Item 7 of this Annual Report (“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors
That May Affect Future Results and Financial Condition – Risks Related to Our Cell Therapy Product Development Efforts; and –
Risks Related to Government Regulation.”). The FDA approval process can be lengthy, expensive and uncertain and there is no guarantee
of ultimate approval or clearance.
We
anticipate that much of our development work in this area will take place at our laboratory facility, outside core facilities at academic,
research or medical institutions, or contractors. See “Laboratory” below.
Curved
Needle Device
Pursuant
to the Regenerative License Agreement discussed under “Disc/Spine Program-License” above, we have licensed and further developed
an investigational curved needle device (“CND”) that is a needle system with a curved inner cannula to allow access to difficult-to-locate
regions for the delivery or removal of fluids and other substances. The investigational CND is intended to deliver stem cells and/or
other therapeutic products or material to the interior of a human intervertebral disc, the spine region, or potentially other areas of
the body. The device is designed to rely on the use of pre-curved nested cannulae that allow the cells or material to be deposited in
the posterior and lateral aspects of the disc to which direct access is not possible due to outlying structures such as vertebra, spinal
cord and spinal nerves. We anticipate that the use of the investigational CND will facilitate the delivery of substances, including living
cells, to specific locations within the body and minimize the potential for damage to nearby structures. The investigational device may
also have more general use applications. In August 2015, a United States patent for the CND was issued to the licensor, Regenerative.
We anticipate that FDA approval or clearance will be necessary for the investigational CND prior to commercialization. We do not intend
to utilize the CND in connection with our contemplated Phase 2 clinical trial with regard to BRTX-100. See “Government Regulation”
below and Item 7 of this Annual Report (“Management’s Discussion and Analysis of Financial Condition and Results of Operations
- Factors That May Affect Future Results and Financial Condition – Risks Related to Our Cell Therapy Product Development Efforts;
and – Risks Related to Government Regulation.”). The FDA review and approval process can be lengthy, expensive and uncertain
and there is no guarantee of ultimate approval or clearance.
Laboratory
We
have established a laboratory in Melville, New York for research purposes and have built a cleanroom within the laboratory for the possible
production of cell-based product candidates, such as BRTX-100, for use in a clinical trial, for third party cell products or general
research purposes.
As
operations grow, our plans include the expansion of our laboratory to perform cellular characterization and culturing, protocol and stem
cell-related IP development, translational research and therapeutic outcome analysis. As we develop our business and our stem cell product
candidates and obtain regulatory approval, we will seek to establish ourselves as a key provider of adult stem cells for therapies and
expand to provide cells in other market areas for stem cell therapy. We may also use outside laboratories specializing in cell therapy
services and manufacturing of cell products.
Technology;
Research and Development
We
intend to utilize our laboratory or a third party laboratory in connection with cellular research activities. We also intend to obtain
cellular-based therapeutic technology licenses and increase our IP portfolio. We intend to seek to develop potential stem cell delivery
systems or devices. The goal of these specialized delivery systems or devices is to deliver cells into specific areas of the body, control
the rate, amount and types of cells used in a treatment, and populate these areas of the body with sufficient stem cells so that there
is a successful therapeutic result.
We
also intend to perform research to develop certain stem cell optimization compounds, media designed to enhance cellular growth and regeneration
for the purpose of improving pre-treatment and post-treatment outcomes.
In
our Disc/Spine Program, two patent applications have been filed with regard to technology that is the subject of the Regenerative
License Agreement (see “Disc/Spine Program-License” above). Regenerative has been issued a patent from one of these applications
with regard to its curved needle therapeutic delivery device. The other application remains pending. The patents that are the subject
of the Regenerative License Agreement have been assigned to Regenexx, LLC which we have been advised is an affiliate of Regenerative.
In
our ThermoStem Program, we have two pending United States patent applications and five United States patents within three patent
families. With regards to the first patent family in the ThermoStem Program, patent applications have been filed in five foreign
jurisdictions (of which four applications have been granted as foreign patents and one application, which is not listed in the table
below, has lapsed). With regards to the second patent family in the ThermoStem Program, patent applications have been filed in
four foreign jurisdictions (of which three applications have been granted as foreign patents). With regards to the third patent family
in the ThermoStem Program, a U.S. application and PCT application have been filed.
Our
patent applications and those of Regenexx, LLC are currently in prosecution (i.e., we and Regenexx, LLC are seeking issued patents).
A description of the active patent applications and issued patents is set forth in the table below:
Program Patent Family I.D. Jurisdiction Title
1 U.S. Patent No. 9,113,950 B2** US Therapeutic delivery device
Metabolic 2 U.S. Patent No. 9,133,438 US Brown fat cell compositions and methods
3 U.S. Patent No. 10,167,449 US Human brown adipose derived stem cells and uses
*Patent
application filed by licensor assignee, Regenexx, LLC
**Patent
issued to licensor assignee, Regenexx, LLC
***Application
has been allowed, but not yet issued as a US patent.
In
March 2014, we entered into a Research and Development Agreement with Rohto Pharmaceutical Co., Ltd., a Japanese pharmaceutical company
(“Rohto”). Pursuant to the Research and Development Agreement with Rohto, we were engaged to provide research and development
services with regard to stem cells.
In
March 2014, we entered into the Research Agreement with Pfizer, as discussed above under “Metabolic Brown Adipose (Fat) Program.”
We
have secured registrations in the U.S. Patent and Trademark Office for the following trademarks:
●
● THERMOSTEM
● STEM PEARLS
We
own an allowed application in the U.S. Patent and Trademark Office for the trademark BRTX. The Dragonfly Logo is also registered
with the U.S. Copyright Office.
We
also have federal common law rights in the trademark BioRestorative Therapies and other trademarks and trade names used in the
conduct of our business that are not registered.
Our
success will depend in large part on our ability to develop and protect our proprietary technology. We intend to rely on a combination
of patent, trade secret and know-how, copyright and trademark laws, as well as confidentiality agreements, licensing agreements, non-compete
agreements and other agreements, to establish and protect our proprietary rights. Our success will also depend upon our ability to avoid
infringing upon the proprietary rights of others, for if we are judicially determined to have infringed such rights, we may be required
to pay damages, alter our services, products or processes, obtain licenses or cease certain activities.
During
the years ended December 31, 2020 and 2019, we incurred $876,829 and $1,722,338, respectively, in research and development expenses.
Scientific
Advisors
We
have established a Scientific Advisory Board whose purpose is to provide advice and guidance in connection with scientific matters relating
to our business. The Scientific Advisory Board has established a Disc Advisory Committee which focuses on matters relating to our Disc/Spine
Program. Our Scientific Advisory Board members are Dr. Wayne Marasco (Chairman), Dr. Naiyer Imam, Dr. Wayne Olan, Dr. Joy Cavagnaro,
Dr. Jason Lipetz, Dr. Harvinder Sandhu, Dr. Christopher Plastaras and Dr. Gerard A. Malanga. The Disc Advisory Committee members are
Dr. Lipetz (Chairman), Dr. Olan, Dr. Sandhu, Dr. Plastaras and Dr. Malanga. See Item 10 of this Annual Report (“Directors, Executive
Officers and Corporate Governance–Scientific Advisors”) for a listing of the principal positions for Drs. Marasco, Imam,
Olan, Cavagnaro, Lipetz, Sandhu, Plastaras and Malanga.
Competition
We
will compete with many pharmaceutical, biotechnology and medical device companies, as well as other private and public stem cell companies
involved in the development and commercialization of cell-based medical technologies and therapies.
Regenerative
medicine is rapidly progressing, in large part through the development of cell-based therapies or devices designed to isolate cells from
human tissues. Most efforts involve cell sources, such as bone marrow, adipose tissue, embryonic and fetal tissue, umbilical cord and
peripheral blood and skeletal muscle.
Companies
working in the area of regenerative medicine with regard to the disc and spine include, among others, Mesoblast, SpinalCyte, DiscGenics
and Isto Biologics. Companies that are developing products and therapies to combat obesity and diabetes, including through the use of
brown fat, include, among others, Novo Nordisk, Sanofi, Merck, Eli Lilly, Roche, Pfizer and Regeneron.
Many
of our competitors and potential competitors have substantially greater financial, technological, research and development, marketing
and personnel resources than we do. We cannot, with any accuracy, forecast when or if these companies are likely to bring their products
and therapies to market in competition with those that we are pursuing.
With
the enactment of the Biologics Price Competition and Innovation Act of 2009 (the “BPCIA”), an abbreviated pathway for the
approval of biosimilar and interchangeable biological products was created. For the FDA to approve a biosimilar product, it must find
that there are no clinically meaningful differences between the reference product and the proposed biosimilar product. Interchangeability
requires that a product is biosimilar to the reference product, and the product must demonstrate that it can be expected to produce the
same clinical results as the reference product and, for products administered multiple times, the biologic and the reference biologic
may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to
exclusive use of the reference biologic. Under the BPCIA, an application for a biosimilar product cannot be submitted to the FDA until
four years following approval of the reference product, and it may not be approved by the FDA until 12 years after the original branded
product is approved under a biologics license application (“BLA”).
We
believe that, if any of our product candidates are approved as a biological product under a BLA, it should qualify for the 12-year period
of exclusivity. However, there is a risk that the FDA could permit biosimilar applicants to reference approved biologics other than our
therapeutic candidates, thus circumventing our exclusivity and potentially creating the opportunity for competition sooner than anticipated.
Additionally, this period of regulatory exclusivity does not apply to companies pursuing regulatory approval via their own traditional
BLA, rather than via the abbreviated pathway. Moreover, the extent to which a biosimilar, once approved, will be substituted for any
one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear,
and will depend on a number of marketplace and regulatory factors that are still developing.
Set
forth below is a comparison of BRTX-100 to Mesoblast’s adult stem cell biologic:
We
believe that BRTX-100 has competitive advantages to Mesoblast’s product for the following reasons:
● Strong runway for value creation with successful clinical results
Customers
Upon
regulatory approval, our cell product candidates are intended to be marketed to physicians, other health care professionals, hospitals,
research institutions, pharmaceutical companies and the military. It is anticipated that physicians who are trained and skilled in performing
spinal injections will be the physicians most likely to treat discs with injections of BRTX-100 upon regulatory approval. These
physicians would include interventional physiatrists (physical medicine physicians), pain management anesthesiologists, interventional
radiologists and neurosurgeons.
Governmental
Regulation
U.S.
Government Regulation
The
health care industry is highly regulated in the United States. The federal government, through various departments and agencies, state
and local governments, and private third-party accreditation organizations, regulate and monitor the health care industry, associated
products, and operations. The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose
substantial requirements upon the clinical development, approval, manufacture, distribution and marketing of medical products, including
drugs, biologics, and medical devices. These agencies and other federal, state and local entities regulate research and development activities
and the testing, manufacture, quality control, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval,
post-approval monitoring, advertising, promotion, sampling and import and export of medical products. The following is a general overview
of the laws and regulations pertaining to our business.
FDA
Regulation of Stem Cell Treatment and Products
The
FDA regulates the manufacture of human stem cell treatments and associated products under the authority of the Public Health Service
Act (“PHSA”) and the Federal Food, Drug, and Cosmetic Act (“FDCA”). Stem cells can be regulated under the FDA’s
Human Cells, Tissues, and Cellular and Tissue-Based Products Regulations (“HCT/Ps”) or may also be subject to the FDA’s
drug, biologic, or medical device regulations, each as discussed below.
Human
Cells, Tissues, and Cellular and Tissue-Based Products Regulation
Under
Section 361 of the PHSA, the FDA issued specific regulations governing the use of HCT/Ps in humans. Pursuant to Part 1271 of Title 21
of the Code of Federal Regulations (“CFR”) (the “HCT/P Regulations”), the FDA established a unified registration
and listing system for establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor
eligibility determinations; current good tissue practices covering all stages of production, including harvesting, processing, manufacture,
storage, labeling, packaging, and distribution; and other procedures to prevent the introduction, transmission, and spread of communicable
diseases.
The
HCT/P Regulations define HCT/Ps as articles “containing or consisting of human cells or tissues that are intended for implantation,
transplantation, infusion or transfer into a human recipient.” The HCT/P Regulations strictly constrain the types of products that
may be regulated solely as HCT/P. Factors considered include the degree of manipulation, whether the product is intended for a homologous
function, whether the product has been combined with noncellular or non-tissue components, and the product’s effect or dependence
on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissue-based products have been only
minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and
do not depend on or have any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit
a list of manufactured products, and adopt and implement procedures for the control of communicable diseases. If one or more of the above
factors has been exceeded, the product would be regulated as a drug, biological product, or medical device rather than an HCT/P.
Because
we are an enterprise in the early stages of operations and have not generated significant revenues from operations, it is difficult to
anticipate the likely regulatory status of the array of products and services that we may offer. We believe that some of the adult autologous
(self-derived) stem cells that will be used in our cellular therapy products and services, including the brown adipose (fat) tissue that
we intend to use in our ThermoStem Program, may be regulated by the FDA as HCT/Ps under the HCT/P Regulations. However, the FDA
may disagree with this position or conclude that some or all of our stem cell therapy products or services do not meet the applicable
definitions and exemptions to the regulation. In July 2020, the FDA issued an updated guidance document entitled “Regulatory Considerations
for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use” that provides additional
guidance on how FDA interprets the HCT/P Regulations, particularly the definition of the terms “minimally manipulated” and
“homologous use.” In the guidance, FDA stated it will exercise enforcement discretion until May 31, 2021 for products that
do not comply with the HCT/P Regulations. After that date, manufacturers of products marketed as HCT/Ps that do not comply with the HCT/P
Regulations will be subject to immediate FDA enforcement action. If we are not regulated solely under the HCT/P Regulations, we would
need to expend significant resources to comply with the FDA’s broad regulatory authority under the FDCA. Third party litigation
concerning the autologous use of a stem cell mixture to treat musculoskeletal and spinal injuries has increased the likelihood that some
of our products and services are likely to be regulated as a drug or biological product and require FDA approval. In past litigation,
the FDA asserted that the defendants’ use of cultured stem cells without FDA approval is in violation of the FDCA, claiming that
the defendants’ product is a drug. The defendants asserted that their procedure is part of the practice of medicine and therefore
beyond the FDA’s regulatory authority. The District Court ruled in favor of the FDA, and in February 2014 the Circuit Court affirmed
the District Court’s holding.
If
regulated solely under the FDA’s HCT/P statutory and regulatory provisions, once our laboratory in the United States becomes operational,
it will need to satisfy the following requirements, among others, to process and store stem cells:
● registration and listing of HCT/Ps with the FDA;
● adverse event reporting;
● FDA inspection; and
Non-reproductive
HCT/Ps and non-peripheral blood stem/progenitor cells that are offered for import into the United States and regulated solely under Section
361 of the PHSA must also satisfy the requirements under 21 C.F.R. § 1271.420. Section 1271.420 requires that the importer of record
of HCT/Ps notify the FDA prior to, or at the time of, importation and provide sufficient information for the FDA to make an admissibility
decision. In addition, the importer must hold the HCT/P intact and under conditions necessary to prevent transmission of communicable
disease until an admissibility decision is made by the FDA.
If
the FDA determines that we have failed to comply with applicable regulatory requirements, it can impose a variety of enforcement actions
including public warning letters, fines, consent decrees, orders of retention, recall or destruction of product, orders to cease manufacturing,
and criminal prosecution. If any of these events were to occur, it could materially adversely affect us.
To
the extent that our cellular therapy activities are limited to developing products and services outside the United States, as described
in detail below, the products and services would not be subject to FDA regulation, but will be subject to the applicable requirements
of the foreign jurisdiction. We intend to comply with all applicable foreign governmental requirements.
Drug
and Biological Product Regulation
An
HCT/P product that does not meet the criteria for being solely regulated under Section 361 of the PHSA will be regulated as a drug, device
or biological product under the FDCA and/or Section 351 of the PHSA, and applicable FDA regulations. The FDA has broad regulatory authority
over drugs and biologics marketed for sale in the United States. The FDA regulates the research, clinical testing, manufacturing, safety,
effectiveness, labeling, storage, recordkeeping, promotion, distribution, and production of drugs and biological products. The FDA also
regulates the export of drugs and biological products manufactured in the United States to international markets in certain situations.
The
process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following:
●
completion of non-clinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practice (“GLP”)
or other applicable regulations;
●
submission of an IND, which allows clinical trials to begin unless the FDA objects within 30 days;
●
performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug or biologic
for its intended use or uses conducted in accordance with FDA regulations and Good Clinical Practices (“GCP”), which are
international ethical and scientific quality standards meant to ensure that the rights, safety and well-being of trial participants are
protected and that the integrity of the data is maintained;
●
registration of clinical trials of FDA-regulated products and certain clinical trial information;
●
preparation and submission to the FDA of a new drug application (“NDA”), in the case of a drug or BLA in the case of a biologic;
●
review of the product by an FDA advisory committee, where appropriate or if applicable;
●
satisfactory completion of pre-approval inspection of manufacturing facilities and clinical trial sites at which the product, or components
thereof, are produced to assess compliance with Good Manufacturing Practice, or cGMP, requirements and of selected clinical trial sites
to assess compliance with GCP requirements; and
●
FDA approval of an NDA or BLA which must occur before a drug or biologic can be marketed or sold.
Approval
of an NDA requires a showing that the drug is safe and effective for its intended use and that the methods, facilities, and controls
used for the manufacturing, processing, and packaging of the drug are adequate to preserve its identity, strength, quality, and purity.
To obtain a BLA, a manufacturer must show that the proposed product is safe, pure, and potent and that the facility in which the product
is manufactured, processed, packed, or held meets established quality control standards.
For
purposes of an NDA or BLA approval by the FDA, human clinical trials are typically conducted in the following phases (which may overlap):
●
Phase 1: The investigational product is initially given to healthy human subjects or patients and tested for safety, dosage tolerance,
absorption, metabolism, distribution and excretion. These trials may also provide early evidence on effectiveness. During Phase 1 clinical
trials, sufficient information about the investigational product’s pharmacokinetics and pharmacologic effects may be obtained to
permit the design of well-controlled and scientifically valid Phase 2 clinical trials.
●
Phase 2: These clinical trials are conducted in a limited number of human subjects in the target population to identify possible adverse
effects and safety risks, to determine the efficacy of the investigational product for specific targeted diseases and to determine dosage
tolerance and dosage levels. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning
larger and more costly Phase 3 clinical trials.
●
Phase 3: Phase 3 clinical trials are undertaken after Phase 2 clinical trials demonstrate that a dosage range of the investigational
product appears effective and has a tolerable safety profile. The Phase 2 clinical trials must also provide sufficient information for
the design of Phase 3 clinical trials. Phase 3 clinical trials are conducted to provide statistically significant evidence of clinical
efficacy and to further test for safety risks in an expanded human subject population at multiple clinical trial sites. These clinical
trials are intended to further evaluate dosage, effectiveness and safety, to establish the overall benefit-risk profile of the investigational
product and to provide an adequate basis for product labeling and approval by the FDA. In most cases, the FDA requires two adequate and
well-controlled Phase 3 clinical trials to demonstrate the efficacy of an investigational drug or biologic.
All
clinical trials must be conducted in accordance with FDA regulations, GCP requirements and their protocols in order for the data to be
considered reliable for regulatory purposes. Progress reports detailing the results of the clinical trials must be submitted at least
annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed
successfully within any specified period, or at all. These government regulations may delay or prevent approval of product candidates
for a considerable period of time and impose costly procedures upon our business operations.
The
FDA may require, or companies may pursue, additional clinical trials, referred to as Phase 4 clinical trials, after a product is approved.
Such trials may be made a condition to be satisfied for continuing drug approval. The results of Phase 4 clinical trials can confirm
the effectiveness of a product candidate and can provide important safety information. In addition, the FDA has authority to require
sponsors to conduct post-marketing trials to specifically address safety issues identified by the agency.
Under
the Pediatric Research Equity Act (“PREA”), certain NDAs and BLAs and certain supplements to an NDA or BLA must contain data
to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing
and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission
of pediatric data or full or partial waivers. The Food and Drug Administration Safety and Innovation Act (“FDASIA”) amended
the FDCA to require that a sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient,
new indication, new dosage form, new dosing regimen, or new route of administration submit an initial Pediatric Study Plan (“PSP”)
within 60 days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase
3 or Phase 2/3 study. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including
study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed
information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from
pediatric studies along with supporting information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit
amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from
preclinical studies, early phase clinical trials, and/or other clinical development programs.
Changes
to some of the conditions established in an approved application, including changes in indications, labeling, manufacturing processes
or facilities, require submission and FDA approval of a new NDA or BLA, or an NDA or BLA supplement, before the change can be implemented.
An NDA or BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA
uses the same procedures and actions in reviewing NDA and BLA supplements as it does in reviewing NDAs and BLAs.
Drug
and biological products must also comply with applicable requirements, including monitoring and recordkeeping activities, manufacturing
requirements, reporting to the applicable regulatory authorities of adverse experiences with the product, providing the regulatory authorities
with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising
requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or
in patient populations that are not described in the drug’s approved labeling, or off-label use, limitations on industry-sponsored
scientific and educational activities and requirements for promotional activities involving the internet. Although physicians may, in
their independent professional medical judgment, prescribe legally available drugs for off-label uses, manufacturers typically may not
market or promote such off-label uses. Modifications or enhancements to the product or its labeling, or changes of the site of manufacture,
are often subject to the approval of the FDA and other regulators, who may or may not grant approval or may include a lengthy review
process.
In
the event that the FDA does not regulate our product candidates in the United States solely under the HCT/P regulation, our products
and activities could be regulated as drug or biological products under the FDCA. If regulated as drug or biological products, we will
need to expend significant resources to ensure regulatory compliance. If an IND and NDA or BLA are required for any of our product candidates,
there is no assurance as to whether or when we will receive FDA approval of the product candidate. The process of designing, conducting,
compiling and submitting the non-clinical and clinical studies required for NDA or BLA approval is time-consuming, expensive and unpredictable.
The process can take many years, depending on the product and the FDA’s requirements.
In
addition, even if a product candidate receives regulatory approval, the approval may be limited to specific disease states, patient populations
and dosages, or might contain significant limitations on use in the form of warnings, precautions or contraindications, or in the form
of onerous risk management plans, restrictions on distribution or use, or post-marketing trial requirements. Further, even after regulatory
approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product, including
safety labeling or imposition of a Risk Evaluation and Mitigation Strategy (“REMS”), the requirement to conduct post-market
studies or clinical trials or even complete withdrawal of the product from the market. Delay in obtaining, or failure to obtain, regulatory
approval for our products, or obtaining approval but for significantly limited use, would harm our business. Further, we cannot predict
what adverse governmental regulations may arise from future United States or foreign governmental action.
If
the FDA determines that we have failed to comply with applicable regulatory requirements, it can impose a variety of enforcement actions
from public warning letters, fines, injunctions, consent decrees and civil penalties to suspension or delayed issuance of approvals,
seizure of our products, total or partial shutdown of our production, withdrawal of approvals, and criminal prosecutions. If any of these
events were to occur, it could materially adversely affect us.
FDA
Expedited Review Programs
The
FDA is authorized to expedite the review of NDAs and BLAs in several ways. Under the Fast Track program, the sponsor of a drug or biologic
product candidate may request the FDA to designate the product for a specific indication as a Fast Track product concurrent with or after
the filing of the IND. Drug and biologic products are eligible for Fast Track designation if they are intended to treat a serious or
life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies
to the combination of the product candidate and the specific indication for which it is being studied.
In
addition to other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of
a Fast Track NDA or BLA before the application is complete, a process known as rolling review.
Any
product submitted to the FDA for marketing, including under a Fast Track program, may also be eligible for the following other types
of FDA programs intended to expedite development and review:
●
Breakthrough therapy designation. To qualify for the breakthrough therapy program, product candidates must be intended to treat a serious
or life-threatening disease or condition, and preliminary clinical evidence must indicate that such product candidates may demonstrate
substantial improvement on one or more clinically significant endpoints over existing therapies. The FDA will seek to ensure the sponsor
of a breakthrough therapy product candidate receives intensive guidance on an efficient drug development program, intensive involvement
of senior managers and experienced staff on a proactive, collaborative and cross-disciplinary review, and rolling review.
●
Priority review. A product candidate is eligible for priority review if it treats a serious condition and, if approved, it would be a
significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention of a serious condition compared to marketed
products. The FDA aims to complete its review of priority review applications within six months as opposed to ten months for standard
review.
●
Accelerated approval. Drug or biologic products studied for their safety and effectiveness in treating serious or life-threatening illnesses
and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval. Accelerated approval means
that a product candidate may be approved on the basis of adequate and well-controlled clinical trials establishing that the product candidate
has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical
endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity
and prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require
that a sponsor of a drug or biologic product candidate receiving accelerated approval perform adequate and well-controlled post-marketing
clinical trials. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials.
Fast
Track designation, breakthrough therapy designation, priority review and accelerated approval do not change the standards for approval
but may expedite the development or approval process.
Further,
with the passage of the 21st Century Cures Act (the “Cures Act”) in December 2016, Congress authorized the FDA to accelerate
review and approval of products designated as regenerative advanced therapies. A product is eligible for this designation if it is a
regenerative medicine advanced therapy (“RMAT”) (which may include a cell therapy) that is intended to treat, modify, reverse
or cure a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug has the potential
to address unmet medical needs for such disease or condition. The benefits of a RMAT designation include early interactions with the
FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for priority review and accelerated
approval based on surrogate or intermediate endpoints.
Medical
Device Regulation
The
FDA also has broad authority over the regulation of medical devices marketed for sale in the United States. The FDA regulates the research,
clinical testing, manufacturing, safety, labeling, storage, recordkeeping, premarket clearance or approval, promotion, distribution,
and production of medical devices. The FDA also regulates the export of medical devices manufactured in the United States to international
markets.
Under
the FDCA, medical devices are classified into one of three classes, Class I, Class II, or Class III, depending upon the degree of risk
associated with the medical device and the extent of control needed to ensure safety and effectiveness. Class I devices are subject to
the lowest degree of regulatory scrutiny because they are considered low risk devices and need only comply with the FDA’s General
Controls. The General Controls include compliance with the registration, listing, adverse event reporting requirements, and applicable
portions of the Quality System Regulation as well as the general misbranding and adulteration prohibitions.
Class
II devices are subject to the General Controls as well as certain Special Controls such as 510(k) premarket notification. Class III devices
are subject to the highest degree of regulatory scrutiny and typically include life supporting and life sustaining devices and implants.
They are subject to the General Controls and Special Controls that include a premarket approval application (“PMA”). “New”
devices are automatically regulated as Class III devices unless they are shown to be low risk, in which case they may be subject to de
novo review to be moved to Class I or Class II. Clinical research of an investigational device is subject to the FDA’s Investigational
Device Exemption (“IDE”) regulations. Nonsignificant risk devices are subject to abbreviated requirements that do not require
a submission to the FDA but must have Institutional Review Board (IRB) approval and comply with other requirements pertaining to informed
consent, labeling, recordkeeping, reporting, and monitoring. Significant risk devices require the submission of an IDE application to
the FDA and the FDA’s approval of the IDE application.
The
FDA premarket clearance and approval process can be lengthy, expensive and uncertain. It generally takes three to twelve months from
submission to obtain 510(k) premarket clearance, although it may take longer. Approval of a PMA could take one to four years, or more,
from the time the application is submitted and there is no guarantee of ultimate clearance or approval. Securing FDA clearances and approvals
may require the submission of extensive clinical data and supporting information to the FDA. Additionally, the FDA actively enforces
regulations prohibiting marketing and promotion of devices for indications or uses that have not been cleared or approved by the FDA.
In addition, modifications or enhancements of products that could affect the safety or effectiveness or effect a major change in the
intended use of a device that was either cleared through the 510(k) process or approved through the PMA process may require further FDA
review through new 510(k) or PMA submissions.
In
the event we develop processes, products or services which qualify as medical devices subject to FDA regulation, we intend to comply
with such regulations. If the FDA determines that our products are regulated as medical devices and we have failed to comply with applicable
regulatory requirements, it can impose a variety of enforcement actions from public warning letters, application integrity proceedings,
fines, injunctions, consent decrees and civil penalties to suspension or delayed issuance of approvals, seizure of our products, total
or partial shutdown of our production, withdrawal of approvals, and criminal prosecutions. If any of these events were to occur, it could
materially adversely affect us.
Current
Good Manufacturing Practices and other FDA Regulations of Cellular Therapy Products
Products
that fall outside of the HCT/P regulations and are regulated as drugs, biological products, or devices must comply with applicable cGMP
regulations. These cGMPs and related quality standards are designed to ensure the products that are processed at a facility meet the
FDA’s applicable requirements for identity, strength, quality, sterility, purity, and safety. In the event that our domestic United
States operations are subject to the FDA’s drug, biological product, or device regulations, we intend to comply with the applicable
cGMPs and quality regulations.
If
the FDA determines that we have failed to comply with applicable regulatory requirements, it can impose a variety of enforcement actions
from public warning letters, fines, injunctions, consent decrees and civil penalties to suspension or delayed issuance of approvals,
seizure of our products, total or partial shutdown of our production, withdrawal of approvals, and criminal prosecutions. If any of these
events were to occur, it could materially adversely affect us.
Promotion
of Foreign-Based Cellular Therapy Treatment— “Medical Tourism”
We
may establish, or license technology to third parties in connection with their establishment of, adult stem cell therapy facilities outside
the United States. We also intend to work with hospitals and physicians to make the stem cell-based therapies available for patients
who travel outside the United States for treatment. “Medical tourism” is defined as the practice of traveling across international
borders to obtain health care.
The
Federal Trade Commission (the “FTC”) has the authority to regulate and police advertising of medical treatments, procedures,
and regimens in the United States under the Federal Trade Commission Act (the “FTCA”). The FTC has regulatory authority to
prevent unfair and deceptive practices and false advertising. Specifically, the FTC requires advertisers and promoters to have a reasonable
basis to substantiate and support claims. The FTC has many enforcement powers, one of which is the power to order disgorgement by promoters
deemed in violation of the FTCA of any profits made from the promoted business and can order injunctions from further violative promotion.
Advertising that we may utilize in connection with our medical tourism operations will be subject to FTC regulatory authority, and we
intend to comply with such regulatory régime. Similar laws and requirements are likely to exist in other countries and we intend
to comply with such requirements.
Federal
Regulation of Clinical Laboratories
Congress
passed the Clinical Laboratory Improvement Amendments (“CLIA”) in 1988, which provided the Centers for Medicare and Medicaid
Services (“CMS”) authority over all laboratory testing, except research, that is performed on humans in the United States.
The Division of Laboratory Services, within the Survey and Certification Group, under the Center for Medicaid and State Operations (“CMSO”)
has the responsibility for implementing the CLIA program.
The
CLIA program is designed to establish quality laboratory testing by ensuring the accuracy, reliability, and timeliness of patient test
results. Under CLIA, a laboratory is a facility that does laboratory testing on specimens derived from humans and used to provide information
for the diagnosis, prevention, treatment of disease, or impairment of, or assessment of health. Laboratories that handle stem cells and
other biologic matter are, therefore, included under the CLIA program. Under the CLIA program, laboratories must be certified by the
government, satisfy governmental quality and personnel standards, undergo proficiency testing, be subject to inspections, and pay fees.
To the extent that our business activities require CLIA certification, we intend to obtain and maintain such certification. If we are
subject to CLIA, the failure to comply with CLIA standards could result in suspension, revocation, or limitation of a laboratory’s
CLIA certificate. In addition, fines or criminal penalties could also be levied. If any of these events were to occur, it could impact
our business operations.
Health
Insurance Portability and Accountability Act—Protection of Patient Health Information
We
may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
The Health Insurance Portability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and
Clinical Health Act (“HITECH”) and their respective implementing regulations, including the Final Omnibus Rule published
on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health
information on certain types of individuals and organizations. In addition, certain state laws govern the privacy and security of health
information in certain circumstances, many of which differ from each other and from HIPAA in significant ways and may not have the same
effect, thus complicating compliance efforts. Further, we may need to also comply with additional federal or state privacy laws and regulations
that may apply to certain diagnoses, such as HIV/AIDS, to the extent that they apply to us.
The
Department of Health and Human Services (“HHS”), through its Office for Civil Rights, investigates breach reports and determines
whether administrative or technical modifications are required and whether civil or criminal sanctions should be imposed. Companies failing
to comply with HIPAA and the implementing regulations may also be subject to civil money penalties or in the case of knowing violations,
potential criminal penalties, including monetary fines, imprisonment, or both. In some cases, the State Attorneys General may seek enforcement
and appropriate sanctions in federal court.
Other
Applicable U.S. Laws
In
addition to the above-described regulation by United States federal and state government, the following are other federal and state laws
and regulations that could directly or indirectly affect our ability to operate the business:
● state and local licensure of medical professionals;
● state statutes and regulations related to the corporate practice of medicine;
● other laws and regulations administered by the FDA;
● other laws and regulations administered by HHS;
● the federal False Claims Act (“FCA”);
● federal and state coverage and reimbursement laws and regulations;
● state and other federal laws addressing the privacy of health information; and
Violation
of any of the laws described above or any other governmental laws and regulations may result in penalties, including civil and criminal
penalties, damages, fines, the curtailment or restructuring of operations, the exclusion from participation in federal and state healthcare
programs and imprisonment. Furthermore, efforts to ensure that business activities and business arrangements comply with applicable healthcare
laws and regulations can be costly for manufacturers of branded prescription products.
Foreign
Government Regulation
In
general, we will need to comply with the government regulations of each individual country in which our therapy centers are located and
products are to be distributed and sold. These regulations vary in complexity and can be as stringent, and on occasion even more stringent,
than FDA regulations in the United States. Due to the fact that there are new and emerging cell therapy regulations that have recently
been drafted and/or implemented in various countries around the world, the application and subsequent implementation of these new and
emerging regulations have little to no precedence. Therefore, the level of complexity and stringency is not always precisely understood
for each country, creating greater uncertainty for the international regulatory process. Furthermore, government regulations can change
with little to no notice and may result in up-regulation of our product(s), thereby creating a greater regulatory burden for our cell
processing technology products. We have not yet thoroughly explored the applicable laws and regulations that we will need to comply with
in foreign jurisdictions. It is possible that we may not be permitted to expand our business into one or more foreign jurisdictions.
We
do not have any definitive plans or arrangements with respect to the establishment by us of stem cell therapy clinics in any country.
We intend to explore any such opportunities as they arise.
Offices
Our
principal executive offices are located at 40 Marcus Drive, Suite One, Melville, New York, and our telephone number is (631) 760-8100.
Our website is www.biorestorative.com. Our internet website and the information contained therein or connected thereto are not intended
to be incorporated by reference into this Annual Report.
Employees
We
currently have five employees, all of whom are full-time employees. We believe that our employee relations are good.
ITEM 1A. RISK FACTORS.
Not
applicable. See, however, Item 7 of this Annual Report (“Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Factors That May Affect Future Results and Financial Condition”).
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not
applicable.
ITEM 2. PROPERTIES.
Our
principal executive offices and laboratory are located at 40 Marcus Drive, Suite One, Melville, New York. We occupy 6,800 square feet
of space at the premises pursuant to a lease that expires in December 2024. The lease provides for an annual base rental during the five
year period ending in December 2024 ranging between $153,748 and $173,060. Our premises are suitable and adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS.
Not
applicable. See, however, Item 1 of this Annual Report (“Business – Business Development – Chapter 11 Reorganization”)
for a discussion of a voluntary petition filed by us in March 2020 commencing a case under chapter 11 of title 11 of the U.S. Code in
the United States Bankruptcy Court for the Eastern District of New York. The Amended Joint Plan of Reorganization filed in connection
with the proceeding became effective on November 16, 2020.
ITEM 4. MINE SAFETY DISCLOSURES.
Not
applicable.
PART II
Market
Information
Transactions
in our common stock are currently reported under the symbol “BRTX” on the OTC markets. Any over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.
Holders
As
of April 27, 2021, there were 367 record holders of our shares of common stock.
Dividends
Not
applicable.
Recent
Sales of Unregistered Securities
During
the three months ended December 31, 2020, we issued the following securities in transactions not involving any public offering. For each
of the following transactions, we relied upon Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”),
as transactions by an issuer not involving any public offering or Section 1145 of the Bankruptcy Code as a security exchanged by an issuer
for a claim against the issuer in a bankruptcy plan of reorganization. For each such transaction, we did not use general solicitation
or advertising to market the securities, the securities were offered to a limited number of persons, the investors had access to information
regarding us (including information contained in our Annual Report on Form 10-K for the year ended December 31, 2018, Quarterly
Reports on Form 10-Q for the periods ended March 31, 2019, June 30, 2019 and September 30, 2019 and Current Reports
on Form 8-K filed with the Securities and Exchange Commission, press releases made by us and information contained in filings with the
bankruptcy court), and we were available to answer questions by prospective investors. We reasonably believe that each of the investors
is an accredited investor. The proceeds were used to reduce our working capital deficiency and for other corporate purposes.
Warrants
(2) Accredited investor.
(4) Issued in exchange for allowed unsecured claims pursuant to the Plan.
Issuer
Purchases of Equity Securities
During
the quarter ended December 31, 2020, there were no purchases of common stock made by us or any “affiliated purchaser”.
ITEM 6. SELECTED FINANCIAL DATA.
Not
applicable.
The
following discussion and analysis of the consolidated results of operations and financial condition of BioRestorative Therapies, Inc.
and its subsidiary as of December 31, 2020 and 2019 and for the years ended December 31, 2020 and 2019 should be read in conjunction
with our financial statements and the notes to those financial statements that are included elsewhere in this Annual Report following
Item 16 (“Form 10-K Summary”). References in this “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” to “us,” “we,” “our,” and similar terms refer to BioRestorative
Therapies, Inc.. This Annual Report contains forward-looking statements as that term is defined in the federal securities laws. The events