|
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
|
|
24,107,116
|
(Class)
|
|
Outstanding at November 4, 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.
|
||
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
||||
|
|
2016
|
|
2015
|
||||
ASSETS
|
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
|
||
Cash
|
|
$
|
8,880
|
|
|
$
|
14,581
|
|
Accounts receivable (net of allowance for doubtful accounts of $97 and $68, respectively)
|
|
7,871
|
|
|
10,919
|
|
||
Inventory
|
|
3,607
|
|
|
1,379
|
|
||
Other current assets
|
|
741
|
|
|
464
|
|
||
Total current assets
|
|
21,099
|
|
|
27,343
|
|
||
Property and equipment, net
|
|
4,215
|
|
|
4,049
|
|
||
Intangible assets, net
|
|
2,708
|
|
|
2,917
|
|
||
Total assets
|
|
$
|
28,022
|
|
|
$
|
34,309
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
5,467
|
|
|
$
|
7,588
|
|
Accrued expenses
|
|
3,398
|
|
|
3,603
|
|
||
Revolving and term loan credit agreement, net of deferred costs of $433
|
|
5,566
|
|
|
—
|
|
||
Warrant liabilities
|
|
658
|
|
|
757
|
|
||
Short-term deferred rent
|
|
232
|
|
|
118
|
|
||
Other
|
|
39
|
|
|
42
|
|
||
Total current liabilities
|
|
15,360
|
|
|
12,108
|
|
||
|
|
|
|
|
||||
Long-term deferred rent
|
|
1,227
|
|
|
—
|
|
||
Long term debt
|
|
42
|
|
|
71
|
|
||
Total liabilities
|
|
16,629
|
|
|
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 — 22,745 and 23,789, respectively
|
|
310,208
|
|
|
307,766
|
|
||
Treasury stock — 1,250 shares
|
|
(3,150
|
)
|
|
(3,150
|
)
|
||
Warrants
|
|
190
|
|
|
—
|
|
||
Accumulated deficit
|
|
(337,394
|
)
|
|
(324,025
|
)
|
||
Total shareholders’ equity
|
|
11,393
|
|
|
22,130
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
28,022
|
|
|
$
|
34,309
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||
Product sales
|
|
$
|
10,929
|
|
|
$
|
11,309
|
|
|
$
|
37,860
|
|
|
$
|
35,748
|
|
Total revenues
|
|
10,929
|
|
|
11,309
|
|
|
37,860
|
|
|
35,748
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of product sales
|
|
6,856
|
|
|
6,772
|
|
|
20,716
|
|
|
19,241
|
|
||||
Gross profit
|
|
4,073
|
|
|
4,537
|
|
|
17,144
|
|
|
16,507
|
|
||||
Research and development
|
|
3,443
|
|
|
3,740
|
|
|
11,037
|
|
|
11,486
|
|
||||
Selling, general and administrative
|
|
7,010
|
|
|
5,674
|
|
|
19,463
|
|
|
16,735
|
|
||||
Total operating expenses
|
|
10,453
|
|
|
9,414
|
|
|
30,500
|
|
|
28,221
|
|
||||
Loss from operations
|
|
(6,380
|
)
|
|
(4,877
|
)
|
|
(13,356
|
)
|
|
(11,714
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
0
|
|
|
|
|
||||
Decrease (increase) in fair value of warrants
|
|
(203
|
)
|
|
461
|
|
|
99
|
|
|
256
|
|
||||
Foreign currency translation (loss) gain
|
|
(6
|
)
|
|
(5
|
)
|
|
(17
|
)
|
|
5
|
|
||||
Interest income
|
|
—
|
|
|
7
|
|
|
7
|
|
|
29
|
|
||||
Interest expense
|
|
(86
|
)
|
|
(2
|
)
|
|
(92
|
)
|
|
(6
|
)
|
||||
Other (income) expense
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
||||
Total other income (expense)
|
|
(295
|
)
|
|
461
|
|
|
(13
|
)
|
|
284
|
|
||||
Net loss
|
|
$
|
(6,675
|
)
|
|
$
|
(4,416
|
)
|
|
$
|
(13,369
|
)
|
|
$
|
(11,430
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Net loss per share attributable to common shareholders (Basic and Diluted) (see note 11)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.84
|
)
|
|
$
|
(0.69
|
)
|
Weighted average number of common shares outstanding (Basic and Diluted)
|
|
22,744
|
|
|
23,788
|
|
|
22,678
|
|
|
23,786
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Operating activities:
|
|
|
|
|
|
|
||
Net loss
|
|
$
|
(13,369
|
)
|
|
$
|
(11,430
|
)
|
Adjustments to reconcile net loss to net cash used for operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
1,393
|
|
|
1,182
|
|
||
Stock compensation expense
|
|
1,973
|
|
|
2,188
|
|
||
Change in fair value of warrants
|
|
(99
|
)
|
|
(256
|
)
|
||
Inventory provision
|
|
98
|
|
|
621
|
|
||
Asset retirement obligation
|
|
—
|
|
|
(267
|
)
|
||
Deferred rent expense
|
|
438
|
|
|
—
|
|
||
Foreign currency translation loss
|
|
17
|
|
|
5
|
|
||
Gain on sales of fixed assets
|
|
—
|
|
|
(35
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||
Inventory
|
|
(2,325
|
)
|
|
(339
|
)
|
||
Accounts receivable
|
|
3,048
|
|
|
552
|
|
||
Other current assets
|
|
(278
|
)
|
|
521
|
|
||
Accounts payable
|
|
(2,173
|
)
|
|
(899
|
)
|
||
Accrued expenses
|
|
(205
|
)
|
|
(1,109
|
)
|
||
Tenant improvement reimbursement
|
|
898
|
|
|
—
|
|
||
Other non-current assets and liabilities, net
|
|
—
|
|
|
(43
|
)
|
||
Net cash used for operating activities
|
|
(10,584
|
)
|
|
(9,309
|
)
|
||
Investing activities:
|
|
|
|
|
|
|
||
Expenditures for property, plant and equipment
|
|
(1,314
|
)
|
|
(2,330
|
)
|
||
Other
|
|
—
|
|
|
35
|
|
||
Net cash used in investing activities
|
|
(1,314
|
)
|
|
(2,295
|
)
|
||
Financing activities:
|
|
|
|
|
|
|
||
Net proceeds from issuance of common stock
|
|
469
|
|
|
11
|
|
||
Deferred financing costs
|
|
(244
|
)
|
|
—
|
|
||
Borrowings under revolving credit agreement and term loan
|
|
8,400
|
|
|
—
|
|
||
Repayments of short-term debt
|
|
(2,400
|
)
|
|
—
|
|
||
Payments on long-term debt
|
|
(28
|
)
|
|
(26
|
)
|
||
Net cash provided by (used in) financing activities
|
|
6,197
|
|
|
(15
|
)
|
||
Net decrease in cash
|
|
(5,701
|
)
|
|
(11,619
|
)
|
||
Cash at beginning of period
|
|
14,581
|
|
|
30,343
|
|
||
Cash at end of period
|
|
$
|
8,880
|
|
|
$
|
18,724
|
|
|
|
|
|
|
||||
Supplemental cash flow information (non-cash):
|
|
|
|
|
|
|
||
Additions to equipment in process included in accounts payable
|
|
$
|
36
|
|
|
$
|
65
|
|
Warrants issued in connection with debt arrangement
|
|
$
|
190
|
|
|
$
|
—
|
|
Supplementary cash flows information:
|
|
|
|
|
||||
Interest paid, net of interest capitalized
|
|
$
|
73
|
|
|
$
|
—
|
|
1.
|
Organization
|
2.
|
Basis of Presentation
|
3.
|
Recent Accounting Pronouncements
|
4.
|
Selected Balance Sheet Components
|
(In thousands)
|
September 30, 2016
|
|
December 31, 2015
|
||||
Raw materials
|
$
|
3,214
|
|
|
$
|
1,228
|
|
Work-in-process
|
373
|
|
|
131
|
|
||
Finished goods
|
20
|
|
|
20
|
|
||
Inventory
|
$
|
3,607
|
|
|
$
|
1,379
|
|
(In thousands)
|
September 30, 2016
|
|
December 31, 2015
|
||||
Machinery and equipment
|
$
|
3,207
|
|
|
$
|
3,280
|
|
Furniture, fixtures and office equipment
|
931
|
|
|
931
|
|
||
Computer equipment and software
|
2,674
|
|
|
2,662
|
|
||
Leasehold improvements
|
3,319
|
|
|
2,393
|
|
||
Construction in process
|
810
|
|
|
421
|
|
||
Total property and equipment, gross
|
10,941
|
|
|
9,687
|
|
||
Less: Accumulated depreciation
|
(6,726
|
)
|
|
(5,638
|
)
|
||
|
$
|
4,215
|
|
|
$
|
4,049
|
|
(In thousands)
|
September 30, 2016
|
|
December 31, 2015
|
||||
Commercial rights
|
$
|
3,360
|
|
|
$
|
3,360
|
|
Less: accumulated amortization
|
$
|
(652
|
)
|
|
$
|
(443
|
)
|
|
$
|
2,708
|
|
|
$
|
2,917
|
|
Calendar Years Ending December 31, (In thousands)
|
|
||
2016
|
$
|
70
|
|
2017
|
280
|
|
|
2018
|
280
|
|
|
2019
|
280
|
|
|
2020
|
280
|
|
|
Thereafter
|
1,518
|
|
|
Total
|
$
|
2,708
|
|
(In thousands)
|
September 30, 2016
|
|
December 31, 2015
|
||||
Bonus related compensation
|
$
|
1,615
|
|
|
$
|
1,956
|
|
Employee related accruals
|
1,759
|
|
|
1,341
|
|
||
Accrued expenses
|
24
|
|
|
306
|
|
||
|
$
|
3,398
|
|
|
$
|
3,603
|
|
5.
|
Stock Purchase Warrants
|
|
|
August 2013
Warrants |
|
September 2016 Warrants
|
Exercise price
|
|
$4.80
|
|
$2.48
|
Expiration date
|
|
August 16, 2018
|
|
September 9, 2022
|
Total shares issuable on exercise
|
|
724,950
|
|
117,074
|
August 2013 Warrants
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Closing stock price
|
|
$
|
2.80
|
|
|
$
|
2.58
|
|
Expected dividend rate
|
|
—
|
%
|
|
—
|
%
|
||
Expected stock price volatility
|
|
90.0
|
%
|
|
91.4
|
%
|
||
Risk-free interest rate
|
|
0.8
|
%
|
|
1.3
|
%
|
||
Expected life (years)
|
|
1.88
|
|
|
2.63
|
|
September 2016 Warrants
|
|
September 9, 2016
|
||
Closing stock price
|
|
$
|
2.20
|
|
Expected dividend rate
|
|
—
|
%
|
|
Expected stock price volatility
|
|
89.8
|
%
|
|
Risk-free interest rate
|
|
1.4
|
%
|
|
Expected life (years)
|
|
6.00
|
|
6.
|
Debt
|
7.
|
Stock-based Compensation
|
|
|
Nine Months Ended September 30,
|
||||
Service-Based Stock Options
|
|
2016
|
|
2015
|
||
Expected dividend rate
|
|
—
|
%
|
|
—
|
%
|
Expected stock price volatility
|
|
78.7 – 92.2%
|
|
|
77.6 – 88.1%
|
|
Risk-free interest rate
|
|
1.1 – 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
|
|
1,086,030
|
|
|
$
|
3.02
|
|
|
|
|
|
|
|
Exercised
|
|
39,231
|
|
|
$
|
3.06
|
|
|
|
|
$
|
76,827
|
|
Expired
|
|
79,963
|
|
|
$
|
34.98
|
|
|
|
|
|
|
|
Forfeited
|
|
126,631
|
|
|
$
|
3.80
|
|
|
|
|
|
|
|
Outstanding at September 30, 2016
|
|
3,363,605
|
|
|
$
|
4.73
|
|
|
8.4
|
|
$
|
471,219
|
|
Exercisable at September 30, 2016
|
|
1,129,664
|
|
|
$
|
7.83
|
|
|
7.8
|
|
$
|
49,148
|
|
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).
|
|
|
September 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
|
|
$
|
658
|
|
|
$
|
—
|
|
|
$
|
658
|
|
|
$
|
—
|
|
|
$
|
757
|
|
|
$
|
—
|
|
|
$
|
757
|
|
|
$
|
—
|
|
9.
|
Shareholders' Equity
|
10.
|
Preferred Stock
|
11.
|
Net Loss Per Common Share
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
(Amounts in thousands except per share amounts)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss
|
|
$
|
(6,675
|
)
|
|
$
|
(4,416
|
)
|
|
$
|
(13,369
|
)
|
|
$
|
(11,430
|
)
|
Dividends accumulated on convertible preferred stock
|
|
(1,931
|
)
|
|
(1,654
|
)
|
|
(5,591
|
)
|
|
(4,965
|
)
|
||||
Net loss attributable to common shareholders
|
|
$
|
(8,606
|
)
|
|
$
|
(6,070
|
)
|
|
$
|
(18,960
|
)
|
|
$
|
(16,395
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator for basic and diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding
|
|
22,744
|
|
|
23,788
|
|
|
22,678
|
|
|
23,786
|
|
||||
Net loss per share attributable to common shareholders (basic and diluted)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.84
|
)
|
|
$
|
(0.69
|
)
|
(In thousands)
|
|
Total
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
More than 5 Years
|
||||||||||||||
Operating leases
|
|
$
|
24,658
|
|
|
$
|
1,043
|
|
|
$
|
4,933
|
|
|
$
|
4,646
|
|
|
$
|
4,316
|
|
|
$
|
4,413
|
|
|
$
|
5,307
|
|
Purchase commitments
|
|
4,610
|
|
|
440
|
|
|
1,668
|
|
|
1,668
|
|
|
834
|
|
|
—
|
|
|
—
|
|
|||||||
Capital leases
|
|
86
|
|
|
11
|
|
|
43
|
|
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Total
|
|
$
|
29,354
|
|
|
$
|
1,494
|
|
|
$
|
6,644
|
|
|
$
|
6,346
|
|
|
$
|
5,150
|
|
|
$
|
4,413
|
|
|
$
|
5,307
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Total revenues
|
|
$
|
10,929
|
|
|
$
|
11,309
|
|
|
$
|
37,860
|
|
|
$
|
35,748
|
|
Cost of product sales
|
|
6,856
|
|
|
6,772
|
|
|
20,716
|
|
|
19,241
|
|
||||
Gross profit
|
|
4,073
|
|
|
4,537
|
|
|
17,144
|
|
|
16,507
|
|
||||
Total operating expenses
|
|
10,453
|
|
|
9,414
|
|
|
30,500
|
|
|
28,221
|
|
||||
Loss from operations
|
|
(6,380
|
)
|
|
(4,877
|
)
|
|
(13,356
|
)
|
|
(11,714
|
)
|
||||
Other expense
|
|
(295
|
)
|
|
461
|
|
|
(13
|
)
|
|
284
|
|
||||
Net loss
|
|
$
|
(6,675
|
)
|
|
$
|
(4,416
|
)
|
|
$
|
(13,369
|
)
|
|
$
|
(11,430
|
)
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
Revenue by product (in thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Carticel
|
|
$
|
8,319
|
|
|
$
|
7,736
|
|
|
$
|
26,117
|
|
|
$
|
23,917
|
|
Epicel
|
|
2,610
|
|
|
3,246
|
|
|
11,743
|
|
|
11,159
|
|
||||
Bone Marrow
|
|
—
|
|
|
327
|
|
|
—
|
|
|
672
|
|
||||
|
|
$
|
10,929
|
|
|
$
|
11,309
|
|
|
$
|
37,860
|
|
|
$
|
35,748
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Gross profit
|
|
$
|
4,073
|
|
|
$
|
4,537
|
|
|
$
|
17,144
|
|
|
$
|
16,507
|
|
Gross profit %
|
|
37
|
%
|
|
40
|
%
|
|
45
|
%
|
|
46
|
%
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Research and development costs
|
|
3,444
|
|
|
3,740
|
|
|
11,037
|
|
|
11,486
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Dilated Cardiomyopathy
|
|
$
|
1,875
|
|
|
$
|
1,930
|
|
|
$
|
5,732
|
|
|
$
|
7,229
|
|
MACI
|
|
636
|
|
|
903
|
|
|
1,916
|
|
|
1,509
|
|
||||
Carticel
|
|
462
|
|
|
409
|
|
|
1,828
|
|
|
1,409
|
|
||||
Epicel
|
|
470
|
|
|
498
|
|
|
1,561
|
|
|
1,339
|
|
||||
Total research and development expenses
|
|
$
|
3,443
|
|
|
$
|
3,740
|
|
|
$
|
11,037
|
|
|
$
|
11,486
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Selling, general and administrative costs
|
|
$
|
7,010
|
|
|
$
|
5,674
|
|
|
$
|
19,463
|
|
|
$
|
16,735
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
(Increase) decrease in fair value of warrants
|
|
$
|
(203
|
)
|
|
$
|
461
|
|
|
$
|
99
|
|
|
$
|
256
|
|
Foreign currency translation (loss) gain
|
|
(6
|
)
|
|
(5
|
)
|
|
(17
|
)
|
|
5
|
|
||||
Other income
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
||||
Net interest income
|
|
(86
|
)
|
|
5
|
|
|
(85
|
)
|
|
23
|
|
||||
Total other income (expense)
|
|
$
|
(295
|
)
|
|
$
|
461
|
|
|
$
|
(13
|
)
|
|
$
|
284
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(In thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Cost of goods sold
|
|
$
|
117
|
|
|
$
|
59
|
|
|
$
|
330
|
|
|
$
|
245
|
|
Research and development
|
|
133
|
|
|
109
|
|
|
$
|
392
|
|
|
$
|
467
|
|
||
Selling, general and administrative
|
|
404
|
|
|
406
|
|
|
1,251
|
|
|
1,476
|
|
||||
Total non-cash stock-based compensation expense
|
|
$
|
654
|
|
|
$
|
574
|
|
|
$
|
1,973
|
|
|
$
|
2,188
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(Amounts In thousands except per share amounts)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Numerator of basic and diluted EPS
|
|
$
|
(8,606
|
)
|
|
$
|
(6,070
|
)
|
|
$
|
(18,960
|
)
|
|
$
|
(16,395
|
)
|
Add: (Decrease) increase in fair value of warrants
|
|
203
|
|
|
(461
|
)
|
|
(99
|
)
|
|
(256
|
)
|
||||
Add: Dividends accumulated on convertible preferred stock
|
|
1,931
|
|
|
1,654
|
|
|
5,591
|
|
|
4,965
|
|
||||
Adjusted net loss - Non-GAAP
|
|
$
|
(6,472
|
)
|
|
$
|
(4,877
|
)
|
|
$
|
(13,468
|
)
|
|
$
|
(11,686
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Denominator for basic and diluted EPS:
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
|
22,744
|
|
|
23,788
|
|
|
22,678
|
|
|
23,786
|
|
||||
Add: Treasury stock
|
|
1,250
|
|
|
—
|
|
|
1,250
|
|
|
—
|
|
||||
Adjusted denominator for basic and diluted EPS - Non-GAAP
|
|
23,994
|
|
|
23,788
|
|
|
23,928
|
|
|
23,786
|
|
||||
Adjusted net loss per share (basic and diluted) - Non-GAAP
|
|
$
|
(0.27
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.56
|
)
|
|
$
|
(0.49
|
)
|
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
|
|
|
|
5.1
|
|
Opinion of Dykema Gossett PLLC (incorporated by reference to Exhibit 5.1 on Form 8-K filed October 11, 2016).
|
|
|
|
10.1
|
|
Loan and Security Agreement, dated September 9, 2016, between the Company, as borrower, and Silicon Valley Bank, in its capacity as Administrative Agent, and Silicon Valley Bank, MidCap Financial Trust, MidCap Funding III Trust and other lenders listed therein as lenders (incorporated by reference to Exhibit 10.1 on Form 8-K filed September 14, 2016).
|
|
|
|
10.2
|
|
Form of Warrants issued by the Company to the Lenders (incorporated by reference to Exhibit 10.1 on Form 8-K filed September 14, 2016).
|
|
|
|
10.3
|
|
Sales Agreement, dated October 10, 2016, among the Company and Cowen and Company, LLC (incorporated by reference to Exhibit 10.1 on Form 8-K filed October 11, 2016).
|
|
|
|
10.4†**
|
|
Third Amendment to Services Agreement, dated October 12, 2016, by and between the Company and Dohmen Life Science Services, LLC.
|
|
|
|
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.
|
Randomized Clinical Trial
|
|
A clinical trial in which the participants are assigned randomly to different treatment groups.
|
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.
|
Guarantee
. If, with respect to any implant of the Product performed during a Guarantee Period for a Patient that is an eligible member of a Guaranteed Payer (a “Guaranteed Implant”), a Guaranteed Payer denies a claim for reimbursement or reimburses at a rate of less than [***], DLSS agrees to guarantee reimbursement in an amount equal to [***], subject to the payment terms set forth in Section 3 below. Notwithstanding anything to the contrary contained herein, (i) for purposes of this Amendment, all references to [***] shall be fixed at an amount equal to $[***], and (ii) if, with respect to any Guaranteed Implant, a Guaranteed Payer reimburses at a rate of greater than [***], such excess amount shall offset and reduce the aggregate guarantee obligation of DLSS arising under this Section 2.
|
3.
|
Payment of Guarantee
. No later than March 15, 2017, DLSS shall pay to Client an amount equal to (i) the product of (A) the number of Guaranteed Implants, multiplied by (B) [***], less (ii) any amounts collected by DLSS in connection with the Guaranteed Implants (including any amount paid by the Patient or reimbursement paid by the Guaranteed Payer) regardless of whether the amount collected for any particular Guaranteed Implant exceeds [***]. In the event such calculation results in a negative number, no payment under this Amendment will be due to Client, and any amounts collected by DLSS in connection with the submission of claims for the Guaranteed Implants will be remitted to Client as set forth in Section 6 of the Agreement. Upon payment to Client pursuant
|
4.
|
Reimbursement Support
. DLSS shall use commercially reasonable efforts to contract directly with Payers, including but not limited to Medicare, Medicaid, commercial health plans and third party administrators, military facilities, and workers’ compensation plans, based on the reimbursement rates and/or parameters set by Client for the Product as set forth on
Exhibit D
and
Exhibit E
. DLSS and Client agree that the foregoing hereby supersedes and replaces Section III(a)(4)(a) of
Exhibit B
of the Agreement in its entirety. Notwithstanding anything to the contrary, DLSS and Client acknowledge and agree that the obligations of DLSS under Section 3(g) of the Agreement, as amended, are hereby deemed to have been satisfied and that DLSS has no further commitments or obligations thereunder.
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5.
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Administration of Program/Description of Services
. The Program is to be administered pursuant to DLSS SOP’s and Client-specific SOP’s mutually developed by DLSS and Vericel following implementation and in accordance with the Agreement. DLSS and Vericel are to re-evaluate
Exhibit B
of the Agreement, and mutually consider whether the DLSS SOP’s and Client-specific SOP’s should replace parts of
Exhibit B
of the Agreement.
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6.
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Exclusivity
. If there is a 3
rd
party organization that can provide direct contracting services for any payer that DLSS is not able to provide a direct contract, then DLSS and Vericel would be willing to permit an exception to the exclusivity provision contained in Section 4(a)(vi) of the Agreement with respect to reimbursement support/payer contracting,
but
only if such 3
rd
party organization agrees not to take title to the Product and can guarantee a direct contract with such payer. Following an evaluation of results of trial submissions by such 3
rd
party organization, DLSS and Vericel are to discuss possible exception to exclusivity provision, which would be set forth in an amendment to the Agreement as mutually agreed upon by the parties hereto under which Vericel would contract directly with such 3
rd
party organization. DLSS and Vericel mutually agree to discuss reimbursement support services for military Payers.
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7.
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Operational Metrics & Reporting
. Vericel is to review and evaluate the operational metrics proposed by DLSS. Following such evaluation, the parties hereto would update and revise any existing metrics based on mutually agreed operational metrics. DLSS and Vericel are to mutually evaluate and determine those reports that are important to the program. Following such evaluation, an amendment to the Agreement would update and revise the reporting obligations contained in
Exhibit C
of the Agreement.
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8.
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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.
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DOHMEN LIFE SCIENCE SERVICES, LLC
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VERICEL CORPORATION
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By: /
s/Joe Nolan
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By: /
s/ Dominick C. Colangelo
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Name: Joe Nolan
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Name: Dominick C. Colangelo
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Title: President DLSS
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Title: President and CEO
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/s/ DOMINICK C. COLANGELO
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Dominick C. Colangelo
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President and Chief Executive Officer
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(Principal Executive Officer)
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/s/ GERARD MICHEL
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Gerard Michel
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Chief Financial Officer and Vice President, Corporate Development
|
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(
Principal Financial Officer)
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/s/ DOMINICK C. COLANGELO
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Dominick C. Colangelo
|
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President and Chief Executive Officer
|
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(Principal Executive Officer)
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/s/ GERARD MICHEL
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Gerard Michel
|
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Chief Financial Officer and Vice President, Corporate Development
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(Principal Financial Officer)
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