The following is management's discussion and analysis summarizing the
significant factors affecting our results of operations, financial condition and
liquidity position for the three and nine months ended September 30, 2020 and
2019, and should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes included elsewhere in this
filing.
This report contains forward-looking statements. Generally, the words
"believes," "anticipates," "may," "will," "should," "could," "expect," "plans,"
"intend," "estimate," "projects," "presidents," "potential," "continue" and
similar expressions or the negative thereof or comparable terminology are
intended to identify forward-looking statements. These statements reflect our
current views with respect to future events or to our future financial
performance and involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Given these uncertainties, you should
not place undue reliance on these forward-looking statements.
A variety of factors, some of which are outside our control, may cause our
operating results to fluctuate significantly. They include:
· the severity, magnitude, and duration of the COVID-19 pandemic, including
impacts of the pandemic and of responses to the pandemic by governments,
business, and individuals on our operations;
· our ability to timely complete and equip our Rockville, Maryland GMP
facility amid the COVID-19 pandemic;
· our ability to mitigate the intracompany transferee visa travel ban in
connection with the technical transfer of our institutionalized process from
our Shanghai, China facility to the new Rockville site to support clinical
trial in the U.S.;
· our anticipated cash needs and our estimates regarding our anticipated
expenses, capital requirements and our needs for additional financings;
· the success, cost, and timing of our product development activities and
clinical trials;
· our ability and the potential to successfully advance our technology
platform to improve the safety and effectiveness of our existing product
candidates; the potential for our identified research priorities to advance
our cancer and degenerative disease technologies;
· our ability to obtain drug designation or breakthrough status for our
product candidates and any other product candidates, or to obtain and
maintain regulatory approval of our product candidates, and any related
restrictions, limitations and/or warnings in the label of an approved
product candidate;
· the ability to generate or license additional intellectual property relating
to our product candidates;
· regulatory developments in China, the United States, and other foreign
countries;
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· the potential of the technologies we are developing;
· fluctuations in the exchange rate between the U.S. dollars and the Chinese
Yuan;
· our plans to equip our manufacturing facilities;
· the occurrence of any event, change or other circumstance that could give
rise to the termination of the Merger Agreement;
· the inability to complete the proposed Merger due to the failure to obtain
the required stockholder approvals or the failure to satisfy other
conditions to the consummation of the proposed Merger;
· the parties may be unable to obtain CFIUS clearance, or CFIUS may delay the
Merger or result in the imposition of conditions that could cause the
parties to abandon the Merger;
· risks related to disruption of Company management's attention from the
Company's ongoing business operations due to the Merger;
· the outcome of any legal proceedings, regulatory proceedings or enforcement
matters that have been or may be instituted against the Company and others
relating to the Merger;
· our announcement and pursuit of the Merger may disrupt our business and make
it more difficult to maintain our business and operational relationships,
and the restrictions imposed on us prior to the closing of the Merger or
termination of the Merger Agreement may prevent us from growing our business
or operating outside of the ordinary course of business without the consent
of Parent and/or Merger Sub;
· the potential difficulties in employee retention as a result of the pendency
of the Merger;
· the risk associated with the timing of the closing of the Merger, including
the risk that the conditions to the Merger are not satisfied on a timely
basis, or at all, and the failure of the Merger to close for any other
reason;
· unanticipated difficulties or expenditures relating to the Merger, the
response of business partners and retention as a result of the announcement
and pendency of the Merger;
· the amount of the costs, fees, expenses and charges related to the Merger;
and
· the additional risks, uncertainties, and other factors described in our SEC
filings.
We discuss many of these risks in greater detail under the heading "Risk
Factors" included in our Annual Report on Form 10-K for the year ended December
31, 2019 filed with the Securities and Exchange Commission on February 28, 2020.
Unless required by law, we undertake no obligation to update or revise any
forward-looking statements to reflect new information or future events or
developments. Thus, you should not assume that our silence over time means that
actual events are bearing out as expressed or implied in such forward-looking
statements.
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For additional information, see Item 7 of Part II, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Overview" of our
2019 Annual Report on Form 10-K.
OVERVIEW
The "Company", "CBMG", "we", "us", "our" and similar terms refer to Cellular
Biomedicine Group, Inc. (a Delaware corporation) as a combined entity including
each of its subsidiaries and controlled companies, unless the context otherwise
requires.
Impact of COVID-19
The following guidance regarding the impact of the COVID-19 pandemic on our
business operations is highly uncertain and subject to change. We cannot
determine with certainty what the ultimate impact of the pandemic will be.
The COVID-19 pandemic has created new challenges for CBMG, the broader biotech
community, and society as a whole. We have and continue to prioritize the safety
and well-being of our employees and have implemented work-from-home policies for
our U.S.- and China-based employees since the early stages of the COVID-19
pandemic. In early April 2020, our China-based employees returned to the office
and are required to adhere to the Company's COVID-19 prophylactic process and
procedures. In July 2020, our U.S.-based employees also returned to the office
in accordance with local rules and ordinances. Commensurate to impacts
throughout the biopharma industry, we have observed some broad-based COVID-19
supply chain related issues and are continuing to mitigate its impact on our
operations by implementing concrete measures to prioritize the safety and
physical wellbeing of our employees. Amid the COVID-19 pandemic, we are working
with our clinical studies partners in China to mitigate risk to patients
participating in our studies while taking into account regulatory,
institutional, and government guidance and policies. We continue to evaluate
enrollment trends in our studies as well as the impact of COVID-19 on our
clinical programs. Patients enrolled on anti-BCMA CAR-T for Relapsed or
Refractory Multiple Myeloma and anti-CD19/CD20 Bi-Specific CAR-T for
Non-Hodgkin's Lymphoma have continued treatment and study visits with limited
disruption to date, and we are working closely with trial sites to support the
continued treatment of patients in compliance with study protocols. An early
phase clinical trial using T cells transduced with AFP TCR-T targeting
hepatocellular carcinoma (HCC) has been initiated and is ongoing. At the end of
Q3, 2020, we suspended our autologous KOA clinical trial in China due to a
shortage of participants, caused by the coronavirus anxiety in situations
involving non-life-threatening physical ailments. Any potential further delays
cannot be predicted and may vary by clinical study and program depending on a
variety of currently unknown factors. The Company remains committed to
maintaining its development plans but acknowledges the potential impact on
clinical studies amid the rapidly evolving pandemic environment.
Recent Developments from Q3 and Subsequent Developments
On July 13, 2020, the Company hosted a virtual research and development showcase
to present an overview and update on the current state of its clinical and
pre-clinical programs.
On July 18, 2020, we began enrolling patients for our clinical study on human
adipose mesenchymal stem cell exosomes (ahaMSCs-Exo) in the treatment of mild to
moderate Alzheimer's disease. Our clinical partner is Ruijin Hospital
(affiliated to Shanghai Jiao Tong University School of Medicine). The study is
expected to enroll 18 patients.
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On August 10, 2020, the Company notified China Merchant Bank of its plan to draw
from a one-year line of credit for working capital and research and development
activities. This line of credit is capped at CNY 30 million (approximately $4.4
million).
On August 11, 2020, the Company entered into a Bridge Loan Agreement (the
"Yunfeng Bridge Loan Agreement 1") with Yunfeng Capital Limited, an affiliate of
Yunfeng Fund III, L.P., pursuant to which Yunfeng Capital Limited agreed to
provide for an unsecured loan to the Company in an aggregate principal amount of
$25 million at a simple interest rate of 6% per annum (the "Yunfeng Bridge Loan
1"). The Company is required to paypay all unpaid principal amount of the
Yunfeng Bridge Loan, together with accrued but unpaid interest thereon, on the
maturity date, which is the earlier of (i) August 7, 2021, and (ii) the
occurrence of an event of default (as defined in the promissory note issued
pursuant to the terms of the Yunfeng Bridge Loan Agreement 1, the "Yunfeng Note
1") unless such event of default has been remedied by the end of the applicable
grace period. Pursuant to the Yunfeng Note, Yunfeng Capital Limited has the
right, at its option to convert all (but not part) of the unpaid principal
amount of the Yunfeng Bridge Loan 1 together with the accrued but unpaid
interest into common stock of the Company (i) on the close of business on the
maturity date at a conversion price equal to the lower of (A) US$19.50 per share
and (B) an amount representing a 15% discount to the volume weighted average
price over the preceding 30 trading days prior to and including the maturity
date, subject to ratable adjustment for any stock split, stock dividend, stock
combination or other recapitalization occurring subsequent to the date of the
Yunfeng Note 1 or (ii) immediately prior to (but subject to) the closing of
certain acquisitions of the Company (including the proposed merger previously
disclosed on August 12, 2020) prior to the maturity date, at a conversion price
equal to the price per share of common stock payable (or deemed payable) in such
acquisition.
On August 11, 2020, the Company and Winsor Capital Limited, an affiliate of TF
Capital Ranok Ltd., entered into an Amendment Letter (the "Amendment Letter") in
connection with the Winsor Bridge Loan. Pursuant to the Amendment Letter, the
Company and Winsor Capital Limited have agreed to revise the terms of the
previously announced bridge loan to provide for a new maturity date being the
earlier of (i) August 7, 2021, and (ii) the occurrence of an event of default
(as defined in the promissory note issued pursuant to the terms of the bridge
loan agreement of the Winsor Bridge Loan) unless such event of default has been
remedied by the end of the applicable grace period as set out therein.
On August 11, 2020, the Company entered into the Merger Agreement with CBMG
Holdings, an exempted company with limited liability incorporated under the laws
of the Cayman Islands ("Parent"), and CBMG Merger Sub Inc., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), providing
for the merger of Merger Sub with and into the Company (the "Merger"), with the
Company surviving the Merger as a wholly-owned subsidiary of Parent. Parent and
Merger Sub are newly-formed entities formed on behalf of the Consortium.
Pursuant to the Merger Agreement, at the effective time of the Merger
("Effective Time"), each share of the Company's common stock, par value $0.001
per share ("Company Common Stock"), issued and outstanding immediately prior to
the Effective Time (other than (i) shares of Company Common Stock owned by
Parent, Merger Sub or any other direct or indirect wholly-owned subsidiary of
Parent and shares of common stock owned by the Company, (ii) certain shares of
Company Common Stock owned by the Consortium Rollover Stockholders and Novartis
Pharma AG (collectively, the "Rollover Stockholders"), and (iii) shares of
Company Common Stock owned by stockholders who are entitled to appraisal rights
pursuant to Section 262 of the DGCL) will be converted into the right to receive
$19.75 in cash, without interest (the "Per Share Merger Consideration").
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On August 11, 2020, we executed a nonexclusive patent license agreement (the
"AAV5 License Agreement") with the U.S. Department of Health and Human Services,
as represented by National Heart, Lung, and Blood Institute of the National
Institutes for Health, for sixteen AAV5 vector patents (the "AAV5 Patents"),
pursuant to which we acquired certain rights to the worldwide development,
manufacture and commercialization of such licensed rights to introduce
therapeutic genes to enhance the efficacy of T cell immunotherapy, and to
produce CAR/TCR/TIL cells for the treatment of non-small cell lung cancer and
multiple myeloma. The AAV5 patents expire in 2025.
On August 20, 2020, we initiated our participation in a multicenter, randomized,
double-blind, clinical study targeting non-COVID 19 related ARDS by atomizing
inhalation of allogeneic human mesenchymal stem cell exosomes (hMSC-Exos). Our
clinical partners are Ruijin Hospital (affiliated to Shanghai Jiao Tong
University School of Medicine), Zhongshan Hospital (affiliated to Fudan
University), Shanghai First People's Hospital, and East China Hospital
(affiliated to Fudan University). We have started recruiting patients for the
Phase I study.
On August 25, 2020, we submitted a declaration relating to the transactions
contemplated by the Merger Agreement to CFIUS pursuant to 31 C.F.R. § 800.402
(the "CFIUS Declaration").
On August 30, 2020, we presented our research and development pipeline at the
25th Annual Conference of the Chinese Biopharmaceutical Association-USA.
On September 21, 2020, we executed a sponsored collaborative research agreement
with Duke University, pursuant to which both parties entered into a research
collaboration to investigate NSCLC tumor specimens for pre-clinical development
and manufacturing of a clinical TIL cell-therapy product.
On September 25, 2020 CFIUS requested that the Company file the CFIUS Notice
regarding the Merger in accordance with 31 C.F.R. part 800, subpart E.
On October 23, 2020, the Company entered into a Bridge Loan Agreement with TF I
Ltd., an affiliate of TF Capital Fund III L.P. (the "TF Bridge Loan Agreement")
pursuant to which TF I Ltd. agreed to provide an unsecured loan to the Company
in an aggregate principal amount of $10 million at a simple interest rate of 6%
per annum (the "TF Bridge Loan"). The TF Bridge Loan Agreement was approved by
the Board of Directors (the "Board") of the Company based on the recommendation
of the Special Committee of the Board (the "Special Committee") and its
advisers. TF Capital Fund III L.P., an affiliate of TF I Ltd., is a member of
the Consortium that, through certain newly formed entities, entered into the
Merger Agreement with the Company on August 11, 2020 relating to the Merger. The
TF Bridge Loan was funded on October 28, 2020. The Company is required to repay
all unpaid principal of the TF Bridge Loan, together with the accrued but unpaid
interest thereon, on the maturity date, which is the earlier of (i) August 7,
2021, and (ii) the occurrence of an event of default (as specified in the
convertible promissory note issued pursuant to the terms of the TF Bridge Loan
Agreement (the "TF Note"), the form of which is attached as Exhibit A to the TF
Bridge Loan Agreement), unless any such event of default has been remedied by
the end of the applicable grace period. Pursuant to the TF Note, TF I Ltd. has
the right, at its option, to convert all (but not part) of the unpaid principal
amount of the TF Bridge Loan together with the accrued but unpaid interest into
common stock of the Company (i) on the close of business on the maturity date at
a conversion price equal to the lower of (A) $19.50 per share and (B) an amount
representing a 15% discount to the volume weighted average price over the
preceding 30 trading days prior to and including the maturity date, subject to
ratable adjustment for any stock split, stock dividend, stock combination or
other recapitalization occurring subsequent to the date of the TF Note or (ii)
immediately prior to (but subject to) the closing of certain acquisitions of the
Company (including the Merger) prior to the maturity date, at a conversion price
equal to the price per share of common stock payable (or deemed payable) in such
acquisition.
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On October 23, 2020, the Company entered into a Bridge Loan Agreement with
Yunfeng Capital Limited (the "Yunfeng Bridge Loan Agreement 2") pursuant to
which Yunfeng Capital Limited agreed to provide an unsecured loan to the Company
in an aggregate principal amount of $10 million at a simple interest rate of 6%
per annum (the "Yunfeng Bridge Loan 2"). The Yunfeng Bridge Loan Agreement 2 was
approved by the Board based on the recommendation of the Special Committee and
its advisers. Yunfeng Fund III, L.P., an affiliate of Yunfeng Capital Limited,
is a member of the Consortium that, through certain newly formed entities,
entered into the Merger Agreement with the Company on August 11, 2020 relating
to the Merger. The Yunfeng Bridge Loan 2 was funded on October 30, 2020. The
Company is required to repay all unpaid principal of the Yunfeng Bridge Loan 2,
together with the accrued but unpaid interest thereon, on the maturity date,
which is the earlier of (i) August 7, 2021, and (ii) the occurrence of an event
of default (as specified in the convertible promissory note issued pursuant to
the terms of the Yunfeng Bridge Loan Agreement 2 (the "Yunfeng Note 2"), the
form of which is attached as Exhibit A to the Yunfeng Bridge Loan Agreement 2),
unless any such event of default has been remedied by the end of the applicable
grace period. Pursuant to the Yunfeng Note 2, Yunfeng Capital Limited has the
right, at its option, to convert all (but not part) of the unpaid principal
amount of the Yunfeng Bridge Loan 2 together with the accrued but unpaid
interest into common stock of the Company (i) on the close of business on the
maturity date at a conversion price equal to the lower of (A) $19.50 per share
and (B) an amount representing a 15% discount to the volume weighted average
price over the preceding 30 trading days prior to and including the maturity
date, subject to ratable adjustment for any stock split, stock dividend, stock
combination or other recapitalization occurring subsequent to the date of the
Yunfeng Note 2 or (ii) immediately prior to (but subject to) the closing of
certain acquisitions of the Company (including the Merger) prior to the maturity
date, at a conversion price equal to the price per share of common stock payable
(or deemed payable) in such acquisition.
On October 23, 2020, CBMG Holdings, as the Parent under the Merger Agreement,
executed a consent letter to consent to (i) the execution of the TF Bridge Loan
Agreement and the Yunfeng Bridge Loan Agreement 2 (together, the "Loan
Agreements") by the Company, the transactions contemplated thereunder and the TF
Bridge Loan and Yunfeng Bridge Loan 2 (together, the "Loans") to be incurred
upon the execution of the Loan Agreements and (ii) acknowledge that the Loans do
not constitute Indebtedness under Section 7.1(b)(vi)(A) of the Merger Agreement.
On October 28, 2020, CFIUS accepted the joint voluntary notice field in
connection with the transactions contemplated by the Merger Agreement.
In the next 12 months, we aim to accomplish the following, though there can be
no assurances that we will be able to accomplish any of these goals:
· Field answers to questions in the CFIUS Notice review and complete the
proposed Merger transaction;
· Evaluate the potential of adding anti-Glypican 3 (GPC3) in our HCC research
and development pipeline;
· Prepare and submit an IND application for C-CAR039 (anti-CD20/CD19
bi-specific CAR-T) for NHL to the U.S. FDA;
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· Launch a clinical study in the U.S. to evaluate the safety and clinical
benefit of TIL in NSCLC (TIL051);
· File an IND application in China for C-TCR055 upon promising IIT proof of
concept (POC) study results in China;
· Improve our capabilities and resources, including the manufacturing
capabilities of our U.S. R&D center in Rockville, Maryland to support our
clinical development in the U.S.;
· Continue to rationalize Novartis' material specifications and reduce our
cost on Kymriah®;
· Explore strategic drug development partnerships with large pharmaceutical
companies by leveraging our vertically integrated infrastructure in China to
execute the IIT expedited POC.
· Explore bringing our proprietary virus manufacturing process from Shanghai
to our Rockville site to enable U.S. clinical trials;
· Conduct clinical study on the treatment of Alzheimer's disease;
· Collaborate with Duke University on TIL process development to improve cycle
time and institutionalized scalability;
· Continue to assess and explore third-party technologies to augment our IP
portfolio;
· Explore the feasibility of establishing a new R&D and clinical manufacturing
site in China to adapt to our rapid business expansion and explore the
addition of our Contract Development and Manufacturing Organization (CDMO)
business to support certain specific market-oriented business strategies;
· Pursue additional capital funding to strengthen our balance sheet;
· Execute the technology transfer and align the manufacturing processes with
the global CAR-T leader to support the development of the world's first
CAR-T therapy in China;
· Explore and introduce a gene therapy technology platform, product
development, and manufacturing for our current business to create synergy
with our cell therapy pipelines;
· Enrich our intellectual property portfolio globally;
· Evaluate and implement a digital data tracking and storage technology system
for research and development, material management, GMP production, and
integrated clinical data management;
· Continue our allogeneic KOA clinical trials in China;
· Continue our exosome ARDS clinical study in China;
· Assess the feasibility of starting an IIT on Universal Chimeric Antigen
Receptor (UCAR) BCMA for MM in China;
· Evaluate emerging regenerative medicine technology platform for other
indications and review recent developments in the competitive landscape;
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· Strengthen our Quality Management System (QMS) centralized document control
system and electronic batch recording system for quality assurance, and
laboratory information management system (LMS) for quality control as well
as leverage our QMS system and our strong scientific expertise in both the
U.S. and China;
· Continue to field inbound inquiries and to explore opportunities to monetize
our clinical assets;
· Collaborate with multinational pharmaceutical companies to co-develop cell
therapy products in China and the U.S. by leveraging our existing leading
clinical assets or research on new targets; and
· Continue to implement the International Organization for Standardization
(ISO) 27001 standard to fortify our information assets security.
Our operating expenses for the three months ended September 30, 2020 were in
line with management's plans and expectations. We had an increase in total
operating expenses of approximately $1 million and $4 million for the three and
nine months period ended September 30, 2020, as compared to the same periods
ended September 30, 2019, which was primarily attributable to G&A expenses for
the privatization and increased R&D expenses in 2020 excluding the impact of
one-time expense incurred in connection with a research collaboration with Duke
University in 2019.
Corporate History
Please refer to Note 1 of the unaudited condensed consolidated financial
statements for the corporate history.
BIOPHARMACEUTICAL BUSINESS
Our biopharmaceutical business was founded in 2009 by a team of seasoned
Chinese-American executives, scientists and doctors. In 2010, we established a
facility designed and built to comply with China's GMP standards in Wuxi, China,
and in 2012, we established a U.S. FDA compliant manufacturing facility in
Shanghai. In November 2017, we opened our Zhangjiang facility in Shanghai, of
which 40,000 square feet, or 35% of the total facility, was designed and built
to GMP standards and dedicated to advanced cell manufacturing. We are expanding
our U.S. presence with a new 22,477 square foot Rockville, Maryland facility
scheduled to be completed in late Q4 2020. The Rockville site is designed to
house approximately 4,500 square feet of GMP manufacturing facility to support
early stage U.S. clinical trials. Our focus has been to serve the rapidly
growing health care market initially in China by marketing and commercializing
immune cell and stem cell therapeutics, related tools and products from our
patent-protected homegrown and acquired cell technology, as well as by utilizing
in-licensed and other acquired intellectual properties before shifting our
attention to serve the mature and highly competitive health care market in the
U.S. We continue to explore new products and gene therapies that may require the
investment of a material amount of assets.
Our current treatment focal points are cancer, KOA and ARDS.
Cancer. We are focusing our clinical development efforts on assets such as
C-CAR088, C-CAR039, TIL051, AFT-TCRT in China and/or U.S. As discussed above in
Item 1 - Business, under the subheading "Overview," we entered into the Novartis
LCA in September of 2018. With the execution of the Novartis LCA, we have
prioritized our efforts on working with Novartis to bring Kymriah® to patients
in China as soon as practicable. In light of our collaboration with Novartis, we
will no longer pursue our own acute lymphoblastic leukemia (ALL) and diffuse
large B-cell lymphoma (DLBCL) biologics license application submission with the
NMPA. We plan to continue to leverage our cutting-edge Chemistry, Manufacturing
and Control (CMC) platform, as well as our Quality Management System and our
strong scientific expertise in the U.S and in China, to collaborate with
multinational pharmaceutical companies to co-develop cell therapies in China.
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KOA. In 2013, we completed a Phase-I/IIa clinical study, in China, for our KOA
therapy named ReJoin®. The trial tested the safety and efficacy of
intra-articular injections of autologous human adipose-derived mesenchymal
progenitor cells (haMPCs) in order to reduce inflammation, relieve pain, improve
knee function and repair damaged joint cartilage. Our ReJoin® haMPC therapy for
KOA is an interventional therapy using our proprietary process, culture and
medium. From 2013 to 2020, we conducted clinical studies on ReJoin® and our
trial data has demonstrated positive results on the performance of ReJoin®. We
have recently suspended our autologous ReJoin® KOA clinical trial in China due
to a shortage of participants caused by coronavirus anxiety in situations
involving non-life-threatening physical ailments.
Our process is distinguishable from sole Stromal Vascular Fraction (SVF)
therapy. The immunophenotype of our haMPCs exhibited a homogenous population
expressing multiple biomarkers such as CD73+, CD90+, CD105+, HLA-DR-, CD14-,
CD34- and CD45-. In contrast, SVF is merely a heterogeneous fraction including
preadipocytes, endothelial cells, smooth muscle cells, pericytes, macrophages,
fibroblasts and adipose-derived stem cells.
In January 2016, we launched the Allogeneic KOA Phase-I Trial in China to
evaluate the safety and efficacy of AlloJoin®, an off-the-shelf haMPC therapy
for the treatment of KOA. On August 5, 2016, we completed patient treatment for
the Allogeneic KOA Phase-I trial, and on December 9, 2016, we announced interim
three-month safety data from the Allogenic KOA Phase-I Trial in China. The
interim analysis of the trial has demonstrated a preliminary safety and
tolerability profile of AlloJoin® in the three doses tested, and no serious
adverse events (SAE) related to AlloJoin® have been observed. On March 16, 2018,
we announced a positive 48-week AlloJoin® Phase-I data in China, which
demonstrated good safety and early efficacy for the slowing of cartilage
deterioration. China finalized its cell therapy regulatory pathway in December
2017. Our AlloJoin® IND application to conduct a Phase-II clinical trial with
the NMPA was been approved in January 2019 and we launched our Phase-II
AlloJoin® clinical trial on September 12, 2019. On September 27, 2019, we
received the ReJoin® therapy application acceptance for Phase-II clinical trials
by the NMPA. This clinical trial is a randomized, double-blind and
blank-controlled study of intra-articular injections conducted at seven
hospitals in China, including Shanghai Renji Hospital, Shanghai Sixth People's
Hospital, Shanghai First People's Hospital, Shanghai Huashan Hospital,
China-Japan Friendship Hospital, the Second Affiliated Hospital of Medical
College of Zhejiang University and Shanghai Ninth People's Hospital. As of
September 2020, we have enrolled 54 patients, 52 of whom have received the
AlloJoin® therapy, and we have not yet observed any serious adverse effects.
We established adult adipose-derived progenitor cell and immuno-oncology
cellular therapy platforms in treating specific medical conditions and diseases.
Our QMS have been assessed and certified to meet the requirements of ISO 9001:
2015, and a quality manual based on GMP guidelines has been finalized. The
facilities, utilities and equipment in both Zhangjiang and Wuxi Sites have been
calibrated and/or qualified and in compliance with requirements of local health
authorities. We installed an Enterprise Quality Management System (EQMS) in
April 2019 to facilitate the quality activities. A document management system
and Laboratory Information Management System (LIMS) will be installed and
qualified in early 2021.
Our proprietary manufacturing processes and procedures include (i) banking of
allogenic cellular product and intermediate product; (ii) manufacturing process
of GMP-grade viral vectors; (iii) manufacturing process of GMP-grade cellular
product; and (iv) analytical testing to ensure the safety, identity, purity and
potency of cellular products.
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Recent Developments in Adoptive Immune Cell Therapy (ACT)
The immune system plays an essential role in cancer development and growth. In
the past decade, immune checkpoint blockade has demonstrated a major
breakthrough in cancer treatment and has currently been approved for the
treatment of multiple tumor types. ACT with TIL or gene-modified T-cells
expressing novel T-cell receptors (TCR) or chimeric antigen receptors (CAR) is
another strategy to modify the immune system to recognize tumor cells and thus
carry out an anti-tumor effector function.
The TILs consist of tumor-resident T-cells which are isolated and expanded ex
vivo after surgical resection of the tumor. Thereafter, the TILs are further
expanded in a rapid expansion protocol (REP). Before intravenous adoptive
transfer into the patient, the patient is treated with a lymphodepleting
conditioning regimen. TCR gene therapy and CAR gene therapy are ACT with
genetically modified peripheral blood T-cells. For both treatment modalities,
peripheral blood T-cells are isolated via leukapheresis. These T-cells are then
transduced by viral vectors to either express a specific TCR or CAR. These
treatments have shown promising results in various tumor types.
Chimeric antigen receptor T-cells (CAR-Ts)
According to the U.S. National Cancer Institute's 2013 cancer topics research
update on CAR-T-Cells, excitement is growing for immunotherapy-therapies that
harness the power of a patient's immune system to combat their disease, or what
some in the research community are calling the "fifth pillar" of cancer
treatment.
One approach to immunotherapy involves engineering patients' own immune cells to
recognize and attack their tumors. This approach is called adoptive cell
transfer. Adoptive cell transfer's building blocks are T-cells, a type of immune
cell collected from the patient's own blood. One of the well-established
adoptive cell transfer approaches is CAR-T cancer therapy. After collection, the
T-cells are genetically engineered to produce special receptors on their surface
called chimeric antigen receptors (CARs). CARs are proteins that allow the
T-cells to recognize a specific protein (antigen) on tumor cells. These
engineered CAR-T cells are then grown until the number reaches dose level. The
expanded population of CAR-T cells is then infused into the patient. After the
infusion, if all goes as planned, the T-cells multiply in the patient's body
and, with guidance from their engineered receptor, recognize and kill cancer
cells that harbor the antigen on their surfaces. This process builds on a
similar form of adoptive cell transfer pioneered from NCI's Surgery Branch for
patients with advanced melanoma. In 2013, NCI's Pediatric Oncology Branch
commented that the CAR-T cells are much more potent than anything they can
achieve with other immuno-based treatments being studied. Although investigators
working in this field caution that there is still much to learn about CAR T-cell
therapy, the early results from trials like these have generated considerable
optimism.
CAR-T cell therapies, such as anti-CD19 CAR-T and anti-BCMA CAR-T, have been
tested in several hematological indications on patients that are
refractory/relapsing to chemotherapy, and many of them have relapsed after stem
cell transplantation. All of these patients had limited treatment options prior
to CAR-T therapy. We have begun an anti-BCMA CAR-T investigator-initiated trial
in January 2019 and are continuing to enroll more patients. CAR-T has shown
encouraging clinical efficacy in many of these patients, and some of them have
had durable clinical response for years. However, some adverse effects, such as
CRS and neurological toxicity, have been observed in patients treated with
CAR-T-cells. For example, in July 2016, Juno Therapeutics, Inc. reported the
death of patients enrolled in the U.S. Phase-II clinical trial of JCAR015
(anti-CD19 CAR-T) for the treatment of relapsed or refractory B-cell acute
lymphoblastic leukemia (B-ALL). The U.S. FDA put the trial on hold and lifted
the hold within a week after Juno provided a satisfactory explanation and
solution. Juno attributed the cause of patient deaths to the use of Fludarabine
preconditioning and they switched to use only cyclophosphamide pre-conditioning
in subsequent enrollment. We are optimistic on the prospect of this pipeline and
will continue to seek partnerships on co-development.
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In August 2017, the U.S. FDA approved Novartis' Kymriah®, a CD19-targeted CAR-T
therapy, for the treatment of patients up to 25 years old for relapsed or
refractory (r/r) ALL, the most common cancer in children. Current treatments
show a rate of 80% remission using intensive chemotherapy. However, there are
almost no conventional treatments to help patients who have relapsed or are
refractory to traditional treatment. Kymriah® has shown results of complete and
long lasting remission, and was the first U.S. FDA-approved CAR-T therapy. In
October 2017, the U.S. FDA approved Kite Pharmaceuticals' (Gilead) CAR-T therapy
for DLBCL the most common type of NHL in adults. The initial results of
axicabtagene ciloleucel (Yescarta), the prognosis of high-grade chemo refractory
NHL, is dismal with a medium survival time of a few weeks. Yescarta is a therapy
for patients who have not responded to or who have relapsed after at least two
other kinds of treatment.
In May 2018, the U.S. FDA approved Novartis' Kymriah® for intravenous infusion
for its second indication-the treatment of adult patients with relapsed or
refractory (r/r) large B-cell lymphoma after two or more lines of systemic
therapy including DLBCL not otherwise specified, high grade B-cell lymphoma and
DLBCL arising from follicular lymphoma. Kymriah® is now the only CAR-T cell
therapy to receive U.S. FDA approval for two distinct indications in non-Hodgkin
lymphoma and B-cell ALL. On September 25, 2018, we entered into the Novartis LCA
with Novartis to manufacture and supply Kymriah® to Novartis in China.
Besides anti-CD19 CAR-T, anti-BCMA CAR-T has shown promising clinical efficacy
in treatment of multiple myeloma. For example, bb2121, a CAR-T therapy targeting
BCMA, has been developed by Bluebird bio, Inc. and Celgene for previously
treated patients with multiple myeloma. Based on preliminary clinical data from
the ongoing Phase-I study CRB-401, bb2121 has been granted Breakthrough Therapy
Designation by the U.S. FDA and PRIME eligibility by the European Medicines
Agency (EMA) in November 2017. Some companies have made progress in securing
financing for development of this therapy.
Recent progress in Universal Chimeric Antigen Receptor (UCAR) T-cells showed
benefits such as ease of use, availability and the drug pricing challenge.
Currently, most therapeutic UCAR products are being developed with gene editing
platforms such as CRISPR or TALEN. For example, UCART19 is an allogeneic CAR
T-cell product candidate developed by Cellectis for treatment of CD19-expressing
hematological malignancies. UCART19 Phase-I clinical trials started in adult and
pediatric patients in Europe in June 2016 and in the U.S. in 2017. The use of
UCAR may have the potential to overcome the limitation of the current autologous
approach by providing an allogeneic, frozen, "off-the-shelf" T-cell products for
cancer treatment.
Tumor Infiltrating Lymphocytes (TILs)
While CAR-T cell therapy has proven successful in treatment of several
hematological malignancies, other cell therapy approaches, including TIL are
being developed to treat solid tumors. For example, Iovance Biotherapeutics is
focused on the development of autologous tumor-directed TILs for treatments of
patients with various solid tumor indications. Iovance is conducting several
Phase-II clinical trials to assess the efficacy and safety of autologous TIL for
treatment of patients with Metastatic Melanoma, Squamous Cell Carcinoma of the
Head and Neck, NSCLC and Cervical Cancer in the U.S. and Europe.
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T-Cell Receptor-Engineered T-Cells (TCRs)
Adaptimmune is partnering with GlaxoSmithKline to develop TCR-T therapy
targeting the NY-ESO-1 peptide, which is present across multiple cancer types.
Their NY-ESO SPEAR T-cell has been used in multiple Phase-I/II clinical trials
in patients with solid tumors and haematological malignancies, including
synovial sarcoma, myxoid round cell liposarcoma, multiple myeloma, melanoma,
NSCLC and ovarian cancer. The initial data suggested positive clinical responses
and evidence of tumor reduction in patients. NY-ESO SPEART T-cell has been
granted breakthrough therapy designation by the U.S. FDA and PRIME regulatory
access in Europe. Adaptimmune's other TCR-T product, AFP SPEAR T-cell targeting
AFP peptide, is aimed at the treatment of patients with hepatocellular carcinoma
(HCC). AFP SPEAR T-cell is in a Phase-I study and enrolling HCC patients in the
U.S.
CBMG's Adoptive Immune Cell Therapy (ACT) Programs
In December 2017, the Chinese government issued trial guidelines concerning the
development and testing of cell therapy products in China. Although these trial
guidelines are not yet codified as mandatory regulation, we believe they provide
a measure of clarity and a preliminary regulatory pathway for our cell therapy
operations in an uncertain regulatory environment. On April 18 and April 21,
2018, the Center for Drug Evaluation (CDE) posted on its website acceptance of
the IND application for CAR-T cancer therapies in treating patients with NHL and
adult ALL submitted by the Company's wholly-owned subsidiaries, CBMG Shanghai
and Shanghai Cellular Biopharmaceutical Group Ltd. On September 25, 2018 we
entered into Novartis LCA to manufacture and supply Kymriah® in China. As part
of the deal, Novartis took approximately a 9% equity stake in CBMG, and CBMG is
discontinuing development of its own anti-CD19 CAR-T cell therapy. This
collaboration with Novartis reflects our shared commitment to bringing the first
marketed CAR-T cell therapy, Kymriah®, a transformative treatment option
currently approved in the U.S., EU and Canada for two difficult-to-treat
cancers, to China, where the number of patients in need remains the highest in
the world. Together with Novartis, we plan to bring the first CAR-T cell therapy
to patients in China as soon as possible. We continue to develop CAR-T therapies
other than CD 19 on our own and Novartis has the first right of negotiation on
these CAR-T developments. The CBMG oncology pipeline includes CAR-T targeting
CD20-, CD 19 and 20 and BCMA, AFP TCR-T, which could specifically eradicate AFP
positive HCC tumors and TIL technologies for solid tumors. Our current priority
is to collaborate with Novartis to bring Kymriah® to China. At the same time, we
remain committed to developing our existing pipeline of immunotherapy candidates
for hematologic and solid tumor cancers to help deliver potential new treatment
options for patients in China. We are striving to build a competitive research
and development function, a translational medicine unit, along with a
well-established cellular manufacturing capability and ample capacity, to
support Kymriah® in China and our development of multiple assets in multiple
indications. We believe that these efforts will allow us to boost the Company's
Immuno-Oncology presence. We have initiated multiple clinical trials to evaluate
C-CAR088 in MM, C-CAR039 in NHL, anti-CD20 CAR-T in NHL for patients that have
relapsed after anti-CD19 CAR-T treatment, and AFP TCR-T in HCC.
Market for Immune Cell Therapies
Our immune cell therapies involve the genetic engineering of T-cells to express
either chimeric antigen receptors, or CARs, or T-cell receptors, or TCRs and
TIL. These T-cells are designed to recognize and attack cancer cells. Kymriah is
a type of immune cell therapy that is made from a patient's own white blood
cells and is a prescription cancer treatment used in patients up to 25 years old
who have acute lymphoblastic leukemia that is either relapsing or is refractory.
It is also used in patients with non-Hodgkin lymphoma that has relapsed or is
refractory after having at least two other kinds of treatment. On August 30,
2017, Kymriah was approved by the U.S. FDA for the treatment of children and
young adults with ALL. By October 18, 2017, the U.S. FDA granted approval for
Yescarta for treating patients with relapsed/refractory DLBCL and other rare
large B-cell lymphomas. On May 1, 2018, the U.S.FDA approved Kymriah for a
second indication (diffuse large B-cell lymphoma). In August 2018, Kymriah and
Yescarta secured European Union approval for the treatment of blood cancers,
including B-cell ALL and relapsed or refractory DLBCL. Health Canada approved
Kymriah as the first CAR-T therapy in Canada and the Therapeutic Goods
Administration (TGA) approved it as the first CAR-T therapy in Australia.
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The American Cancer Society estimates there will be 1.8 million new cancer cases
diagnosed and 606,520 cancer deaths in the U.S. in 2020. According to a 2018
International Agency for Cancer publication, China, as the most populous country
in the world with an estimated population of nearly 1.42 billion, is projected
to have around 4.51 million cancer cases and 3.04 million cancer death by year
2020. A 2018 Global Cancer Statistics Cancer Communications report (the 2018
Global Cancer Statistics Report) states that compared to the U.S. and UK, China
has a 30% and 40%, respectively, higher cancer mortality among which 36.4% of
the cancer-related deaths were from the digestive tract cancers (stomach, liver
and esophagus cancer) and have relatively poorer prognoses.
The 2018 Global Cancer Statistics Report also reported that in 2018, lung cancer
was the most diagnosed cancer type worldwide and in China with 2,093,8761 and
733,3002 new cases respectively. HCC is the 4th most common cancer in China and
more than 50% of new HCC cases world-wide are in China. There are approximately
466,000 new liver cancer cases each year in China with the mortality around
343,700.3 In 2018, there were approximately 510,000 new cases of NHL worldwide
with 248,724 patient deaths.4
Multiple myeloma accounts for 1% of all cancers and approximately 10% of all
hematological malignancies.5 In 2016 there were 138,509 incident cases
worldwide. The United States had the most cases (24,407) and the most deaths
(14,212), China was the second in both measures with 16,537 incident cases and
10,363 deaths. The global incidence of multiple myeloma rose by 126% from 1990
to 2016. East Asia (China, North Korea, and Taiwan) saw incident cases of
multiple myeloma jump by 262%, which was the largest increase among any of the
21 global regions.6
Market for Stem Cell-Based Therapies
The U.S. forecast is that shipments of treatments with stem cells, or
instruments which concentrate stem cell preparations for injection into painful
joints, will fuel an overall increase in the use of stem cell based treatments
resulting in an increase to $5.7 billion in 2020, with key growth areas being
Spinal Fusion, Sports Medicine and Osteoarthritis of the joints. Osteoarthritis
(OA) is a chronic disease that is characterized by degeneration of the articular
cartilage, hyperosteogeny and, ultimately, joint destruction that can affect all
of the joints. KOA accounts for approximately 85% of the burden of OA worldwide
today. The incidence of radiographic KOA is 42% and 31%, respectively, among
women and men over age 60 in North America.7 The costs of OA management has
grown exponentially over recent decades, accounting for up to 1% to 2.5% of the
gross national product of countries with aging populations, including the U.S.,
Canada, the UK, France and Australia. According to the American Academy of
Orthopedic Surgeons (AAOS), the only pharmacologic therapies recommended for OA
symptom management are non-steroidal anti-inflammatory drugs (NSAIDs) and
tramadol (for patients with symptomatic osteoarthritis). Moreover, there is no
approved disease modification therapy for OA in the world. Disease progression
is a leading cause of hospitalization and ultimately requires joint replacement
surgery. Medicinal products used in the treatment of osteoarthritis need to
provide both a symptom relief effect for at least six months and a structure
modification effect to slow cartilage degradation by at least 12 months. Symptom
relief is generally measured by a composite questionnaire, the Western Ontario
and McMaster Universities Osteoarthritis Index (WOMAC) score, and structure
modification is measured by MRI, or radiographic image as accepted by
international communities. The Company uses the WOMAC as the primary end point
to demonstrate symptom relief, and MRI to assess structure and regeneration
benefits as a secondary endpoint.
________________
1 Chen et al. CA Cancer J Clin. 2016; 66:155-132
2 Bray F et al. CA Cancer J Clin. 2018: 68:394-424
3 Chen et al. CA Cancer J Clin. 2016; 66:155-132
4 Bray F et al. CA Cancer J Clin. 2018: 68:394-424
5 Moreau P et al., Annals of Oncol. 24 (Supplement 6): vi133-vi137, 2013)
6 Cowan AJ et al., JAMA Oncol. 2018;4(9):1221-1227
7 David J Hunter et al., Lancet. 2019 Apr 27;393(10182):1745-1759.
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According to the Foundation for the National Institutes of Health, there are 27
million Americans with OA, and symptomatic KOA occurs in 13% of persons aged 60
and older. According to a nationwide population-based longitudinal survey among
the Chinese retired population, approximately 8.1% of participants were found to
suffer from symptomatic knee OA. Currently no treatment exists that can
effectively preserve knee joint cartilage or slow the progression of KOA.
According to Alternative and Integrative Medicine, 53% of KOA patients will
degenerate to the point of disability. Conventional treatment usually involves
invasive surgery with painful recovery and physical therapy and replacement
surgeries are typically only suggested and performed on patients in the late
stage of KOA.
Our Global Strategy
CBMG is a drug development company focusing on developing cell therapies first
in China, to take advantage of cost efficiencies, leveraging the expeditious IIT
process in China, publish and share our data in major conferences and scientific
journals and then address the rest-of-the-world market after safety and efficacy
of those programs are established. Our strategy outside of China to monetize our
assets is to pursue the proof of concept (POC) acknowledgement bolstered by
promising clinical trial data from IIT or early IND in the U.S.. After POC, our
plan is to proactively seek strategic partnership to defray the prohibitive
costs associated in achieving Biologics License Application (BLA) approval in
the United States and the rest of the world.
Our goal is to develop safe and effective cellular therapies for indications
that represent a large unmet need in China. We intend to use our first-mover
advantage in China, against a backdrop of enhanced regulation by the central
government, to differentiate ourselves from the competition and establish a
leading position in the China cell therapeutic market. We intend to invest and
expand our clinical research capabilities by building drug development and
manufacturing infrastructure in China and in the U.S., expanding our clinical
research platform, hiring new talent and enhancing our existing coverage. We
believe that few competitors in China are as well-equipped as we are in the
areas of clinical trial development, internationally compliant manufacturing,
quality assurance and control, as well as our dedication to regulatory
compliance and process improvement.
The key issues with cell therapy as modality are drug therapeutic index,
institutionalized, scalable manufacturing and an affordable price for the
patients. We believe our manufacturing platform is unique as we utilize a
semiautomatic, fully closed system, which is expected to lead to economies of
scale. Additionally, our focus on being a fully integrated cell therapy company
has enabled us to be one of only a few companies that are able to manufacture
clinical grade viral vectors in China to cater to the increasing global demand
for cell and gene therapies.
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In China, Good Clinical Practice (GCP) only requires institutional review board
approval from the hospital and local NMPA approval for IIT, which is more
expeditious than the traditional IND route. IITs can provide early evidence of
POC for novel drugs which are more time and cost efficient than the traditional
IND approach. IITs are also good ways to identify and develop novel platforms.
Currently, we have our own drug development pipeline in CAR-T, AFP TCR-T, TIL
and KOA. Our R&D team continues to identify additional platform cell therapy
technologies to develop internally or acquire established technologies.
In addition to the manufacturing of Novartis' Kymriah® for patients in China as
contemplated by the Novartis LCA and the Manufacture and Supply Agreement with
Novartis, we are actively developing and evaluating other therapies comprised of
other CAR-T, TCR-T and TIL therapies. We have also advanced our KOA AlloJoin®
Phase-II clinical trial and ReJoin® Phase-II clinical trial with the NMPA.
In addition to our drug development efforts, we are evaluating co-development,
strategic partnerships and both in-licensing and out-licensing opportunities
with high quality, multinational partners. Such partnerships will enable us to
take advantage of the technologies of our partners while leveraging our quality
control and manufacturing infrastructure to further expand our pipelines.
Our proprietary and patent-protected manufacturing processes enable us to
produce, store and distribute ancillary media, viral vectors and cellular
product. Our clinical protocols include medical assessment to qualify each
patient for treatment, evaluation of each patient before and after a specific
therapy, cell infusion methodologies including dosage, frequency and the use of
adjunct therapies, handling potential adverse effects and their proper
management. Applying our proprietary intellectual property, we plan to customize
specialize formulations to address complex diseases and debilitating conditions.
Currently, we have a total of approximately 70,000 square feet of manufacturing
space in three locations, the majority of which is in the new Shanghai facility.
We operate our manufacturing facilities under the design of the standard GMP
conditions as well ISO standards. We employ institutionalized and proprietary
process and quality management system to optimize reproducibility and to hone
our efficiency. Our Shanghai and Wuxi facilities are designed and built to meet
GMP standards. With our integrated Plasmid, Viral Vectors platforms, our T-cells
manufacturing capacities are highly distinguishable from other companies in the
cellular therapy industry. We are currently assessing the feasibility of
expanding manufacturing spaces in new sites in both China and the U.S.
Most importantly, our seasoned cell therapy team members have decades of highly
relevant experience in the U.S., China and the European Union. We believe that
these are the primary factors that make CBMG a high-quality cell products
manufacturer in China. We have been implementing significant human resources
initiatives such as stock incentive programs, graduate school and continuing
education sponsorship and a robust health insurance plan to attract and retain
quality talent to support our rapid growth.
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Our Targeted Indications and Potential Therapies
The chart below illustrates CBMG's pipelines:
[[Image Removed: docaavqjimg56.jpg]]
[[Image Removed: docaavqjimg57.jpg]]
Immuno-oncology (I/o)
Our CAR-T platform is built on lenti-virial vector and second-generation CAR
design, which is used by most of the current trials and studies. We select the
patient population for each asset and indication to allow the optimal path
forward for potential regulatory approval. We integrate the state-of-the-art
translational medicine effort into each clinical study to aid in dose selection,
to investigate the mechanism of action and POC, and to attempt to identify the
optimal targeting patient population. We plan to continue to grow our
translational medicine team and engage key opinion leaders to support our
development efforts.
We have developed several CAR-Ts to treat hematological malignancies including
anti-CD20, anti-CD20-19 bispecific CAR-T, and anti-BCMA CAR-Ts, and we have
initiated clinical studies to evaluate the safety and efficacy of these assets.
We are preparing investigational new drug (IND) gap analysis for our U.S.
pre-IND and IND application for C-CAR039 anti-CD20/CD19 Bi-specific CAR for NHL,
and TIL051 for NSCLC.
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C-CAR039
C-CAR039 is a novel 2nd generation bispecific CAR-T, targeting both CD19 and
CD20. C-CAR039 showed reactivity against both single positive and double
positive tumor in vitro and in vivo, and has the potential to be the
best-in-class of CAR-T cell therapies for B cell NHL as it addresses the CD19
antigen loss by co-targeting CD20. As of October 30, 2020, 18 of the 21 enrolled
patients received single dose C-CAR039 intravenous infusion with a dose range of
1.0 x 106 to 5.0 x 106 CAR-T cells/kg of body weight. Seventeen patients,
including 15 patients with DLBCL, 1 with follicular lymphoma (FL) and 1 with
transformed follicular lymphoma (tFL), are evaluable for safety (evaluated by
CTCAE V5.0), and 16 patients have one month or longer efficacy data utilizing
the 2014 Lugano Classification for the assessment of lymphoma. The median age of
evaluable, infused patients was 60 years (range: 28-71 years). The median number
of lines of prior therapies was 3 (range: 1-5). 11 of the 17 patients were stage
III or IV patients (64.7%). C-CAR039 treatment was well tolerated with no grade
3 or higher cytokine release syndrome (CRS) as evaluated by CTCAE V5.0 and ASTCT
Consensus Grading for Cytokine Release Syndrome and Neurologic Toxicity
Associated with Immune Effector Cells 2018 for safety and The Lugano
Classification 2014 for efficacy, and one grade 1 neurotoxicity event.
Reversible grade 1 or 2 CRS was observed in 15/17 (88.2%) of patients. At the
one-month efficacy evaluation, 15/16 patients showed clinical improvement
(ORR=94%). The best overall response (BOR) includes 14 CR (87.5%, 12 DLBCL, 1 FL
and 1 tFL) and 1 partial response (PR). 12 patients have at least 3-month
follow-up data. The overall survival (OS) at 3 months is 100%. 9/12 (75%)
patients had on going responses beyond 3 months after C-CAR039 treatment. The
median follow-up was 156 days (39-345 days), and the median duration of response
(DOR) has not yet been reached. We also observed tumor regression and positive
correlation between the expansion of C-CAR039 CAR-T cells in the treated
patients' peripheral blood. No Grade 3 or higher CRS was observed. No Grade 2 or
higher neurotoxicity was observed. Cytopenia was mostly related to Cy/Flu
lymphodepletion.
C-CAR088
BCMA is a member of the TNF receptor superfamily, universally expressed in MM
cells. It is not detectable in normal tissues except plasma and mature B cells.
It is a proven, effective and safer target for treating refractory MM patients
in several clinical trials. Our anti-BCMA CAR-T clinical lead (C-CAR088)
exhibits potent anti-tumor activity both in vitro and in vivo. We initiated an
IIT in refractory MM patients in January 2019. As of October 30, 2020, we have
enrolled 28 patients and infused 26 patients. 23 patients had evaluable data for
safety and clinical response. We observed 95.7% ORR in 23 patients. Best
responses included 10 CR, 11 VGPR and 1 PR. No Grade 4 or higher CRS was
observed in 23 patients. No Grade 2 or higher neurotoxicity and DLTs was
observed. Cytopenia was mostly related to Cy/Flu lymphodepletion. The
clinical safety was evaluated by CTCAE 5.0 and clinical efficacy was evaluated
by IMWG 2016. Our abstract for this study has been accepted for an oral
presentation on Saturday, December 5, 2020, 1:15pm at the 62nd American Society
of Hematology (ASH) Annual Meeting and Exposition. We continue to evaluate the
therapeutic index with more patients at 6×106 CAR+ cell/kg (high dose) and the
duration of response.
AFP TCR
We license the AFP-TCR technology from Augusta University. C-TCR055 is CBMG's
proprietary clinical lead of TCR-T which specifically recognizes the HLA-A*02:01
restricted AFP158-166 peptide that is highly expressed in HCC and other solid
tumors. It was selected based on anti-tumor activity and a preclinical safety
profile including on/off-target toxicity and allo-reactivity. We are currently
conducting an IIT to evaluate the safety and clinical efficacy in China.
TIL
CBMG is developing multiple approaches for TIL therapies to treat immunogenic
cancers. In the early stages of cancer, lymphocytes infiltrate into the tumor,
specifically recognizing the tumor targets and mediating anti-tumor response.
These cells are known as TIL. TIL-based therapies have shown encouraging
clinical results in melanoma, cervical cancer, and NSCLC. For example, in
Phase-II clinical studies in patients with metastatic melanoma performed by Dr.
Steven Rosenberg, TIL therapy demonstrated robust efficacy in patients with
metastatic melanoma with objective response rates of 56% and complete response
rates of 24%. We have started our manufacture process development in both the
U.S. and China and plan to sponsor and initiate a TIL trial in late 2021 in the
U.S. to evaluate the safety and clinical efficacy of TIL in stage IIIB and IV
NSCLC patients refractory to anti-PD1 therapy.
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CD20 CAR
CD20 is broadly overexpressed in a series of B-cell malignant tumors. In the
patients that relapsed after CD19 CAR-T treatment, the expression of CD20 on
target tumor cells is relatively stable. It is proven to be an optimal target
for treating CD19 CAR-T relapsing patients. We have developed a novel CD20
CAR-Ts clinical lead asset, which has demonstrated strong anti-tumor activity in
both in vitro assays and in vivo animal studies. Currently the program is in an
IIT to evaluate the safety and clinical benefit in anti-CD19 CAR-T refractory
DLBCL patients in China.
Knee Osteoarthritis (KOA)
We completed the Phase-I/IIa clinical trial for the treatment of KOA. The trial
tested the safety and efficacy of intra-articular injections of autologous
haMPCs in order to reduce inflammation, relieve pain, improve knee function, and
repair damaged joint cartilage. The six-month follow-up clinical data showed
ReJoin® therapy to be both safe and effective.
In the second quarter of 2014, we completed patient enrollment for the Phase-IIb
clinical trial of ReJoin® for KOA. The multi-center study has enrolled 53
patients to participate in a randomized, single blind trial. We published 48
weeks' follow-up data of Phase-I/IIa on December 5, 2014. The 48 weeks' data
indicated that patients have reported a decrease in pain and a significant
improvement in mobility and flexibility, while the clinical data shows our
ReJoin® regenerative medicine treatment to be safe. We announced positive
Phase-IIb 48-week follow-up data in January 2016, with statistically significant
evidence that ReJoin® enhanced cartilage regeneration, which concluded the
planned Phase-IIb trial.
Osteoarthritis is a degenerative disease of the joints. KOA is one of the most
common types of osteoarthritis. Pathological manifestation of osteoarthritis is
primarily local inflammation caused by immune response and subsequent damage of
joints. Restoration of immune response and joint tissues are the objective of
therapies. Conventional treatment usually involves invasive surgery with painful
recovery and physical therapy. As drug-based methods of management are
ineffective, about 18% of the KOA patients ultimately elected for knee
replacement surgery.8
Adult mesenchymal stem cells can currently be isolated from a variety of adult
human sources, such as liver, bone marrow and adipose (fat) tissue. We believe
the advantages in using adipose tissue (as opposed to bone marrow or blood) are
that it is one of the richest sources of multipotent cells in the body, the easy
and repeatable access to fat via liposuction, and the simple cell isolation
procedures that can begin to take place even on-site with minor equipment needs.
The procedure we are testing for autologous KOA involves extracting a very small
amount of fat using a minimally invasive extraction process which takes up to 40
minutes and leaves no scarring. The haMPC cells are then processed and isolated
on site, and injected intraarticularly into the knee joint with ultrasound
guidance. For allogeneic KOA, we use donor haMPC cells.
These haMPC cells are capable of differentiating into bone, cartilage and fat
under the right conditions. As such, haMPCs are an attractive focus for medical
research and clinical development. Importantly, we believe both allogeneic and
autologously sourced haMPCs may be used in the treatment of disease. Numerous
studies have provided preclinical data that support the safety and efficacy of
allogeneic and autologous haMPC, offering a choice for those where factors such
as donor age and health are an issue.
____________
8 Malin Wetterholm, et al. Acta Orthop. 2016 Jun; 87(3): 245-251.
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The haMPCs are currently being considered as a new and effective treatment for
osteoarthritis, with a huge potential market. Osteoarthritis is one of the ten
most disabling diseases in developed countries. The incidence of radiographic
KOA is 42% and 31%, respectively, among women and men over age 60 in North
America, and 43% and 22%, respectively, among women and men over age 60 in Asia.
According to the Global Osteoarthritis Therapeutics Market report 1029-2024
Market, the osteoarthritis therapeutics market is projected to reach $10.1
billion by 2024 from $6.8 billion in 2019, at a CAGR of 8.1%.
In order to bring haMPC-based KOA therapy to market, our market strategy is to:
(a) establish regional laboratories that comply with cGMP standards in Shanghai
and Beijing that meet Chinese regulatory approval; (b) submit to the NMPA an IND
package for Allojoin™ to treat patients with donor haMPC cells; and (c) file
joint applications with Class AAA hospitals to use ReJoin® to treat patients
with their own haMPC cells.
Our competitors are pursuing treatments for osteoarthritis with knee cartilage
implants. However, unlike their approach, our KOA therapy is not surgically
invasive-it uses a small amount (30ml-50ml) of adipose tissue obtained via
liposuction from the patient, which is cultured and re-injected into the
patient. The injections are designed to induce the body's secretion of growth
factors promoting immune response and regulation, and regrowth of cartilage. The
down-regulation of the patient's immune response is aimed at reducing and
controlling inflammation which is a central cause of KOA.
We believe our proprietary method, subsequent haMPC proliferation and processing
know-how will enable haMPC therapy to be a low cost and relatively safe and
effective treatment for KOA. Additionally, banked haMPCs can continue to be
stored for additional use in the future.
Based on current estimates, we expect to generate collaboration payment and
revenues through our sale of Kymriah® products to Novartis within the next two
years. We plan to systematically advance our own cell therapy pipeline and
timely seek BLA opportunities to commercialize our products within the next
three years although we cannot assure you that we will be successful at all or
within the foregoing timeframe.
Acute Respiratory Distress Syndrome (ARDS)
Atomization of allogeneic MSC-Exos for ARDS may alleviate acute lung injury,
repair damaged lung tissue structure, shorten the course of disease and improve
the survival rate and quality of life of patients. Our clinical study aims to
develop treatment for patients with refractory respiratory critical illness,
which is expected to deter and delay the progress of ARDS disease, improve
patient prognosis and improve the survival rates. Our plan is to utilize
atomized inhalation to administer allogeneic human mesenchymal stem cell
exosomes (hMSC-Exos) and to explore its feasibility as a new treatment in
moderate and severe ARDS.
Alzheimer's Disease
Alzheimer's disease, a progressive neurodegenerative illness, is a common form
of dementia. We have initiated a study and hope to determine the responses to
the pathological microenvironment of the brain using allogeneic human
mesenchymal stem cell extracellular vesicles. The main clinical manifestations
of Alzheimer's disease include gradual loss of memory, cognitive dysfunction,
behavioral abnormalities and social dysfunction. The incidence of Alzheimer's
disease increases sharply with age, with prevalence rates ranging from 1 to 5
percent among people over 65 years old to 20 to 40 percent among people over 85
years old. Alzheimer's disease is characterized by high disability, high
fatality rate, long course of disease, and heavy burden of medical treatment and
care. We have begun enrolling patients for our IIT clinical study using human
adipose mesenchymal stem cell extracellular vesicles to treat mild to moderate
Alzheimer's disease.
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Competition
Many companies operate in the cellular biopharmaceutical field. We face
competition based on several factors, including quality and breadth of services,
ability to protect our intellectual property or other confidential information,
timeliness of implementation, maintenance of quality standards, depth of
collaboration partner relationships, price and geography. Currently there are
several approved stem cell therapies on the market including Canada's pediatric
graft-versus-host disease and the European Commission's approval in March 2018
for the treatment of complex perianal fistulas in adult Crohn's disease. There
are several public and private cellular biopharmaceutical-focused companies
outside of China with varying phases of clinical trials addressing a variety of
diseases. We compete with these companies in bringing cellular therapies to the
market. However, our focus is to develop a core business in the China market,
with plans to expand in the U.S. market. This difference in focus places us in a
different competitive environment from other western companies with respect to
fund raising, clinical trials, collaborative partnerships and the markets in
which we compete.
In terms of entry barriers, the cellular biopharmaceutical business generally
requires high, upfront capital and other resources, significant financial and
time commitment in recruiting experienced talents, a successful track record and
solid reputation to build up synergies with business partners and emphasis on
cost efficiency. Our core competitive edge is our strong capacity to cover the
full research and development process of the full life cycle of a product, and
to satisfy the increasing demand for timely realization and localization in
China of key products already approved in foreign markets. We believe that we
are able to maintain our competitiveness by leveraging our established position
in global research and development in the cellular biopharmaceutical market and
capitalizing on the opportunities offered by the booming pharmaceutical market
in China.
To meet the overall social, economic and healthcare challenges in China, the PRC
central government has a focused strategy to enable China to compete effectively
in certain designated areas of biotechnology and the health sciences. Because of
the aging population in China, China's Ministry of Science and Technology (MOST)
has targeted stem cell development as high priority field, and development in
this field has been intense in the agencies under MOST. For example, the 973
Program has funded a number of stem cell research projects such as
differentiation of human embryonic stem cells and the plasticity of adult stem
cells. To the best of our knowledge, none of the companies in China are
utilizing our proposed international manufacturing protocol and our unique
technologies in conducting what we believe will be fully compliant
NMPA-sanctioned clinical trials to commercialize cell therapies in China. Our
management believes that it is difficult for most of these Chinese companies to
turn their results into translational stem cell science or commercially
successful therapeutic products using internationally acceptable standards.
We compete globally with respect to the discovery and development of new
cell-based therapies, and we also compete within China to bring new therapies to
market. In the biopharmaceutical specialty segment, namely in the areas of cell
processing and manufacturing, clinical development of cellular therapies and
cell collection, processing and storage, are characterized by rapidly evolving
technology and intense competition. Our competitors worldwide include
pharmaceutical, biopharmaceutical and biotechnology companies, as well as
numerous academic and research institutions and government agencies engaged in
drug discovery activities or funding, in the U.S., Europe and Asia. Many of
these companies are well-established and possess technical, research and
development, financial and sales and marketing resources significantly greater
than ours. In addition, many of our smaller potential competitors have formed
strategic collaborations, partnerships and other types of joint ventures with
larger, well established industry competitors that afford these companies
potential research and development and commercialization advantages in the
technology and therapeutic areas currently being pursued by us. Academic
institutions, governmental agencies and other public and private research
organizations are also conducting and financing research activities which may
produce products directly competitive to those being commercialized by us.
Moreover, many of these competitors may be able to obtain patent protection,
obtain government (e.g., the U.S. FDA) and other regulatory approvals and begin
commercial sales of their products before us.
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Cancer Immune Cell Therapies
Our primary competitors in the field of cancer immune cell therapies are
comprised of:
o Lung Cancer
§ Merck & Co., Inc., Astra AB Zeneca Group plc, Bristol Meyers Squibb
Company, Genetech, Inc., Innovent Biologics, Inc., BeiGene Co. Ltd,
Jiangsu Henrui Medicine Company Ltd, Shanghai Junshi Biosciences Co.,
Ltd (with approved immunotherapy); and
§ Regeneron Pharmaceuticals, Inc., Iovance Biotherapeutics, Inc.,
Adaptimmune Therapeutics PLC and Cstone Pharmaceuticals Co., Ltd (in
advanced stage of development).
o Liver Cancer
§ Moderna, Inc., Adaptimmune Therapeutics PLC, Oncorus, Inc., Translate
Bio, Inc., Promethera Biosciences SA, Metacrine, Inc., Madrigal
Pharmaceuticals, Inc., Enyo Pharma SA, Aurora Biopharma, Inc, Actavis
Group, Inc., Alnylam Pharmaceuticals, Inc., ArQule, Inc., Bayer
Schering Pharma AG, Bristol-Myers Squibb Company, Celsion Corp, Eli
Lilly & Company, ImClone Systems Inc., F. Hoffmann-La Roche Ltd,
Jennerex Biotherapeutics, Inc., Onyx Pharmaceuticals, Inc., Pfizer
Inc., Progen Pharmaceuticals Ltd, Teva Pharmaceutical Industries Ltd,
Eureka Therapeutics, Inc. and CARsgen Therapeutics Co., Ltd.
o Multiple Myeloma
§ GlaxoSmithKline, Inc., Amgen, Inc., Johnson & Johnson's Legend Biotech
USA Inc., bluebird bio, inc., Bristol-Myers Squibb Company (Celgene
Corporation), Bellicum Pharmaceuticals, Inc., Active Biotech AB,
Oncolytics Biotech, Inc., Karyopharm Therapeutics, Inc., Seattle
Genetics, Inc., Janssen Pharmaceutical Companies, Genmab A/S, Adaptive
Biotechnologies Corporation, AbbVie, Inc., Kite Pharma, a subsidiary of
Gilead Sciences, Inc., CARsgen Therapeutics Co., Ltd and Jiangsu Henrui
Medicine Company Ltd.
o Lymphoma/leukemia
§ There are over 280 Non-Hodgkin lymphoma (NHL) development in various
stages of clinical trials, CAR-T for NHL has 78 clinical trials in
progress.
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The most notable, selected list of key competitors of the Company are:
o Kite Pharma, a subsidiary of Gilead Sciences, Inc. and Novartis
International AG (approved immunotherapy)
o AbbVie Inc., Juno Therapeutics, Inc.(a Bristol Meyers Squibb Company),
Celgene Corporation, Autous Therapeutics PLC, Beam Therapeutics, Fate
Therapeutics, Oxford Biomedica PLC, Nektar Therapeutics, Fosun Kite
Biotechnology Co. Ltd, JW Therapeutics Co. Ltd., and Jiangsu Henrui
Medicine Company Ltd.
While approved CAR-Ts utilize an autologous harvest, many competitors such as
Allogene Therapeutics, Inc., CRISPR Therapeutics AG, Atara Biotherapeutics,
Inc., Precision Biosciences, Inc., Kuur Therapeutics, Celularity, Inc., Ceylad
Oncology, Fate Therapeutics, Inc., Kaedi Biotech Co., Ltd, Pfizer Inc.,
Cellectics, and Servier Laboratories are developing an allogenic or "off-the
-shelf" therapies. CBMG has yet to develop an advanced allogenic approach and
has paused its autologous KOA clinical study in China due to a shortage of
participants caused by coronavirus anxiety in situations involving
non-life-threatening physical ailments.
Services
We also operate contract immune-oncology manufacturing services in China with
Novartis AG as our sole customer to supply Kymriah, to treat NHL patients in
China. We expect Novartis to obtain China regulatory approval to market Kymriah
in China before 2023. We consider contract development and manufacturing
organization (CDMO) such as Lonza Group AG, WuXi Advanced Therapies, Minaris
Regenerative Medicine, a wholly-owned subsidiary of Hitachi Chemical Co., Ltd
and Miltenyi Biotec competitors in the manufacturing service business.
KOA
The osteoarthritis industry is highly competitive and subject to rapid and
significant technological change. The large size and expanding scope of the pain
market makes it an attractive therapeutic area for biopharmaceutical businesses.
Our potential competitors include pharmaceutical, biotechnology, medical device
and specialty pharmaceutical companies. Several of these companies have robust
drug pipelines, readily available capital and established research and
development organizations. We believe our success will be driven by our ability
to develop and commercialize treatment options that make a meaningful difference
for patients with KOA. Our primary competitors in the field of stem cell therapy
for osteoarthritis and other indications include Mesoblast Ltd., Caladrius
Biosciences, Inc. and others. On September 12, 2019, we launched allogenic haMPC
KOA Phase-II of the clinical trial across six leading hospitals in China. We
submitted our autologous adipose stem cell therapy (ReJoin® ) KOA with IND
filing with the CDE and the application was approved by NMPA. We have paused our
autologous KOA clinical study in China due to due to a shortage of participants
caused by coronavirus anxiety in situations involving non-life-threatening
physical ailments.
Additionally, in the general area of cell-based therapies for knee
osteoarthritis ailments, we potentially compete with a variety of companies,
from big pharma to specialty medical products or biotechnology companies. Some
of these companies, such as Abbvie, Merck KGaA, Sanofi, Teva, GlaxosmithKline,
Baxter, Johnson & Johnson, Sanumed, Medtronic and Miltenyi Biotech are
well-established and have substantial technical and financial resources compared
to ours. However, as cell-based products are only just recently emerging as
viable medical therapies, many of our more direct competitors are smaller
biotechnology and specialty medical products companies comprised of Vericel
Corporation, Regeneus Ltd., Advanced Cell Technology, Inc., Nuo Therapeutics,
Inc., ISTO technologies, Inc., Ember Therapeutics, Athersys, Inc., Bioheart,
Inc., Mesoblast, Pluristem, Inc., Medipost Co. Ltd. and others. There are also
several non-cell-based, small molecule and peptide clinical trials targeting
knee osteoarthritis, and several other U.S. FDA-approved treatments for knee
pain.
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Other companies have OA product candidates in advanced stages of clinical
development. These product candidates include:
· Anika Therapeutics, Inc.'s Cingal®, which has been approved as a combination
viscosupplement, is formulated to provide a cross-linked hyaluronic acid
(HA) and a fast acting steroid to effectively treat the symptoms associated
with OA.
· Kolon TissueGene, Inc.'s Invossa™, which is a combination of human
allogeneic chondrocytes and TGF-b1 transfected allogeneic chondrocytes. In
November 2018, Kolon TissueGene announced that it enrolled the first patient
in a pivotal U.S. Phase-III trial. According to clinicaltrials.gov, the
estimated primary completion date for the trial is October 2023.
· Ampio Pharmaceuticals, Inc.'s Ampion™, which is a derivative of human serum
albumin, is described as having anti-inflammatory properties, and is
formulated for immediate-release. Ampio stated that Ampion is in Phase-III
development but has not announced a timeline for submitting a Biologics
License Application (BLA).
· Centrexion Therapeutics Corporation's CNTX-4975, which is a synthetic,
ultra-pure injection of trans-capsaicin. In December 2018, Centrexion
announced completion of patient enrollment in its Phase-III VICTORY-1 trial.
· A number of investigational nerve growth factor antibodies are in
development. Regeneron's fasinumab and Pfizer and Eli Lilly's tanezumab are
both in Phase-III development. Initial results from Phase-III clinical
trials for each were announced in 2018. In January 2019, Pfizer and Lilly
announced results from a second Phase-III study showing that the tanezumab 5
mg treatment arm met all three co-primary endpoints at 24 weeks. However, in
the 2.5 mg treatment arm, patients' overall assessment of their OA was not
statistically different than a placebo. Rapidly progressive OA was seen in
2.1% of tanezumab-treated patients and was not observed in the placebo arm.
· Servier and Galapagos NV's S201086/GLPG1972, an ADAMTS-5 inhibitor, is
currently in Phase-II clinical development.
· Flexion Therapeutics, Inc.'s extended-release corticosteroid was approved in
2017 to manage osteoarthritis knee pain.
· Taiwan Liposome Company's TLC599, which is a liposomal formulation of
dexamethasone sodium phosphate, is currently in Phase-II clinical
development.
Certain CBMG competitors also work with adipose-derived stem cells. To our
knowledge, none of these companies are currently utilizing the same technologies
as ours to treat KOA, nor are we aware of any of these companies conducting
government-approved clinical trials in China.
Some of our targeted disease applications may compete with drugs from
traditional pharmaceutical or Traditional Chinese Medicine companies. We do not
believe that our chosen targeted disease applications are in competition with
the products and therapies offered by traditional pharmaceutical or Traditional
Chinese Medicine companies.
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We believe we have a strategic advantage over our competitors based on our
outstanding quality management system and robust and efficient manufacturing
capability, which we believe is possessed by few, if any, of our competitors in
China, in an industry in which meeting exacting standards and achieving
extremely high purity levels is crucial to success. In addition, in comparison
to the broader range of cellular biopharmaceutical firms, we believe we have the
advantages of cost and expediency, and a first mover advantage with respect to
commercialization of cell therapy products and treatments in the China market.
ARDS
Respiratory diseases, especially ARDS, pose a risk of great harm to human health
and has a high mortality rate. Treatment of such diseases faces new challenges.
Currently, there are few clinical therapeutic studies using mesenchymal stem
cell exosomes. Athersys Inc. received the Regenerative Medicine Advanced Therapy
(RMAT) designation for MultiStem® in ARDS, and is making progress in the MACOVIA
(MultiStem® Administration for COVID-19 Induced ARDS) trial. Mesoblast Limited's
randomized controlled Phase 3 trial of remestemcel-L, on top of maximal care in
ventilator-dependent patients with ARDS due to COVID-19 infection has surpassed
50% enrollment.
Alzheimer's Disease
The FDA has approved the Phase 1/2 trial of Hope Biosciences' autologous,
adipose-derived mesenchymal stem cells (HB-adMSCs) designed for the treatment of
Alzheimer's disease. And there are many clinical trials using stem cells like
those in cord tissue to treat Alzheimer's disease. The main clinical
manifestations of Alzheimer's disease include gradual loss of memory, cognitive
dysfunction, behavioral abnormalities and social dysfunction. The incidence of
Alzheimer's disease increases sharply with age, with prevalence rates ranging
from 1 to 5 percent among people over 65 years old to 20 to 40 percent among
people over 85 years old. Alzheimer's disease is characterized by high
disability, high fatality rate, long course of disease, and heavy burden of
medical treatment and care. We have begun enrolling patients for our IIT
clinical study using human adipose mesenchymal stem cell extracellular vesicles
to treat mild to moderate Alzheimer's disease.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("U.S. GAAP"). The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. On an ongoing basis, our
management evaluates the estimates, including those related to revenue
recognition, accounts receivable, long-lived assets, goodwill and other
intangibles, investments, stock-based compensation, and income taxes. Of the
accounting estimates we routinely make relating to our critical accounting
policies, those estimates made in the process of determining the valuation of
accounts receivable, long-lived assets, and goodwill and other intangibles,
measuring share-based compensation expense, preparing investment valuations, and
establishing income tax valuation allowances and liabilities are the estimates
most likely to have a material impact on our financial position and results of
operations. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances. However, because these estimates inherently involve judgments and
uncertainties, there can be no assurance that actual results will not differ
materially from those estimates.
During the three and nine months ended September 30, 2020, we believe that there
have been no significant changes to the items that we disclosed as our critical
accounting policies and estimates in the "Critical Accounting Policies and
Estimates" section of Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2019.
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Results of Operations
Below is a discussion of the results of our operations for the three and nine
months ended September 30, 2020 and 2019. These results are not necessarily
indicative of result that may be expected in any future period. Our prospects
should be considered in light of the risks, expenses and difficulties that we
may encounter. We may not be successful in addressing these risks and
difficulties.
Comparison of Three Months Ended September 30, 2020 to Three Months Ended
September 30, 2019
The descriptions in the results of operations below reflect our operating
results as set forth in our Condensed Consolidated Statement of Operations filed
herewith.
Three Months Three Months
Ended Ended
September 30, September 30,
2020 2019
Net sales and revenue $ 32,295 $ -
Operating expenses:
Cost of sales 7,618 -
General and administrative 5,100,189 3,326,630
Selling and marketing - 38,267
Research and development 12,611,853 13,126,699
Total operating expenses 17,719,660 16,491,596
Operating loss (17,687,365 ) (16,491,596 )
Other income
Interest income, net 2,774 352,935
Other income, net 646,587 274,430
Total other income 649,361 627,365
Loss before taxes (17,038,004 ) (15,864,231 )
Income taxes credit - 325
Net loss $ (17,038,004 ) $ (15,863,906 )
Other comprehensive income (loss):
Cumulative translation adjustment 894,793 (303,821 )
Total other comprehensive income (loss): 894,793 (303,821 )
Comprehensive loss $ (16,143,211 ) $ (16,167,727 )
Net loss per share:
Basic and diluted $ (0.88 ) $ (0.82 )
Weighted average common shares outstanding:
Basic and diluted 19,433,988 19,256,129
__________
* These line items include the following amounts of non-cash, stock-based
compensation expense for the periods indicated:
Three Months Three Months
Ended Ended
September 30, September 30,
2020 2019
General and administrative 408,376 435,123
Selling and marketing - 6,457
Research and development 482,634 554,295
891,010 995,875
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Results of Operations
Net sales and revenue
2020 2019 Change Percent
For the three months ended September 30, $ 32,295 $ - $ 32,295 N/A
We are a clinical stage company, and currently have no material revenues with
similar effect.
Cost of Sales
2020 2019 Change Percent
For the three months ended September 30, $ 7,618 $ - $ 7,618 N/A
The gross margin change was immaterial as currently we have no material
revenues.
General and Administrative Expenses
2020 2019 Change Percent
For the three months ended
September 30, $ 5,100,189 $ 3,326,630 $ 1,773,559 53 %
The increase in general and administrative expenses in 2020 primarily relates to
financial advisor consulting fees in connection with the Merger.
Selling and Marketing Expenses
2020 2019 Change Percent
For the three months ended September 30, $ - $ 38,267 $ (38,267 ) (100 )%
We did not have a sales force in 2020 and therefore, no expense has been
incurred in 2020.
Research and Development Expenses
2020 2019 Change Percent
For the three months ended
September 30, $ 12,611,853 $ 13,126,699 $ (514,846 ) (4 )%
Research and development costs decreased by approximately $515,000 in the three
months ended September 30, 2020 as compared to the three months ended September
30, 2019, primarily as a result of a one-time expense incurred in the third
quarter of 2019 in connection with a research collaboration with Duke
University, which was not incurred in the third quarter of 2020, partially
offset by the increased spending in the growth of our pipeline in both liquid
tumor and solid tumor development and expanding the U.S. R&D operations at
Maryland.
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R&D expenses for the three months ended September 30, 2020 and 2019 are as
follows:
For the Three Months Ended
September 30,
2020 2019
Research and pre-clinical studies $ 1,578,685 $ 5,447,378
Development, clinical development and studies 11,033,168 7,679,321
Total $ 12,611,853 $ 13,126,699
Operating Loss
2020 2019 Change Percent
For the three months ended
September 30, $ (17,687,365 ) $ (16,491,596 ) $ (1,195,769 ) 7 %
The increase in the operating loss for the three months ended September 30, 2020
as compared to the same period in 2019 is primarily due to changes in general
and administrative expenses, which is described above.
Total Other Income
2020 2019 Change Percent
For the three months ended September 30, $ 649,361 $ 627,365 $ 21,996 4 %
Other expense for the three months ended September 30, 2020 was primarily
subsidy income of $1,144,000, offset by interest expense of $447,000. Other
income for the three months ended September 30, 2019 was primarily government
subsidy of $577,237, interest income of $352,935, as partially offset by
interest expense of $162,279.
Income Taxes Credit
2020 2019 Change Percent
For the three months ended September 30, $ - $ 325 $ (325 ) (100 )%
While we have optimistic plans for our business strategy, we determined that a
valuation allowance was necessary given the current and expected near term
losses and the uncertainty with respect to our ability to generate sufficient
profits from our business model. Therefore, we established a valuation allowance
for deferred tax assets other than the extent of the benefit from other
comprehensive income. Income tax expense for the three months ended September
30, 2019 all represent US state tax.
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Net Loss
2020 2019 Change Percent
For the three months ended
September 30, $ (17,038,004 ) $ (15,863,906 ) $ (1,174,098 ) 7 %
The increase in net loss for the three months ended September 30, 2020 as
compared to the same period in 2019 is primarily attributable to changes in
operations which are described above.
Comprehensive Loss
2020 2019 Change Percent
For the three months ended
September 30, $ (16,143,211 ) $ (16,167,727 ) $ 24,516 0 %
Comprehensive loss for the three months ended September 30, 2020 and 2019
includes a currency translation net gain (loss) of approximately $895,000 and
($304,000) combined with the changes in net loss, respectively.
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Comparison of Nine Months Ended September 30, 2020 to Nine Months Ended
September 30, 2019
The descriptions in the results of operations below reflect our operating
results as set forth in our Condensed Consolidated Statement of Operations filed
herewith.
Nine Months Nine Months
Ended Ended
September 30, September 30,
2020 2019
Net sales and revenue $ 32,295 $ 49,265
Operating expenses:
Cost of sales 7,618 8,087
General and administrative 11,812,062 9,955,073
Selling and marketing - 121,779
Research and development 30,457,415 28,157,321
Impairment of non-current assets 240,000 -
Total operating expenses 42,517,095 38,242,260
Operating loss (42,484,800 ) (38,192,995 )
Other income
Interest income, net 38,343 631,986
Other income, net 330,642 267,043
Total other income 368,985 899,029
Loss before taxes (42,115,815 ) (37,293,966 )
Income taxes provision (1,775 ) (3,425 )
Net loss $ (42,117,590 ) $ (37,297,391 )
Other comprehensive income (loss):
Cumulative translation adjustment 501,965 (303,220 )
Total other comprehensive income (loss): 501,965 (303,220 )
Comprehensive loss $ (41,615,625 ) $ (37,600,611 )
Net loss per share:
Basic and diluted $ (2.17 ) $ (1.98 )
Weighted average common shares outstanding:
Basic and diluted 19,390,235 18,881,266
__________
* These line items include the following amounts of non-cash, stock-based
compensation expense for the periods indicated:
Nine Months Nine Months
Ended Ended
September 30, September 30,
2020 2019
General and administrative 1,330,314 1,461,868
Selling and marketing - 23,980
Research and development 1,365,536 1,623,562
2,695,850 3,109,410
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Results of Operations
Net sales and revenue
2020 2019 Change Percent
For the nine months ended September 30, $ 32,295 $ 49,265 $ (16,970 ) (34 )%
We are a clinical stage company, and currently have no material revenues or
other income with similar effect.
Cost of Sales
2020 2019 Change Percent
For the nine months ended September 30, $ 7,618 $ 8,087 $ (469 ) (6 )%
The change in gross margin was immaterial as currently we have no material
revenues.
General and Administrative Expenses
2020 2019 Change Percent
For the nine months ended
September 30, $ 11,812,062 $ 9,955,073 $ 1,856,989 19 %
The increase in general and administrative expenses in 2020 primarily relates to
financial advisor consulting fees in connection with the Merger.
Selling and Marketing Expenses
2020 2019 Change Percent
For the nine months ended September 30, $ - $ 121,779 $ (121,779 ) (100 )%
We did not have a sales force in 2020 and therefore, no expense has been
incurred in 2020.
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Research and Development Expenses
2020 2019 Change Percent
For the nine months ended
September 30, $ 30,457,415 $ 28,157,321 $ 2,300,094 8 %
Research and development costs increased by approximately $2,300,000 in the nine
months ended September 30, 2020 as compared to the nine months ended September
30, 2019, primarily as a result of the increase in the staff costs of
$1,704,000, clinical trial expenses of $2,316,000, depreciation and amortization
of $810,000 and raw material consumption of $672,000, as well as the increased
spending in the growth of our pipeline in both liquid tumor and solid tumor
development and expanding the U.S. R&D operations at Maryland, partially offset
by a one-time expense incurred in the third quarter of 2019 in connection with a
research collaboration with Duke University, which was not incurred in the third
quarter of 2020.
R&D expenses for the nine months ended September 30, 2020 and 2019 are as
follows:
For the Nine Months Ended
September 30,
2020 2019
Research and pre-clinical studies $ 5,304,907 $ 8,452,005
Development, clinical development and studies 25,152,508 19,705,316
Total $ 30,457,415 $ 28,157,321
Impairment of Investments
2020 2019 Change Percent
For the nine months ended September 30, $ 240,000 $ - $ 240,000 N/A
The impairment of investments for the nine months ended September 30, 2020
resulted from the recognition of other-than-temporary impairment on the value of
shares in investments of $240,000. No such expense existed for the period ended
September 30, 2019. In 2020, the Company contacted certain brokers to handle our
ARPC restricted legend removal from the stock certificates to convert to
free-trade shares. Because of ARPC's non-filing status and illiquid nature of
the stock, the brokers' compliance department summarily rejected our request. In
light of the illiquid nature of the ARPC stock, we applied full impairment to
our ARPC holdings in the first quarter of 2020.
Operating Loss
2020 2019 Change Percent
For the nine months ended
September 30, $ (42,484,800 ) $ (38,192,995 ) $ (4,291,805 ) 11 %
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The increase in the operating loss for the nine months ended September 30, 2020
as compared to the same period in 2019 is primarily due to changes in general
and administrative expenses and research and development expenses, which is
described above.
Total Other Income
2020 2019 Change Percent
For the nine months ended September
30, $ 368,985 $ 899,029 $ (530,044 ) (59 )%
Other expense for the nine months ended September 30, 2020 was primarily subsidy
income of $1,306,000 offset by net interest expense of $879,000 and foreign
currency exchange loss of $97,000. Other income for the nine months ended
September 30, 2019 was primarily net interest income of $632,000 and subsidy
income of $590,000 offset by the net interest expense of $321,000.
Income Taxes Provision
2020 2019 Change Percent
For the nine months ended September 30, $ (1,775 ) $ (3,425 ) $ 1,650 (48 )%
While we have optimistic plans for our business strategy, we determined that a
valuation allowance was necessary given the current and expected near term
losses and the uncertainty with respect to our ability to generate sufficient
profits from our business model. Therefore, we established a valuation allowance
for deferred tax assets other than the extent of the benefit from other
comprehensive income. Income tax expense for the nine months ended September 30,
2020 and 2019 all represent US state tax.
Net Loss
2020 2019 Change Percent
For the nine months ended
September 30, $ (42,117,590 ) $ (37,297,391 ) $ (4,820,199 ) 13 %
The increase in net loss for the nine months ended September 30, 2020 as
compared to the same period in 2019 is primarily attributable to changes in
operations which are described above.
Comprehensive Loss
2020 2019 Change Percent
For the nine months ended
September 30, $ (41,615,625 ) $ (37,600,611 ) $ (4,015,014 ) 11 %
Comprehensive loss for the nine months ended September 30, 2020 and 2019
includes a currency translation net gain (loss) of approximately $502,000 and
($303,000) combined with the changes in net loss, respectively.
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Liquidity and Capital Resources
We had negative working capital of ($31,425,938) as of September 30, 2020
compared to $10,356,774 as of December 31, 2019. Our cash, cash equivalents and
restricted cash decreased to $26,028,897 at September 30, 2020 compared to
$32,443,649 at December 31, 2019, as we had an increase in cash used in
operating partially offset by cash inflow generated from proceeds from debt
borrowing and option exercise.
Net cash provided by or used in operating, investing and financing activities
from continuing operations was as follows:
Net cash used in operating activities was approximately $33,170,000 and
$28,361,000 for the nine months ended September 30, 2020 and 2019, respectively.
The following table reconciles net loss to net cash used in operating
activities:
For the nine months ended September
30, 2020 2019 Change
Net loss $ (42,117,590 ) $ (37,297,391 ) $ (4,820,199 )
Non cash transactions 7,786,349 7,240,675 545,674
Changes in operating assets, net 1,160,947 1,695,317 (534,370 )
Net cash used in operating activities $ (33,170,294 ) $ (28,361,399 ) $ (4,808,895 )
The change in non-cash transaction was primarily due to the increase in
depreciation and amortization of $751,000 compared with same period in 2019.
Net cash used in investing activities was approximately $7,233,000 and
$9,278,000 in the nine months ended September 30, 2020 and 2019, respectively.
The decrease was primarily the result of less new equipment purchase and
facility improvement.
Cash provided by financing activities was approximately $34,062,000 and
$30,869,000 in the nine months ended September 30, 2020 and 2019, respectively.
Net cash inflow in financing activities in 2020 was mainly attributed to the net
cash in from short-term debt. Net cash inflow in financing activities in 2019
was mainly attributed to the proceeds of $17 million received from the issuance
of common stock and debt borrowings of $15 million netting of the repurchase of
the Company's common stock of $1 million.
Liquidity and Capital Requirements Outlook
We anticipate that the Company will require approximately $63 million in cash to
operate as planned in the coming 12 months excluding repayment of convertible
bonds and other borrowings. Of this amount, approximately $53 million will be
used for operations and approximately $10 million will be used for capital
expenditures, although we may revise these plans depending on the changing
circumstances of our biopharmaceutical business. The Company's plans can also be
adjusted by management depending on the availability of funding.
The Company has suffered recurring losses from operations and has a net capital
deficiency that raises substantial doubt about its ability to continue as a
going concern. In order to finance our operations, management intends to rely
upon external financing. This financing may be in the form of equity and or
debt, private placements and/or public offerings or arrangements with private
lenders.
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We may also pursue co-development of our clinical assets to defray operating
expenses. We may further explore non-dilutive financing opportunities forging
strategic partnerships with big pharma companies. As we continue to incur
losses, achieving profitability is dependent upon the successful development of
our cell therapy business and commercialization of our technology in the
research and development phase, which is a number of years in the future. Once
that occurs, we will have to achieve a level of revenues adequate to support our
cost structure. We may never achieve profitability, and unless and until we do,
we will continue to need to raise additional capital. Management intends to fund
future operations through additional private or public debt or equity offerings,
and may seek additional capital through arrangements with strategic partners or
from other sources.
On October 23, 2020, the Company entered into a Bridge Loan Agreement with TF I
Ltd. for an unsecured loan to the Company in an aggregate principal amount of
$10 million at a simple interest rate of 6% per annum. The Company is required
to repay all unpaid principal of the TF Bridge Loan, together with the accrued
but unpaid interest thereon, on the maturity date, which is the earlier of (i)
August 7, 2021, and (ii) the occurrence of an event of default.
On October 23, 2020, the Company entered into a Bridge Loan Agreement with
Yunfeng Capital Limited for an unsecured loan to the Company in an aggregate
principal amount of $10 million at a simple interest rate of 6% per annum. The
Company is required to repay all unpaid principal of the Yunfeng Bridge Loan 2,
together with the accrued but unpaid interest thereon, on the maturity date,
which is the earlier of (i) August 7, 2021, and (ii) the occurrence of an event
of default.
Our medium-to-long-term capital needs involve the further development of our
biopharmaceutical business, and may include, at management's discretion, new
clinical trials for other indications, strategic partnerships, joint ventures,
acquisitions of licensing rights from new or current partners and/or expansion
of our research and development programs. Furthermore, as our therapies pass
through the clinical trial process and if they gain regulatory approval, we
expect to expend significant resources on sales and marketing of our future
products, services and therapies.
In order to finance our medium to long-term plans, we intend to rely upon
external financing. This financing may be in the form of equity and or debt, in
private placements and/or public offerings or arrangements with private lenders.
Due to our short operating history and our early stage of development,
particularly in our biopharmaceutical business, we may find it challenging to
raise capital on terms that are acceptable to us, or at all. Furthermore, our
negotiating position in the capital raising process may worsen as we consume our
existing resources. Investor interest in a company such as ours is dependent on
a wide array of factors, including the state of regulation of our industry in
China (e.g. the policies of MOH and the NMPA), the U.S. and other countries,
political headwinds affecting our industry, the investment climate for issuers
involved in businesses located or conducted within China, the risks associated
with our corporate structure, risks relating to our partners, licensed
intellectual property, as well as the condition of the global economy and
financial markets in general. Additional equity financing may be dilutive to our
stockholders; debt financing, if available, may involve significant cash payment
obligations and covenants that restrict our ability to operate as a business;
our stock price may not reach levels necessary to induce option or warrant
exercises; and asset sales may not be possible on terms we consider acceptable.
If we are unable to raise the capital necessary to meet our medium- and
long-term liquidity needs, we may have to delay or discontinue certain clinical
trials, the licensing, acquisition and/or development of cell therapy
technologies and/or the expansion of our biopharmaceutical business; or we may
have to raise funds on terms that we consider unfavorable. While we do not
currently expect the COVID-19 pandemic to materially impact our ability to
secure financial resources or satisfy our liquidity needs, given the rapidly
evolving global situation the actual impact cannot be predicted and may depend
on a variety of currently unknown factors.
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Off Balance Sheet Transactions
CBMG does not have any off-balance sheet arrangements except the lease and
capital commitment disclosed in the unaudited condensed consolidated financial
statements.
Contractual Obligations
We have various contractual obligations that will affect our liquidity. The
following table sets forth our contractual obligations as of September 30, 2020.
Payments due by period
Contractual
Obligations Less than 2-3 4-5 More than
Total 1 year years years 5 years
Borrowings and
interest payables $ 48,648,777 $ 48,648,777 $ - $ - $ -
Capital commitment 2,919,662 2,919,662
- - -
Operating lease
obligations 22,897,109 3,429,296 6,582,285 6,257,347 6,628,181
Total $ 74,465,548 $ 54,997,735 $ 6,582,285 $ 6,257,347 $ 6,628,181
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