Athersys : 2022 Annual Report

ANNUAL REPORT

DEDICATED TO CHANGING THE FUTURE OF MEDICINE

2022

Dear

Stockholders,

At Athersys, our mission is to change the future of medicine. We strive to do this through MultiStem®, a patented, adult-derived"off-the-shelf" stem cell product, initially for disease indications in neurological, inflammatory and immune, and other critical care indications. MultiStem is being developed to extend and enhance the quality of life for patients with hard- to-treat medical conditions, with a current focus on ischemic stroke, acute respiratory distress syndrome (ARDS) and trauma. In 2022, we made substantial progress towards achieving this goal while restructuring our organization to be more focused, transparent, and accountable. We have more work to do but I'm proud of the progress we've made over the past year and the new company we've become.

This past February marked one year for me as Athersys' new Chief Executive Officer and as I reflect back on my first year leading the Company, it's marked by significant transformation and meaningful progress. Our corporate restructuring efforts have allowed us to substantially reduce costs, draw more focus to our top priorities and foster a lean, specialized team of driven individuals who are collectively committed to helping achieve our goals and reach near-term milestones.

Clinical Progress

Our clinical focus is on treating conditions where there is significant unmet medical need and where the current standard of care is limited or inadequate for many patients. Our most advanced program is for the treatment of ischemic stroke, which is being evaluated in MASTERS-2, a Phase 3 clinical study being conducted in the United States and several other countries under a Special Protocol Assessment (SPA). Most recently, we received approval from the U.S. Food and Drug Administration (FDA) to conduct an interim analysis along with subset analyses for this study, which will happen in the third quarter of this year. These analyses will be important for assessing whether the powering of the study is on track to achieve our desired outcome and whether we need to modify patient enrollment, if at all. We expect to discuss these results in the fourth quarter of this year and to complete enrollment in MASTERS-2 in the second quarter of 2024.

Our second active clinical trial is MATRICS-1, a randomized, double-blind,placebo-controlled Phase

2 clinical study, evaluating MultiStem in 156 patients following resuscitation from hemorrhagic trauma. This study is underway at The University of Texas Health Science Center at Houston and Memorial Hermann- Texas Medical Center, a leading certified Level 1 Trauma Center in the U.S. We recently completed enrollment of Cohort 2 and began enrolling Cohort 3 utilizing MultiStem produced through our novel 3D

bioreactor-based manufacturing process. MATRICS-1 is supported in part by the Medical Technology Enterprise Consortium in partnership with the Department

of Defense, and funding from Memorial Hermann Foundation.

Representing a significant unmet medical need with no FDA-approved treatment, ARDS is our third area of focus, for which we have been granted both Fast Track and regenerative medicine advanced therapy (RMAT) designation by the FDA. Following the completion of our MUST-ARDS study and our partner Healios' Phase 2 ONE-BRIDGE study, Healios has recently received approval from the Pharmaceuticals and Medical Devices Agency (PMDA) in Japan to initiate a Phase 3 study evaluating MultiStem for the treatment of ARDS. We are encouraged by the results of our ARDS studies thus far and continue to explore other opportunities to continue studying MultiStem for the treatment of ARDS in the clinical setting.

Our Vision for the Future

As we near the end of 2023 and look ahead to 2024, I remain confident in Athersys' ability to bring MultiStem to more patients in need and remain optimistic in the benefit MultiStem could offer patients across multiple indications. We have many value-driving initiatives

in the works, from streamlined manufacturing to preclinical research, to new partnership opportunities and the potential for regional and/or global licensing deals. I would like to thank the executive team and all Athersys employees for the passion and commitment they bring to work on a daily basis to carry out our mission.

I would also like to thank all the patients and healthcare professionals who graciously take part in our clinical research. Without these important people, we would not be able to carry on.

Lastly, I would like to thank our shareholders for your continued support. Your faith in the company and belief in our mission allows us to advance on a daily basis.

Sincerely,

Dan Camardo, MBA

Chief Executive Officer and Director

2022 Annual Report - 1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________________

FORM 10-K

_____________________________________________

(Mark one)

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from		to
		Commission file number 001-33876
	_____________________________________________
		Athersys, Inc.
	(Exact name of registrant as specified in its charter)
	_____________________________________________
Delaware			20-4864095
(State or other jurisdiction of					(I.R.S. Employer
incorporation or organization)					Identification No.)
3201 Carnegie Avenue,	Cleveland,	Ohio	44115-2634
(Address of principal executive offices)					(Zip Code)
	Registrant's telephone number, including area code [phone]
	Securities registered pursuant to Section 12(b) of the Act:
Title of each class		Trading			Name of each exchange on which registered
		Symbol
Common Stock, par value $0.001 per share	ATHX				The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of 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 ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value at June 30, 2022, the last business day of the registrant's most recently completed second fiscal quarter, of shares of the registrant's common stock (based upon the closing price per share of $6.50 of such stock as quoted on the Nasdaq Capital Market on such date) held by non-affiliates of the registrant was approximately $71.2 million.

The registrant had 18,448,489 shares of common stock outstanding on March 28, 2023.

Documents Incorporated By Reference.

None.

ATHERSYS, INC.
Unless otherwise stated or the context otherwise indicates, all references in this Annual Report on Form 10-K to "Athersys," "us," "our," "we" or "the
Company" mean Athersys, Inc. and its subsidiaries.
TABLE OF CONTENTS
PART I
Item 1. Business	3
Item 1A. Risk Factors	20
Item 1B. Unresolved Staff Comments	37
Item 2. Properties	37
Item 3. Legal Proceedings	37
Item 4. Mine Safety Disclosures	37
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	38
Item 6. [Reserved]	38
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	39
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	47
Item 8. Financial Statements and Supplementary Data	48
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	72
Item 9A. Controls and Procedures	72
Item 9B. Other Information	72
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	72
PART III
Item 10. Directors, Executive Officers and Corporate Governance	73
Item 11. Executive Compensation	75
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	86
Item 13. Certain Relationships and Related Transactions, and Director Independence	87
Item 14. Principal Accountant Fees and Services	88
PART IV
Item 15. Exhibits and Financial Statement Schedules	89
Item 16. Form 10-K Summary	93

PART I

ITEM 1. BUSINESS

We are a biotechnology company that is focused primarily in the field of regenerative medicine. We are committed to the discovery and development of best- in-class therapies designed to extend and enhance the quality of human life and have established a portfolio of therapeutic product development programs to address significant unmet medical needs in multiple disease areas. Our MultiStem® (invimestrocel) cell therapy, a patented and proprietary allogeneic stem cell product candidate, is our lead platform product and is currently in late-stage clinical development. Our most advanced therapeutic program is focused on the treatment of ischemic stroke, which is currently being evaluated in a pivotal Phase 3 clinical trial ongoing in the United States under a Special Protocol Assessment agreement, or SPA, from the U.S. Food and Drug Administration, or FDA, in Europe and in certain other international locations. Our current clinical development programs are focused on treating critical care and other conditions where current standard of care is limited or inadequate for many patients. These represent major areas of clinical need, as well as substantial commercial opportunities.

We believe our MultiStem cell therapy product candidate represents a potential breakthrough in the field of regenerative medicine and stem cell therapy, and could be used to treat a range of disease indications. MultiStem received Regenerative Medicine Advanced Therapy, or RMAT, designation for [the treatment of] both ischemic stroke and acute respiratory distress syndrome, or ARDS. MultiStem treatment has shown the potential to enhance tissue repair and healing in multiple ways, including reducing inflammatory damage, protecting tissue that is at risk following acute or ischemic injury, and promoting formation of new blood vessels in regions of ischemic injury. These cells appear to be responsive to the environment in which they are administered, by homing to sites of injury and/or organs involved in injury response and providing active disease response. These cells also produce proteins that may provide benefit in both acute and chronic conditions and regulate other cell types. In contrast to traditional pharmaceutical products or biologics that generally act through a single biological mechanism of action, MultiStem cell therapy may enhance healing and tissue repair through several distinct mechanisms acting in parallel, resulting in a more effective therapeutic response.

We believe the therapeutic and commercial potential for MultiStem cell therapy to be very broad, applying to many areas of significant unmet medical need, and we are pursuing opportunities in several potential multi-billion dollar markets. While traditional pharmaceuticals and biologic therapies typically may be used to treat only a single disease or a narrowly defined set of related conditions, MultiStem cell therapy may have far broader potential and could be developed in different formulations and with different delivery approaches to effectively treat a wide range of disease indications.

The MultiStem product candidate under development may be unique among regenerative medicine approaches because it has the potential to be manufactured on a large scale, can be administered in an "off-the-shelf" manner with minimal processing, and has the potential to augment healing by providing biological potency and therapeutic effects that other cell therapy approaches may not be able to achieve. Additionally, MultiStem treatment has consistently demonstrated good tolerability in both preclinical and clinical studies. Like conventional drugs and biologics, the product candidate is cleared from the body over time, which we believe may enhance product safety relative to other types of stem cell therapy. While the product candidate does not permanently engraft in the patient, the therapeutic effects of treatment with MultiStem cells appear to be durable based on both clinical and preclinical results.

We have evaluated the use of MultiStem cell therapy as a potential treatment in several disease areas. Working with an international network of leading investigators and prominent research and clinical institutions, and through our own internal efforts, we have explored the potential for MultiStem cell therapy to be used as a treatment of acute and chronic forms of neurological conditions or injury, inflammatory and immune disorders, certain pulmonary conditions and cardiovascular disease. We have advanced several MultiStem programs into clinical development, targeting areas of significant medical need and major commercial market opportunities, and have two ongoing clinical trials in the critical care area. We have a collaboration with HEALIOS K.K., or Healios, to develop and commercialize MultiStem for the treatment of certain indications in Japan. Among other things, Healios has a license to our technology and is responsible for the development and commercialization of MultiStem for ischemic stroke and ARDS in Japan on an exclusive basis.

Our lead program is our pivotal Phase 3 clinical trial to evaluate the potential for MultiStem treatment of patients who have suffered neurological damage from an ischemic stroke entitled, "MultiStem Administration for Stroke Treatment and Enhanced Recovery Study-2," or MASTERS-2. The results from our completed Phase 2 study demonstrated favorable tolerability for MultiStem, consistent with the results from prior studies. Though the Phase 2 study did not achieve the primary endpoints for the intent-to-treat population, MultiStem treatment was associated with lower rates of mortality and life-threatening adverse events, infections and pulmonary events, and a reduction in hospitalization and time in the intensive care unit, or ICU. In addition, analyses show that patients who received MultiStem treatment earlier in the study's treatment window (24 to 36 hours post-stroke, in accordance with the original study protocol) had better recovery in comparison to placebo. Furthermore, analysis of biomarker data obtained from samples of study subjects indicated that MultiStem treatment reduced post-stroke inflammation compared to placebo, and the results suggest that this effect was more pronounced for subjects who received

3