The regulators could also suspend or withdraw our marketing authorizations, requiring us to conduct additional clinical trials, change our product labeling, or submit additional applications for marketing authorization. If any of these events occurs, our ability to sell such product may be impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could materially adversely affect our business, financial condition, and results of operations.
In addition, if we have any product candidate approved, our product labeling, advertising, and promotion will be subject to regulatory requirements and continuing regulatory review. In the United States, the FDA and the Federal Trade Commission, (“FTC”), strictly regulate the promotional claims that may be made about pharmaceutical products to ensure that any claims about such products are consistent with regulatory approvals, not misleading or false in any particular, and adequately substantiated by clinical data. The promotion of a drug product in a manner that is false, misleading, unsubstantiated, or for unapproved (or off-label) uses may result in enforcement letters, inquiries and investigations, and civil and criminal sanctions by the FDA or the FTC. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. If we receive marketing approval for a product candidate, physicians may nevertheless prescribe it to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant sanctions and may result in false claims litigation under federal and state statutes, which can lead to consent decrees, civil monetary penalties, restitution, criminal fines and imprisonment, and exclusion from participation in Medicare, Medicaid, and other federal and state healthcare programs. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

issue warning or untitled letters;

issue, or require us to issue, safety-related communications, such as safety alerts, field alerts, “Dear Doctor” letters to healthcare professionals, or import alerts;

impose civil or criminal penalties;

suspend, limit, or withdraw regulatory approval;

suspend any of our preclinical studies and clinical trials;
 
33

 

refuse to approve pending applications or supplements to approved applications submitted by us;

impose restrictions on our operations, including closing our and our contract manufacturers’ facilities; or

seize or detain products, refuse to permit the import or export of products, or require us to conduct a product recall.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products, if approved. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.
Moreover, the policies of the FDA and of comparable foreign regulatory authorities may change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. In addition, if we are slow or unable to adapt to changes in existing requirements or 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 and we may not achieve or sustain profitability.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain, or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved, or commercialized in a timely manner or at all, 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, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. In addition, government funding of other government agencies 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 biologics or modifications to licensed biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
Separately, in response to the COVID-19 pandemic, on March 10, 2020 the FDA announced its intention to postpone most inspections of foreign manufacturing facilities, and on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Subsequently, on July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or comparable foreign regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or comparable foreign regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Compliance with current and future governmental regulations regarding the treatment of animals used in research could increase our operating costs or impact the commercialization of our technology.
Certain laws and regulations require us to test our product candidates on animals before initiating clinical trials involving humans. In addition, we are subject to federal law that covers the treatment of
 
34

 
certain animals used in research. Currently, federal law imposes a wide variety of specific regulations that govern the humane handling, care, treatment and transportation of certain animals by producers and users of research animals, most notably relating to personnel, facilities, sanitation, cage size, feeding, watering and shipping conditions. Third parties with whom we contract are subject to registration, inspections and reporting requirements. Furthermore, some states have their own regulations, including general anti-cruelty legislation, which establish certain standards in handling animals. If we or any of our contractors fail to comply with regulations concerning the treatment of animals used in research, we may be subject to fines and penalties and adverse publicity, and our operations could be adversely affected.
Moreover, animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted, delayed, or become more expensive.
Our business operations and current and future relationships with healthcare professionals, principal investigators, consultants, vendors, customers, and third-party payors in the United States and elsewhere are subject to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, and other healthcare laws and regulations, which could expose us to substantial penalties, contractual damages, reputation harm, administrative burdens, and diminished profits.
Healthcare providers, healthcare facilities and institutions, physicians, and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, healthcare facilities and institutions, principal investigators, consultants, customers, and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act, that may constrain the business or financial arrangements and relationships through which we research, sell, market, and distribute any product candidates for which we obtain marketing approval. In addition, we may be subject to physician payment transparency laws and regulation by the federal government and by the states and foreign jurisdictions in which we conduct our business. The applicable federal, state, and foreign healthcare laws that affect our ability to operate include, but are not limited to, the following:

the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving, or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under any U.S. federal healthcare program, such as Medicare and Medicaid. The term “remuneration” has been broadly interpreted to include anything of value, including stock options. The federal Anti-Kickback Statute has also been interpreted to apply to arrangements between biologics manufacturers on the one hand and prescribers, purchasers and formulary managers on the other hand. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but the exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection. Any arrangements with prescribers must be for bona fide services and compensated at fair market value. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but the exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection. 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;

the U.S. federal civil and criminal false claims laws, including without limitation, the civil False Claims Act, which can be enforced by private citizens on behalf of the U.S. federal government through civil whistleblower or qui tam actions, and the federal civil monetary penalties law which
 
35

 
prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease, or conceal an obligation to pay money to the U.S. federal government. Pharmaceutical manufacturers can cause false claims to be presented to the U.S. federal government by, among other things, engaging in impermissible marketing practices, such as the off-label promotion of a product for an indication for which it has not received FDA approval. Further, pharmaceutical manufacturers can be held liable under the civil 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. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;

the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items, or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation;

the FFDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics, and medical devices;

the PHSA, which prohibits, among other things, the introduction into interstate commerce of a biological product unless a biologics license is in effect for that product;

the U.S. Physician Payments Sunshine Act and its implementing regulations, which requires, among other things, certain manufacturers of drugs, devices, biologics, and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare and Medicaid Services, or CMS, information related to certain payments and other transfers of value to physicians, as defined by statute, and teaching hospitals, as well as ownership and investment interests held by such physicians and their immediate family members. Beginning in 2022, such obligations will include the reporting of payments and other transfers of value provided in the previous year to certain other healthcare professionals, including physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiologist assistants, and certified nurse-midwives;

analogous U.S. state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements, and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; and state and local laws requiring the registration of biologics sales representatives; and

similar healthcare laws and regulations in foreign jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers.
Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is not always possible to identify and deter employee misconduct or business noncompliance, and the precautions we take to
 
36

 
detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. We have entered into consulting and scientific advisory board arrangements with physicians and other healthcare providers, including some who could influence the use of our product candidates, if approved. Compensation under some of these arrangements includes the provision of stock or stock options in addition to cash consideration. Because of the complex and far-reaching nature of these laws, it is possible that governmental authorities could conclude that our payments to physicians may not be fair market value for bona fide services or that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal, and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid, or similar programs in other countries or jurisdictions, integrity oversight and reporting obligations to resolve allegations of noncompliance, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment, which could affect our ability to operate our business. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.
Our employees, independent contractors, principal investigators, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of employee fraud or other misconduct. We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts committed by our employees, agents, contractors, or collaborators that would violate the laws or regulations of the jurisdictions in which we operate, including, without limitation, employment, foreign corrupt practices, trade restrictions and sanctions, environmental, competition, and patient privacy and other privacy laws and regulations. Misconduct by employees could include failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we may establish, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately, or disclose unauthorized activities to us. In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, labeling, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a material and adverse effect on our business, financial condition, results of operations and prospects, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, individual imprisonment, disgorgement of profits, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting or oversight obligations if we become subject to a corporate integrity agreement or other agreement to
 
37

 
resolve allegations of noncompliance with the law, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and pursue our strategy.
Current and future legislation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize our product candidates and affect the prices we, or they, may obtain.
In the United States and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, was enacted, which substantially changed the way healthcare is financed by both governmental and private payors. Among the provisions of the ACA of importance to the pharmaceutical and biotechnology industries, which includes biologics, are the following:

manufacturers and importers of certain biologics with annual sales of more than $5 million made to or covered by specified federal healthcare programs are required to pay an annual, nondeductible fee according to their market share of all such sales;

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% of the average manufacturer price for most branded drugs, biologics, and biosimilars and to 13.0% for generic drug, and cap of the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price, or AMP;

a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including our product candidates, that are inhaled, infused, instilled, implanted, or injected;

extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;

expansion of the entities eligible for discounts under the Public Health program, commonly referred to as the “340B Program;”

a new requirement to annually report drug samples that manufacturers and distributors provide to physicians, also known as the “Physician Payments Sunshine Act;”

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending; and

a licensure framework for follow-on biologic products.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. For example, legislation enacted in 2017 informally titled the Tax Cuts and Jobs Act of 2017, repealed the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage that is commonly referred to as the “individual mandate.” In December 2019, a U.S. District Court upheld a ruling that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. In November 2020, the Supreme Court of the United States heard oral arguments in the appeal of this case, but it is uncertain when the Supreme Court will rule on this case. It is unclear how this and other efforts to challenge, repeal, or replace the ACA will impact the ACA or our business.
 
38

 
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted which, among other things, have reduced Medicare payments to several types of providers, including hospitals and cancer treatment centers. These new laws or any other similar laws introduced in the future, as well as regulatory actions that may be taken by CMS, may result in additional reductions in Medicare and other healthcare funding, which could negatively affect our customers and accordingly, our financial operations. Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. Additionally, individual states in the United States have passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing and costs. Similar developments have occurred outside of the United States, including in the European Union where healthcare budgetary constraints have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. To obtain reimbursement or pricing approval in some European Union member states, we may be required to conduct studies that compare the cost-effectiveness of our product candidates to other therapies that are considered the local standard of care.
It is also possible that additional governmental action is taken in response to address the COVID-19 pandemic. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action in the United States, particularly as a result of the recent presidential election, or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.
Even if we are able to commercialize any product candidate, coverage and adequate reimbursement may not be available or such product candidate may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, which would harm our business.
The regulations that govern regulatory approvals, pricing, and reimbursement for biologics such as our product candidates vary widely from country to country. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing approval is granted. In some foreign markets, product pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain regulatory approval.
Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from third-party payors, such as government authorities, private health insurers, and other organizations. Even if we succeed in bringing one or more products to the market, these products may not be considered cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis. Because our programs are in the early stages of development, and in particular due to the novel nature of our technology, we are unable at this time to determine their cost effectiveness or the likely level or method of coverage and reimbursement. Increasingly, the third-party payors who reimburse patients or healthcare providers are requiring that companies provide them with predetermined discounts from list prices, and are seeking to reduce the prices charged or the amounts reimbursed for drug products. If the price we are able to charge for any products we develop, or the coverage and reimbursement provided for such products, is inadequate in light of our development and other costs, our return on investment could be affected adversely.
Further, no uniform policy for coverage and reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to payor. Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. As a result, the
 
39

 
coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidates that we develop will be made on a payor-by-payor basis. One payor’s determination to provide coverage for a biologic does not assure that other payors will also provide coverage and adequate reimbursement for the biologic. Additionally, a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal, and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future, including repeal, replacement, or significant revisions to the Affordable Care Act. 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 obtain coverage and reimbursement approval for a product;

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.
Our inability to promptly obtain coverage and adequate reimbursement from both third-party payors for the product candidates that we may develop and for which we obtain regulatory approval could have a material and adverse effect on our business, financial condition, results of operations, and prospects.
We face potential liability related to the privacy of personal information, including health information we utilize in the development of our product candidates.
We and our partners and vendors are subject to various federal, state, and foreign data protection laws and regulations. If we fail to comply with these laws and regulations, we may be subject to litigation, regulatory investigations, enforcement notices, enforcement actions, fines, and criminal or civil penalties, as well as negative publicity, reputational harm, and a potential loss of business.
In the United States, numerous federal and state laws and regulations, including state data breach notification laws and federal and state data privacy laws and regulations that govern the collection, use, disclosure, and protection of health information and other personal information apply to our operations and the operations of our partners. For example, most healthcare providers, including research institutions from which we obtain patient health information, are subject to data privacy and security regulations promulgated under HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH). Depending on the facts and circumstances, we could be subject to significant penalties if we violate HIPAA. For example, under HIPAA, we could potentially face substantial criminal or civil penalties if we knowingly receive protected health information from a HIPAA-covered healthcare provider or research institution that has not satisfied HIPAA’s requirements for disclosure of such health information, or otherwise violate applicable HIPAA requirements related to the protection of such information. Even when HIPAA does not apply, failing to take appropriate steps to keep consumers’ personal information secure may constitute a violation of the Federal Trade Commission Act.
Certain of the research materials we use in our research and development efforts are derived from human sources, which potentially contain sensitive identifiable personal information regarding the donor. In addition, once we commence clinical trials, we may maintain sensitive identifiable personal information, including health information, that we receive throughout the clinical trial process, in the course of our research collaborations, and directly from individuals (or their healthcare providers) who
 
40

 
enroll in our patient assistance programs. As such, we may become subject to further obligations under HIPAA. In addition, our collection of personal information generally (e.g., of employees currently and/or of patients in the future) may subject us to state data privacy laws governing the processing of personal information and requiring notification of affected individuals and state regulators in the event of a breach of such personal information. Numerous laws relating to data privacy and security have been proposed at the state and federal level, and if passed, such laws may have potentially conflicting requirements that would make compliance challenging, require us to expend significant resources to come into compliance, and restrict our ability to process certain personal information. New legislation proposed or enacted in various other states will continue to shape the data privacy environment nationally. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to confidential, sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts.
Any clinical trial programs and research collaborations that we engage in outside the United States may implicate international data protection laws, including, in Europe, the General Data Protection Regulation (GDPR). The GDPR imposes stringent operational requirements for data processors and controllers of personal data. Among other things, the GDPR requires detailed notices for clinical trial subjects and investigators, as well as the security of personal data, and notification of data processing obligations or security incidents to appropriate data protection authorities or data subjects. Further, following the United Kingdom’s withdrawal from the European Union effective as of December 31, 2020, we will have to comply with the GDPR and the GDPR as incorporated into United Kingdom national law, which may have differing requirements.
One particularly sensitive issue under these European Union data privacy laws involves European Economic Area (EEA) laws on data export if we begin to transfer personal data from the EEA to other jurisdictions. Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EEA to the United States. For example, on July 16, 2020, the Court of Justice of the European Union, or CJEU, invalidated the EU-US Privacy Shield Framework, or Privacy Shield, under which personal data could previously be transferred from the EEA to United States entities who had self-certified under the Privacy Shield scheme. The CJEU decision also created additional obligations and uncertainty around the ability to use standard contractual clauses for such data transfers. As government authorities issue further guidance on personal data export mechanisms or start aggressively taking enforcement action based on such guidance or the CJEU decision, we could suffer additional costs, complaints, and/or regulatory investigations or fines. If we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and adversely affect our financial results. These international laws and regulations may apply not only to us, but also to vendors that store or otherwise process personal data on our behalf, such as information technology vendors. If our data privacy and/or security measures fail to comply with European Union and United Kingdom data privacy laws, or if a vendor misuses data we have provided to it or fails to safeguard such data, we may be subject to litigation, regulatory investigations, enforcement notices, and/or enforcement actions imposing fines and/or requiring us to change the way we use personal data, as well as negative publicity, reputational harm, and a potential loss of business.
We are likely to be required to expend significant capital and other resources to ensure ongoing compliance with applicable data privacy and security laws. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend, and could result in adverse publicity that could harm our business. Moreover, even if we take all necessary action to comply with legal and regulatory requirements, we could be subject to a data breach or other unauthorized access of personal information, which could subject us to fines and penalties, as well as litigation and reputational damage.
If we fail to keep apprised of and comply with applicable international, federal, state, or local regulatory requirements, we could be subject to a range of regulatory actions that could affect our or any collaborators’ ability to seek to commercialize our clinical candidates. Any threatened or actual government enforcement action or litigation where private rights of action are available could also
 
41

 
generate adverse publicity, damage our reputation, result in liabilities, fines and loss of business, and require that we devote substantial resources that could otherwise be used in other aspects of our business.
Our business involves the use of hazardous materials and we must comply with environmental laws and regulations, which may be expensive and restrict how we do business.
Our manufacturing activities may involve the controlled storage, use and disposal of hazardous materials and, on that basis, we may be subject to federal, state, local and non-U.S. laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these hazardous materials. We currently carry no insurance specifically covering environmental claims relating to the use of hazardous materials.
Although we believe that our safety procedures for handling and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials. In the event of an accident, federal, state or other applicable authorities may curtail our use of these materials and interrupt their business operations which could adversely affect our business.
Compliance with environmental laws and regulations may be expensive and non-compliance could result in substantial liabilities, fines and penalties, personal injury and third-party property damage claims and substantial investigation and remediation costs. Environmental laws and regulations could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations. We cannot assure you that violations of these laws and regulations will not occur in the future or have not occurred in the past as a result of human error, accidents, equipment failure or other causes. The expense associated with environmental regulation and remediation could harm our financial condition and results of operations.
Risks Related to Our Business
We may not be able to scale our manufacturing to support our future plans.
Although we believe our manufacturing capabilities are sufficient for our current purposes, we will need to build a new facility to support our human clinical trials, which we expect to begin as early as late 2022. We have designed this new facility, but we will need to obtain additional financing to build and equip the facility. Any new facility will also be required to conform to cGMP regulations. If we are not able to raise the funds to build this new facility, or if the development or construction of this facility experiences delays or cost overruns, we will not have the capacity to conduct our clinical activities in line with our business plans and our business and prospects will suffer.
Our financial results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our quarterly and annual results of operations may vary significantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter or period should not be relied upon as an indication of future performance. Our quarterly and annual financial results may fluctuate as a result of a variety of factors, many of which are outside our control.
Factors that may cause fluctuations in our quarterly and annual results include:

our ability to obtain and maintain regulatory clearance or approval for any products in development or for any additional indications or in additional jurisdictions;

timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors;

surgeon and patient adoption of our future products;

changes in coverage policies by third-party payors;
 
42

 

unanticipated pricing pressures;

results of clinical research and trials on our products in development;

delays in, or failure of, component and raw material deliveries by our suppliers; and

positive or negative coverage in the media or clinical publications of our future products or products of our competitors or our industry.
Because our quarterly and annual results may fluctuate, period-to-period comparisons may not be the best indication of the underlying results of our business. These fluctuations may also increase the likelihood that we will not meet our forecasted performance, which could negatively affect the market price for our common stock.
All of our operations are currently conducted at one location and any disruption at this facility could materially and adversely affect our businesses.
Because of the level of precision and quality required for our operations, we currently conduct and intend to conduct all of our manufacturing and preclinical work in-house at our own facility for the foreseeable future. Our facility and equipment would be costly to replace and could require substantial lead time to repair or replace. The facility may be harmed or rendered inoperable by natural or man-made disasters, including, but not limited to, tornadoes, flooding, fire and power outages, which may render it difficult or impossible for us to perform our research, development and commercialization activities for some period of time. The inability to perform those activities may result in the loss of certain opportunities or harm to our reputation. Although we possess insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and this insurance may not continue to be available to us on acceptable terms, or at all.
We may in the future face the risk of product liability claims that could be expensive, divert management’s attention and harm our reputation and business.
Our business exposes us to the risk of product liability claims that are inherent in the testing, manufacturing and marketing of products in the industry in which we operate. This risk exists even if a product is cleared or approved for commercial sale by the FDA or another regulator, and manufactured in facilities licensed and regulated by such regulator(s). Any side effects, manufacturing defects or misuse associated with our product candidates could result in patient injury or death, in particular because our product candidates are designed to be permanently placed in the human body. Further, given that our products deal with biological material, there is a product liability risk related to disease transmission from the bioengineered organ to the patient. We could also become subject to liability caused by any adverse events caused by technology that we license out, including Miroderm and Miromesh. The industry in which we operate has historically been subject to extensive litigation over product liability claims, and we cannot offer any assurance that we will not face product liability suits. We may be subject to product liability claims if our future products cause, or merely appear to have caused, patient injury or death. Such claims may be brought against us by patients, healthcare providers or others selling or otherwise coming into contact with our products. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities and reputational harm. In addition, regardless of merit or eventual outcome, product liability claims may result in substantial litigation costs, product recalls or market withdrawals, decreased sales and demand for our future products and damage to our reputation.
While we may attempt to manage our product liability exposure by proactively recalling or withdrawing from the market any defective products, any recall or market withdrawal of our products may delay the supply of those products to our customers and may impact our reputation. We can provide no assurance that we will be successful in initiating appropriate market recall or market withdrawal efforts that may be required in the future or that these efforts will have the intended effect of preventing product malfunctions and the accompanying product liability that may result. Such recalls and withdrawals may also be used by our competitors to harm our reputation for safety or be perceived by patients as a safety risk when considering the use of our products, either of which could have a material adverse effect on our business, financial condition and results of operations.
 
43

 
Although we plan on obtaining product liability insurance that we believe will be appropriate, this insurance will be subject to deductibles and coverage limitations and coverage may not be adequate to protect us against any future product liability claims. We do not have nor do we expect to obtain insurance covering our costs and losses as the result of any recall of our products due to alleged defects, whether such a recall is instituted by us or required by a regulatory agency. A product liability claim, recall or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could have a material adverse effect on our business, financial condition and results of operations.
We anticipate that, if we receive regulatory clearance or approval for any of our product candidates, those clearances or approvals will be for specific indications. We would not, however, be able to prevent a surgeon or medical professional from using any products we may commercialize in the future for off-label uses. In such a case, the FDA or another regulatory authority could conclude that we have engaged in off-label promotion. If the FDA determines that our promotional or training materials constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions. It is also possible that other federal, state or non-U.S. enforcement authorities might take action under other regulatory authority if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations. In those possible events, our reputation could be damaged, and adoption of the products would be impaired.
The sizes of the markets for our future products may be smaller than we estimate. Our results of operations could be materially harmed if we are unable to accurately forecast addressable markets for our product candidates and manage our inventory.
Our estimates of the annual total addressable markets for our products under development are based on a number of internal and third-party estimates, as well as assumed prices at which we can sell our future products. While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. As a result, our estimates of the annual total addressable market for our product candidates may prove to be incorrect. If the price at which we can sell future products, or the annual total addressable market for our product candidates is smaller than we have estimated, it could have an adverse impact on our business. Moreover, our product candidates have a limited shelf life and will expire if not timely used. To ensure adequate inventory supply once commercialized, we will need to forecast inventory needs based on forecasted markets, which could be negatively affected by many factors, including:

product introductions by competitors;

an increase or decrease in surgeon demand for our products or for products of our competitors;

our failure to accurately manage our growth strategy;

our failure to accurately forecast surgeon acceptance of new products; and

unanticipated changes in general market conditions or regulatory matters.
Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, which would cause our gross margin to be adversely affected and could impair the strength of our brand. Additionally, we are subject to the risk that a portion of our inventory will expire, which could have a material adverse effect on our earnings and cash flows due to the resulting costs associated with the inventory impairment charges and costs required to replace such inventory. Conversely, if we underestimate customer demand for our future products, we may not be able to deliver, and this could result in damage to our reputation and customer relationships. In addition, if we experience a significant increase in demand, additional supplies of raw materials or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, which could have an adverse effect on our ability to meet customer demand and our results of operations.
 
44

 
Our ability to maintain our competitive position depends on our ability to attract and retain senior management and other highly qualified personnel.
We are highly dependent on our senior management and other key personnel. Our success depends in part on our continued ability to attract, retain and motivate highly qualified senior management and attract, retain and motivate qualified employees, including sales and marketing professionals, clinical specialists and other highly skilled personnel. Competition for skilled personnel in our market is intense and may limit our ability to hire and retain highly qualified personnel on acceptable terms, or at all. If we are not successful in attracting and retaining highly qualified personnel, it would have a material adverse effect on our business, financial condition and results of operations. The loss of highly qualified employees could result in delays in product development and commercialization and harm our business
Although we have entered into an employment agreement with our chief executive officer, he may terminate his employment with us at any time. The replacement of any of our key personnel likely would involve significant time and costs and may significantly delay or prevent the achievement of our business objectives and could therefore have an adverse effect on our business. We also do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees.
We currently have no marketing and sales organization. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our products, we may not be able to generate future product revenue.
We have no internal sales, marketing or distribution capabilities. If any of our product candidates ultimately receives regulatory approval, we expect to establish a direct marketing and sales force with technical expertise and supporting distribution capabilities to commercialize each such product in major markets, which will be expensive and time consuming. There are significant risks involved in building and managing a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. We may also choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. We may not be able to enter into collaborations or hire consultants or external service providers to assist us in sales, marketing and distribution functions on acceptable financial terms, or at all. In addition, our product revenues and our profitability, if any, may be lower if we rely on third parties for these functions than if we were to market, sell and distribute any products that we develop ourselves. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we are not successful in commercializing our products, either on our own or through arrangements with one or more third parties, we may not be able to generate any future product revenue and our business would be harmed.
Economic conditions may adversely affect our business.
Adverse worldwide economic conditions may negatively impact our business. Our general business strategy may be adversely affected by such economic conditions or the presence of a volatile business environment or unpredictable and unstable market conditions. Challenging global economic conditions may impact the availability to or affordability of health insurance or may impact patient decisions to have a medical procedure performed. Accordingly, a pronounced and sustained economic downturn, including the current economic challenges associated with the COVID-19 pandemic, could have a material adverse effect on our business, financial condition and prospects. Furthermore, challenging economic conditions could also cause a delay or disruption in the performance or satisfaction of commitments to us by our distribution partners, contract clinical providers, suppliers or other third parties, which would have a material adverse effect on our business.
 
45

 
Our business may be adversely affected by global health epidemics, including the COVID-19 pandemic.
The outbreak of COVID-19 and government measures taken in response to the pandemic have had a significant impact, both direct and indirect, on businesses and commerce, including our company, and may continue to significantly impact our business in the future. In particular, worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. As a result of the COVID-19 pandemic, we have experienced disruptions and may continue to experience disruptions that could severely impact our preclinical studies and business development plan, including:

interruption of our preclinical trial activities, due to restricted or limited operations at our manufacturing facility, limitations on travel, or interruption of study procedures that are deemed non-essential, which may impact the integrity of subject data and study endpoints;

interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;

interruption of, or delays in receiving, supplies of raw materials or other components for our preclinical activities; and

limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies, including because of sickness of employees or their families;
The COVID-19 pandemic continues to rapidly evolve. The extent to which the outbreak impacts our business, preclinical studies and future plans will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, timeline and success of the vaccine rollout, travel restrictions, new safety requirements or regulations imposed on us, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. We continue to monitor our operations and governmental recommendations and have made modifications for an indefinite period to our normal operations because of the COVID-19 pandemic. Additionally, while the potential economic impact brought by and the duration of the COVID-19 pandemic are difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively affect our short- and long-term liquidity. In addition, the impact of the COVID-19 pandemic could exacerbate other risks we face, including those described elsewhere in “Risk Factors.”
Changes in U.S. tax law could adversely affect our financial condition and results of operations.
The rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. Future changes in U.S. tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations. We urge investors to consult with their legal and tax advisors regarding the implications of potential changes in U.S. tax laws on an investment in our common stock.
If we become profitable, our ability to use our net operating loss carryforwards and other tax attributes to offset future taxable income or taxes may be subject to limitations.
As described under “— Risks Related to Our Limited Operating History, Financial Position and Capital Requirements,” we have incurred net losses since our inception, and expect to continue to incur operating losses for the foreseeable future. If we become profitable in the future, our ability to use net operating loss carryforwards, or NOLs, and other tax attributes to offset future taxable income or reduce taxes may be subject to limitations. In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” ​(generally defined as a greater than 50% cumulative change by value in its equity ownership of certain
 
46

 
stockholders over a rolling three-year period) is subject to an annual limitation on its ability to utilize its pre-change NOLs and other tax attributes (including any research and development credit carryforwards). Similar provisions of state tax law may also apply to limit the use of our state NOLs and other tax attributes.
We have not performed an analysis to determine whether our past issuances of stock and other changes in our stock ownership may have resulted in one or more ownership changes within the meaning of Sections 382 and 383 of the Code. In addition, we may experience an ownership change in connection with this offering or in the future as a result of subsequent changes in our stock ownership, some of which are outside our control ;and we are not intending to take any steps to prohibit any subsequent changes in our stock ownership in order to avoid such an ownership change. If an ownership change has occurred in the past or occurs in the future, we may not be able to use a material portion of our NOLs and other tax attributes to offset future taxable income or taxes if we attain profitability.
In addition to any limitation imposed by Section 382 of Code, the use of NOLs arising after December 31, 2017 generally is limited to a deduction of 80% of taxable income for the corresponding taxable year. NOLs arising after December 31, 2017, with certain exceptions that do not apply at the time of this offering, may not be carried back to previous taxable years, but may be carried forward indefinitely.
Risks Related to Our Common Stock and this Offering
In connection with the audit of our financial statements as of and for the years ended December 31, 2020 and 2019, a significant deficiency in our internal control over financial reporting was identified and we may identify additional significant deficiencies in the future.
In connection with the preparation and audits of our financial statements as of and for the years ended December 31, 2020 and 2019, a significant deficiency (as defined under the Exchange Act and by the auditing standards of the U.S. Public Company Accounting Oversight Board, or “PCAOB”), was identified in our internal control over financial reporting. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting.
Specifically, we have determined that we have not maintained sufficient staffing or written policies and procedures for accounting and financial reporting, which contributed to the lack of a formalized process or controls for management’s timely review and approval of financial information.
More specifically, we have determined that our financial statement close process includes significant control gaps mainly driven by the small size of our accounting and finance staff and, as a result, a significant lack of appropriate segregation of duties. We also determined that we have not maintained sufficient staffing or written policies and procedures for accounting and financial reporting, which contributed to the lack of a formalized process or controls for management’s timely review and approval of financial information.
The process of designing and implementing an effective accounting and financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain an accounting and financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the significant deficiency we have identified or avoid potential future significant deficiencies.
If we are unable to successfully remediate our existing or any future significant deficiencies in our internal control over financial reporting, or if we identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to
 
47

 
applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our share price may decline as a result. We also could become subject to investigations by Nasdaq, the SEC, or other regulatory authorities.
There has been no prior public market for our common stock and an active trading market may never develop or be sustained.
Prior to this offering, there has been no public market for our common stock. Although we have applied to list our common stock on the Nasdaq Capital Market, or Nasdaq, an active trading market for our common stock may never develop following completion of this offering or, if developed, may not be sustained. The lack of an active trading market may impair the value of your shares and your ability to sell your shares at the time you wish to sell them. An inactive trading market may also impair our ability to raise capital by selling shares of our common stock and enter into strategic partnerships or acquire other complementary products, technologies or businesses by using shares of our common stock as consideration. Furthermore, even if approved for listing there can be no guarantee that we will continue to satisfy the continued listing standards of Nasdaq. If we fail to satisfy the continued listing standards, we could be de-listed, which would have a negative effect on the price of our common stock.
The price of our common stock may be volatile and you may lose all or part of your investment.
The initial public offering price for the shares of our common stock sold in this offering is determined by negotiation between the underwriter and us. This price may not reflect the market price of our common stock following this offering. In addition, the market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including:

results of our clinical trials;

the introduction of new products or product enhancements by us or others in our industry;

the timing of regulatory clearances of our product candidates or those of our competitors;

disputes or other developments with respect to our or others’ intellectual property rights;

product liability claims or other litigation;

quarterly variations in our results of operations or those of others in our industry;

media exposure of our product candidates or of those of others in our industry;

changes in governmental regulations or in reimbursement;

changes in earnings estimates or recommendations by securities analysts; and

general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our common stock shortly following this offering. If the market price of shares of our common stock after this offering does not ever exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.
In addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s attention and resources from our business.
 
48

 
We do not intend to pay dividends on our common stock, so any returns will be limited to increases, if any, in our stock’s value. Your ability to achieve a return on your investment will depend on appreciation, if any, in the price of our common stock.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, the agreement governing our credit facility precludes, and any future debt agreements may preclude, us from paying cash dividends. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on, among other factors, our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Any return to stockholders will therefore be limited to the appreciation in the value of their stock, if any.
A significant portion of our outstanding shares of common stock are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that these sales may occur, could result in a decrease in the market price of our common stock. Immediately after this offering, we will have outstanding 17,769,108 shares of common stock, based on the number of shares of common stock outstanding as of June 1, 2021, (after giving effect to the automatic conversion of all shares of our preferred stock into shares of our common stock immediately prior to the closing of this offering). This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates or existing stockholders who have entered into lock-up agreements. Of the remaining shares, substantially all of the shares are currently restricted as a result of securities laws or 180-day lock-up agreements (which may be waived, with or without notice, by the underwriter) but will be able to be sold beginning 180 days after this offering, unless held by one of our affiliates, in which case the resale of those securities will be subject to volume limitations under Rule 144 of the Securities Act of 1933, as amended, or the Securities Act. See “Shares Eligible for Future Sale.” Moreover, holders of an aggregate of up to 11,439,536 shares of our common stock, (including shares of our common stock issuable upon the automatic conversion of all shares of our preferred stock into shares of our common stock immediately prior to the closing of this offering), have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders as described in the section of this prospectus entitled “Description of Capital Stock — Registration Rights.” We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market, subject to volume limitations applicable to affiliates and the lockup agreements referred to above and described in the section of this prospectus entitled “Underwriting.”
We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In particular, while we are an “emerging growth company” ​(i) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (ii) we will be exempt from any rules that could be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements, (iii) we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (iv) we will not be required to hold nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved.
We may remain an emerging growth company until as late as December 31, 2026, the fiscal year-end following the fifth anniversary of the completion of this initial public offering, though we may
 
49

 
cease to be an “emerging growth company” earlier under certain circumstances, including if (i) we have more than $1.07 billion in annual revenue in any fiscal year, (ii) the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 or (iii) we issue more than $1.0 billion of non-convertible debt over a three-year period.
The exact implications of the JOBS Act are still subject to interpretations and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take advantage of all of the benefits of the JOBS Act. In addition, investors may find our common stock less attractive to the extent we rely on the exemptions and relief granted by the JOBS Act. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may decline or become more volatile.
If you purchase shares of our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.
Investors purchasing shares of our common stock in this offering will pay a price per share that substantially exceeds the pro forma as adjusted net tangible book value per share of our common stock. As a result, investors purchasing common stock in this offering will incur immediate dilution of $5.55 per share, representing the difference between our assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and our pro forma as adjusted net tangible book value per share as of December 31, 2020. To the extent outstanding options to purchase shares of our common stock are exercised, new investors may incur further dilution. For more information on the dilution you may experience as a result of investing in this offering, see the section of this prospectus entitled “Dilution.”
We will have broad discretion in the use of proceeds of this offering designated for working capital and general corporate purposes.
We intend to use the net proceeds from this offering for: (i) research and development activities, which may include clinical trials for our bioengineered organs, (ii) expenditures related to a new facility, (iii) repayment of the Cheshire Note to the extent not converted prior to the completion of this offering and (iv) the remaining funds, if any, for working capital and general corporate purposes. Our management will have broad discretion over the use and investment of the net proceeds of this offering. Accordingly, investors in this offering have only limited information concerning our management’s specific intentions and will need to rely upon the judgment of our management with respect to the use of proceeds.
We expect to incur significant additional costs as a result of being a public company.
Upon completion of this offering, we expect to incur costs associated with corporate governance requirements that will become applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, as well as the rules of Nasdaq. These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs and make some activities more time-consuming. We also expect these rules and regulations to make it more expensive for us to maintain directors’ and officers’ liability insurance. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. Accordingly, increases in costs incurred as a result of becoming a publicly traded company may adversely affect our business, financial condition and results of operations.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Upon the closing of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and
 
50

 
procedures, no matter how well those controls and procedures are conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
We are at risk of securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because life science companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
If a trading market for our common stock develops, the trading market will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business. We do not control these analysts. As a newly public company, we may be slow to attract research coverage and the analysts who publish information about our common stock will have had relatively little experience with us or our business and products, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline and result in the loss of all or a part of your investment in us.
Provisions in our corporate charter documents and under Delaware law could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. As our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. These provisions provide, among other things, that:

our board of directors has the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
 
51

 

a special meeting of stockholders may be called only by the chair of our board of directors, our chief executive officer (or president, in the absence of a chief executive officer) or a majority of our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

our board of directors may alter certain provisions of our amended and restated bylaws without obtaining stockholder approval;

the approval of the holders of at least two-thirds of our shares entitled to vote at an election of our board of directors is required to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors;

stockholders must provide advance notice and additional disclosures to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain voting control of our shares; and

our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, or DGCL, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation that will become effective upon the completion of this offering provides that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the United State District Court for the District of Delaware) is the exclusive forum, to the fullest extent permitted by law, for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine, except, in each case, (A) any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within 10 days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than such court, or (C) for which such court does not have subject matter jurisdiction, in all cases subject to the courts having jurisdiction over indispensable parties named as defendants. This provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. For example, stockholders who do bring a claim in the Court of Chancery could face additional litigations costs in pursuing any such claim, particularly if they do not reside in or near the State of Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than
 
52

 
to our stockholders. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. This provision will not apply to actions arising under the Securities Act or Exchange Act. Our amended and restated certificate of incorporation and amended and restated bylaws further provide that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Section 22 of the Securities Act, however, creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.
 
53

 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements concerning our business, operations and financial performance and conditions, as well as our plans, objectives and expectations for our business operations and financial performance and condition. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. In addition, statements that “we believe” or similar statements reflect our beliefs and opinions on the relevant subject. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These forward-looking statements include, but are not limited to, statements regarding:

estimates regarding future results of operations, financial position, research and development costs, capital requirements and our needs for additional financing;

our expectations with respect to the regulatory pathway of our product candidates, our ability to obtain regulatory approvals for such product candidates, and the anticipated effect of delays in obtaining any such regulatory approvals;

our expectations with respect to pre-clinical and clinical trial plans for our product candidates, the results of such activities and the safety and efficacy of our product candidates;

our plans with respect to collaborating with third parties on product development and other matters;

our ability to commercialize our product candidates

our expectations regarding our manufacturing capabilities;

our ability to compete successfully with larger competitors in our highly competitive industry;

our ability to achieve and maintain adequate levels of coverage or reimbursement for any future products we may seek to commercialize;

our beliefs with respect to the development, regulatory approval, efficacy and commercialization of competing products;

our business model and strategic plans for our product candidates, technologies and business, including our implementation thereof;

the size of the markets for our product candidates and our expectations about market trends;

our ability to attract and retain senior management and key scientific personnel;

our ability to obtain additional capital to finance our planned operations;

regulatory developments in the United States and internationally;

our ability to establish and maintain intellectual property protection for our products, as well as our ability to operate our business without infringing the intellectual property rights of others;

our expectations regarding the use of proceeds from this offering; and

other risks and uncertainties, including those listed under the caption “Risk Factors.”
These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe the expectations reflected in the forward-looking statements are reasonable, the future results, levels of activity, performance or
 
54

 
events and circumstances reflected in the forward-looking statements may not be achieved or occur at all. You should refer to the section titled “Risk Factors” and elsewhere in this prospectus for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. These forward-looking statements speak only as of the date of this prospectus. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
MARKET AND INDUSTRY DATA
We obtained the industry, market and competitive position data used throughout this prospectus from our own internal estimates and research, as well as from independent market research, industry and general publications and surveys, governmental agencies and publicly available information in addition to research, surveys and studies conducted by third parties. The market and industry data used in this prospectus involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Although we believe the industry, market and competitive position data included in this prospectus is reliable and based on reasonable assumptions, such data involve risks and uncertainties and are subject to change based on various factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties or by us.
 
55

 
USE OF PROCEEDS
We estimate that the net proceeds to us from this offering will be approximately $28.2 million (or approximately $32.6 million if the underwriter exercises in full its option to purchase up to 600,000 additional shares of common stock), based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase (decrease) in the assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $3.7 million, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million in the number of shares of common stock offered by us, as set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us by approximately $7.4 million, assuming an initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We currently intend to use the net proceeds from this offering, together with our existing cash and cash equivalents as follows:

between approximately $34.8 million to $40.0 million to fund our research and development activities, which we expect will be sufficient to fund such activities through 2023, including, but not limited to, our Phase 1 trial for ELAP and certain pre-clinical trials for our bioengineered organs;

between approximately $3.0 million to $4.0 million to fund the full cost of constructing a new facility;

approximately $7.2 million for repayment of the Cheshire Note to the extent not converted prior to the completion of this offering; and

The remaining funds, if any, for working capital and general corporate purposes.
This expected use of the net proceeds from this offering, and the sufficiency of such net proceeds to fund certain of our operations, represents our intentions based on our current plans and business conditions, which could change in the future as our plans and business conditions evolve. Our management will have broad discretion over the use of the net proceeds from this offering, and our investors will be relying on the judgment of our management regarding the application of the net proceeds of this offering.
On March 6, 2020, we entered into a note and warrant purchase agreement (the “Cheshire Purchase Agreement”) with Cheshire MD Holdings, LLC (“Cheshire”), an affiliate of DaVita Inc., under which we received a bridge financing of $6,000,000. In connection with the Cheshire Purchase Agreement, we issued a $6,000,000 convertible promissory note (the “Cheshire Note”) to Cheshire and issued Cheshire a warrant to purchase up to $750,000 of shares of our preferred stock. The Cheshire Note is unsecured and has a maturity date of September 6, 2021. If we complete a preferred stock offering of at least $34,000,000 prior to the maturity date, the Cheshire Note and all accrued interest will automatically convert into preferred shares of such offering at the offering price. The Cheshire Note bore interest at 5% per annum through and until May 1, 2020, at which time the interest rate increased to 7%. The interest rate increased by an additional 2% on the first day of each subsequent month (beginning on June 1, 2020) prior to the maturity date, provided that the interest rate shall not exceed 20%. As of December 1, 2020, the interest rate reached the maximum of 20%.
Pending the use of the net proceeds from this offering as described above, we intend to invest the net proceeds in a variety of capital preservation instruments, including short-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the United States government.
 
56

 
DIVIDEND POLICY
We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and, therefore, we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors, subject to various factors, including applicable laws, our results of operations, financial condition, future prospects and any other factors deemed relevant by our board of directors. Investors should not purchase our common stock with the expectation of receiving cash dividends.
 
57

 
CAPITALIZATION
The following table sets forth our cash and cash equivalents and our capitalization as of March 31, 2021, as follows:

an actual basis;

on a pro forma basis to give effect to (i) the receipt by us of $20.0 million in the Private Placement and (ii) the automatic conversion of all our preferred stock outstanding, into an aggregate of 11,439,536 shares of our common stock immediately prior to the completion of this offering based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus;

a pro forma as adjusted basis, giving effect to the pro forma adjustments discussed above, and giving further effect to (a) the use of $7,199,671 to repay the Cheshire Note,which reflects the repayment of the the aggregate amount of principal and accrued interest outstanding as of June 30, 2021, and (b) the issuance and sale of 4,000,000 shares of common stock in this offering at an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us; and

a pro forma alternative as adjusted basis, giving effect to the pro forma adjustments discussed in the second bullet above, and giving further effect to (a) the conversion of the Cheshire Note into common stock as of June 30, 2021 based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, (b) the exercise of the Cheshire Warrants on June 30, 2021 based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and (c) the issuance and sale of 4,000,000 shares of common stock in this offering at an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The pro forma and pro forma as adjusted information below is illustrative only, and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with the sections titled “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus.
As of March 31, 2021
Actual
Pro Forma
Pro Forma
As Adjusted(1)
Pro Forma
Alternative As
Adjusted
(unaudited)
Cash and cash equivalents
$ 4,263,528 $ 24,263,530 $ 45,508,927 $ 52,413,530
Total liabilities
$ 10,009,372 $ 10,009,372 $ 3,104,769 $ 3,104,769
Series B-2 Convertible Preferred
Stock, $.00001 par value;
2,500,000 shares authorized;
2,095,874 shares issued and
outstanding, actual and as adjusted
15,670,097
Series B Convertible Preferred Stock,
$.00001 par value; 4,000,000
shares authorized; 3,218,282
shares issued and outstanding,
actual and as adjusted
23,865,732
 
58

 
As of March 31, 2021
Actual
Pro Forma
Pro Forma
As Adjusted(1)
Pro Forma
Alternative As
Adjusted
(unaudited)
Series A Convertible Preferred Stock,
$.00001 par value; 3,300,000
shares authorized; 3,000,380
shares issued and outstanding,
actual and as adjusted
7,125,661
Stockholders’ deficit:
Common Stock, $.00001 par value;
30,000,000 shares authorized;
2,290,822 shares issued and
outstanding, actual and as adjusted
23 137 177 189
Additional paid-in capital
8,509,143 75,170,521 103,320,481 110,520,140
Accumulated deficit
(59,815,500) (59,815,500) (59,815,500) (59,815,500)
Total stockholders’ deficit
$ (51,306,334) $ 15,355,158 $ 43,505,158 $ 50,704,829
Total capitalization
$ 5,364,528 $ 25,364,530 $ 46,609,927 $ 53,809,598
(1)
Each $1.00 increase (decrease) in the assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital and total stockholders’ deficit by approximately $3.7 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares of common stock offered by us would increase (decrease) the pro forma as adjusted cash and cash equivalents, additional paid-in capital and stockholders’ deficit by approximately $7.4 million, assuming the assumed initial public offering price of $8.00 per share remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
For the three months ended March 31, 2021, our interest expense was $305,374. After giving pro forma effect to either (i) the conversion of the Cheshire Note into preferred stock, as if such conversion had occurred on January 1, 2021, or (ii) the repayment of the Cheshire Note, as if such repayment had occurred on January 1, 2021, our interest expense would be $9,483. For the three months ended March 31, 2021, our earnings per share was $(0.04) after giving pro forma effect to the conversion of all outstanding shares of preferred stock into common stock. After giving further pro forma effect to either (i) the conversion of the Cheshire Note into preferred stock, as if such conversion had occurred on January 1, 2021, or (ii) to the repayment of the Cheshire Note, as if such repayment had occurred on January 1, 2021, our earnings per share would be $(0.01).
The foregoing discussion and tables are based on are based on 13,769,108 shares of common stock outstanding as of March 31, 2021, which gives effect to the pro forma transactions described above, and excludes:

3,552,505 shares of our common stock issuable upon the exercise of stock options as of March 31, 2021, at a weighted-average exercise price of $3.25 per share;

564,191 shares of our common stock issuable upon the exercise of warrants as of March 31, 2021; and

559,500 shares of our common stock that remain available for issuance as of March 31, 2021 under the 2019 Plan.
The foregoing discussion and tables excludes the optional conversion of the Cheshire Warrants into common stock.
 
59

 
DILUTION
If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.
Our historical net tangible book deficit as of March 31, 2021 was $(4,644,844), or $(2.03) per share of common stock based on 2,290,822 shares of common stock outstanding as of such date. Our historical net tangible book deficit represents our total tangible assets less total liabilities divided by the number of shares of our common stock outstanding as of March 31, 2021.
Our pro forma net tangible book value as of March 31, 2021 was approximately $15.4 million, or $1.12 per share of our common stock. Pro forma net tangible book value (deficit) represents the amount of our total tangible assets less our total liabilities after giving effect to (i) the automatic conversion of all our preferred stock outstanding, into an aggregate of 11,439,536 shares of our common stock immediately prior to the completion of this offering based on an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus. Pro forma net tangible book value (deficit) per share is our pro forma net tangible book value (deficit) divided by the number of shares of our common stock deemed to be outstanding as of March 31, 2021.
After giving effect to the issuance and sale of 4,000,000 shares of common stock in this offering at an assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, the use of $7.2 million to repay the Cheshire Note,which reflects the repayment of the the aggregate amount of principal and accrued interest outstanding as of June 30, 2021, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value (deficit) as of March 31, 2021 would have been approximately $43.5 million, or $2.45 per share. This represents an immediate increase (decrease) in pro forma as adjusted net tangible book value of $1.33 per share to our existing stockholders and an immediate dilution of $5.55 per share to new investors purchasing shares of our common stock in this offering. We determine dilution per share to new investors by subtracting our pro forma as adjusted net tangible book value per share after this offering from the assumed public offering price per share paid by new investors in this offering.
The following table illustrates this dilution on a per share basis:
Assumed initial public offering price per share
$ 8.00
Historical net tangible book deficit per share as of March 31, 2021
$ (2.03)
Increase in historical net tangible book deficit per share attributable to pro forma transactions and other adjustments described above
3.15
Pro forma net tangible book value (deficit) per share as of March 31, 2021
1.12
Increase in pro forma net tangible book value per share attributable to new investors participating in this offering
1.33
Pro forma as adjusted net tangible book value per share after this offering
2.45
Dilution per share to new investors participating in this offering
$ 5.55
Each $1.00 increase (decrease) in the assumed initial public offering price of $8.00 (which is the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) our pro forma as adjusted net tangible book value (deficit) per share after this offering by approximately $0.27 per share and the dilution per share to new investors participating in this offering by approximately $0.73 per share, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million in the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value (deficit) per share after this offering by $0.27 per share and increase (decrease) the dilution per share to new investors participating in this offering by $0.27 per share, assuming that the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
 
60

 
If the underwriter exercises in full its option to purchase additional shares of common stock, the pro forma as adjusted net tangible book value (deficit) per share after giving effect to this offering would be $2.62 per share, representing an immediate increase to existing stockholders of $4.65 per share and immediate dilution to new investors participating in this offering of $5.38 per share assuming that the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The following table shows, as of March 31, 2021, on a pro forma as adjusted basis as described above, the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid, or to be paid, by existing stockholders and by new investors purchasing common stock in this offering at the assumed initial public offering price of $8.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses payable by us:
Shares
Purchased
Total
Consideration
Number
Percent
Amount
Percent
Average Price
Per Share
Existing stockholders before this offering
13,730,358 77.4% $ 67,711,238 67.9% $ 4.93
New investors participating in this offering
4,000,000 22.6 32,000,000 32.1 8.00
Total
17,730,358 100% 99,711,238 100% 5.62
Each $1.00 increase (decrease) in the assumed initial public offering price of $8.00 per share (which is the midpoint of the price range set forth on the cover page of this prospectus), would increase (decrease) the total consideration paid by new investors participating in this offering and total consideration paid by all stockholders by approximately $3.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The above table assumes no exercise of the underwriter’s option to purchase additional shares. If the underwriter exercises its option to purchase additional shares in full, our existing stockholders before this offering would own 74.9% and our new investors participating in this offering would own 25.1% of the total number of shares of our common stock outstanding immediately prior to the completion of this offering. Additionally, the consideration paid to us by existing stockholders before this offering would be approximately $67.7 million, or approximately 65% of the total consideration, and the consideration paid to us by new investors participating in this offering would be $36.8 million, or approximately 35% of the total consideration.
The foregoing discussion and tables are based on (other than the historical net tangible book value calculation) are based on 13,769,108 shares of common stock outstanding as of March 31, 2021, which gives effect to the pro forma transactions described above, and excludes:

3,552,505 shares of our common stock issuable upon the exercise of stock options as of March 31, 2021, at a weighted-average exercise price of $3.25 per share;

564,191 shares of our common stock issuable upon the exercise of warrants as of March 31, 2021; at a weighted average exercise price of $2.30 and

559,500 shares of our common stock that remain available for issuance as of March 31, 2021 under our 2019 Plan.
The foregoing discussion and tables excludes the optional conversion of the Cheshire Warrants into common stock.
 
61

 
To the extent that stock options or warrants are exercised, new equity compensation awards are issued under our stock incentive plans, or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.
 
62

 
SELECTED FINANCIAL DATA
You should read the following selected financial data together with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus. The selected financial data included in this section are not intended to replace the financial statements and are qualified in their entirety by the financial statements and the related notes included elsewhere in this prospectus.
We derived the selected statement of operations data for the years ended December 31, 2020 and 2019 and the selected balance sheet data as of December 31, 2020 and 2019 from our audited financial statements and accompanying notes appearing elsewhere in this prospectus. The summary statements of operations data for the three months ended March 31, 2021 and 2020 and the summary balance sheet data as of March 31, 2021 are derived from our unaudited interim financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Year ended December 31,
Three Months Ended March 31,
2019
2020
2020
2021
Statement of Operations:
Licensing revenue
$ 250,000 $ 46,530 $ 11,088 $ 6,108
Cost of goods sold
250,000 500,000 125,000 125,000
Gross margin
(453,470) (113,912) (118,892)
Operating expenses:
Research and development
6,266,670 7,280,798 1,801,378 1,868,001
Regulatory and clinical
289,020 265,885 73,106 83,705
Quality
149,199 85,787
General and administrative
2,435,974 2,109,196 465,663 562,874
Total operating expenses
8,991,664 9,805,078 2,340,147 2,600,367
Operating loss from continuing operations
(8,991,664) (10,258,548) (2,454,059) (2,719,259)
Other income (expense):
Interest income
106,428 8,733 5,863 40
Interest expense
(48,385) (656,552) (37,175) (305,374)
Amortization of discount on note
(108,620) (10,862) (32,586)
Change in fair value of derivative
(51,446) 193,971
Research grants
431,880 992,144 180,000 150,537
Loss from continuing operations
(8,501,741) (10,074,289) (2,316,233) (2,712,671)
Gain on equity investment
4,495,500
Equity loss in affiliate
(1,025,000) (2,358,392) (640,000) (223,633)
Gain on sale of equity investment
2,123,113 1,983,912
Gain on debt extinguishment
518,050
Gain on disposal of discontinued operations
1,802,555
Loss from discontinued operations
(818,113)
Net loss
$ (4,046,799) $ (10,309,568) $ (2,956,233) $ (434,342)
Net loss per common share
Basic and diluted
$ (1.98) $ (4.76) $ (1.40) $ (0.19)
Weighted average common shares outstanding, basic and diluted
2,043,356 2,165,105 2,108,981 2,255,378
 
63

 
Year ended December 31,
Three Months Ended March 31,
2019
2020
2020
2021
Pro forma net loss per common share basic and diluted (unaudited)
$ (0.98) $ (0.04)
Pro forma weighted average shares outstanding, basic and diluted (unaudited)
10,479,641 10,569,914
As of December 31,
As of
March 31,
2021
2020
2019
Balance Sheet Data:
Cash and cash equivalents
$ 4,444,395 $ 3,250,014 $ 4,263,528
Working capital (deficit)(1)
(3,474,276) 2,249,556 (3,538,077)
Total assets
5,254,428 7,745,811 5,364,528
Total liabilities
9,627,131 2,517,700 10,009,372
Convertible preferred stock
46,661,490 46,661,490 46,661,490
Total stockholders’ deficit
$ (51,034,193) $ (41,433,379) $ (51,306,334)
(1)
We define working capital as current assets minus current liabilities.
 
64

 
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Selected Financial Data” and the financial statements and the related notes included elsewhere in this prospectus. In addition to historical financial information, the following discussion contains forward-looking statements based upon our current plans, expectations and beliefs that involve risks, uncertainties and assumptions. Our actual results may differ materially from those described in or implied by these forward-looking statements as a result of many factors, including those set forth under the section titled “Risk Factors” and in other parts of this prospectus.
Overview
We are a life sciences company pioneering a novel technology for bioengineering fully transplantable human organs to help save and improve patients’ lives. Organ disease is a major public health issue. According to the American Transplant Foundation, there are an estimated 114,000 people in the U.S. waiting for a lifesaving organ transplant, and on average 20 people die daily due to lack of available organs. We have developed a proprietary perfusion technology platform for bioengineering organs that we believe will efficiently scale to address the shortage of available human organs. Our initial development focus is on human livers and kidneys, and we have demonstrated the ability to bioengineer these organs with functional vasculature and important organ function in preclinical studies. In addition, we believe our technology platform will be able to develop other organs, including lungs, pancreas, and hearts. We have collaborations with the Mayo Clinic, Mount Sinai and the Texas Heart Institute, and our strategic investors include DaVita, Baxter and CareDx.
Substantially all of our revenue to date has been generated by royalties we received from the sale of our biologic surgical products Miromesh and Miroderm which we spun out as Reprise effective June 30, 2019 and subsequently divested our minority ownership stake in March 2021. We continue to receive a royalty on the sales of these products by Reprise. This prior acellular business is accounted for as discontinued operations in our financial statements. See ““Related Party Transactions — Reprise.”
Our revenue for the years ended December 31, 2020 and 2019 was $46,530 and $250,000, respectively, consisting entirely of licensing revenue. Our net loss for the years ended December 31, 2020 and 2019 was $10.3 million and $4.0 million, respectively. We have not been profitable since inception and as of December 31, 2020, we had an accumulated deficit of $59.4 million.
Components of Our Results of Operations
Revenue
For the periods presented, all of our revenue consists of licensing revenue pursuant to the license agreement with Reprise. Revenue pursuant to this agreement is recognized at the later of (i) when the related sales occur after the minimum guarantee is satisfied, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Cost of Goods Sold
Cost of goods sold for continuing operations relates to our license agreement with the University of Minnesota, pursuant to which we owe the University of Minnesota royalties on our revenues, which are subject to annual minimum payments.
Gross Margin
Our gross margin is calculated by subtracting our cost of goods sold from our revenue.
Research and Development Expenses
Research and development expenses consist primarily of engineering, product development, consulting services, materials, depreciation and other costs associated with products and technologies
 
65

 
in development. These expenses include payroll and related expenses, consulting expenses, laboratory supplies, and amounts incurred under certain collaborative agreements. Expenditures for research and development activities are charged to operations as incurred.
We expect research and development expenses in absolute dollars to increase in the future as we develop our lead product candidates and expand into other programs. We expect research and development expenses as a percentage of revenue to vary over time depending on the level and timing of new product development initiatives.
Regulatory and Clinical Expenses
Regulatory and clinical expenses include costs for developing our regulatory and clinical study strategies for our products. These expenses include payroll and related expenses and consulting expenses.
Over time we expect our regulatory and clinical expenses to increase in absolute dollars as we continue to expand our product offerings and move through various regulatory processes. We expect our regulatory and clinical expenses to decrease as a percentage of revenue primarily as, and to the extent, our revenue grows.
Quality Expenses
Quality expenses relate to costs of systems and procedures to develop a cGMP manufacturing facility. These expenses include payroll and related expenses. We expect our quality expenses to increase in future years as we continue to develop the process and systems need to produce our products.
General and Administrative Expenses
General and administrative expenses include costs for our executive, accounting and human resources functions. Costs consist primarily of payroll and related expenses, professional service fees related to accounting, legal and other contract and administrative services and related infrastructure expenses.
We expect that our general and administrative expenses will increase in absolute dollars as we expand our headcount to support our growth and incur additional expenses related to operating as a public company, including director and officer insurance coverage, legal costs, accounting costs, costs related to exchange listing and costs related to SEC compliance and investor relations. We expect our general and administrative expenses to decrease as a percentage of revenue primarily as, and to the extent, we generate revenue and our revenue grows.
Interest Income
Interest income consists of interest earned on our cash and cash equivalents.
Interest Expense
Interest expense consists of interest under our loan agreements. See “— Liquidity and Capital Resources.”
 
66

 
Results of Operations
Comparison of the Years Ended December 31, 2020 and 2019 and the Three Months Ended March 31, 2020 and 2021
Year ended
December 31,
Change
Three Months Ended
March 31,
Change
2019
2020
Dollar
Percentage
2020
2021
Dollar
Percentage
(unaudited) (unaudited) (unaudited) (unaudited)
(in thousands)
Statement of Operations:
Licensing revenue
$ 250 $ 47 $ (203) (81.2)% $ 11 $ 6 $ (5) (44.5)%
Cost of goods sold
250 500 250 100.0 125 125 0%
Gross margin
(453) (453) (114) (119) (5) 4.4
Operating expenses:
Research and development
6,267 7,281 1,014 16.2 1,801 1,868 67 3.7
Regulatory and clinical
289 266 (23) (8.0) 73 83 10 13.7
Quality
149 149 86 86
General and administrative
2,436 2,109 (327) (13.4) 466 563 97 20.8
Total operating expenses
8,992 9,805 813 9.0 2,340 2,600 260 11.1
Operating loss from continuing operations
(8,992) (10,258) (1,266) 14.1 (2,454) (2,719) (265) 10.8
Other income (expense):
Interest income
106 9 (97) (91.5) 6 (6) (100.0)
Interest expense
(48) (657) (609) 1,268.8 (37) (305) (268) 724.3
Amortization of discount on note
(109)