|
Michigan
|
|
94-3096597
|
(State or other jurisdiction of
|
|
(I.R.S. employer
|
incorporation or organization)
|
|
identification no.)
|
|
|
|
64 Sidney Street
|
||
Cambridge, MA 02139
|
||
(Address of principal executive offices, including zip code)
|
Large accelerated filer -
o
|
|
Accelerated filer -
x
|
|
|
|
Non-accelerated filer -
o
|
|
Smaller reporting company -
o
|
(Do not check if a smaller reporting company)
|
|
|
COMMON STOCK, NO PAR VALUE
|
|
23,995,116
|
(Class)
|
|
Outstanding at August 5, 2016
|
|
|
|
|
|
|
PART I — FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
PART II — OTHER INFORMATION
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 6.
|
||
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
||||
|
|
2016
|
|
2015
|
||||
ASSETS
|
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
|
||
Cash
|
|
$
|
9,835
|
|
|
$
|
14,581
|
|
Accounts receivable (net of allowance for doubtful accounts of $54 and $68, respectively)
|
|
9,031
|
|
|
10,919
|
|
||
Inventory
|
|
2,393
|
|
|
1,379
|
|
||
Other current assets
|
|
1,046
|
|
|
464
|
|
||
Total current assets
|
|
22,305
|
|
|
27,343
|
|
||
Property and equipment, net
|
|
4,351
|
|
|
4,049
|
|
||
Intangible assets, net
|
|
2,778
|
|
|
2,917
|
|
||
Total assets
|
|
$
|
29,434
|
|
|
$
|
34,309
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
5,305
|
|
|
$
|
7,588
|
|
Accrued expenses
|
|
2,892
|
|
|
3,603
|
|
||
Revolving credit agreement, net of deferred costs of $96
|
|
2,304
|
|
|
—
|
|
||
Warrant liabilities
|
|
455
|
|
|
757
|
|
||
Short-term deferred rent
|
|
460
|
|
|
118
|
|
||
Other
|
|
39
|
|
|
42
|
|
||
Total current liabilities
|
|
11,455
|
|
|
12,108
|
|
||
|
|
|
|
|
||||
Long-term deferred rent
|
|
820
|
|
|
—
|
|
||
Long term debt
|
|
52
|
|
|
71
|
|
||
Total liabilities
|
|
12,327
|
|
|
12,179
|
|
||
COMMITMENTS AND CONTINGENCIES (Note 13)
|
|
|
|
|
|
|
||
Shareholders’ equity:
|
|
|
|
|
|
|
||
Series A non-voting convertible preferred stock, no par value: shares authorized and reserved — 1; shares issued and outstanding — 1
|
|
3,150
|
|
|
3,150
|
|
||
Series B-2 voting convertible preferred stock, no par value: shares authorized and reserved — 39, shares issued and outstanding — 12
|
|
38,389
|
|
|
38,389
|
|
||
Common stock, no par value; shares authorized — 75,000; shares issued and outstanding — 22,684 and 23,789, respectively
|
|
309,437
|
|
|
307,766
|
|
||
Treasury stock — 1,250 shares
|
|
(3,150
|
)
|
|
(3,150
|
)
|
||
Accumulated deficit
|
|
(330,719
|
)
|
|
(324,025
|
)
|
||
Total shareholders’ equity
|
|
17,107
|
|
|
22,130
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
29,434
|
|
|
$
|
34,309
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||
Product sales
|
|
$
|
12,823
|
|
|
$
|
13,590
|
|
|
$
|
26,931
|
|
|
$
|
24,439
|
|
Total revenues
|
|
12,823
|
|
|
13,590
|
|
|
26,931
|
|
|
24,439
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product sales
|
|
7,300
|
|
|
6,901
|
|
|
13,860
|
|
|
12,469
|
|
||||
Gross profit
|
|
5,523
|
|
|
6,689
|
|
|
13,071
|
|
|
11,970
|
|
||||
Research and development
|
|
4,058
|
|
|
3,369
|
|
|
7,594
|
|
|
7,746
|
|
||||
Selling, general and administrative
|
|
6,449
|
|
|
5,585
|
|
|
12,453
|
|
|
11,061
|
|
||||
Total operating expenses
|
|
10,507
|
|
|
8,954
|
|
|
20,047
|
|
|
18,807
|
|
||||
Loss from operations
|
|
(4,984
|
)
|
|
(2,265
|
)
|
|
(6,976
|
)
|
|
(6,837
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
0
|
|
|
|
|
||||
Decrease (increase) in fair value of warrants
|
|
1,942
|
|
|
112
|
|
|
302
|
|
|
(205
|
)
|
||||
Foreign currency translation (loss) gain
|
|
(1
|
)
|
|
(6
|
)
|
|
(11
|
)
|
|
10
|
|
||||
Interest income
|
|
2
|
|
|
9
|
|
|
7
|
|
|
22
|
|
||||
Interest expense
|
|
(3
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
(4
|
)
|
||||
Other expense
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
||||
Total other income (expense)
|
|
1,940
|
|
|
113
|
|
|
282
|
|
|
(177
|
)
|
||||
Net loss
|
|
$
|
(3,044
|
)
|
|
$
|
(2,152
|
)
|
|
$
|
(6,694
|
)
|
|
$
|
(7,014
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Net loss per share attributable to common shareholders (Basic and Diluted) (see note 11)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.46
|
)
|
|
$
|
(0.43
|
)
|
Weighted average number of common shares outstanding (Basic and Diluted)
|
|
22,684
|
|
|
23,786
|
|
|
22,644
|
|
|
23,786
|
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Operating activities:
|
|
|
|
|
|
|
||
Net loss
|
|
$
|
(6,694
|
)
|
|
$
|
(7,014
|
)
|
Adjustments to reconcile net loss to net cash used for operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
923
|
|
|
672
|
|
||
Stock compensation expense
|
|
1,319
|
|
|
1,614
|
|
||
Change in fair value of warrants
|
|
(302
|
)
|
|
205
|
|
||
Inventory provision
|
|
86
|
|
|
—
|
|
||
Deferred rent expense
|
|
260
|
|
|
—
|
|
||
Tenant improvement reimbursement
|
|
607
|
|
|
—
|
|
||
Foreign currency translation loss
|
|
11
|
|
|
10
|
|
||
Gain on sales of fixed assets
|
|
—
|
|
|
(35
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||
Inventory
|
|
(1,099
|
)
|
|
(157
|
)
|
||
Accounts receivable
|
|
1,888
|
|
|
(789
|
)
|
||
Other current assets
|
|
(385
|
)
|
|
(1,235
|
)
|
||
Accounts payable
|
|
(2,305
|
)
|
|
(412
|
)
|
||
Accrued expenses
|
|
(711
|
)
|
|
(1,458
|
)
|
||
Other non-current assets and liabilities, net
|
|
—
|
|
|
8
|
|
||
Net cash used for operating activities
|
|
(6,402
|
)
|
|
(8,591
|
)
|
||
Investing activities:
|
|
|
|
|
|
|
||
Expenditures for property, plant and equipment
|
|
(1,074
|
)
|
|
(1,555
|
)
|
||
Other
|
|
93
|
|
|
35
|
|
||
Net cash used in investing activities
|
|
(981
|
)
|
|
(1,520
|
)
|
||
Financing activities:
|
|
|
|
|
|
|
||
Net proceeds from issuance of common stock
|
|
352
|
|
|
3
|
|
||
Borrowings under revolving credit agreement
|
|
2,400
|
|
|
—
|
|
||
Deferred financing costs
|
|
(96
|
)
|
|
—
|
|
||
Payments on long-term debt
|
|
(19
|
)
|
|
(17
|
)
|
||
Net cash provided by (used in) financing activities
|
|
2,637
|
|
|
(14
|
)
|
||
Net decrease in cash
|
|
(4,746
|
)
|
|
(10,125
|
)
|
||
Cash at beginning of period
|
|
14,581
|
|
|
30,343
|
|
||
Cash at end of period
|
|
$
|
9,835
|
|
|
$
|
20,218
|
|
|
|
|
|
|
||||
Supplemental cash flow information (non-cash):
|
|
|
|
|
|
|
||
Additions to equipment in process included in accounts payable
|
|
$
|
11
|
|
|
$
|
700
|
|
1.
|
Organization
|
2.
|
Basis of Presentation
|
3.
|
Recent Accounting Pronouncements
|
4.
|
Selected Balance Sheet Components
|
(In thousands)
|
June 30, 2016
|
|
December 31, 2015
|
||||
Raw materials
|
$
|
2,089
|
|
|
$
|
1,228
|
|
Work-in-process
|
276
|
|
|
131
|
|
||
Finished goods
|
28
|
|
|
20
|
|
||
Inventory
|
$
|
2,393
|
|
|
$
|
1,379
|
|
(In thousands)
|
June 30, 2016
|
|
December 31, 2015
|
||||
Machinery and equipment
|
$
|
3,200
|
|
|
$
|
3,280
|
|
Furniture, fixtures and office equipment
|
931
|
|
|
931
|
|
||
Computer equipment and software
|
2,662
|
|
|
2,662
|
|
||
Leasehold improvements
|
3,291
|
|
|
2,393
|
|
||
Construction in process
|
593
|
|
|
421
|
|
||
Total property and equipment, gross
|
10,677
|
|
|
9,687
|
|
||
Less: Accumulated depreciation
|
(6,326
|
)
|
|
(5,638
|
)
|
||
|
$
|
4,351
|
|
|
$
|
4,049
|
|
(In thousands)
|
June 30, 2016
|
|
December 31, 2015
|
||||
Commercial rights
|
$
|
3,360
|
|
|
$
|
3,360
|
|
Less: accumulated amortization
|
$
|
(582
|
)
|
|
$
|
(443
|
)
|
|
$
|
2,778
|
|
|
$
|
2,917
|
|
Calendar Years Ending December 31, (In thousands)
|
|
||
2016
|
$
|
141
|
|
2017
|
280
|
|
|
2018
|
280
|
|
|
2019
|
280
|
|
|
2020
|
280
|
|
|
Thereafter
|
1,517
|
|
|
Total
|
$
|
2,778
|
|
(In thousands)
|
June 30, 2016
|
|
December 31, 2015
|
||||
Bonus related compensation
|
$
|
1,325
|
|
|
$
|
1,956
|
|
Employee related accruals
|
1,485
|
|
|
1,341
|
|
||
Accrued expenses
|
82
|
|
|
306
|
|
||
|
$
|
2,892
|
|
|
$
|
3,603
|
|
5.
|
Stock Purchase Warrants
|
|
|
August 2013
Warrants |
Exercise price
|
|
$4.80
|
Expiration date
|
|
August 16, 2018
|
Total shares issuable on exercise
|
|
724,950
|
August 2013 Warrants
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Closing stock price
|
|
$
|
2.25
|
|
|
$
|
2.58
|
|
Expected dividend rate
|
|
—
|
%
|
|
—
|
%
|
||
Expected stock price volatility
|
|
85.9
|
%
|
|
91.4
|
%
|
||
Risk-free interest rate
|
|
0.6
|
%
|
|
1.3
|
%
|
||
Expected life (years)
|
|
2.13
|
|
|
2.63
|
|
6.
|
Debt
|
7.
|
Stock-based Compensation
|
|
|
Six Months Ended June 30,
|
||||
Service-Based Stock Options
|
|
2016
|
|
2015
|
||
Expected dividend rate
|
|
—
|
%
|
|
—
|
%
|
Expected stock price volatility
|
|
78.7 – 92.2%
|
|
|
78.8 – 88.1%
|
|
Risk-free interest rate
|
|
1.2 – 1.8%
|
|
|
1.5 – 2.0%
|
|
Expected life (years)
|
|
5.5 – 6.3
|
|
|
5.5 – 6.3
|
|
Service-Based Stock Options
|
|
Options
|
|
Weighted
Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Term
(Years)
|
|
Aggregate
Intrinsic Value
|
|||||
Outstanding at December 31, 2015
|
|
2,523,400
|
|
|
$
|
6.36
|
|
|
8.7
|
|
$
|
5,000
|
|
Granted
|
|
1,072,230
|
|
|
$
|
3.03
|
|
|
|
|
|
|
|
Exercised
|
|
39,231
|
|
|
$
|
3.06
|
|
|
|
|
$
|
76,827
|
|
Expired
|
|
72,375
|
|
|
$
|
37.79
|
|
|
|
|
|
|
|
Forfeited
|
|
113,686
|
|
|
$
|
3.81
|
|
|
|
|
|
|
|
Outstanding at June 30, 2016
|
|
3,370,338
|
|
|
$
|
4.75
|
|
|
7.8
|
|
$
|
150,224
|
|
Exercisable at June 30, 2016
|
|
900,364
|
|
|
$
|
8.93
|
|
|
8.6
|
|
$
|
8,439
|
|
8.
|
Fair Value Measurements
|
•
|
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
•
|
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
|
•
|
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||||||||
|
|
|
|
Fair value measurement category
|
|
|
|
Fair value measurement category
|
||||||||||||||||||||||||
(In thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Warrant liabilities
|
|
$
|
455
|
|
|
$
|
—
|
|
|
$
|
455
|
|
|
$
|
—
|
|
|
$
|
757
|
|
|
$
|
—
|
|
|
$
|
757
|
|
|
$
|
—
|
|
9.
|
Shareholders' Equity
|
10.
|
Preferred Stock
|
11.
|
Net Loss Per Common Share
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(Amounts In thousands except per share amounts)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss
|
|
$
|
(3,044
|
)
|
|
$
|
(2,152
|
)
|
|
$
|
(6,694
|
)
|
|
$
|
(7,014
|
)
|
Dividends accumulated on convertible preferred stock
|
|
(1,856
|
)
|
|
(1,654
|
)
|
|
(3,660
|
)
|
|
(3,244
|
)
|
||||
Net loss attributable to common shareholders
|
|
$
|
(4,900
|
)
|
|
$
|
(3,806
|
)
|
|
$
|
(10,354
|
)
|
|
$
|
(10,258
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator for basic and diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding
|
|
22,684
|
|
|
23,786
|
|
|
22,644
|
|
|
23,786
|
|
||||
Net loss per share attributable to common shareholders (basic and diluted)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.46
|
)
|
|
$
|
(0.43
|
)
|
(In thousands)
|
|
Total
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
More than 5 Years
|
||||||||||||||
Operating leases
|
|
$
|
25,538
|
|
|
$
|
2,123
|
|
|
$
|
4,897
|
|
|
$
|
4,590
|
|
|
$
|
4,267
|
|
|
$
|
4,386
|
|
|
$
|
5,275
|
|
Purchase commitments
|
|
450
|
|
|
450
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Capital leases
|
|
97
|
|
|
22
|
|
|
43
|
|
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Total
|
|
$
|
26,085
|
|
|
$
|
2,595
|
|
|
$
|
4,940
|
|
|
$
|
4,622
|
|
|
$
|
4,267
|
|
|
$
|
4,386
|
|
|
$
|
5,275
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Total revenues
|
|
$
|
12,823
|
|
|
$
|
13,590
|
|
|
$
|
26,931
|
|
|
$
|
24,439
|
|
Cost of product sales
|
|
7,300
|
|
|
6,901
|
|
|
13,860
|
|
|
12,469
|
|
||||
Gross profit
|
|
5,523
|
|
|
6,689
|
|
|
13,071
|
|
|
11,970
|
|
||||
Total operating expenses
|
|
10,507
|
|
|
8,954
|
|
|
20,047
|
|
|
18,807
|
|
||||
Loss from operations
|
|
(4,984
|
)
|
|
(2,265
|
)
|
|
(6,976
|
)
|
|
(6,837
|
)
|
||||
Other expense
|
|
1,940
|
|
|
113
|
|
|
282
|
|
|
(177
|
)
|
||||
Net loss
|
|
$
|
(3,044
|
)
|
|
$
|
(2,152
|
)
|
|
$
|
(6,694
|
)
|
|
$
|
(7,014
|
)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
Revenue by product (in thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Carticel
|
|
$
|
8,987
|
|
|
$
|
9,063
|
|
|
$
|
17,798
|
|
|
$
|
16,181
|
|
Epicel
|
|
3,836
|
|
|
4,274
|
|
|
9,133
|
|
|
7,913
|
|
||||
Bone Marrow
|
|
—
|
|
|
253
|
|
|
—
|
|
|
345
|
|
||||
|
|
$
|
12,823
|
|
|
$
|
13,590
|
|
|
$
|
26,931
|
|
|
$
|
24,439
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Gross profit
|
|
$
|
5,523
|
|
|
$
|
6,689
|
|
|
$
|
13,071
|
|
|
$
|
11,970
|
|
Gross profit %
|
|
43
|
%
|
|
49
|
%
|
|
49
|
%
|
|
49
|
%
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Research and development costs
|
|
4,058
|
|
|
3,369
|
|
|
7,594
|
|
|
7,746
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Dilated Cardiomyopathy
|
|
$
|
2,038
|
|
|
$
|
1,866
|
|
|
$
|
3,857
|
|
|
$
|
5,298
|
|
MACI
|
|
728
|
|
|
417
|
|
|
1,280
|
|
|
607
|
|
||||
Carticel
|
|
719
|
|
|
522
|
|
|
1,366
|
|
|
1,000
|
|
||||
Epicel
|
|
573
|
|
|
564
|
|
|
1,091
|
|
|
841
|
|
||||
Total research and development expenses
|
|
$
|
4,058
|
|
|
$
|
3,369
|
|
|
$
|
7,594
|
|
|
$
|
7,746
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Selling, general and administrative costs
|
|
$
|
6,449
|
|
|
$
|
5,585
|
|
|
$
|
12,453
|
|
|
$
|
11,061
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Increase in fair value of warrants
|
|
$
|
1,942
|
|
|
$
|
112
|
|
|
$
|
302
|
|
|
$
|
(205
|
)
|
Foreign currency translation (loss) gain
|
|
(1
|
)
|
|
(6
|
)
|
|
(11
|
)
|
|
10
|
|
||||
Other income
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
||||
Net interest income
|
|
(1
|
)
|
|
7
|
|
|
1
|
|
|
18
|
|
||||
Total other income (expense)
|
|
$
|
1,940
|
|
|
$
|
113
|
|
|
$
|
282
|
|
|
$
|
(177
|
)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Cost of goods sold
|
|
$
|
131
|
|
|
$
|
67
|
|
|
$
|
214
|
|
|
$
|
187
|
|
Research and development
|
|
179
|
|
|
145
|
|
|
$
|
258
|
|
|
$
|
357
|
|
||
Selling, general and administrative
|
|
521
|
|
|
480
|
|
|
847
|
|
|
1,070
|
|
||||
Total non-cash stock-based compensation expense
|
|
$
|
831
|
|
|
$
|
692
|
|
|
$
|
1,319
|
|
|
$
|
1,614
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(Amounts In thousands except per share amounts)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Numerator of basic and diluted EPS
|
|
$
|
(4,900
|
)
|
|
$
|
(3,806
|
)
|
|
$
|
(10,354
|
)
|
|
$
|
(10,258
|
)
|
Add: (Decrease) increase in fair value of warrants
|
|
(1,942
|
)
|
|
(112
|
)
|
|
(302
|
)
|
|
205
|
|
||||
Add: Dividends accumulated on convertible preferred stock
|
|
1,856
|
|
|
1,654
|
|
|
3,660
|
|
|
3,244
|
|
||||
Adjusted net loss - Non-GAAP
|
|
$
|
(4,986
|
)
|
|
$
|
(2,264
|
)
|
|
$
|
(6,996
|
)
|
|
$
|
(6,809
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Denominator for basic and diluted EPS:
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
|
22,684
|
|
|
23,786
|
|
|
22,644
|
|
|
23,786
|
|
||||
Add: Treasury stock
|
|
1,250
|
|
|
—
|
|
|
1,250
|
|
|
—
|
|
||||
Adjusted denominator for basic and diluted EPS - Non-GAAP
|
|
23,934
|
|
|
23,786
|
|
|
23,894
|
|
|
23,786
|
|
||||
Adjusted net loss per share (basic and diluted) - Non-GAAP
|
|
$
|
(0.21
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.29
|
)
|
1)
|
Removed inappropriate permissions. Information Technology staff responsible for the maintenance of Active Directory Group assignments made changes to the Controller’s permissions and the Controller’s permissions were corrected to remove the incompatible access.
|
2)
|
Enabled and designed a reporting functionality that provides an audit trail for journal entries, module access and other relevant user actions.
|
3)
|
Reviewed remaining conflicts and permissions and documented the appropriate control that effectively mitigate the risk associated with the conflicts and/or permissions. In addition, we implemented a new control to review changes to personnel access in the financial reporting system.
|
|
VERICEL CORPORATION
|
|
|
|
|
|
/s/ DOMINICK C. COLANGELO
|
|
Dominick C. Colangelo
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
|
|
|
|
/s/ GERARD MICHEL
|
|
Gerard Michel
|
|
Chief Financial Officer and Vice President, Corporate Development
|
|
(Principal Financial Officer)
|
Exhibit No.
|
|
Description
|
|
|
|
10.1†**
|
|
Amended and Restated Contract Manufacturing and Supply Agreement, dated April 20, 2016 between the Company and Vention Medical Inc. (formerly ATEK Medical, LLC).
|
|
|
|
10.2**
|
|
First Amendment to the Services Agreement, dated April 5, 2016 between the Company and Dohmen Life Science Services, LLC, dated May 31, 2016.
|
|
|
|
10.3†**
|
|
Second Amendment to the Services Agreement, dated April 5, 2016 between the Company and Dohmen Life Science Services, LLC, dated July 1, 2016.
|
|
|
|
10.4**
|
|
Seventh Amendment to Transition Services Agreement, dated as of May 28, 2016, by and between the Company and Genzyme Corporation.
|
|
|
|
31.1**
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2**
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1**
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2**
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
101.INS**
|
|
XBRL Instance Document
|
|
|
|
101.SCH**
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101 DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
TERM
|
|
DEFINITION
|
Adverse Event
|
|
Any adverse change in health or “side-effect” that occurs in a person participating in a clinical trial, from the time they consent to joining the trial until a pre-specified period of time after their treatment has been completed.
|
Autologous (Patient Specific)
|
|
Originating from the patient receiving treatment. (Vericel uses only autologous cells).
|
BLA — Biologics License Application
|
|
An application containing product safety, efficacy and manufacturing information required by the FDA to market biologics products in the U.S.
|
CLI — Critical Limb Ischemia
|
|
An atherosclerotic vascular disease characterized by insufficient blood flow in the lower extremities that causes severe pain, tissue loss or both.
|
Controlled Clinical Trial
|
|
A clinical study that compares patients receiving a specific treatment to patients receiving an alternate treatment for the condition of interest. The alternate treatment may be another active treatment, standard of care for the condition and/or a placebo (inactive) treatment.
|
DCM — Dilated Cardiomyopathy
|
|
A chronic cardiac disease where expansion of the patient’s heart reduces the pumping function to a point that the normal circulation of blood cannot be maintained.
|
Double-Blind Clinical Trial
|
|
Clinical trials in which neither the patient nor the physician know if the patient received the experimental treatment or a control/placebo.
|
FDA — Food & Drug Administration
|
|
The U.S. FDA ensures that medicines, medical devices, and radiation-emitting consumer products are safe and effective. Authorized by Congress to enforce the Federal Food, Drug, and Cosmetic Act and several other public health laws, the agency monitors the manufacture, import, transport, storage, and sale of $1 trillion worth of goods annually.
|
GMP — Good Manufacturing Practice
|
|
GMP regulations require that manufacturers, processors, and packagers of drugs, medical devices, some food, and blood take proactive steps to ensure that their products are safe, pure, and effective. GMP regulations require a quality approach to manufacturing, enabling companies to minimize or eliminate instances of contamination, mix-ups, and errors.
|
Hematopoietic Cells
|
|
All of the cells in the blood system including myeloid (monocytes and macrophages, neutrophils, basophils, eosinophils, erythrocytes, megakaryocytes/platelets, dendritic cells), and lymphoid lineages (T-cells, B-cells, NK-cells).
|
Ischemia
|
|
A shortage or inadequate flow of blood to a body part (commonly an organ or tissue) caused by a constriction or obstruction of the blood vessels supplying it.
|
LVEF — Left Ventricular Ejection Fraction
|
|
The fraction of blood pumped out of the left ventricle with each heartbeat.
|
Mesenchymal stromal cells
|
|
Connective tissue cells that, in the case of bone marrow derived MSCs, function to support blood forming cells and secrete anti-inflammatory factors.
|
M2 anti-inflammatory macrophages
|
|
Specialized blood cells that remove damaged tissue and bacteria and secrete anti-inflammatory factors.
|
Open-label Clinical Trial
|
|
A trial in which both the treating physician and the patient know whether they are receiving the experimental treatment or control/placebo treatment.
|
Orphan Drug Designation
|
|
“Orphan drug” refers to a drug or biologic that is intended for use in the treatment of a rare disease or condition. Orphan drug designation from the U.S. Food and Drug Association (FDA) qualifies the sponsor to receive certain benefits from the Government in exchange for developing the drug for a rare disease or condition. The drug must then go through the FDA marketing approval process like any other drug or biologic which evaluates for safety and efficacy. Usually a sponsor receives a quicker review time and lower application fees for an orphan product.
|
Phase 1 Clinical Trial
|
|
A Phase 1 trial represents an initial study in a small group of patients to test for safety and other relevant factors.
|
Phase 2 Clinical Trial
|
|
A Phase 2 trial represents a study in a moderate number of patients to assess the safety and efficacy of a product.
|
Phase 2b Clinical Trial
|
|
A Phase 2b trial is a moderately-sized Phase 2 trial that is more specifically designed assess the efficacy of a product than a Phase 2a trial.
|
Phase 3 Clinical Trial
|
|
Phase 3 studies are initiated to establish safety and efficacy in an expanded patient population at multiple clinical trial sites and are generally larger than trials in earlier phases of development.
|
Prospective Clinical Trial
|
|
A clinical trial in which participants are identified and then followed throughout the study going forward in time.
|
Randomized Clinical Trial
|
|
A clinical trial in which the participants are assigned randomly to different treatment groups.
|
1.
|
PRODUCTS
|
2.
|
OBLIGATIONS
|
2.1
|
Supplier's Obligations.
|
2.1.1
|
Sterilization Cost
. Supplier will include the cost of gamma sterilization in the Product unit cost. Supplier shall arrange for initial sterilization validations and Vericel requested re-validations using mutually approved protocols. The cost for development of protocols, execution of the validation, and writing of the sterilization final report shall be paid for by Vericel at a pre-approved cost. Supplier will coordinate sterilization schedules and will generate purchase orders for sterilization to a Vericel approved contract sterilization company. Subsequent certificates of sterilization will be provided by the contract sterilization company to Supplier. Supplier shall forward such certificates to Vericel upon shipment of Product and will be included in the Product unit price. In the event of a failed sterilization, Vention shall be responsible for the sterilization costs of such product.
|
2.1.2
|
Quarterly Dose Audits.
Supplier will coordinate the execution of quarterly dose audits related to sterilized Product using a mutually approved standard operating procedure. Vericel will provide a purchase order for the periodic dose audits with associated bioburden and sterility testing. Any Supplier requested modifications requiring re-validation will be performed at Supplier's expense.
|
2.1.3
|
Purchasing
. Supplier is responsible for obtaining all Vericel approved components pertaining to the Product including those for manufacturing, assembly, packaging, labeling and sterilization in accordance with the schedule and quantities outlined on Appendix A attached hereto and Sections 10.1 and 10.2, unless otherwise noted in Appendix A of this Agreement. Supplier will order components against pre-approved purchase specifications and will receive components against pre-approved incoming inspection plans.
|
2.1.4
|
Schedule
. Supplier will ship the Product in accordance with Sections 10.1 and 10.2 of this Agreement.
|
2.1.5
|
Production Affecting Events
. Supplier will notify Vericel of any plant shut down, manufacturing delay, or other event about which Supplier is aware that would result in the inability of Supplier to provide Product. Vericel will be notified within two days of any shutdown or other information that may impede Supplier in the manufacture of the Product.
|
2.1.6
|
Sustaining
. Supplier shall provide reasonable ongoing manufacturing support of the Product in order to satisfy production requirements outlined in Appendix A and Section 10.
|
2.2
|
Vericel Obligations
.
|
2.2.1
|
Purchasing
. Vericel shall order and purchase the Product from Supplier as provided in Appendix A attached hereto and Section 10, as amended from time to time by mutual consent.
|
2.2.2
|
Engineering Support
. Vericel shall provide Supplier with reasonable engineering support to initiate, maintain and ramp up manufacturing of the Product, including training, substitute part validation and sterilization validation.
|
2.2.3
|
Obsolescence.
If Vericel decides to make obsolete a component of the Product, Vericel shall reimburse Supplier at cost for any remaining inventory of such component and work in process to the extent that such inventory and work in process can be converted into finished Products, but not to exceed [***] months of the Forecast (as defined in Section 10) Product demand or as agreed to in writing by both parties.
|
2.2.4
|
Tooling for External Suppliers
. Vericel shall be responsible for costs in connection to routine tooling maintenance performed by any external supplier appointed by Vericel.
|
3.
|
EQUIPMENT & CALIBRATION
|
4.
|
CONFIDENTIALITY
|
a)
|
was in the possession of the recipient before disclosure hereunder as evidenced by written records; or
|
b)
|
is or becomes known to the public through no fault of the recipient party; or
|
c)
|
is information received by the recipient from a third party who is under no obligation to the disclosing party to maintain such information as confidential; or
|
d)
|
is developed by the recipient independent of any disclosure hereunder as evidenced by written records.
|
5.
|
DESIGN CONTROL AND SPECIFICATIONS; RECORDS; REGULATORY CONTACT
|
5.1
|
General
. Supplier shall only manufacture the Product to Vericel's specifications and shall not change materials, specifications, design/configuration, procedures, packaging or labeling without Vericel’s prior written consent. Vericel may reject any Product lots that are defective or otherwise do not conform to Vericel's specifications, drawings, or to Vericel's purchase orders.
|
5.2
|
Changes by Vericel. Vericel may change specifications from time to time as needed, (e.g. to meet market requirements, comply with regulatory requirements, improve Product function or quality, or lower Product cost). Any changes in specifications shall be conveyed to Supplier in writing. Supplier shall confirm, in writing, its receipt of Vericel's changes and shall use its commercial best efforts to implement the documented changes within forty-five (45) days of notification unless otherwise agreed upon. Once changes are implemented, Supplier shall immediately advise Vericel in writing of the first Product lot to contain the changes.
|
5.3
|
Changes by Supplier
. Supplier may recommend design or specification changes to Vericel but no such changes will be incorporated into the Product without Vericel's prior written approval and without following appropriate documentation change procedures. Such Supplier proposed changes shall be made at Vericel's expense.
|
5.4
|
Discontinuation of Product
. Vericel may discontinue the manufacture of the Product at its sole discretion. In the event Vericel decides to discontinue the manufacture of the Product, Vericel shall use commercially reasonable efforts to notify Supplier at least one hundred eighty (180) days prior to Vericel's intention to discontinue manufacture of the Product. Failure to provide Supplier prior notice shall not be a breach of this Agreement; provided, however, if Vericel does not give Supplier one hundred eighty (180) days prior notice, Vericel agrees to purchase from Supplier any finished goods that are in a usable condition and comply with all Vericel specifications, component or raw materials inventory and work in process to the extent that such inventory and work in process can be converted into finished Products, that Supplier has purchased or completed at Supplier's actual cost, in aggregate quantities not to exceed the actual accumulated monthly production from Vericel purchase orders for
[***]
days preceding notice of discontinuation of the Product.
|
5.5
|
Records
. Supplier will keep complete and accurate records (including reports, accounts, notes, raw data, and records of all information and results obtained from performance of services) of all work done by it under this Agreement, in form and substance as specified in the applicable Quality Agreement and this Agreement (collectively, the “
Records
”). All such Records will be the property of Vericel. Supplier will not transfer, deliver or otherwise provide any such Records to any party other than Vericel, without the prior written approval of Vericel. Records will be available at reasonable times for inspection, examination and copying by or on behalf of Vericel. All original Records of the Manufacture of Product under this Agreement will be retained and archived by Supplier in accordance with cGMP (if applicable) and Applicable Law, but in no case for less than a period of five (5) years. Upon Vericel’s request, Supplier will promptly provide Vericel with copies of such Records. Five (5) years after completion of services, all of the aforementioned Records will be sent to Vericel or Vericel’s designee; provided, however, that Vericel may elect to have such Records retained in Supplier’s archives for an additional period of time at a reasonable charge to Vericel.
|
5.6
|
Regulatory Approvals
. Vericel will be responsible for obtaining, at its expense, all regulatory and governmental approvals and permits necessary for Vericel’s use of any Product developed and/or manufactured under this Agreement, including investigational new drug application, biologics license application, new drug application, and abbreviated new drug application submissions and
|
5.7
|
Regulatory Inspections
. Supplier will promptly notify Vericel of any visit or inspection by any regulatory authority of the Facility. Supplier will provide Vericel with a copy of any report or other written communication received from such regulatory authority in connection with such visit or inspection (assuming the same relates to Product), and any written communication received from any regulatory authority relating to any Product, the Facility (if it relates to or affects the development and/or manufacture of Product) or the manufacturing process, within
[***]
after receipt,
and will consult with Vericel prior to submitting a response to the applicable regulatory authority; provided, however, that the response specifically relates to Product. Supplier will provide Vericel with a copy of its final responses within
[***]
business days after submission.
|
6.
|
FACILITY; QUALITY
|
6.1
|
Supplier will perform all services at the Facility, provide all staff necessary to perform the services in accordance with the terms of this Agreement, and hold at such Facility all equipment, Vericel materials and other items used in the services. Supplier will not change the location of such Facility or use any additional facility for the performance of services under this Agreement without at least one hundred eighty (180) days prior written notice to, and prior written consent from, Vericel, which consent will not be unreasonably withheld or delayed (it being understood and agreed that Vericel may withhold consent pending satisfactory completion of a quality assurance audit and/or regulatory impact assessment of the new location or additional facility, as the case may be). Supplier will maintain, at its own expense, the Facility and all equipment required for the manufacture of Product in a state of repair and operating efficiency consistent with the requirements of cGMP (if applicable) and all applicable law. For clarification, no Facility shall be located outside of the continental United States.
|
6.1.1
|
Validation
. Supplier will be responsible for performing all validation of the Facility, equipment and cleaning and maintenance processes employed in the manufacturing process in accordance with cGMP (if applicable), Supplier’s SOPs, the applicable Quality Agreement (if any), applicable law, and in accordance with any other validation procedures established by Vericel and made known in writing to Supplier. Supplier will also be responsible for ensuring that all such validated processes are carried out in accordance with their terms.
|
6.1.2
|
Licenses and Permits
. Supplier will be responsible for obtaining, at its expense, any Facility or other licenses or permits, and any regulatory and government approvals necessary for the performance of services by Supplier under this Agreement. At Vericel’s request, Supplier will provide Vericel with copies of all such approvals and submissions to regulatory authorities, and Vericel will have the right to use any and all information contained in such approvals or submissions in connection with regulatory approval and/or commercial development of Product.
|
6.2
|
Access to Facility
. Supplier will permit Vericel or its duly authorized representatives to observe and consult with Supplier during the performance of services under this Agreement, including the
|
6.3
|
Quality Agreement
. A separate written Quality Agreement will be drafted and mutually agreed upon between Vericel and Supplier.
|
7.
|
PRICING
|
7.1
|
General
. The Product shall be purchased and sold in US dollars. Prices per unit of Product are listed in Appendix A.
|
7.2
|
Extension Option; Quarterly Charge
. As of the Amendment Effective Date, Vericel hereby exercises its right to extend the Term for an additional five (5) years subject to the terms of this Section 7.2. Commencing with the calendar quarter in which the initial QDA/Sterility production runs are shipped and for each calendar quarter thereafter during the Term, Vericel shall pay Supplier a quarterly charge equal to
[***]
Dollars ($
[***]
), provided Supplier is not in material breach of its supply obligations as provided hereunder, subject to Supplier’s right to cure as provided in Section 9. The first such quarterly charge shall be pro-rated based upon the date of the shipment of the QDA/Sterility production runs required to re-qualify the Supplier’s cleanroom and production processes.
|
7.3
|
Annual Price Adjustment Notification
At least forty-five (45) days prior to the end of the first year of the Term and each year thereafter that this Agreement remains in effect, Supplier shall notify Vericel of any proposed Product unit price increase or decrease for the next succeeding year. Any increase or decrease in Product unit price shall be applicable only to those production lots of the Product of which the production process is completed after the change and cost becomes effective and shall remain in effect until another price change occurs. Additionally, any increase shall be limited to actual, documented increases in materials costs or shall not exceed the then current consumer price index for non-material related costs, without Vericel’s prior approval.
|
7.4
|
Justification of Price Increases
. Supplier will provide written rationale for its price increases for the Product any year during the Term upon Vericel's request. Vericel and Supplier will work collaboratively and in good faith to mitigate any potential cost increases.
|
7.5
|
Scrap
. Supplier unit cost shall assume a scrap rate of
[***]
%. If during the Term, actual scrap rate exceeds
[***]
% for a period of thirty (30) days or more, Supplier will notify Vericel in writing of the actual scrap rate and failure mode. Supplier and Vericel will work collaboratively to determine root cause of the increased scrap. When the supplier and Vericel agree on the root cause, financial responsibility shall remain with the party at cause. Best efforts shall be made by both parties to resolve all scrap issues within ninety (90) days from occurrence.
|
7.6
|
Cost Reduction
. Both parties shall continuously work towards reducing costs. Any cost reduction efforts researched and implemented by both parties shall result in a 50/50 gain sharing of the savings realized. When a cost saving measure is solely driven by Vericel the savings will benefit Vericel 100%. Vericel and Supplier will meet periodically to review cost reduction efforts and define an action plan for driving improvement.
|
8.
|
TERM
|
9.1
|
Procedure for Termination
: This Agreement may be terminated as follows:
|
•
|
Either party may terminate this Agreement if the other party materially defaults in the performance of any provision of this Agreement. Should any such default occur, and then the non-defaulting party may give written notice to the defaulting party that if the default is not cured within forty-five (45) days, the Agreement will be terminated. If the non-defaulting party gives such notice and the default is not cured during the forty-five (45) day period, then the Agreement shall automatically terminate at the end of such period unless an extension is mutually agreed to by both parties.
|
•
|
In addition to other remedies, either party may terminate the Agreement at any time if either breaches its confidentiality obligations under Section 4, in which case termination shall be effective immediately upon receipt of notice of the breach and of termination.
|
•
|
Commencing on the first anniversary of the Amendment Effective Date, Vericel shall have the right to terminate this Agreement in its sole discretion upon twelve (12) months’ prior written notice to Supplier.
|
•
|
Commencing on the first anniversary of the Amendment Effective Date, Vention shall have the right to terminate this Agreement in its sole discretion upon eighteen (18) months’ prior written notice to Vericel.
|
•
|
Either party may immediately terminate this Agreement by written notice upon the occurrence of any of the following events: (i) the other party is or becomes insolvent or unable to pay its debts as they become due within the meaning of the United States Bankruptcy Code (or any successor statute) or any analogous foreign statute; or (ii) the other party appoints or has appointed a receiver for all or substantially all of its assets, or makes an assignment for the benefit of its creditors; or (iii) the other party files a voluntary petition under the United States Bankruptcy Code (or any successor statute) or any analogous foreign statute; or (iv) the other party has filed against it an involuntary petition under the United States Bankruptcy Code (or any successor statute) or any analogous foreign statute, and such petition is not dismissed within ninety (90) days.
|
9.2
|
Return of Confidential Information and Equipment
. Upon termination of this Agreement for any reason, each party shall return all confidential information, including, but not limited to technical information, and any equipment belonging to Vericel, each party shall make no further use of such information.
|
9.3
|
Inventory and Equipment Purchase Upon Termination
. If the Agreement is terminated by Supplier for material breach by Vericel then Vericel shall purchase: (a) finished Products that are in a usable condition and comply with all Vericel specifications, including sterility on the date of termination; and (b) ninety (90) day work in process and component and raw materials inventory to the extent that such work in process and inventory can be converted into finished Products, all based on Vericel's Forecast needs. Such purchases shall be made within sixty (60) days following the effective date of the termination.
|
9.4
|
Other Termination
. If the Agreement terminates by mutual agreement of both parties, then both parties will mutually agree upon the purchase and/or disposition of raw component materials, Product and/or equipment. Supplier shall provide reasonable technical support to transition Product to new manufacturing facility. Such technical support will be provided at Supplier's published engineering rates and shall be at Vericel's expense. If the Agreement terminates by Vericel for material breach by Supplier, then Vericel shall have the option to purchase any raw materials, inventory or Products at any stage of assembly as long as all materials are within current Vericel specification.
|
10.
|
FORECAST, ORDERS AND QUANTITY
|
10.1
|
Purchase Orders
. Orders by Vericel shall be initiated by purchase orders executed by an authorized representative of Vericel. Supplier shall provide written confirmation to Vericel within 3 business days. If Supplier is unable to meet requested delivery date Supplier will provide alternative delivery date based on current manufacturing schedule. Supplier will make best efforts to achieve Vericel requested delivery date.
|
10.2
|
Delivery.
Supplier shall use best efforts to ship the Product for delivery by the requested date on the Vericel purchase order. In order for shipment to be considered timely, a delivery must be shipped no earlier than three (3) days prior or no days later to the requested date.
|
10.3
|
Production Forecast
. Vericel will provide to Supplier a
[***]
month rolling forecast ("
Forecast
'') upon the placement of initial production order. At all times the first
[***]
months will represent a firm production demand.
|
11.
|
SHIPMENT, RISK OF LOSS AND PAYMENT TERMS
|
12.
|
INTELLECTUAL PROPERTY RIGHTS
|
13.
|
WARRANTY AND REMEDIES FOR NON-CONFORMANCE
|
13.1
|
Warranty
. Supplier warrants that upon delivery as provided for hereunder and for the shelf life period (
[***]
months) of the Product after delivery that (i) the Product shall be manufactured in compliance with document at ion provided and certified by Vericel; (ii) the Product delivered shall conform to documented specifications, including component inspection, test, and product release testing; (iii) any components or parts shall be sourced from Vericel approved vendors and inspected by mutually approved incoming inspection plans; (iv) the Product will be free of defects related to internal sterilization, workmanship, or material; (v) it shall not manufacture Product in advance of confirmed purchase orders so that the Product is delivered with the longest possible expiration date; and (vi) it shall manufacture the Product in a workmanlike manner and in accordance with industry standards, applicable law and, to the best of its knowledge, not in violation or infringement of any patent, copyright or trademark laws (the "
Product Warranty
"). Should any failure to conform to the Product Warranty become apparent, Vericel shall notify Supplier in writing, and Supplier will either correct such nonconformity by replacement of the defective Product or credit Vericel for any payments made with respect to the value of any defective Product, including direct expenses to Vericel.
|
13.2
|
Vericel warrants that to Vericel’s knowledge the specifications and license contemplated herein do not violate or infringe any applicable laws, regulations or standards, including any patent copyright or trademark laws. Supplier's Product Warranty does not extend to (i) any Product rendered defective by a component provided by Vericel, unless Supplier is aware of the defect at or before the time the Product is assembled, or (ii) to defects caused by improper sterilization, use, transportation, maintenance or storage; third party negligence; or unauthorized repair, service or modification; in each case unless and to the extent caused by Supplier. EXCEPT FOR THE WARRANTIES SET FORTH IN THIS AGREEMENT, EACH PARTY EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, ARISING BY OPERATION OF LAW OR OTHERWISE, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
|
13.3
|
Remedies for Non-Conformance
. In case of any disagreement between the parties as to whether Product conforms to the applicable specifications or cGMP (if applicable), warranties, or was manufactured in accordance with the manufacturing process, the quality assurance and/or engineering representatives of the parties will attempt in good faith to resolve any such disagreement and Vericel and Supplier will follow their respective SOPs to determine the conformity of the Product to the specifications and cGMP (if applicable) and manufacture in compliance with the manufacturing process. If the foregoing discussions do not resolve the disagreement in a reasonable time (which will not exceed thirty (30) days), a representative sample of such Product and/or relevant documentation will be submitted to an independent testing laboratory (in the case of an alleged failure to meet Specifications) and/or independent cGMP consultant (in the case of an alleged failure to comply with cGMP or the manufacturing process), as appropriate, that are mutually agreed upon by the parties for tests and final determination of whether such Product conforms with such specifications and/or cGMP (if applicable). The laboratory must meet cGMP (if applicable). The laboratory and consultant, as applicable, must be of recognized standing in the industry, and consent to the appointment of such laboratory and consultant will not be unreasonably withheld or delayed by either party. Such laboratory will use the test methods contained in the applicable specifications. The determination of conformance by such laboratory and/or cGMP consultant, as applicable, with respect to all or part of such Product will be final and binding on the parties absent manifest error. The fees and expenses of the laboratory and/or consultant, as applicable, incurred in making such determination will be paid by the party against whom the determination is made.
|
13.4
|
Product Non-Compliance and Remedies
. If a lot of Product fails to conform to the specifications or was not manufactured in compliance with cGMP (if applicable) and the manufacturing process, then Supplier will, at Vericel’s sole option: (a) at Supplier’s cost and expense, replace the Product by manufacture of a new lot as soon as reasonably possible; or (b)
refund in full the fees and expenses paid by Vericel for such lot.
|
13.5
|
Disposition of Non-Conforming Product
. The ultimate disposition of non-conforming Product will be the responsibility of Vericel’s quality assurance and/or engineering departments.
|
14.
|
INDEMNIFICATION AND LIMITATION OF LIABILITY
|
14.1
|
Indemnification
. Each party (the "
Indemnifying Party
") will indemnify and hold harmless the other party (the "
Indemnified Party
") from any claims, actions, proceedings, awards, demands, losses, damages or expenses suffered by the Indemnified Party ("
Losses
"), whether or not such Losses relate to any liability to a third party, to the extent claimed or arising from or relating to a material breach of the Indemnifying Party's representations, warranties or covenants under this Agreement or the Indemnifying Party's negligence or willful misconduct.
|
14.2
|
Procedure
. To obtain indemnification, the Indemnified Party shall: (a) provide prompt notice in writing of any such Losses claimed to the Indemnifying Party and permit the Indemnifying Party, through counsel chosen by the Indemnifying Party, the opportunity to answer and defend such claims; and (b) provide the Indemnifying Party information,
assistance and authority, at the Indemnifying Party's expense, to assist the Indemnifying Party in defending such claims. Neither party shall be responsible for any settlement made by the other party without the other party's prior written approval. Neither party shall admit any liability of the other party without the other party's prior written approval.
|
14.3
|
Limitation of Liability
. Notwithstanding any other provision of this Agreement, neither party shall be liable to the other for, nor obligated to allow claims for, special, incidental, consequential, or other indirect damages or expenses of any kind.
|
15.
|
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE PARTIES
|
15.1
|
Vericel hereby represents and warrants to Supplier that:
|
15.1.1
|
Vericel is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Michigan, and has all corporate power and authority to own, lease and operate its properties and to carry on its businesses as it is currently being conducted. Vericel has all necessary corporate power and authority to enter into this Agreement and to perform its obligations hereunder. This Agreement has been duly authorized, executed and delivered by Vericel.
|
15.1.2
|
Vericel is the lawful owner of all right, title and interest in and to the applicable Intellectual Property incorporated in the Product, free and clear of all liens, claims, security interests or other restrictions or encumbrances.
|
15.2
|
Supplier hereby represents and warrants to Vericel that:
|
15.2.1
|
Supplier is a company duly organized and existing under the laws of the State of Minnesota, and has all power and authority to own, lease and operate its properties and to carry on its businesses as currently conducted. Supplier has all necessary power and authority to enter into this Agreement and to perform its obligations hereunder. This Agreement has been duly authorized, executed and delivered by Supplier.
|
15.2.2
|
Supplier has the manufacturing and assembly facilities and personnel reasonably necessary to perform its functions and otherwise carry out its obligations under the terms of this Agreement.
|
15.2.3
|
All Products manufactured, sold and shipped pursuant to this Agreement shall, upon delivery, have been manufactured and shipped by Supplier in compliance with applicable law and regulations, including the U.S. Food and Drug Administration regulations and current Good Manufacturing Practices requirements set forth in the Quality System promulgated under the U.S. Food, Drug & Cosmetic Act.
|
15.2.4
|
The conduct and the provision of the services will not, to the best of its knowledge, violate any patent, trade secret or other proprietary or intellectual property rights of any third party and Supplier will promptly notify Vericel in writing should it become aware of any claims asserting such violation.
|
15.2.5
|
Supplier, its affiliates, approved subcontractors, and each of their respective officers and directors,
|
16.
|
RELATIONSHIP OF THE PARTIES
|
17.
|
SUCCESSORS, ASSIGNS AND SUBCONTRACTORS
|
18.
|
NO WAIVER
|
19.
|
NO INVALIDITY
|
20.
|
ENTIRE AGREEMENT; NO OTHER AGREEMENTS
|
21.
|
MODIFICATION
|
22.
|
NOTICES
|
24.
|
DISPUTE RESOLUTION
|
25.
|
FORCE MAJEURE
|
26.
|
RISK MITIGATION
|
27.
|
INSURANCE
|
28.
|
APPENDIX TO THIS AGREEMENT
|
|
VERICEL CORPORATION
|
|
By: /s/ Dominick Colangelo
|
|
Name: Dominick Colangelo
|
|
Title: President and CEO
|
|
|
|
VENTION MEDICAL INC.
|
|
By: /s/ Bill Flaherty
|
|
Name: Bill Flaherty
|
|
Title: President
|
1)
|
Facilities:
|
a.
|
[***]
|
1.
|
[***]
|
2.
|
[***]
|
b.
|
[***]
|
3.
|
[***]
|
4.
|
[***]
|
5.
|
[***]
|
2)
|
Supplier Molded Components: [***]:
|
a.
|
[***]
|
b.
|
[***].
|
c.
|
[***]
|
3)
|
Pricing: [***]
|
a.
|
[***]
|
i.
|
[***]
|
b.
|
[***]
|
i.
|
[***]
|
1.
|
Defined Terms
. Capitalized terms in this Amendment that are not defined in this Amendment have the meanings given to them in the Agreement. If there is any conflict between the Agreement and any provision of this Amendment, this Amendment will control.
|
2.
|
Section 17 - Miscellaneous
. Section 17 is hereby amended to add the following subsection:
|
(g)
|
This contractor (Client) and subcontractor (DLSS) shall abide by the requirements of 41 CFR §§ 60-1.4(a), 60-300.5(a) and 60-741.5(a). These regulations prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, and prohibit discrimination against all individuals based on their race, color, religion, sex, sexual orientation, gender identity or national origin. Moreover, these regulations require that covered prime contractors and subcontractors take affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, protected veteran status or disability.
|
3.
|
No Other Changes
. This Amendment, together with the Agreement, constitutes the entire agreement between the parties and supersedes all prior or contemporaneous discussions, negotiations, representations, warranties, or agreements relating to the subject matter hereof. All other terms and conditions contained in the Agreement will remain in full force and effect. In the event of any conflict between the Agreement and this Amendment, the terms of this Amendment shall prevail, and the Agreement shall be deemed amended to incorporate the provisions contained herein.
|
DOHMEN LIFE SCIENCE SERVICES, LLC
|
VERICEL CORPORATION
|
By:
s/ Marie E. Lamont
|
By:
s/ Dominick C. Colangelo
|
Name: Marie E. Lamont
|
Name: Dominick C. Colangelo
|
Title: President, Patient Services
|
Title: Chief Executive Officer
|
1.
|
Defined Terms
. Capitalized terms in this Amendment that are not defined in this Amendment have the meanings given to them in the Agreement. If there is any conflict between the Agreement and any provision of this Amendment, this Amendment will control.
|
2.
|
Amendment of Section 3(g)
. Section 3(g) of the Agreement is hereby amended and restated in its entirety as follows:
|
3.
|
Amendment of Exhibit D
.
Exhibit D
of the Agreement is hereby superseded and replaced in its entirety with
Exhibit D
attached hereto.
|
4.
|
Guarantee
. If, with respect to any implant of the Product performed during a Guarantee Period, a Guaranteed Payer denies a claim for reimbursement or reimburses at a rate of less than
[***]
, DLSS agrees to guarantee the payment of such reimbursement in an amount equal to (i)
[***]
, less (ii) any amounts collected by DLSS in connection with the implant (including any amount paid by the patient or reimbursement paid by the Guaranteed Payer). DLSS shall be required to pay any guarantee amount due hereunder on or prior to December 31, 2016. If, with respect to any implant of the Product performed during a Guarantee Period, a Guaranteed Payer reimburses at a rate of greater than
[***]
, DLSS agrees to promptly remit to Client the payment of such reimbursement in an amount equal to (i) any amounts collected by DLSS in connection with the implant (including any amount paid by the patient or reimbursement paid by the Guaranteed Payer), less (ii)
[***]
.
|
5.
|
Military Payers.
The Parties agree that notwithstanding anything to the contrary in the Agreement, in particular Sections 2(a) and 4(a)(vi), US Bioservices Corporation will continue to provide Client with reimbursement support services for military Payers for a transition period after the date hereof as determined by Client.
|
6.
|
No Other Changes
. This Amendment, together with the Agreement, constitutes the entire agreement between the parties and supersedes all prior or contemporaneous discussions, negotiations, representations, warranties, or agreements relating to the subject matter hereof. All other terms and conditions contained in the Agreement will remain in full force and effect. In the event of any conflict between the Agreement and this Amendment, the terms of this Amendment shall prevail, and the Agreement shall be deemed amended to incorporate the provisions contained herein.
|
DOHMEN LIFE SCIENCE SERVICES, LLC
|
VERICEL CORPORATION
|
By:
s/ Marie E. Lamont
|
By:
s/ Daniel R. Orlando
|
Name: Marie E. Lamont
|
Name: Daniel R. Orlando
|
Title: President, Patient Services
|
Title: Chief Operating Officer
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
1)
|
IT services related to data transfer,
|
2)
|
Data Controller and data hosting services until such time as data controller responsibility may be legally transferred, and
|
3)
|
Transferred Intellectual Property
missing residual documentation,
|
1.
|
All capitalized terms not defined herein shall have the same meaning as set forth in the Agreement. For purposes of clarity, the Agreement in certain instances relies on definitions as set forth in the Asset Purchase Agreement, and all capitalized terms defined in neither this Seventh Amendment nor the Agreement shall have the same meaning as set forth in the Asset Purchase Agreement.
|
2.
|
Section 4.1, Term
. Section 4.1 is hereby stricken and replaced in its entirety by the following:
|
3.
|
Miscellaneous
. The Parties acknowledge that, as set forth in Section 7.22 of the Asset Purchase Agreement, all transition services were to end by May 29, 2015. Service Provider hereby confirms that Service Provider has received approval from its Affiliate to continue certain transition services beyond May 29, 2015. The Parties hereby agree that, notwithstanding the term limit to the transition services set forth in Section 7.22 of the Asset Purchase Agreement, the Services will be extended as set forth in this Seventh Amendment.
|
|
/s/ DOMINICK C. COLANGELO
|
|
Dominick C. Colangelo
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/s/ GERARD MICHEL
|
|
Gerard Michel
|
|
Chief Financial Officer and Vice President, Corporate Development
|
|
(
Principal Financial Officer)
|
|
/s/ DOMINICK C. COLANGELO
|
|
Dominick C. Colangelo
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/s/ GERARD MICHEL
|
|
Gerard Michel
|
|
Chief Financial Officer and Vice President, Corporate Development
|
|
(Principal Financial Officer)
|