1、 UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_FORM 10-K Annual Report Pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934 For the fiscal year ended December 31,2017OR Transition Report Pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934_Fib
2、rocell Science,Inc.(Exact name of registrant as specified in its Charter.)Delaware001-3156487-0458888(State or other jurisdiction of incorporation)(Commission File Number)(I.R.S.Employer Identification No.)405 Eagleview BoulevardExton,Pennsylvania 19341(Address of principal executive offices,includi
3、ng zip code)(484)713-6000(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of Each ClassName of each exchange on which registeredCommon Stock,$.001 par value The Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g)of
4、the Act:None_Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes o No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes o No Indicate by check mark wheth
5、er the registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934,as amended,during thepreceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements f
6、or the past 90 days.Yes No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if any,every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 mo
7、nths(or for such shorter period that the registrant was required to submit andpost such files).Yes No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(229.405)is not contained herein,and will not be contained,to the best ofregistrants knowledge,in def
8、initive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.oIndicate 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 growt
9、h 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 (Do not check if a smaller reporting company)Smaller reporting compan
10、y x 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 financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark wh
11、ether the registrant is a shell company(as defined in the Exchange Act Rule 12b-2).Yes o No The aggregate market value of the registrants common stock held by non-affiliates was$36.7 million as of June 30,2017(the last business day of the registrants most recentlycompleted second fiscal quarter),bas
12、ed on a total of 9,161,161 shares of common stock held by non-affiliates and on a closing price of$4.01 as reported on the Nasdaq CapitalMarket on June 30,2017.As of March 6,2018,there were 28,356,351 shares of the registrants common stock,par value$0.001 per share,outstanding.DOCUMENTS INCORPORATED
13、 BY REFERENCE Portions of the registrants definitive proxy statement for its 2018 annual meeting of stockholders are incorporated by reference into Part III of this Form 10-K where indicated.Such definitive proxy statement will be filed with the U.S.Securities and Exchange Commission within 120 days
14、 after the year ended December 31,2017.TABLE OF CONTENTSPage NOTE REGARDING FORWARD-LOOKING STATEMENTS1 PART I ITEM 1.BUSINESS3ITEM 1A.RISK FACTORS22ITEM 1B.UNRESOLVED STAFF COMMENTS50ITEM 2.PROPERTIES50ITEM 3.LEGAL PROCEEDINGS50ITEM 4.MINE SAFETY DISCLOSURE50 PART II ITEM 5.MARKET FOR REGISTRANTS C
15、OMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES51ITEM 6.SELECTED FINANCIAL DATA51ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS53ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK64ITEM 8.FINANCIAL STATEMEN
16、TS AND SUPPLEMENTARY DATA64ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE64ITEM 9A.CONTROLS AND PROCEDURES64ITEM 9B.OTHER INFORMATION65 PART III ITEM 10.DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE66ITEM 11.EXECUTIVE COMPENSATION66ITEM 12.SECURIT
17、Y OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS66ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTOR INDEPENDENCE66ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES66 PART IV ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES67ITEM 16.FORM 10-K SUM
18、MARY69 SIGNATURE PAGE70_Unless the context otherwise indicates,references in this Annual Report on Form 10-K to“Fibrocell,”“the Company,”“we,”“us”and“our”refer toFibrocell Science,Inc.and its subsidiaries.Fibrocell,Fibrocell Science and LAVIV are trademarks of Fibrocell.Other trademarks,trade names
19、and service marks appearing in this AnnualReport on Form 10-K are the property of their respective owners.Unless otherwise indicated,all share amounts and the exercise or conversion price of any of our securities reflect,as applicable,the occurrence of a1-for-25 reverse split of our common stock tha
20、t occurred on April 30,2013 and the occurrence of a 1-for-3 reverse split of our common stock that occurred onMarch 10,2017.Table of ContentsNOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K(this Form 10-K)contains“forward-looking statements”within the meaning of the Private
21、Securities LitigationReform Act of 1995.These statements include,among others,statements about:our expectation that our existing cash resources,will be sufficient to enable us to fund our operations into the first quarter of 2019;future expenses and capital expenditures;our estimates regarding expen
22、ses,future revenues,capital requirements and needs for,and ability to obtain,additional financing;our plans to address our future capital requirements and the consequences of failing to do so;our plans to resolve our noncompliance with the minimum bid price requirements of the Nasdaq Capital Market(
23、Nasdaq)listing rules and theconsequences of failing to do so;our need to raise substantial additional capital to fund our operations;our plans to execute enrollment of pediatric patients in the Phase 2 portion of our Phase 1/2 clinical trial of FCX-007 in the first quarter of 2018;our plans to repor
24、t interim data from patients from our Phase 1/2 clinical trial for FCX-007 in the second quarter of 2018;our expectation to begin dosing patients in the Phase 2 portion of our Phase 1/2 clinical trial of FCX-007 in the second quarter of 2018;our expectation to complete enrollment of patients for our
25、 Phase 1/2 clinical trial of FCX-007 in the third quarter of 2018;our plans to report interim data from patients from our Phase 1/2 clinical trial for FCX-007 in the first quarter of 2019;our expectation to initiate enrollment in a Phase 1/2 clinical trial of FCX-013 in the third quarter of 2018;our
26、 product development goals under our collaborations with Intrexon Corporation for our product candidates;the potential benefits of Fast Track,Orphan Drug and Rare Pediatric Disease designations;the potential advantages of our product candidates and technologies;andthe effect of legal and regulatory
27、developments;as well as other statements relating to our future operations,financial performance or financial condition,prospects or other future events.Forward-lookingstatements appear primarily in the sections of this Form 10-K entitled“Item 1Business,”“Item 1ARisk Factors,”“Item 7Managements Disc
28、ussion andAnalysis of Financial Condition and Results of Operations,”“Item 7AQuantitative and Qualitative Disclosures About Market Risk,”and“Item 8Financial Statements and Supplementary Data.”In some cases,you can identify forward-looking statements by words such as“may,”“will,”“could,”“would,”“shou
29、ld,”“expect,”“intend,”“plan,”“anticipate,”“believe,”“estimate,”“predict,”“project,”“potential,”“continue,”“ongoing,”“scheduled”andsimilar expressions,although not all forward-looking statements contain these identifying words.Forward-looking statements are based upon current expectations and assumpt
30、ions and are subject to a number of known and unknown risks,uncertainties and other factors that could cause actual results to differ materially and adversely from those expressed or implied by such statements.Factorsthat could cause or contribute to such differences include,but are not limited to,t
31、hose discussed in this Form 10-K and in particular the risks anduncertainties discussed under Item 1ARisk Factors of this Form 10-K.As a result,you should not place undue reliance on forward-looking statements.Additionally,the forward-looking statements contained in this Form 10-K represent our view
32、s only as of the date of this Form 10-K(or any earlierdate indicated in such statement).While we may update certain forward-looking statements from time to time,we specifically disclaim any obligation to doso,even if new information becomes available in the future.However,you are advised to consult
33、any further disclosures we make on related subjects in theperiodic and current reports thatwe file with the Securities and Exchange Commission.The foregoing cautionary statements are intended to qualify all forward-looking statements wherever they may appear in this Form 10-K.For allforward-looking
34、statements,we claim protection of the safe harbor for the forward-looking statements contained in the Private Securities Litigation ReformAct of 1995.1Table of ContentsThis Form 10-K also contains estimates,projections and other information concerning our industry,our business,and the markets for ce
35、rtaindiseases,including data regarding the estimated size of those markets,and the incidence and prevalence of certain medical conditions.Information that isbased on estimates,forecasts,projections,market research or similar methodologies is inherently subject to uncertainties and actual events or c
36、ircumstancesmay differ materially from events and circumstances reflected in this information.Unless otherwise expressly stated,we obtained this industry,business,market and other data from reports,research surveys,studies and similar data prepared by market research firms and other third parties,in
37、dustry,medical andgeneral publications,government data and similar sources.2Table of ContentsPart IItem 1.BusinessOverviewWe are an autologous cell and gene therapy company focused on translating personalized biologics into medical breakthroughs for diseasesaffecting the skin and connective tissue.O
38、ur distinctive approach to personalized biologics is based on our proprietary autologous fibroblast technology.Fibroblasts are the most common cell in skin and connective tissue and are responsible for synthesizing extracellular matrix proteins,including collagen andother growth factors,that provide
39、 structure and support.Because fibroblasts naturally reside in the localized environment of the skin and connective tissue,they represent an ideal delivery vehicle for proteins targeted to these areas.We target the underlying cause of disease by using fibroblast cells from a patientsskin and genetic
40、ally modifying them to create localized therapies that are compatible with the unique biology of the patient(i.e.,which are autologous).We are focused on discovering and developing localized therapies for diseases affecting the skin and connective tissue,where there are high unmetneeds,to improve th
41、e lives of patients and their families.In that regard,we commit significant resources to our research and development programs.Currently,all of our research and development operations and focus are on gaining regulatory approvals to commercialize our product candidates in theUnited States;however,we
42、 may seek to expand into international markets in the future.Our current pipeline consists of the following product candidates which we are developing in collaboration with Intrexon Corporation(Intrexon):Our most advanced product candidate,FCX-007,has entered the Phase 2 portion of a Phase 1/2 clini
43、cal trial for the treatment of recessive dystrophicepidermolysis bullosa(RDEB).Our second gene therapy product candidate,FCX-013,is in development for the treatment of moderate to severe localizedscleroderma.We submitted an investigational new drug(IND)application for FCX-013 to the United States Fo
44、od and Drug Administration(FDA)in January2018 and in March 2018,the FDA allowed the IND to progress to clinical trials.We expect to initiate enrollment for an open label,single arm Phase 1/2clinical trial in third quarter of 2018.In addition,we have a third program in the research phase for the trea
45、tment of arthritis and related conditions.Seefurther discussion of our gene therapy product candidates under the heading“Development Programs”included within section“Item 1Business”of thisForm 10-K.3Table of ContentsOur StrategyOur strategy is to develop and commercialize transformational therapies
46、for diseases affecting the skin and connective tissue to improve the lives ofpatients and their families.Key elements of our strategy are:Leveraging our proprietary autologous fibroblast technology and patented manufacturing process;Advancing our clinical stage gene therapy product candidate,FCX-007
47、,through human clinical trials;Advancing our gene therapy product candidate,FCX-013,into and through human clinical trials;Advancing our research stage gene therapy program focused on arthritis and related conditions through research and into pre-clinical development;andLeveraging our FDA-compliant
48、current Good Manufacturing Practices(cGMP)manufacturing facility and our expertise in cell therapymanufacturing to advance the development of our autologous cell and gene therapy pipeline.Our PlatformOur proprietary autologous fibroblast technology is the foundation for creating personalized biologi
49、cs for diseases of the skin and connective tissue.This technology uses a patented manufacturing process,which involves collecting small skin biopsies from patients,isolating cells and expanding them inculture,transducing the fibroblast cells with an integrative lentiviral vector to express a targete
50、d protein,followed by continued expansion of the genemodified cells in culture.In this manner,each patient is treated with cells that were cultivated from his or her own dermal tissue(i.e.,autologous).The Science of Autologous FibroblastsFibroblasts are the basis of our personalized biologics platfo
51、rm because they are the most common cell in skin and connective tissue and areresponsible for synthesizing extracellular matrix proteins,including collagen and other growth factors,that provide structure and support.Personalized Biologics Approach Because fibroblasts naturally reside in the localize
52、d environment of the skin and connective tissue,they represent an ideal delivery vehicle forproteins targeted to these areas.Utilizing our autologous fibroblast technology,we use a patients fibroblast cells to create localized gene therapies that arecompatible with the unique biology of the patient
53、and have the potential to address the underlying cause of disease.4Table of ContentsWe believe our personalized biologics approach provides the following distinct advantages for creating gene therapies:Localized administrationavoids side effects typically associated with systemic therapyReduced reje
54、ction and immunogenicity concernsbecause autologous fibroblasts are compatible with the unique biology of each patientFibroblast cells are genetically modified ex vivoto enable testing for safety and confirmation of protein expression levels prior toadministration to the patientDemonstrated expertis
55、e in manufacturing our fibroblast cell therapy We are developing all of our gene therapy product candidates in collaboration with Intrexon,a leader in synthetic biology.Through ourcollaboration with Intrexon,we have access to:Intrexons proprietary vector technology,which is designed to facilitate th
56、e assembly and delivery of the necessary target gene constructs fordelivery to autologous fibroblast cells.Access to this technology allows us to rapidly screen and construct genetic therapeutic solutions.Intrexons proprietary RheoSwitch Therapeutic System(RTS)technology.The RTS biologic switch is a
57、ctivated by an orally-administeredcompound(veledimex)to control level and timing of protein expression in those diseases where such control is ideal.5Table of ContentsDevelopment ProgramsOur development programs are focused on diseases affecting the skin and connective tissue for which there are hig
58、h unmet needs.Our programsconsist of the following:Program Potential Indication StatusFCX-007 RDEB Phase 1/2FCX-013 Moderate to severe localized scleroderma Post-INDResearch Program Arthritis ResearchFCX-007 for Recessive Dystrophic Epidermolysis Bullosa(RDEB)RDEB is the most severe form of dystroph
59、ic epidermolysis bullosa(DEB),a congenital,progressive,devastatingly painful and debilitating geneticdisorder that often leads to death.RDEB is caused by a mutation of the COL7A1 gene,the gene which encodes for type VII collagen(COL7),a protein thatforms anchoring fibrils.Anchoring fibrils hold toge
60、ther the layers of skin,and without them,skin layers separate causing severe blistering,open wounds andscarring in response to friction,including normal daily activities like rubbing or scratching.Children who inherit this condition are often called“butterflychildren”because their skin can be as fra
61、gile as a butterflys wings.We estimate that there are approximately 1,100-2,500 RDEB patients in the U.S.Currently,treatments for RDEB address only the sequelae,including daily bandaging(which can cost a patient in excess of$10,000 per month),hydrogeldressings,antibiotics,feeding tubes and surgeries
62、.Our lead product candidate,FCX-007,is in clinical development for the treatment of RDEB.FCX-007 is a genetically-modified autologousfibroblast that encodes the gene for COL7 for localized treatment of RDEB and is being developed in collaboration with Intrexon.By genetically modifyingautologous fibr
63、oblasts ex vivo to produce COL7,culturing them and then treating blisters and wounds locally via injection,FCX-007 offers the potential toaddress the underlying cause of the disease by providing high levels of COL7 directly to the affected areas,thereby avoiding systemic treatment.In addition,we bel
64、ieve the autologous nature of the cells,localized delivery,use of an integrative vector and the low turnover rate of the protein will contribute to long-term persistence of the COL7 produced by FCX-007.FCX-007 has received Orphan Drug Designation for the treatment of DEB,including RDEB,Rare Pediatri
65、c Disease Designation for the treatment ofRDEB and fast track designation for the treatment of RDEB from the FDA.Phase 1/2 Trial of FCX-007 for RDEBThe primary objective of this open-label trial is to evaluate the safety of FCX-007 in RDEB patients.Additionally,the trial will assess(i)thepharmacolog
66、y of FCX-007 through the presence of vector DNA or COL7 mRNA evaluation of COL7 expression and/or the presence of anchoring fibrils and(ii)the efficacy of FCX-007 through intra-subject paired analysis of target wound areas by comparing FCX-007 treated wounds to untreated wounds in Phase1 and to woun
67、ds administered with sterile saline in Phase 2 through the evaluation of digital imaging of wounds.Prior to treating pediatric patients in thistrial,we were required to and obtained allowance from the FDA by submitting evidence of FCX-007 safety and benefit in the adult6Table of Contentspatients and
68、 data from our completed pre-clinical toxicology study.After submission of the requested data,the FDA granted allowance to include pediatricpatients in the clinical trial in January 2018.Four patients are enrolled in the Phase 1 portion of the clinical trial and continue to progress through follow-u
69、p study visits.In September 2017,wereported interim results from the Phase 1 portion of the Phase 1/2 clinical trial of FCX-007.Three adult NC1+patients were dosed with a single intradermalinjection session of FCX-007 in the margins of and across targeted wounds,as well as in separate intact skin si
70、tes.Five wounds were treated on the threepatients,ranging in size from 4.4cm2 to 13.1cm2.Data from these patients show FCX-007 was well-tolerated through 12 weeks post-administration.Therewere no serious adverse events and no product related adverse events reported.Our study is currently designed to
71、 recruit two additional patients in the NC1-(patients who do not express the first non-collagenous portion of theCOL7 protein)cohort of the Phase 1 portion of the clinical trial.The most recent scientific thinking and the rarity of NC1-patients compared to NC1+,i.e.,the difficulty in recruiting this
72、 group,we are seeking a modification in the protocol to close out the Phase 1 cohort of this clinical trial without including anyadditional patients.The clinical trial protocol is designed to allow a cohort to move into the Phase 2 portion of the trial even if the other cohort is stillenrolling or i
73、n the follow-up evaluation period;therefore,the modification of the protocol for the trial does not impact ongoing enrollment of Phase 2patients.As data is collected,progress will be reported.The targeted wounds of the three adult patients were evaluated during a monitoring period prior to dosing an
74、d were observed to be open for up toeight months.Compared to the baseline measurement collected at Day 0 before the single intradermal injection session of FCX-007,at four weeks post-administration 100%(5/5)of wounds were 75%healed.At 12 weeks post-administration,80%(4/5)of wounds were 70%healed.The
75、 wound that was 70%healed from the 12 week data set was biopsied by the investigator in the middle of the wound bed rather than on the wound edge,which we believe mayhave contributed to the wounds instability.We also monitored and evaluated untreated wounds of similar size to the matched treated wou
76、nds on the samepatient.Compared to the baseline measurement collected at Day 0,at four weeks and 12 weeks post-administration 80%(4/5)of wounds were 25%healed.We will continue to monitor all treated and untreated wounds throughout follow-up visits.Various pharmacology signals for vector DNA,COL7 mRN
77、A,or COL7 protein expression were detected throughout the data set in each patient forone or more assays up to 12 weeks post-administration(qPCR,electron microscopy or immunofluorescence).Anchoring fibrils have not been detected todate,whereas expressed COL7 mRNA and COL7 protein have been confirmed
78、 in multiple patient samples including one that detected linear expression ofCOL7 at the basement membrane zone.The Data Safety Monitoring Board(DSMB)for the trial reviewed the interim data and concluded that safety andpotential benefit were established,and allowed continuation of enrollment and dos
79、ing.We completed dosing of the fourth adult patient and performed additional dosing of existing adult patients in the Phase 1 portion of the trial in thefourth quarter of 2017.We expect to report additional interim adult data and provide a trial update in the second quarter of 2018,which includes pr
80、esentingat the 7th International Investigative Dermatology meeting in May 2018.We plan to enroll six patients ages seven and older in the Phase 2 portion of the clinical trial.One RDEB adult patient has been enrolled as the firstpatient in Phase 2 and dosing of this patient is expected to occur in t
81、he second quarter of 2018.With the allowance from the FDA,we will now includeenrollment of pediatric patients.We expect to complete enrollment of Phase 2 patients in the third quarter of 2018.We plan to report another interim datareadout and trial update in the first quarter of 2019.We plan to use t
82、he existing data from the Phase 1 portion of the Phase 1/2 clinical trial to also support a petition for Regenerative MedicineAdvanced Therapy or Breakthrough Therapy Designation for FCX-007.We have designated our existing,cGMP cell therapy manufacturing facility in Exton,PA as the production site f
83、or FCX-007 in our IND application.FCX-007 drug product dosed in the fourth quarter of 2017 was produced and distributed from our Exton,PA facility.The facility will be used for theremaining clinical and future commercial manufacture of FCX-007,with capacity to serve the U.S.market for RDEB.The appro
84、ximately 13,000 square footfacility previously supported commercial autologous fibroblast manufacturing,with multiple FDA inspections conducted at the site.The facility includescleanroom cell therapy manufacturing,quality control testing,cryogenic storage,shipping/receiving and warehousing space.7Ta
85、ble of ContentsFCX-013 for Moderate to Severe Localized SclerodermaLocalized scleroderma is a chronic autoimmune skin disorder that manifests as excess production of extracellular matrix,specifically collagen,resulting in thickening of the skin and connective tissue.Localized scleroderma encompasses
86、 several subtypes which are classified based on the depth andpattern of the lesion(s).The moderate to severe forms of the disorder include any subtype that affects function or produces symptoms of discomfort,tightnessand pain.Current treatments for localized scleroderma include systemic or topical c
87、orticosteroids which target inflammation,UVA light therapy and physicaltherapy.There are few treatment options to address excessive collagen accumulation in the skin and connective tissue.We estimate that there areapproximately 90,000 patients in the U.S.considered to have moderate to severe localiz
88、ed scleroderma.Our second gene therapy product candidate,FCX-013,is in development for the treatment of moderate to severe localized scleroderma.FCX-013 isan autologous fibroblast genetically-modified using lentivirus and encoded for matrix metalloproteinase 1(MMP-1),the protein responsible for brea
89、kingdown collagen.FCX-013 incorporates Intrexons proprietary RheoSwitch Therapeutic System(RTS),a biologic switch activated by an orally administeredcompound(veledimex)to control protein expression at the site of localized scleroderma lesions.FCX-013 is designed to be injected under the skin at thel
90、ocation of the fibrotic lesions where the genetically-modified fibroblast cells will produce MMP-1 to break down excess collagen accumulation.With theFCX-013 therapy,the patient will take an oral compound(veledimex)to facilitate protein expression.Once the fibrosis is resolved,the patient will stopt
91、aking the oral compound which will halt further MMP-1 production.We previously completed a proof-of-concept study for FCX-013 in which the primary objective was to determine whether FCX-013 had thepotential to reduce dermal thickness in fibrotic tissue.In this study,FCX-013 was evaluated in a bleomy
92、cin-induced scleroderma model utilizing severecombined immunodeficiency(SCID)mice.Data from the study demonstrated that FCX-013 reduced dermal thickness of fibrotic tissue to levels similar tothat of the non-bleomycin treated control and further reduced the thickness of the sub-dermal muscle layer.B
93、ased upon these data and the FDAs feedback toour pre-IND briefing package,we advanced FCX-013 into a pre-clinical dose-ranging study which has been completed.In December 2017,we completed a good laboratory practice(GLP)toxicology/biodistribution study that assessed FCX-013 in a bleomycin fibrosismod
94、el using immunocompromised(NOD/SCID)mice.Data from this study showed no test article-related clinical observations,body weight changes,changes in clinical pathology parameters,gross observations or organ weight change.In addition,there was no significant vector biodistribution to targetorgans.We sub
95、mitted an IND for FCX-013 to FDA in January 2018,and in March 2018,the FDA allowed the IND to progress to clinical trials.We expect toinitiate enrollment for an open label,single arm Phase 1/2 clinical trial in the third quarter of 2018.The primary objective of the trial is to evaluate the safetyof
96、FCX-013.Secondary analyses consist of several fibrosis assessments including histology,skin scores,ultrasound and additional measurements of targetedsclerotic lesions and control sites at various time points up to 16 weeks post-administration of FCX-013.Ten patients with any subtype of localizedscle
97、roderma are targeted for enrollment(approximately 5 patients per Phase).The Phase 1 portion will enroll adult patients,and dosing for the first three adultpatients will be staggered prior to dosing the rest of the trials population.Fibrocell intends to include pediatric patients in the Phase 2 porti
98、on of the trialafter submission and approval of safety and activity data from the adult Phase 1 patients to the FDA and the DSMB for the trial.We plan to manufacture FCX-013 at our Exton,PA cGMP manufacturing facility.FCX-013 has received Orphan Drug Designation from the FDA for the treatment of loc
99、alized scleroderma and Rare Pediatric Disease Designation formoderate to severe localized scleroderma.Gene Therapy Research Program for Arthritis and Related ConditionsArthritis is a broad term that covers a group of more than 100 different types of diseases that affect the joints,as well as connect
100、ive tissues andorgans,including the skin.According to the Centers for Disease Control and Prevention,arthritischaracterized by joint inflammation,pain and decreasedrange of motionis the United States most common cause of disability affecting more than 52 million adults as well as 300,000 children at
101、 a cost exceeding$120 billion.Our third gene therapy program is in the research phase and is focused on the treatment of arthritis and related conditions.Our goal is to deliver aprotein therapy locally to the joint to provide sustained efficacy while avoiding key side effects typically associated wi
102、th systemic therapy.8Table of ContentsIntrexon Collaborations2012 Exclusive Channel Collaboration Agreement(2012 ECC)In October 2012,we entered into an Exclusive Channel Collaboration Agreement,with Intrexon,which was amended in June 2013 and January2014(as amended,the 2012 ECC)pursuant to which we
103、are Intrexons exclusive channel collaborator in the research,development and commercialization ofproducts in the following areas(the 2012 Fields):the enhanced production and purification of autologous fibroblasts(without genetic modification)for all aesthetic and therapeutic indications;the enhanced
104、 production and purification of autologous dermal cells(without genetic modification)for aesthetic and therapeutic treatment ofdermal,vocal cord,and periodontal indications;the development of genetically modified autologous fibroblasts for all aesthetic and therapeutic indications where an autologou
105、s fibroblastitself is the principal effector of the product in contrast to the use of autologous fibroblasts as the source of expression of a systemicallyavailable therapeutic protein in which that protein(and not the fibroblast)is the principal therapeutic effector;the development of genetically mo
106、dified autologous dermal cells for aesthetic and therapeutic treatment of dermal,vocal cord,and periodontalindications;autologous fibroblasts genetically modified to express a therapeutic protein and/or bioactive ribonucleic acid for the treatment of autoimmuneand non-infectious inflammatory disorde
107、rs that manifest in cutaneous tissues,fascia and/or muscle;andautologous human fibroblasts with gene therapy to express bioactive Tenascin-X locally to correct connective tissue disorders associated withEhlers-Danlos Syndrome(hypermobility type).Pursuant to the terms of the 2012 ECC,Intrexon has gra
108、nted us a license to use its proprietary technologies and other intellectual property toresearch,develop and commercialize products in the 2012 Fields within the United States.We are responsible for all costs incurred in connection with theresearch,development and commercialization of products under
109、 the 2012 ECC and own all clinical data,regulatory filings and regulatory approvals relatingto such products.We engage Intrexon for support services for the research and development of products under the 2012 ECC,and reimburse Intrexon for itscost for time and materials for such services.We are requ
110、ired to pay Intrexon quarterly cash royalties on all products developed under the 2012 ECC in an amount equal to 7%of aggregatequarterly net sales up to$25 million,plus 14%on aggregate quarterly net sales greater than$25 million.We are also required to pay Intrexon half of anysublicensing revenues w
111、e receive from third parties in consideration for sublicenses granted by us with respect to products developed under the 2012 ECC,but only to the extent such sublicensing revenues are not included in net sales subject to royalties.Sales from other products that we develop andcommercialize outside of
112、 the 2012 ECC are not subject to royalty payments unless we are able to reduce the products cost of goods sold through the 2012ECC,in which case,we are required to pay quarterly cash royalties on such products equal to one-third of the cost of goods sold savings less any suchsavings developed by us
113、outside of the 2012 ECC.The 2012 ECC may be terminated by Intrexon if we fail to exercise diligent efforts in developing products through the collaboration or if we electnot to pursue the development of a therapy identified by Intrexon within the 2012 Field and that qualifies as a“Superior Therapy”a
114、s defined in the 2012ECC.Upon such termination,the products covered by the 2012 ECC in active and ongoing Phase II clinical trials or later stage development shall beentitled to be continued by us with a continuation of the related milestone,royalty and other payment obligations for such products,an
115、d all rights toproducts covered by the 2012 ECC still in an earlier stage of development shall revert to Intrexon.In September 2015,we and Intrexon entered into a letter of agreement pursuant to which we mutually agreed to terminate our collaboration withrespect to the development of potential thera
116、pies to treat Ehlers-Danlos Syndrome(hypermobility type)due to technical hurdles.As a result,we no longerhave any rights or obligations under the 2012 ECC with respect to the development of“autologous human fibroblasts genetically modified to expressbioactive Tenascin-X locally to correct connective
117、 tissue disorders”.Currently,we are in development of two gene therapy product candidates,FCX-007 and FCX-013,under the 2012 ECC,as more fully describedunder the heading“Development Programs”within“Item 1Business”of this Form 10-K.9Table of Contents2015 Exclusive Channel Collaboration Agreement(2015
118、 ECC)In December 2015,we entered into an additional Exclusive Channel Collaboration Agreement with Intrexon(the 2015 ECC)pursuant to which weare Intrexons exclusive channel collaborator in the research,development and commercialization of products for the treatment of chronic inflammation anddegener
119、ative diseases of human joints through intra-articular or other local administration of genetically-modified fibroblasts(the 2015 Field).Thecollaboration leverages our autologous fibroblast technology with Intrexons synthetic biology technology to identify and develop cell-based therapeuticsthat wil
120、l be genetically modified to express one or more proteins at sites of joint inflammation.We believe this treatment approach has the potential toovercome the limitations of existing therapies for chronic inflammation and degenerative diseases of the joint,including arthritis and related conditions.Pu
121、rsuant to the terms of the 2015 ECC,Intrexon has granted us a license to use its proprietary technologies and other intellectual property todevelop and commercialize products in the 2015 Field throughout the world.We are responsible for all costs incurred in connection with the research,development
122、and commercialization of products under the 2015 ECC and own all clinical data,regulatory filings and regulatory approvals relating to suchproducts.We engage Intrexon for support services in connection with the research and development of products under the 2015 ECC,and reimburse Intrexonfor its cos
123、t for time and materials for such services.In consideration for the license and the other rights that we receive under the 2015 ECC,we paid Intrexon an up-front technology access fee of$10million in cash in January 2016.For each product that we develop under the 2015 ECC,we are required to pay Intre
124、xon development milestones of up to$30million for the first product developed under the 2015 ECC(and development milestones up to$55 million for each subsequent product developed under the2015 ECC)and commercialization milestones of up to$22.5 million,for each product developed,a low double-digit ro
125、yalty on our net sales of suchproducts and half of any sublicensing revenues we receive from third parties in consideration for sublicenses granted by us with respect to such products butonly to the extent such sublicensing revenues are not included in net sales subject to royalties.The 2015 ECC may
126、 be terminated by Intrexon if we fail to exercise diligent efforts in developing products through the collaboration or if we electnot to pursue the development of a therapy identified by Intrexon within the 2015 Field and that qualifies as a“Superior Therapy”as defined in the 2015ECC.Upon such termi
127、nation,the products covered by the 2015 ECC in active and ongoing Phase II clinical trials or later stage development shall beentitled to be continued by us with a continuation of the related milestone,royalty and other payment obligations for such products,and all rights toproducts covered by the 2
128、015 ECC still in an earlier stage of development shall revert to Intrexon.To date,we have only conducted research for a gene therapy product candidate for arthritis and related conditions under the 2015 ECC.We havedeferred further development under the 2015 ECC in order to focus our efforts and our
129、resources on our ongoing development of FCX-007 and FCX-013.ManufacturingWe lease and operate our own manufacturing facility located in Exton,Pennsylvania.We have historically used this facility to manufacture our non-genetically modified products and during 2016 began using this facility for pre-cl
130、inical manufacturing of our gene therapy product candidate,FCX-013.Wedesignated our Exton,PA cGMP manufacturing facility in Exton,PA as the production site for FCX-007 in the fourth quarter of 2017,and are currentlyproducing the drug product for the FCX-007 clinical trial at that facility.We also pl
131、an to manufacture FCX-013 at the same location.Previously weoutsourced certain manufacturing of our genetically-modified product candidate,FCX-007,to a contract manufacturer with a facility located in MountainView,California.We adhere to FDA cGMP regulations.We believe that we have adequate manufact
132、uring capacity to satisfy our pre-clinical and clinicaldemands.The fibroblast cells that constitute our product candidates are cultured by our proprietary cGMP manufacturing process,beginning with thecollection of skin biopsies from the patients skin.Fibroblasts are extracted from the biopsies and c
133、ultured using standard culture techniques to increase thecell population.A viral transduction is then performed to introduce targeted genes to the cells.The fibroblasts are then further expanded and cryopreservedfor storage.When a treatment is requested,the cells are thawed,washed and prepared for s
134、hipment.All component parts,including raw materials and other supplies utilized in our manufacturing process are available from various third partysuppliers and manufacturers in quantities adequate to meet our needs.We seek to ensure continuity of supply of such component parts,raw materials andsupp
135、lies using a strategy of dual sourcing,where possible.Some of our raw materials are currently sourced from one vendor;however,alternate vendors areavailable should they be required,although we would need sufficient lead time to qualify those vendors.10Table of ContentsWe use certain hazardous chemic
136、als and biological materials in our manufacturing process which are subject to a variety of federal,state and locallaws and regulations governing,among other matters,the use,generation,manufacture,transportation,storage,handling,disposal of and human exposure tothese materials,including regulation b
137、y governmental regulatory agencies,such as the Occupational Safety and Health Administration and the U.S.Environmental Protection Agency.We incur capital and operating expenditures and other costs in the ordinary course of our business in complying withthese laws and regulations.We dispose of minima
138、l hazardous biological waste as a result of our manufacturing process.Intellectual PropertyWe believe that patents,trademarks,copyrights and other proprietary rights are important to our business.We also rely on trade secrets,know-howand continuing technological innovations to develop and maintain o
139、ur competitive position.We seek to protect our intellectual property rights by a varietyof means,including obtaining patents,maintaining trade secrets and proprietary know-how and technological innovation to operate without infringing onthe proprietary rights of others and to prevent others from inf
140、ringing on our proprietary rights.As of December 31,2017,we own or license 11 issued U.S.patents,8 pending U.S.patent applications,1 granted foreign patent,1 pendinginternational patent and 14 pending foreign patent applications.Our issued patents and patent applications primarily cover the method o
141、f using autologouscell fibroblasts for the repair of skin and soft tissue defects and the use of autologous fibroblast cells for tissue regeneration.In particular,we own an issuedpatent in the U.S.that is directed to methods of long-term augmentation of subcutaneous or dermal tissue by injecting an
142、effective amount of a suspension ofautologous passaged dermal fibroblasts into subadjacent tissue,which is set to expire in July 2020.In addition,we own an issued U.S.patent,an issuedAustralian patent,and pending applications in Canada,China,Europe,India,Japan,South Korea,Hong Kong and the U.S.direc
143、ted to dosage formulationsfor injection containing particular amounts of autologous human fibroblasts and uses thereof,which naturally expire in 2030 and 2031.We also ownpending applications in the U.S.and several foreign countries related to topical formulations of autologous dermal fibroblasts and
144、 uses thereof,the earliest ofwhich,if issued,would naturally expire in 2027.We have also in-licensed from Intrexon Corporation an international application directed to compositionsand methods for treating Type VII collagen deficiencies which,if issued,would expire in 2037.We have also in-licensed fr
145、om Intrexon Corporation U.S.provisional applications directed to delivery of autologous cells comprising matrix metalloproteinase-1 for treating scleroderma which,if a non-provisionalapplication would issue therefrom,would expire in 2038.CompetitionThere is significant competition in the biopharmace
146、utical industry which can be attributed to companies ranging from small specializedbiotechnology firms to large well-established pharmaceutical companies.More specifically,there are many companies currently competing in drugdevelopment for new therapies for the treatment of diseases affecting the sk
147、in,connective tissue and joints,our focus area.Some of our competitors havesubstantially greater financial resources and larger research and development organizations.In addition,our experience in clinical trials,obtaining FDA andother regulatory approvals,manufacturing and commercialization of prod
148、ucts may be more limited.Product competition is based on a variety of factors,including but not limited to:product safety,efficacy,convenience of dosing,availability,price,as well as brand recognition.Our product candidates,if approved for commercial use,will contend with treatments offered by our c
149、ompetitors.Although webelieve the autologous nature and localized treatment approach of our product candidates provide advantages over our competitors,existing and newtreatments may also possess certain advantages.Additionally,the development of other drug technologies and methods of treating diseas
150、es are occurring at arapid pace.These developments may render our products or technologies obsolete or noncompetitive.Currently,we believe the primary competitors for ourproduct candidates are as follows:FCX-007 for RDEB.Our product candidate FCX-007 is being developed for the treatment of RDEB.Curr
151、ent treatments for RDEB,which includebandaging,antibiotics,feeding tubes,and surgery(hand and esophageal),only address the symptoms of this disorder.There are currently no productsapproved by the FDA for the treatment of RDEB.We are aware of a potentially competing product candidate,EB-101,which is
152、a genetically-modifiedkeratinocyte graft being developed by Abeona Therapeutics(Abeona).Following presentation of Phase 1/2 clinical data at the Society of InvestigativeDermatology conference in 2017,Abeona received guidance from the FDA to initiate a Pivotal Phase 3 trial in 2018.In addition,we are
153、 aware of severalother products in development for the treatment of various forms of epidermolysis bullosa(including DEB and RDEB).11Table of ContentsFCX-013 for Moderate to Severe Localized Scleroderma.Our product candidate FCX-013 is being developed for the treatment of moderate to severelocalized
154、 scleroderma.Current treatments for localized scleroderma include systemic or topical corticosteroids which target inflammation,UVA light therapy,and physical therapy.There are few treatment options to address excessive collagen accumulation in the skin and connective tissue.There are currently nopr
155、oducts approved by the FDA for the treatment of localized scleroderma.We are aware of a potentially competing product,ECCS-50 Cellular Therapy,which is being developed by Cytori Therapeutics(Cytori),for the treatment of systemic scleroderma that affects the hands.Cytori recently released data fromit
156、s clinical trial and is working with statisticians and study investigators in preparation for publication of these results in a peer-reviewed journal.We are alsoaware that miRagen Therapeutics has a product candidate,MRG-201,which utilizes microRNA biology and is in a Phase 1 clinical trial for the
157、treatment ofsystemic and localized scleroderma.Research and DevelopmentWe expense research and development costs as they are incurred.For the years ended December 31,2017 and 2016,we incurred total research anddevelopment expenses of approximately$12.2 million and$12.1 million,respectively.Additiona
158、lly,for the year ended December 31,2016,we incurredexpenses of less than$0.1 million related to a research and development agreement that we have with a third party to investigate potential new non-pharmaceutical applications for our conditioned fibroblast media technology.Expenses pertaining to thi
159、s research and development agreement are classifiedunder the caption“Cost of collaboration revenue”in the Consolidated Statements of Operations.Government RegulationWe are subject to extensive government regulation,principally by the FDA and state and local authorities in the United States and by co
160、mparableagencies in foreign countries.Governmental authorities in the United States extensively regulate the pre-clinical and clinical testing,safety,efficacy,research,development,manufacturing,labeling,storage,record-keeping,advertising,promotion,import,export,marketing and distribution,among other
161、things,of pharmaceutical and biologic products under various federal laws including the Federal Food,Drug and Cosmetic Act(FFDCA),the Public HealthService Act(PHSA)and under comparable laws by the states and in most foreign countries.Domestic Regulation In the United States,the FDA,under the FFDCA,t
162、he PHSA,and other federal statutes and regulations,subjects pharmaceutical and biologic productsto rigorous review.If we do not comply with applicable requirements,we may be subjected to various enforcement actions,such as product seizures andcourt injunctions,the government may refuse to approve ou
163、r marketing applications,and we could even be criminally prosecuted in certain circumstances.The FDA also has the authority to suspend or revoke a Biologics License Application(BLA),issue adverse publicity,and take other measures if we fail tocomply with applicable regulatory standards.FDA Approval
164、ProcessTo obtain approval of a new drug product from the FDA,we must,among other requirements,submit data demonstrating its safety,purity,andpotency,which includes efficacy,as well as detailed information on the manufacture and composition of the product candidate.In most cases,this entailsextensive
165、 laboratory tests and pre-clinical and clinical trials.This testing and the preparation of necessary applications and processing of those applicationsby the FDA are expensive and typically take many years to complete.The FDA may deny our applications or may not act quickly or favorably in reviewingt
166、hese applications,and we may encounter significant difficulties or costs in our efforts to obtain FDA approvals that could delay or preclude us frommarketing any products we may develop.The FDA also may require post-marketing testing and surveillance to monitor the effects of approved products orpla
167、ce conditions on any approvals that could restrict the commercial applications of these products.Regulatory authorities may withdraw product approvalsif we fail to comply with regulatory standards or if we encounter problems following initial marketing.With respect to patented products or technologi
168、es,delays imposed by the governmental approval process may materially reduce the period during which we may have the exclusive right to exploit theproducts or technologies.The FDA does not apply a single regulatory scheme to human cells and tissues and products derived from human cells and tissue.On
169、 a product-by-product basis,the FDA may regulate such products as drugs,biologic products,or medical devices,in addition to regulating them as human cells,tissues,orcellular or tissue-based products(HCT/Ps),depending on whether or not the particular product triggers any of an enumerated list of regu
170、latory factors.Afundamental difference in the treatment of products under these classifications is that the FDA permits certain HCT/Ps,sometimes referred to as section 361HCT/Ps,that do not trigger any of those regulatory factors to be commercially distributed without regulatory approval.In12Table o
171、f Contentscontrast,HCT/P products that trigger those factors,such as if they are more than minimally manipulated,are regulated as drugs,biologics,or medical devicesand require FDA approval prior to commercial distribution.We have determined that our product candidates trigger regulatory factors that
172、 make thembiologic products,in addition to HCT/Ps,and consequently,we must obtain approval from the FDA before marketing such products and must also satisfy allregulatory requirements for HCT/Ps.The process required by the FDA before a new drug or biologic product may be marketed in the United State
173、s generally involves the following:completion of pre-clinical laboratory tests or studies and formulation studies;submission to the FDA of an IND application for a new drug or biologic product,which must become effective before human clinical trials maybegin;performance of adequate and well-controll
174、ed human clinical trials to establish the safety and efficacy of the proposed drug,or safety,purity,andpotency of the proposed biologic product for its intended use;detailed information on product characterization and manufacturing process;andsubmission and approval of a New Drug Application(NDA)for
175、 a drug,or a BLA for a biologic product.Pre-clinical tests include laboratory evaluation of product chemistry formulation and stability,as well as animal and other studies to evaluatetoxicity.Under FDA regulations,the results of any pre-clinical testing,together with manufacturing information and an
176、alytical data,are submitted to theFDA as part of an IND application.The FDA requires a 30-day waiting period after the filing of each IND application before clinical trials may begin,in orderto ensure that human research patients will not be exposed to unreasonable health risks.At any time during th
177、is 30-day period or at any time thereafter,theFDA may halt proposed or ongoing clinical trials,may authorize trials only on specified terms,or may require additional trials.The IND application processmay become extremely costly and substantially delay development of our products.Moreover,positive re
178、sults of pre-clinical tests will not necessarilyforecast positive results in clinical trials.The sponsor typically conducts human clinical trials in three sequential phases,which may overlap.These phases generally include the following:Phase 1:The product candidate is usually first introduced into h
179、ealthy humans or,on occasion,into patients,and is tested for safety,dosagetolerance,absorption,distribution,excretion and metabolism;Phase 2:The product candidate is introduced into a limited patient population to:assess its efficacy in specific,targeted indications;assess dosage tolerance and optim
180、al dosage;andidentify possible adverse effects and safety risks.Phase 3:These are commonly referred to as pivotal studies.If a product candidate is found to have an acceptable safety profile and to bepotentially effective in Phase 2 clinical trials,clinical trials in Phase 3 will be initiated to fur
181、ther demonstrate clinical efficacy,optimal dosageand safety within an expanded and diverse patient population at geographically dispersed clinical trial sites;andIf the FDA does ultimately approve the product candidate,it may require post-marketing testing,including potentially expensive Phase 4stud
182、ies,to confirm or further evaluate its safety and effectiveness.Continued ability to commercialize the product may be based on thesuccessful completion of these additional studies.Before proceeding with a trial,the sponsor may seek a written agreement from the FDA regarding the design,size,and condu
183、ct of a clinical trial.This is known as a Special Protocol Assessment(SPA).Among other things,SPAs can cover clinical trials for pivotal studies whose data will form theprimary basis to establish a products efficacy.SPAs thus help establish up-front agreement with the FDA about the adequacy of a cli
184、nical trial design tosupport a regulatory approval,but the agreement is not binding if new circumstances arise.Even if the FDA agrees to a SPA,the agreement may be changedby the sponsor or the FDA on written agreement by either parties,or if a senior FDA official determines that a substantial scient
185、ific issue essential todetermining the safety or effectiveness of the product was identified after the testing began.There is no guarantee that a study will ultimately be adequate tosupport an approval,even if the study is subject to a SPA.The FDA retains significant latitude and discretion in inter
186、preting the terms of the SPA and thedata and results from any study that is the subject of the SPA.The FDA may revoke or alter its SPA agreement under the following circumstances:13Table of Contentsa substantial scientific issue essential to determining the safety or efficacy of the drug has been id
187、entified after testing has begun;the protocol that was agreed upon with the FDA has not been followed by a sponsor;the relevant data,assumptions,or information provided by a sponsor in a request for a SPA change are found to be false or misleading,or arefound to exclude relevant facts;orthe FDA and
188、sponsor agree in writing to modify the protocol and such modification is intended to improve the study.Clinical trials must meet requirements for Institutional Review Board(IRB)oversight,patient informed consent and the FDAs Good ClinicalPractice(GCP)requirements.Prior to commencement of each clinic
189、al trial,the sponsor must submit to the FDA a clinical plan,or protocol,accompanied bythe approval of the committee responsible for overseeing clinical trials at the clinical trial sites.The FDA or the IRB at each institution at which a clinicaltrial is being performed may order the temporary or per
190、manent discontinuation of a clinical trial at any time if it believes that the clinical trial is not beingconducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients.Data safety monitoring boards,which monitorcertain studies to protect the welfare of
191、 study patients,may also require that a clinical trial be discontinued or modified.The sponsor must submit to the FDA the results of the pre-clinical and clinical trials,together with,among other things,detailed information on themanufacturing and composition of the product,and proposed labeling,in
192、the form of an NDA,or,in the case of a biologic product,a BLA.The applicantmust also submit with the NDA or BLA a substantial user fee payment,unless a waiver or reduction applies.In some cases,a sponsor may be able to expandthe indications in an approved NDA or BLA through a submission of a Prior A
193、pproval Supplement.Each NDA or BLA submitted for FDA approval is usuallyreviewed for administrative completeness and reviewability within 60 days following submission of the application.If deemed complete,the FDA will“file”the NDA or BLA,thereby triggering substantive review of the application.The F
194、DA can refuse to file any NDA or BLA that it deems incomplete or notproperly reviewable.Once the submission has been accepted for filing,the FDA will review the application and will usually respond to the applicant inaccordance with performance goals the FDA,industry and Congress have negotiated for
195、 the review of NDAs and BLAs.For NDAs for new molecular entitydrugs and for original BLA submissions,the review period is currently six months from the filing date of the application for priority applications and tenmonths from the filing date for standard applications.The review process is often si
196、gnificantly extended by FDA requests for additional information,pre-clinical studies or clinical trials,or clarification,or by changes to the application submitted by the applicant in the form of amendments.The FDA may referapplications for novel product candidates which present difficult questions
197、of safety or efficacy to an advisory committee,typically a panel that includesclinicians and other experts,for review,evaluation,and a recommendation as to whether the application should be approved and under what conditions.TheFDA is not bound by the recommendations of an advisory committee,but it
198、considers such recommendations carefully when making decisions.Before approving an NDA or BLA,the FDA generally inspects the facilities at which the product is manufactured and will not approve the productunless the manufacturing facilities are in compliance with cGMP requirements which govern the m
199、anufacture,holding and distribution of a product.Manufacturers of human cellular or tissue-based biologics also must comply with the FDAs Good Tissue Practices,as applicable,and the general biologicproduct standards.It is possible that our product candidates will not successfully proceed through thi
200、s approval process or that the FDA will not approve them in anyspecific period of time,or at all.The FDA may deny or delay approval of applications that do not meet applicable regulatory criteria,or if the FDAdetermines that the clinical data do not adequately establish the safety and efficacy of th
201、e product.Satisfaction of FDA pre-market approval requirements fora new biologic product is a process that may take a number of years and the actual time required may vary substantially based upon the type,complexity andnovelty of the product or disease.The FDA reviews these applications and,when an
202、d if it decides that adequate data are available to show that the product isboth safe and effective and that other applicable requirements have been met,approves the drug or biologic product for marketing.Government regulationmay delay or prevent marketing of potential products for a considerable pe
203、riod of time and imposes costly procedures upon our activities.Success in earlystage clinical trials does not assure success in later stage clinical trials.Data obtained from clinical activities are not always conclusive and may besusceptible to varying interpretations that could delay,limit or prev
204、ent regulatory approval.Upon approval,a product candidate may be marketed only forthose indications approved in the NDA or BLA and will be subject to labeling and promotional requirements or limitations,including warnings,precautions,contraindications and use limitations,which could materially impac
205、t profitability.Once approved,the FDA may withdraw the product approval ifcompliance with pre-and post-market regulatory standards and requirements are not maintained or if safety,efficacy or other problems occur after the productreaches the marketplace.14Table of ContentsThe FDA may,during its revi
206、ew of an NDA or BLA,ask for additional study data.If the FDA does ultimately approve the product,approval may besubject to limitations based on the FDAs interpretation of the existing pre-clinical and clinical data and the FDA may require post-marketing testing,including potentially expensive Phase
207、IV studies,to confirm or otherwise further evaluate the safety and effectiveness of the product.The FDA also mayrequire,as a condition to approval or continued marketing of a drug,a risk evaluation and mitigation strategy(REMS)to ensure that the benefits of a drug orbiologic product outweigh its ris
208、ks.A REMS can include additional educational materials for healthcare professionals and patients such as MedicationGuides and Patient Package Inserts,a plan for communicating information to healthcare professionals,and restricted distribution of the product.In addition,the FDA may,in some circumstan
209、ces,impose restrictions on the use of the product,which may be difficult and expensive to administer and may require priorapproval of promotional materials.Following approval,the FDA may require labeling changes or impose new post-approval study,risk management,ordistribution restriction requirement
210、s.The FDA has developed several programs intended to expedite the development and review of drugs that address unmet medical needs for serious orlife threatening conditions,especially when the drugs are the first available treatment or have advantages over existing treatments:Accelerated Approval.Th
211、e FDA may grant accelerated approval to drugs or biologic products that treat serious or life-threatening illnesses andthat provide meaningful therapeutic benefits to patients over existing treatments.Under this program,the FDA may approve a product based onsurrogate endpoints or clinical endpoints
212、that can be measured earlier than mortality or irreversible morbidity.When approval is based onsurrogate endpoints or clinical endpoints that can be measured earlier than mortality or irreversible morbidity,the sponsor will be required toconduct additional post-approval clinical trials to verify and
213、 describe clinical benefit.Under the agencys accelerated approval regulations,ifthe FDA concludes that a product that has been shown to be effective can be safely used only if distribution or use is restricted,it may requirecertain post-marketing restrictions as necessary to assure safe use.In addit
214、ion,for products approved under accelerated approval,sponsors willbe required to submit all copies of their promotional materials,including advertisements,to the FDA at least thirty days prior to initialdissemination unless otherwise informed by the FDA.After a hearing,the FDA may withdraw a previou
215、sly granted accelerated approval if,forinstance,post-marketing studies fail to verify any clinical benefit,it becomes clear that restrictions on the distribution of the product areinadequate to ensure its safe use,or if a sponsor fails to comply with the conditions of the accelerated approval.Breakt
216、hrough Therapy.The FDA may grant“breakthrough therapy”status to drugs or biologic products designed to treat,alone or incombination with another drug(s)or biologic(s),a serious or life-threatening disease or condition and for which preliminary evidence suggests asubstantial improvement on clinically
217、-meaningful endpoints over existing therapies.Such products need not address an unmet need,but arenevertheless eligible for expedited review if they offer the potential for an improvement over existing therapies.Breakthrough therapy statusentitles the sponsor to earlier and more frequent meetings wi
218、th the FDA regarding the development of nonclinical and clinical data and permitsthe FDA to offer product development or regulatory advice for the purpose of potentially shortening the time to product approval.The FDA mayrescind breakthrough therapy designation if it believes the designated product
219、no longer meets the qualifying criteria.Breakthrough therapystatus does not guarantee that a product will be developed or reviewed more quickly and does not ensure FDA approval.Fast Track.The FDA may grant“fast track”status to drugs or biologic products that are intended to treat serious diseases or
220、 illness anddemonstrate the potential to fill an unmet medical need.Fast track is a process designed to expedite the review of such products by providing,among other things,more frequent meetings with the FDA to discuss the products development plan,more frequent written correspondencefrom the FDA a
221、bout trial design,potential eligibility for accelerated approval,and rolling review,which allows submission of individuallycompleted sections of a NDA or BLA for the FDAs review before the entire filing is completed.Fast track status does not ensure that a productwill be developed more quickly or re
222、ceive FDA approval more quickly,if at all.Priority Review.The FDA may grant“priority review”status to products that,if approved,would be significant improvements in safety oreffectiveness of the treatment,diagnosis or prevention of serious conditions.Priority review is intended to reduce the time it
223、 takes for the FDAto review an NDA or BLA.Regenerative Medicine Advanced Therapy.A product may be eligible for regenerative medicine advanced therapy(RMAT)designation if:a.The drug is a regenerative medicine therapy,which is defined as a cell therapy,therapeutic tissue engineering product,human cell
224、 andtissue product,or any combination product using such therapies or products,except15Table of Contentsfor those regulated solely under Section 361 of the Public Health Service Act and part 1271 of Title 21,Code of Federal Regulations;b.The drug is intended to treat,modify,reverse,or cure a serious
225、 or life-threatening disease or condition;andc.Preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such disease or conditionAdvantages of the RMAT designation include all of the benefits of the fast track breakthrough designation programs,includ
226、ing early interactionswith sponsors.Additionally,there are various incentives to support development and approval of certain product candidates,including,but is not limited to,orphan drug designation and rare pediatric disease designation.Orphan Drug DesignationUnder the U.S.Orphan Drug Act,the FDA
227、may grant orphan drug designation to drugs or biologic products intended to treat a“rare disease orcondition,”which is generally defined as having a prevalence of less than 200,000 individuals in the U.S.Orphan drug designation must be requested beforesubmitting an NDA or BLA for the product.Orphan
228、drug designation does not shorten the regulatory review and approval process,nor does it provide anyadvantage in the regulatory review and approval process.However,if an orphan drug later receives approval for the indication for which it has designation,the relevant regulatory authority may not appr
229、ove any other applications to market the same drug for the same indication,except in very limitedcircumstances,for seven years in the U.S.Although obtaining approval to market a product with orphan drug exclusivity may be advantageous,we cannot becertain:that we will be the first to obtain approval
230、for any drug for which we obtain orphan drug designation;that orphan drug designation will result in any commercial advantage or reduce competition;orthat the limited exceptions to this exclusivity will not be invoked by the relevant regulatory authority.Additionally,orphan drug exclusive marketing
231、rights may be lost under certain conditions,such as if the request for designation was materiallydefective or if the manufacturer is unable to assure sufficient quantity of the drug.FCX-007 and FCX-013 have received Orphan Drug Designation from the FDA,for the treatment of DEB(including RDEB)and loc
232、alizedscleroderma,respectively.Rare Pediatric Disease DesignationFCX-007 has received Rare Pediatric Disease Designation from the FDA for the treatment of RDEB and FCX-013 has received Rare Pediatric DiseaseDesignation from the FDA for the treatment of moderate to severe localized scleroderma.The FD
233、A generally defines a“rare pediatric disease”as a disease thataffects fewer than 200,000 individuals in the U.S.primarily under the age of 18 years old.Under the FDAs Rare Pediatric Disease Priority Review Voucher(PRV)program,upon the approval of an NDA or BLA for a product for the treatment of a ra
234、re pediatric disease that is serious or life-threatening,the sponsorof such application is eligible for a Rare Pediatric Disease Priority Review Voucher.Currently,the Priority Review Voucher can be used to obtain priorityreview for any subsequent NDA or BLA and may be sold or transferred an unlimite
235、d number of times.Under the 21st Century Cures Act,Congress extendedthe PRV program for rare pediatric diseases through 2020.A drug designated as a drug for a rare pediatric disease by September 30,2020,and approved bySeptember 30,2022,may receive a voucher.Because this program has been subject to c
236、riticism,including by the FDA,it is possible that even if we obtainapproval for FCX-007 and FCX-013 and qualify for such a PRV,the program may no longer be in effect at the time of approval.Ongoing FDA Requirements and Post-Marketing ObligationsAll approved drug products are subject to continuing re
237、gulation by the FDA,including record-keeping requirements,reporting of adverseexperiences with the product,sampling and distribution requirements,notifying the FDA and gaining its approval of certain manufacturing or labelingchanges,complying with certain electronic records and signature requirement
238、s,submitting periodic reports to the FDA,maintaining and providing updatedsafety and efficacy information to the FDA,and complying with FDA promotion and advertising requirements.Failure to comply with the statutory andregulatory requirements can subject a manufacturer to possible legal or regulator
239、y action,such as warning letters,suspension of manufacturing,seizure ofproduct,injunctive action,criminal prosecution,or civil penalties.16Table of ContentsThe FDA may require post-marketing studies or clinical trials to develop additional information regarding the safety of a product.These studies
240、ortrials may involve continued testing of a product and development of data,including clinical data,about the products effects in various populations and anyside effects associated with long-term use.The FDA may require post-marketing studies or trials to investigate possible or known serious risks
241、or signals ofserious risks,or to identify unexpected serious risks,and may require periodic status reports if new safety information develops.Failure to conduct thesestudies in a timely manner may result in substantial civil penalties,or withdrawal of product approval.Also,newly discovered or develo
242、ped safety or efficacy data may require changes to a products approved labeling,including the addition of newwarnings and contraindications,additional pre-clinical studies or clinical trials,or even in some instances,withdrawal of the approval.Violations ofregulatory requirements at any stage,includ
243、ing after approval,may result in various adverse consequences,including the FDAs withdrawal of an approvedproduct from the market,other voluntary or FDA-initiated action that could delay or restrict further marketing,and the imposition of civil fines and criminalpenalties against the manufacturer or
244、 the NDA or BLA holder.In addition,later discovery of previously unknown problems may result in restrictions on theproduct,manufacturer or NDA or BLA holder,including withdrawal of the product from the market.The labeling,advertising,promotion,marketing and distribution of a drug or biologic product
245、 also must be in compliance with FDA requirementswhich include,among other things,promotional activities,standards and regulations for direct-to-consumer advertising,promotional activities involving theinternet,and industry sponsored scientific and educational activities.In general,all product promo
246、tion must be consistent with the labeling approved by theFDA for such product,contain a balanced presentation of information on the products uses,benefits,risks,and important safety information and limitationson use,and otherwise not be false or misleading.The FDA has very broad enforcement authorit
247、y,and failure to abide by these regulations can result inpenalties,including the issuance of a warning letter directing a company to correct deviations from regulatory standards and enforcement actions that caninclude seizures,injunctions and criminal prosecution.Failure to comply with applicable FD
248、A requirements and restrictions also may subject a company toadverse publicity and enforcement action by the U.S.Department of Justice(DOJ)or the Office of the Inspector General of the U.S.Department of Health andHuman Services(HHS)as well as state authorities.This could subject the company to a ran
249、ge of penalties that could have a significant commercial impact,including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes its products.Drug and biologic product manufacturers and their subcontractors are required to register thei
250、r establishments with the FDA and certain stateagencies,and to list their products with the FDA.The FDA periodically inspects manufacturing facilities in the United States and abroad in order to assurecompliance with the applicable cGMP regulations and other requirements.These cGMP requirements appl
251、y to all stages of the manufacturing process,including production,processing,sterilization,packaging,labeling,storage and shipment.Facilities also are subject to inspections by other federal,foreign,state and local agencies.In complying with the cGMP regulations,manufacturers must continue to assure
252、 that the product meets applicable specifications,regulations and other post-marketing requirements.Failure to comply with these requirements subjects the manufacturer to possible legal,regulatory orvoluntary action,such as suspension of manufacturing or recall or seizure of product.Sponsors and the
253、ir third-party contractors are also subject to various laws and regulations governing laboratory practices,the experimental use ofanimals and the use and disposal of hazardous or potentially hazardous substances in connection with their research.The FDA has regulatory andenforcement power to disqual
254、ify nonclinical laboratory studies performed by a violative facility from being considered by FDA in support of any applicationfor a research or marketing permit;to publicly disclose the fact of such disqualification;and to pursue any other available and appropriate judicialproceeding or regulatory
255、action,such as court-ordered injunctions denial or withdrawal of regulatory approvals and referral to other federal,state or localgovernment law enforcement or regulatory agencies.Furthermore,new government requirements may be established that could delay or prevent regulatory approval of our produc
256、ts under development,or affect the conditions under which approved products are marketed.17Table of ContentsHIPAA RequirementsOther federal legislation may affect our ability to obtain certain health information in conjunction with our research activities.We may be subject todata privacy and securit
257、y regulation by both the federal government and the states in which we conduct our business.The Health Insurance Portability andAccountability Act of 1996(HIPAA),as amended by the Health Information Technology for Economic and Clinical Health Act of 2009(HITECH),and itsimplementing regulations,impos
258、es obligations,including mandatory contractual terms,with respect to safeguarding the privacy,security and transmission ofindividually identifiable health information.HIPAA also prohibits knowingly and willfully falsifying,concealing or covering up a material fact or makingany materially false,ficti
259、tious or fraudulent statements or representation,or making or using any false writing or document knowing the same to contain anymaterially false,fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits,items or services.In addition,numerous f
260、ederal and state laws and regulations that address privacy and data security,including state data breach notification laws,state health information privacy laws,and federal and state consumer protection laws(e.g.,Section 5 of the Federal Trade Commission Act),govern thecollection,use,disclosure and
261、protection of health-related and other personal information.Failure to comply with data protection laws and regulations couldresult in government enforcement actions and create liability for us(which could include civil and/or criminal penalties),private litigation and/or adversepublicity that could
262、 negatively affect our business.Failure to achieve and sustain compliance with applicable federal and state privacy,security and fraud laws could result in government enforcementactions and create liability for us(which could include civil and/or criminal penalties),private litigation and/or adverse
263、 publicity that could negatively affectour operating results and business.Other U.S.Regulatory RequirementsIn the United States,the research,manufacturing,distribution,sale,and promotion of drug and biologic products are potentially subject toregulation by various federal,state and local authorities
264、 in addition to the FDA,including the Centers for Medicare and Medicaid Services(CMS),otherdivisions of the HHS(e.g.,the Office of Inspector General),the DOJ and individual U.S.Attorney offices within the DOJ,and state and local governments.For example,sales,marketing and scientific/educational gran
265、t programs must comply with the federal Anti-Kickback Statute,the False Claims Act and otherfederal and state fraud and abuse laws,as described in detail below.If we successfully commercialize any of our products,we may participate in the Medicaid Drug Rebate Program.Participation is required for fe
266、deralfunds to be available for our products that we successfully commercialize under Medicaid and Medicare Part B.Under the Medicaid Drug Rebate Program,we would be required to pay a rebate to each state Medicaid program for our covered outpatient drugs that are dispensed to Medicaid beneficiaries a
267、nd paidfor by a state Medicaid program as a condition of having federal funds being made available to the states for our drugs under Medicaid and Part B of theMedicare program.Federal law requires that any company that participates in the Medicaid Drug Rebate Program also participate in the Public H
268、ealth Services 340Bdrug pricing program in order for federal funds to be available for the manufacturers drugs under Medicaid and Medicare Part B.The 340B drug pricingprogram requires participating manufacturers to agree to charge statutorily-defined covered entities no more than the 340B“ceiling pr
269、ice”for themanufacturers covered outpatient drugs.These 340B covered entities include a variety of community health clinics and other entities that receive healthservices grants from the Public Health Service,as well as hospitals that serve a disproportionate share of low-income patients.Under Secti
270、on 603 of the Veterans Health Care Act of 1992(VHCA),drug companies that participate in Medicaid or Medicare Part B are required tooffer their“covered drugs”(biologic products and innovator drugs)for sale on a Federal Supply Schedule(FFS)contract at a statutorily reduced price to fourfederal agencie
271、s including the U.S.Department of Veterans Affairs,the U.S.Department of Defense,the Public Health Service and the Coast Guard.Participation under Section 603 the VHCA requires submission of pricing data and calculation of discounts pursuant to complex statutory formulas,as wellas the entry into gov
272、ernment procurement contracts governed by the Federal Acquisition Regulation.In addition,pursuant to regulations issued by theDepartment of Defense TRICARE Management Activity,now the Defense Health Agency,to implement Section 703 of the National Defense AuthorizationAct for Fiscal Year 2008,manufac
273、turers are required to pay rebates on“covered drug”prescriptions dispensed to TRICARE beneficiaries by TRICAREnetwork retail pharmacies.All of these activities are also potentially subject to federal and state consumer protection,unfair competition,and other laws.In March 2010,President Obama signed
274、 into law the Affordable Care Act,as amended by the Health Care and Education Reconciliation Act of 2010(together,the Affordable Care Act).The Affordable Care Act substantially changed the18Table of Contentsway healthcare is financed by both governmental and private insurers,and significantly impact
275、s the pharmaceutical industry.The Affordable Care Actintended to broaden access to health insurance,reduce or constrain the growth of healthcare spending,enhance remedies against fraud and abuse,add newtransparency requirements for health care and health insurance industries,impose new taxes and fee
276、s on the health industry and impose additional healthpolicy reforms.The Affordable Care Act has resulted in,and we expect it will continue to result in,downward pressure on coverage and the price of productscovered by Medicare and other government programs.Any reduction in reimbursement from Medicar
277、e and other government programs may result in a similarreduction in payments and coverage from private payors.The implementation of cost containment measures or other healthcare reforms may prevent us frombeing able to generate revenue,attain profitability,or commercialize our products.In addition,c
278、ertain legislative changes to and regulatory changes underthe Affordable Care Act have occurred in the 115th United States Congress and under the Trump Administration.For instance,the Bipartisan Budget Act of2018 increased the Affordable Care Act required manufacturer point-of-sale discount from 50%
279、to 70%off the negotiated price for Medicare Part Dbeneficiaries during their coverage gap period beginning in 2019.It is possible that there will be further legislation or regulation that could harm ourbusiness,financial condition and results of operations.At such time as we market,sell and distribu
280、te any products for which we obtain marketing approval,it is possible that our business activities couldbe subject to scrutiny and enforcement under one or more federal or state health care fraud and abuse laws and regulations,which could affect our ability tooperate our business.These include the f
281、ollowing fraud and abuse laws and regulations:The federal Anti-Kickback Statute prohibits,among other things,knowingly and willfully offering,paying,soliciting or receiving remunerationto induce or in return for purchasing,leasing,ordering or arranging for the purchase,lease or order of any healthca
282、re item or servicereimbursable under Medicare,Medicaid or other federally financed healthcare programs.This statute has been interpreted to apply toarrangements between pharmaceutical manufacturers on one hand and prescribers,purchasers,and formulary managers on the other.Althoughthere are a number
283、of statutory exemptions and regulatory safe harbors protecting some business arrangements from prosecution,the exemptionsand safe harbors are drawn narrowly and practices that involve remuneration intended to induce prescribing,purchasing or recommending maybe subject to scrutiny if they do not qual
284、ify for an exemption or safe harbor.Our practices may not in all cases meet all of the criteria for safeharbor protection from federal Anti-Kickback Statute liability.The Affordable Care Act,among other things,clarified that liability may beestablished under the federal Anti-Kickback Statute without
285、 proving actual knowledge of the statute or specific intent to violate it.In addition,the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federalAnti-Kickback Statute constitutes a false or fraudulent claim for pu
286、rposes of the civil False Claims Act(discussed below)or the civil monetarypenalties statute,which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federalhealth program that the person knows or should know is for an item or service that
287、was not provided as claimed or is false or fraudulent.The federal civil False Claims Act prohibits any person from,among other things,knowingly presenting,or causing to be presented,a false orfraudulent claim for payment of government funds;knowingly making,using,or causing to be made or used a fals
288、e record or statement materialto a false or fraudulent claim to the federal government;or knowingly concealing or knowingly and improperly avoiding,decreasing orconcealing an obligation to pay money to the federal government.The False Claims Act also permits a private individual acting as a“whistleb
289、lower”to bring actions on behalf of the federal government alleging violations of the statute and to share in any monetary recovery.Many pharmaceutical and other healthcare companies have been investigated and have reached substantial financial settlements with thefederal government under the civil
290、False Claims Act for a variety of alleged improper marketing activities,including:providing free product tocustomers with the expectation that the customers would bill federal programs for the product;providing sham consulting fees,grants,freetravel and other benefits to physicians to induce them to
291、 prescribe the companys products;and inflating prices reported to private pricepublication services,which are used to set drug payment rates under government healthcare programs.In addition,in recent years thegovernment has pursued civil False Claims Act cases against a number of pharmaceutical comp
292、anies for causing false claims to be submitted asa result of the marketing of their products for unapproved,and thus non-reimbursable,uses.False Claims Act liability is potentially significantin the healthcare industry because the statute provides for treble damages and mandatory penalties in the te
293、ns of thousands of dollars.Pharmaceutical and other healthcare companies also are subject to other federal false claim laws,including,among others,federal criminalhealthcare fraud and false statement statutes that extend to non-government health benefit programs.HIPAA created federal criminal statut
294、es that prohibit among other actions,knowingly and willfully executing,or attempting to execute,ascheme to defraud any healthcare benefit program,including private third-party payors,19Table of Contentsknowingly and willfully embezzling or stealing from a healthcare benefit program,willfully obstruc
295、ting a criminal investigation of a healthcareoffense,and knowingly and willfully falsifying,concealing or covering up a material fact or making any materially false,fictitious or fraudulentstatement in connection with the delivery of or payment for healthcare benefits,items or services.Analogous sta
296、te laws and regulations,such as state anti-kickback and false claims laws,may apply to items or services reimbursed underMedicaid and other state programs or,in several states,apply regardless of the payor.Some state laws also require pharmaceutical companies toreport expenses relating to the market
297、ing and promotion of pharmaceutical products and to report gifts and payments to certain healthcareproviders in the states.Other states prohibit providing meals to prescribers or other marketing related activities.Other states restrict the ability ofmanufacturers to offer co-pay support to patients
298、for certain prescription drugs.Still other states and cities require identification or licensing ofsales representatives.In addition,California,Connecticut,Nevada and Massachusetts require pharmaceutical companies to implementcompliance programs or marketing codes of conduct.The federal Physician Pa
299、yment Sunshine Act,being implemented as the Open Payments Program,requires certain pharmaceutical manufacturersto engage in extensive tracking of payments and other transfers of value to physicians and teaching hospitals,and to submit such data to CMS,which will then make all of this data publicly a
300、vailable on the CMS website.Pharmaceutical manufacturers with products for which payment isavailable under Medicare,Medicaid or the State Childrens Health Insurance Program are required to track reportable payments and must submita report to CMS on or before the 90th day of each calendar year disclo
301、sing reportable payments made in the previous calendar year.Failure tocomply with the reporting obligations may result in civil monetary penalties.The federal Foreign Corrupt Practices Act of 1997 and other similar anti-bribery laws in other jurisdictions generally prohibit companies andtheir interm
302、ediaries from providing money or anything of value to officials of foreign governments,foreign political parties,or internationalorganizations with the intent to obtain or retain business or seek a business advantage.Recently,there has been a substantial increase in anti-bribery law enforcement acti
303、vity by U.S.regulators,with more frequent and aggressive investigations and enforcement proceedings by bothDOJ and the U.S.Securities and Exchange Commission(SEC).Violations of United States or foreign laws or regulations could result in theimposition of substantial fines,interruptions of business,l
304、oss of supplier,vendor or other third-party relationships,termination of necessarylicenses and permits and other legal or equitable sanctions.Other internal or government investigations or legal or regulatory proceedings,including lawsuits brought by private litigants,may also follow as a consequenc
305、e.Violations of any of the laws described above or any other governmental regulations are punishable by significant civil,criminal and administrativepenalties,damages,fines and exclusion from government-funded healthcare programs,such as Medicare and Medicaid.Although compliance programs canmitigate
306、 the risk of investigation and prosecution for violations of these laws,the risks cannot be entirely eliminated.Moreover,achieving and sustainingcompliance with applicable federal and state privacy,security and fraud laws may prove costly.International RegulationThe regulation of our product candida
307、tes outside of the United States varies by country.Certain countries regulate human tissue products as apharmaceutical product,which would require us to make extensive filings and obtain regulatory approvals before selling our product candidates.Certainother countries classify our product candidates
308、 as human tissue for transplantation but may restrict its import or sale.Other countries may have noapplication regulations regarding the import or sale of products similar to our product candidates,creating uncertainty as to what standards we may berequired to meet.EmployeesAs of December 31,2017,w
309、e had 20 full-time employees,all located in the United States.Of these full-time employees,15 are engaged in research,development and manufacturing(including facilities)functions and 5 are engaged in finance,legal,human resources,information technology,and othergeneral administrative functions.None
310、of our employees are covered by a collective bargaining agreement,and we consider our relations with our employeesto be good.20Table of ContentsCorporate InformationWe were incorporated under the laws of the State of Delaware in September 1992.Our corporate office is located at 405 Eagleview Bouleva
311、rd,Exton,Pennsylvania 19341.Our telephone number is(484)713-6000.We maintain an Internet website at .The information contained onour website is not incorporated by reference into this Form 10-K.We file reports,proxy and information statements and other information with the SEC.We make available free
312、 of charge under the“InvestorsSECFilings”section of our website all of our filings with the SEC,including our annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports onForm 8-K,proxy statements and amendments to such documents,each of which is provided on our website as soon as re
313、asonably practicable after weelectronically file the information with the SEC.The public may read and copy any materials we file with the SEC at the SECs Public Reference Room at 100 F Street,NE,Washington,DC 20549.The public may obtain information on the operation of the Public Reference Room by ca
314、lling the SEC at 1-800-SEC-0330.Additionally,the SEC maintainsa website(www.sec.gov)that contains reports,proxy and information statements,and other information regarding issuers that file electronically with theSEC,including us.21Table of ContentsItem 1A.Risk FactorsOur business is subject to subst
315、antial risks and uncertainties.The occurrence of any of the following risks and uncertainties,either alone or taken together,could materially and adversely affect our business,financial condition,results of operations or prospects.In these circumstances,the market price of ourcommon stock could decl
316、ine and you may lose all or part of your investment.The risks and uncertainties described below are not the only ones we face.Risks and uncertainties of general applicability and additional risks and uncertainties not currently known to us or that we currently deem to be immaterialmay also materiall
317、y and adversely affect our business,financial condition,results of operations or prospects.Risks Related to our Financial Position and Need for Additional CapitalWe need to obtain additional capital to continue as a going concern.If we are unable to obtain sufficient capital,we will need to curtail
318、and reduce ouroperations and costs,and modify our business strategy.Our principal sources of liquidity are cash and cash equivalents of$17.4 million as of December 31,2017.As of December 31,2017,we hadworking capital of$13.5 million.We believe that our existing cash and cash equivalents will be suff
319、icient to fund our operations into the first quarter of2019.However,changing circumstances may cause us to consume capital faster than we currently anticipate,and we may need to spend more money thancurrently expected because of such circumstances.To meet our capital needs,we are considering multipl
320、e alternatives,including but not limited to,equity financings,debt financings,corporatecollaborations,partnerships and other strategic transactions and funding opportunities.However,there can be no assurance that we will be able to completeany such transaction on acceptable terms or otherwise.These
321、factors raise substantial doubt about our ability to continue as a going concern.Consequently,the audit report prepared by our independent registered public accounting firm relating to our Consolidated Financial Statements for the year endedDecember 31,2017 includes a paragraph related to the substa
322、ntial doubt about our ability to continue as a going concern.If we raise additional funds by issuing equity securities,our stockholders will experience dilution.Debt financing,if available,will result inincreased fixed payment obligations and may involve agreements that include covenants limiting or
323、 restricting our ability to take specific actions,such asincurring additional debt,making capital expenditures or declaring dividends.Any debt financing or additional equity that we raise may contain terms,suchas liquidation,dividends and other rights or preferences,which are not favorable to us or
324、our stockholders.If we raise additional funds through collaborationor partnership arrangements with third parties,it may be necessary to relinquish valuable rights to our technologies,future revenue streams or productcandidates or to grant licenses on terms that may not be favorable to us.If we are
325、unable to raise additional capital in sufficient amounts or on terms acceptable to us,we will need to curtail and reduce our operations andcosts,and modify our business strategy which may require us to,among other things:significantly delay,scale back or discontinue the development or commercializat
326、ion of one or more of our product candidates or one or more ofour other research and development initiatives;seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on termsthat are less favorable than might otherwise be
327、 available;sell or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercializeourselves;orseek bankruptcy protection which may result in the termination of agreements pursuant to which we license important intellectual proper
328、tyrights including our exclusive collaboration agreements with Intrexon.We have incurred significant losses since our inception and anticipate that we will continue to incur losses in the future.We have incurred losses since our inception,have not generated significant revenue from commercial sales
329、of our products,and have never beenprofitable.Investment in drug development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a productcandidate will fail to gain regulatory approval or become commercially viable.We continue to incur signifi
330、cant research,development and other expensesrelated to our ongoing operations including development of our product candidates and operation of our manufacturing facility.As a result,we are notprofitable and have incurred losses in each period since we emerged from bankruptcy in September 2009.For th
331、e year ended December 31,2017,we had anet loss of$16.2 million and used$17.0 million in operating activities and had an accumulated deficit of$178.8 million as of December 31,2017.22Table of ContentsWe expect to continue to incur significant expenses and increasing operating losses for the foreseeab
332、le future.We anticipate that our expenses willcontinue to be significant if and as we:continue our research and pre-clinical and clinical development of our product candidates;initiate additional pre-clinical,clinical or other studies or trials for our product candidates,including under our collabor
333、ation agreements withIntrexon;continue or expand our collaborations with Intrexon and our other collaborators;further develop the manufacturing process for our product candidates;continue to maintain a cGMP manufacturing facility;change or add additional manufacturers or suppliers;seek regulatory approvals for our product candidates that successfully complete clinical trials;establish a sales,mark
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