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... ... @@ -2,76 +2,31 @@ 2 2 {{toc/}} 3 3 {{/box}} 4 4 5 -= Overview=5 += Paragraph 1 = 6 6 7 - Biostage isabiotechnologycompany developingbioengineered organimplantsbased onitsnovelCellframeTMtechnology. Thecompany'sCellframetechnologyiscomprisedofabiocompatiblescaffoldthatis seeded withtherecipient’sown stem cells.This technologyis beingdevelopedtotreat life-threatening conditionsofthe esophagus,tracheaorbronchuswiththe objectiveofdramaticallyimprovingthetreatment paradigmforthosepatients.7 +Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. 8 8 9 - Thecompanybelieve that its Cellframe technology willprovide surgeons with new ways to address damage to the esophagus, bronchus,and trachea due to congenital abnormalities, cancer, infection or trauma. Products being developed based on its Cellframe technologyfor those indications are called CellspanTM products.9 +== Sub-paragraph == 10 10 11 - The companyannouncedfavorable preliminarypre-clinicalresults oflarge-animal studiesfortheesophagus, tracheaand bronchusin November 2015. Sincethen,theCellspanesophagealimplantproduct candidateshavebeentsleaddevelopmentproductcandidates. Biostageispursuingtwodevelopmentprogramsthat addressconditionsoftheesophagus:esophagealatresiain pediatricpatientsandesophagealcancerinadultpatients.Thecompany's Cellspanesophageal product candidatesareeach intendedtoprovideasurgical solutionostimulateregenerationofa segment ofthe esophagus missingdueto a congenitalabnormalityor followingsurgical removalto establishor reestablish theorgan’s continuity and integrity.11 +Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. 12 12 13 - Approximatelyone in 2,500 babies in the U.S. is born with esophageal atresia, a congenital condition where the child’s esophagus is underdeveloped and does not extend completely from the mouth to the stomach. When a long segment of the esophagus is lacking, the current standard of care is a series of surgical procedures where surgical sutures are applied toboth ends of the esophagus in an attempt to stretch them together so they can be connected at a later date. This process can take weeks and the procedure can result in serious complications and may carry highrates of failure. Such approachalso requires, in time, at least two separate surgical interventions. Other options include the use of the child’s stomach that would be pulled up, or a piece of the patient’s intestine that would be moved to the gap, to allow a connection to the mouth. Biostage is working to develop a Cellspan esophageal implant product candidate to address newborns’ esophageal atresia, to provide a simpler, more effective and potentially organ-sparing solution.13 +== Sub-paragraph == 14 14 15 - A portionof all patients diagnosedwithesophagealcancer are treatedvia a surgicalprocedureknownas anesophagectomy.Thecurrentstandardof carefor anesophagectomyrequiresacomplex surgicalprocedure thatinvolvesmovingthe patient’sstomachoraportionoftheircolonintothechest to replacethe portionofesophagusresectedbythe removalf the tumor.Thesecurrentprocedureshavehighratesof complications,and canleadtoaseverely diminishedquality oflife and requirecostlyongoing care.Thecompany'sCellspanesophagealimplantsaimtosimplifytheprocedure, reduce complications,result in abetterqualityoflifeandreducethe overallcostof these patientsothe healthcare system.15 +Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. 16 16 17 - Thecompany believe that, of its two current programs, the Cellspan Esophageal Implant program to treat pediatric esophageal atresia may provide a shorter time to a commercial product and the greater overall potential value. The company alsobelieve that the pediatric esophageal atresia program needs to advance in the first position with the FDA to ensure eligibilityfor thepediatric rare disease accelerated review voucher program. Receipt of sucha voucher, if achieved, could potentially provide significant value to the company in the future. As a result, the company elevated the pediatric program to its lead program. The company will continue to advance the Cellspan Esophageal Implant adult program, but have not filed an IND for that product candidate at this time. The company's current plan for that product candidate is to update the FDA on the progress and status of the its preclinical testing, including its GLP studies, for the adult esophagus program in the near future. Based on the FDA’s feedback, the the company may amend its preclinical testing plan and continue toward the filing of an IND.17 +=== Sub-sub paragraph === 18 18 19 - Thecompany's productsarecurrentlyin development and have notyetreceivedregulatoryapprovalfor saleanywhere intheworld.19 +Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. 20 20 21 -Following the failure to receive the funding with respect to a securities purchase agreement in August 2017, and in an effort to conserve cash, the company completed a reduction in headcount of 20 persons during October and November 2017. In addition, its officers agreed to a temporary reduction in their cash salaries by 50% effective November 2017. During Q1 2018, the salaries of its officers were increased to approximately 80% of their contracted rate. Biostage has accrued the difference between the officers contracted rate and amount paid for November 2017 through March 2018. Following the capital raises in December 2017 and January 2018 described below the company re-hired five of its former employees into key positions in January 2018. The company believe that its new staffing level after those hires is sufficient to pursue both of its esophageal programs and the company anticipate its 2018 cash burn needs to be significantly less than its 2017 burn. 22 22 23 -= ===RestoringOrganFunction====22 += Paragraph 2 = 24 24 25 - Following extensiveresearchanddevelopment,Biostagehas evolveditstechnologytooptimizethe interaction ofmesenchymalstemcells seededon abiocompatiblescaffold.Preclinicalstudiessuggestthat,once implanted,thescaffoldseededwiththepatient’sowncellssignalsthestemcellniche toguidetheregenerationofabiologicalstructure.24 +Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. 26 26 27 - Cellframetechnology may enable the first trulypersonalized approach to organregeneration.26 +== Sub-paragraph == 28 28 29 - Cellframetechnologyemploys aultistepprocessinwhich thepatient’s ownstem cellsaretakenfrom asimpleadipose/fattissuebiopsy,expandedandbanked,andtheneededontoaproprietaryscaffoldthatmimics thenaturaldimensionsof the organbeingregenerated.After several daysina rotatingbioreactor,thetemcell-containingscaffold isreadyto be implanted.Cellframetechnologyisdesignedtodeliver the necessarycuesfortriggering,guidingandmodulatingtheregenerativeprocess.28 +Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. 30 30 31 - [[image:http://www.biostage.com/sites/default/files/_pop-up-images/032116_HRTREG20512_OurTechFCA.jpg]]30 +== Sub-paragraph == 32 32 33 -Cellframe technology is based on the concept of in situ tissue regeneration using the body’s own biologic resources and reparative capability in combination with tissue-specific biomaterials implanted at the sites of disease or injury. 34 - 35 -Cellframe is a newly developed technology that harnesses the full potential of the in vivo microenvironment to achieve complete tissue regeneration. 36 - 37 -Biostage is investigating its Cellframe technology to replace diseased sections of the esophagus, trachea and bronchus, possible life-threatening conditions that are underserved by current therapies 38 - 39 -==== December 2017 Private Placements and Reverse Stock Split ==== 40 - 41 -Between December 27 and December 29, 2017, the company entered into Securities Purchase Agreements with new investors for the sale of its capital stock. Theses agreement and related transactions resulted in the following: 42 - 43 -* On December 22, 2017, the company effected a reverse stock split of its shares of common stock at a ratio of 1-for-20. All share and per share amounts of common stock in the accompanying consolidated financial statements in this quarterly report on Form 10-Q have been retroactively adjusted to reflect the reverse stock split. 44 -* The company's common stock commenced trading on the OTCQB Venture Market on a reverse stock split basis on December 22, 2017. The Company had delisted from The NASDAQ Capital Market in October 2017 and commenced trading on the OTCQB Venture Market at that time. 45 -* On December 27, 2017, the company issued 518,000 shares of its common stock at $2.00 per share, 3,108 shares of its Series D Convertible Preferred Stock at $1,000 per share, and warrants to purchase 3,108,000 shares of common stock at an exercise price of $2.00 per share, in exchange for aggregate gross proceeds of approximately $4.1 million in a private placement transaction of unregistered shares with a new investor. The warrants were immediately exercisable and expire in December 2022. 46 - 47 -On January 3, 2018, the company issued 50,000 shares of its Common stock at $2.00 per share and warrants to purchase 75,000 shares of common stock at an exercise price of $2.00 per share, in exchange for aggregate gross proceeds of $100,000 in a private placement transaction of unregistered shares with Connecticut Children’s Medical Center. The warrants were immediately exercisable and expire in January 2023. 48 - 49 -Additionally, on February 20, 2018, the company completed a private placement of 302,115 shares of common stock at a purchase price of $3.31 per share for net proceeds of $1.0 million. 50 - 51 -==== Small Business Innovation Research Grant ==== 52 - 53 -On March 28, 2018, the company were awarded a Fast-Track Small Business Innovation Research (SBIR) grant by the Eunice Kennedy National Institute of Child Health and Human Development. The award for Phase I, which is expected to be earned through the third quarter of 2018, provides for the reimbursement of up to $225,000 of qualified research and development costs or expenditures. The SBIR grant has the potential to provide a total award of $1.7 million. If Phase I is successful, and funding is available, a Phase II award of up to approximately $1.5 million would support pre-clinical testing of pediatric Cellspan Esophageal Implants planned to begin later in 2018. The Phase II funds, if awarded, would be spent over an estimated two years. 54 - 55 -==== Operating Losses and Cash Requirements ==== 56 - 57 -Biostage has incurred substantial operating losses since its inception, and as of March 31, 2018 had an accumulated deficit of approximately $49.8 million, which will require it to seek additional financing to fund future operations. The company expect that its cash on hand at March 31, 2018 of $2.8 million will enable it to fund its operating expenses and capital expenditure requirements into the third quarter of 2018. 58 - 59 -Biostage is currently investing significant resources in development of products for use by clinicians in the field of regenerative medicine. The company will need to raise additional funds in future periods to fund its operations. In the event that the company do not raise additional capital from outside sources in the near future, the company may be forced to further curtail or cease its operations. Cash requirements and cash resource needs will vary significantly depending upon the timing of clinical and animal studies and other resource needs that will be required to complete ongoing development and pre-clinical and clinical testing of products as well as regulatory efforts and collaborative arrangements necessary for its products that are currently under development. The company will seek to raise necessary funds through a combination of public or private equity offerings, debt financings, other financing mechanisms, or strategic collaborations and licensing arrangements. The company may not be able to obtain additional financing on terms favorable to it, if at all. 60 - 61 -On May 1, 2018, the company entered into Securities Purchase Agreements (the “Purchase Agreements”) with Chu Bogang and Zhou Heping (each an “Investor” and together “Investors”) pursuant to which the Investors agreed to purchase in private placements (the “Private Placements”), and the company agreed to issue, 500,000 shares of its common stock, par value $0.01 per share (the “Common Stock”) at a purchase price of $3.60 per share to each of the Investors for a total combined issuance of 1,000,000 shares of its Common Stock. The Private Placements are expected to close later in May. 62 - 63 -==== Financial Condition, Liquidity and Capital Resources ==== 64 - 65 -Sources of liquidity. Biostage has incurred operating losses since inception, and as of March 31, 2018 the company had an accumulated deficit of approximately $49.8 million. Biostage is currently investing significant resources in the development and commercialization of its products for use by clinicians and researchers in the field of regenerative medicine. As a result, the company expect to incur operating losses and negative operating cash flow for the foreseeable future. 66 - 67 -Operating activities. Net cash used in operating activities of $2.0 million for the three months ended March 31, 2018 was primarily a result of its $1.5 million net loss, in addition to approximately $0.8 million of cash used for working capital, partially offset by $0.3 million add-back of non-cash expenses related to the change in the fair value of its warrant liability, stock-based compensation and depreciation. The cash used for working capital primarily represented the payment of accounts payable and accrued expenses. 68 - 69 -Net cash used in operating activities of $3.1 million for the three months ended March 31, 2017 was primarily a result of its $3.8 million net loss and $0.3 million of cash used for working capital, partially offset by a $1.0 million add-back of non-cash expenses related to the change in the fair value of its warrant liability, including issuance costs, stock-based compensation and depreciation. 70 - 71 -Investing activities. Net cash provided by investing activities during the three months ended March 31, 2018 was $46,000 reflecting $49,000 of cash received from the sale of property, plant and equipment, offset in part by $3,000 of property and equipment additions. 72 - 73 -Cash used for investing activities for the three months ended March 31, 2017 reflected $0.1 million of additions to property and equipment. 74 - 75 -Financing activities Net cash generated from financing activities during the three months ended March 31, 2018 of $0.8 million consisted of the net proceeds from the issuance of 302,115 shares of its common stock on February 20, 2018 at a purchase price of $3.31 per share and the issuance of 50,000 shares of its common stock on January 2, 2018 at a purchase price of $2.00 per share, partially offset by the repayment of a $0.3 million deposit to an investor related to the private placement transaction from December 2017. 76 - 77 -Net cash generated from financing activities during the three months ended March 31, 2017 of $6.8 million consisted of the net proceeds from the issuance of 1,000,000 shares of its common stock at a purchase price of $8.00 per share, the issuance of warrants to purchase 1,000,000 shares of common stock at an exercise price of $8.00 per warrant and warrants issued to placement agents for the offering to purchase 50,000 shares of common stock at an exercise price of $10.00 per warrant. 32 +Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.