Miromatrix(MIRO) - 2021 Q4 - Annual Report

PART I Item 1. Business. Miromatrix Medical Inc. is a life sciences company focused on bioengineering fully transplantable organs using a proprietary two-step decellularization and recellularization technology Overview Miromatrix Medical Inc. pioneers alternatives to human-donor organ transplants, leveraging a scalable technology for bioengineering various organs - Miromatrix Medical Inc. was founded in 2009 and is at the forefront of developing alternatives to human-donor organ transplants[23] - The company's technology platform is scalable and applicable to bioengineering hearts, lungs, and pancreases, in addition to its initial focus on livers and kidneys[23] - Key benefits of their technology include reduced risk of organ rejection, preservation of natural organ structures, proven safety profile (not classified as xenotransplants), utilization of existing supply chains, and in-house manufacturing capabilities[24] Our Strategy The company aims to be first to market with bioengineered organs, advancing lead candidates into clinical trials and fostering partnerships - The company's goal is to develop bioengineered organs and be the first to market with alternatives to human-donor organ transplants[25] - Strategic elements include advancing MiroliverELAP into Phase 1 clinical trials, progressing Miroliver and Mirokidney preclinical development, leveraging in-house manufacturing, increasing company awareness, and fostering partnerships[28] Our Bioengineered Organ Technology Platform The technology platform consists of two proprietary steps: decellularization and recellularization, exclusively licensed from the University of Minnesota - The technology platform consists of two proprietary steps: decellularization and recellularization, licensed exclusively from the University of Minnesota[25] Decellularization Decellularization removes porcine cells to create a purified acellular extracellular matrix (ECM) in less than 24 hours, preserving organ structures - Decellularization removes porcine cells from organs to create a purified acellular extracellular matrix (ECM) in less than 24 hours, preserving mechanical structures and vascular networks[26] - The resulting native scaffold can be stored for up to 12 months and provides the microenvironment for human cell introduction[26] Recellularization Recellularization re-seeds the ECM with unmodified human cells, completing the process in two to four weeks for transplantable organs - Recellularization re-seeds the ECM with unmodified human cells, sourced from human kidneys and livers not used for transplant, within individual bioreactors[30] - The process can be completed in two to four weeks, depending on the organ type, and the finished bioengineered organs can be transplanted using existing surgical techniques[30] - Third-party studies using the company's technology have demonstrated the creation of functional cellular phenotypes and increased cellular viability on ECMs[31] Our Bioengineered Organ Pipeline The company's pipeline leverages its decellularization technology, with bioengineered organs expected to be regulated as biologics, not xenotransplants - The company's pipeline leverages data from commercialized products Miromesh and Miroderm (licensed to Reprise Biomedical) which utilize the decellularization process and are not regulated as xenotransplants[32][33] - The company believes its bioengineered organs, using unmodified human cells, should be regulated as biologics or combination products, not xenotransplants, leading to a more efficient regulatory pathway[33][34] Bioengineered External Liver Assist Product (MiroliverELAP) MiroliverELAP is an External Liver Assist Product for acute liver failure, with preclinical studies demonstrating liver functionality and an IND filing anticipated in 2022 - MiroliverELAP is an External Liver Assist Product (ELAP) designed for acute liver failure (ALF) patients, providing temporary liver support outside the human body[38] - Preclinical studies demonstrated revascularization of decellularized liver scaffolds with human vascular cells and sustained perfusion, as well as liver functionality (albumin production, urea synthesis, ammonia clearance) with over 10 billion seeded hepatocytes[39][42] - The company anticipates filing an IND application in the second half of 2022, followed by a Phase 1 clinical trial[44] Bioengineered Liver Program (Miroliver) Miroliver is a fully implantable bioengineered liver for acute and chronic liver failure, developed in collaboration with the Mayo Clinic - Miroliver is a fully implantable bioengineered liver for acute and chronic liver failure, developed in collaboration with the Mayo Clinic since 2011[45] - It involves recellularizing a decellularized porcine liver with human endothelial, hepatocyte, accessory, and cholangiocyte cells[45] - Key milestones include sustained vascular patency in large animal models, non-destructive monitoring of revascularization, and successful seeding and phenotypic expression of bile duct cells (cholangiocytes)[47][52] - The company anticipates submitting a pre-IND request in 2023, followed by an IND application and Phase 1 clinical trial[53] Bioengineered Kidney Program (Mirokidney) Mirokidney is a fully implantable bioengineered kidney for end-stage renal disease, with preclinical studies showing vascular patency and early function - Mirokidney is a fully implantable bioengineered kidney for end-stage renal disease (ESRD), awarded the Kidney X prize in 2019[54] - It is bioengineered by recellularizing a decellularized porcine kidney with human endothelial and renal-specific cells, including glomerular and nephron cells[54] - Preclinical studies demonstrated long-term vascular patency in large animal models, successful heterotopic transplantation, and early kidney function (creatinine clearance)[58] - Successful nephron recellularization was achieved, with isolated tubule epithelial cells showing proliferation, E-cadherin expression, and ciliated brush border formation[59][61] - The company anticipates submitting a pre-IND request in 2023, followed by an IND application and Phase 1 clinical trial[63] Potential Future Programs Future programs may include bioengineering other organs and exploring stem cell use for recellularization to improve efficiency and reduce immunosuppression - Future programs may include bioengineering other organs like hearts, lungs, and pancreases, or exploring the use of stem cells (iPSCs) for recellularization to potentially eliminate immunosuppression and improve manufacturing efficiency[64][65] - The technology also has applicability to bioengineered partial organs, heart valves, glands, tissues, and bones[66] Bioengineered Organ Pipeline Milestones | Program | Indication | Next Anticipated Milestone | | :------------ | :--------- | :------------------------- | | miroliverELAP | ALF | Submit IND 2H 2022 | | miroliver | ESLD | Submit Pre-IND 2023 | | mirokidney | ESRD | Submit Pre-IND 2023 | Market Organ transplantation represents a significant global unmet medical need, with kidney and liver transplants accounting for over 80% of procedures - Organ transplantation represents a significant unmet medical need globally, with kidney and liver transplants accounting for over 80% of procedures[67][68] - The U.S. organ transplant waitlist was 116,388 as of March 24, 2022, with kidneys and livers making up nearly 95% of the total[68] Organ Transplants and Waitlist (2019/2022) | Organ Type | 2019 Worldwide Transplants | 2019 U.S. Transplants | March 24, 2022 U.S. Waitlist | | :--------- | :------------------------- | :-------------------- | :--------------------------- | | Kidney | 102,403 (65%) | 24,273 (60%) | 97,522 (84%) | | Liver | 36,745 (23%) | 8,896 (22%) | 11,525 (10%) | | Heart | 8,848 (6%) | 3,597 (9%) | 3,443 (3%) | | Lung | 6,807 (4%) | 2,759 (7%) | 1,127 (1%) | | Pancreas | 2,352 (2%) | 1,015 (2%) | 2,771 (2%) | | Total | 157,155 (100%) | 40,540 (100%) | 116,388 (100%) | Kidney Market The kidney market faces high demand and long wait times, with transplants offering significant cost savings and improved patient outcomes over dialysis - An estimated 37 million people in the U.S. have kidney disease, with over 550,000 patients on dialysis[69] - The median wait time for a kidney transplant is 49.2 months, and five-year survival rates for dialysis patients are less than 50%, compared to over 80% for transplant recipients[69] - Kidney transplants offer significant cost savings (over $1.5 million per transplant) and improved patient outcomes compared to dialysis[70] Liver Market Unlike kidney disease, there is no effective long-term solution for end-stage liver disease, as current dialysis technologies fail to replicate complex liver functions - Unlike kidney disease, there is no similarly effective long-term solution for end-stage liver disease (ESLD) patients, as liver dialysis technologies have not successfully replicated the liver's complex functions[73] Chronic Liver Failure Chronic liver disease affects millions in the U.S., with Miroliver aiming to provide a viable transplant treatment for end-stage patients - An estimated 30 million people in the U.S. have some form of liver disease, with 5.5 million suffering from chronic liver disease or cirrhosis[74] - Miroliver is intended to provide a viable treatment for ESLD patients requiring a transplant[75] Acute Liver Failure Acute liver failure affects approximately 80,000 U.S. patients annually, with MiroliverELAP and Miroliver aiming to improve outcomes by replicating liver functions - Approximately 80,000 patients are hospitalized annually in the U.S. with acute liver failure (ALF), which has outcomes of 45% spontaneous recovery, 25% liver transplantation, and 30% death without transplant[76] - MiroliverELAP aims to better replicate liver functions than current dialysis, potentially increasing spontaneous recoveries, while Miroliver could treat ALF patients needing transplants[77] Competition The life sciences industry is highly competitive, with Miromatrix competing in External Liver Assist and Whole Organ Transplant segments - The life sciences industry is highly competitive, characterized by rapid technological development and a strong emphasis on intellectual property[78] - The company competes in two primary market segments: External Liver Assist and Whole Organ Transplant[78] External Liver Assist Technologies Miromatrix believes its MiroliverELAP, utilizing bioengineered organs, could offer superior function compared to existing liver dialysis products - The company is unaware of any commercialized or in-development external liver assist systems utilizing bioengineered organs, believing MiroliverELAP could offer superior function compared to existing liver dialysis products[79][80] Whole Organ Transplant Technologies The whole organ transplant market includes bioengineering, xenotransplantation, and 3D printing, with Miromatrix differentiating through its human cell recellularization approach - The whole organ transplant market is segmented into bioengineering (Miromatrix's focus), xenotransplantation (e.g., Revivicor, eGenesis), and 3D printing (e.g., Organovo, BICO Group)[81][84] - Miromatrix believes its bioengineering approach, using perfusion decellularization and recellularization with unmodified human cells, offers significant differentiation[84] - Competitors often have greater financial resources and expertise in R&D, manufacturing, and regulatory approvals[82] Collaborations and Partnerships Miromatrix engages in collaborations with leading transplant institutions and strategic partners to advance its bioengineered organ development - Miromatrix engages in collaborations with leading transplant institutions and strategic partners to advance its bioengineered organ development[24] Mayo Clinic Since 2011, Miromatrix has collaborated with the Mayo Clinic to evaluate recellularized liver transplantation viability, holding exclusive licensing rights for related inventions - Since 2011, Miromatrix has collaborated with the Mayo Clinic to test and evaluate recellularized liver transplantation viability, with Mayo Clinic surgeons responsible for transplantation and evaluation[83] - Miromatrix has exclusive licensing rights to any inventions or discoveries solely developed under the Mayo Agreement[83] Mount Sinai Since 2015, Miromatrix has collaborated with Mount Sinai Hospital to develop a large animal kidney transplantation model, demonstrating continuous blood flow in transplanted kidneys - Since 2015, Miromatrix has collaborated with Mount Sinai Hospital to develop a large animal kidney transplantation model, demonstrating continuous blood flow through decellularized and recellularized transplanted kidneys[84] - Inventions conceived solely by Mount Sinai employees are licensed to Miromatrix for non-commercial research, and vice-versa for Miromatrix employees' inventions[86] Texas Heart Institute (THI) Miromatrix granted THI an exclusive sub-license for heart organ transplantation IP, with rights reverting to Miromatrix upon first-in-human trial completion - Miromatrix granted THI an exclusive sub-license for intellectual property related to heart organ transplantation using perfusion decellularization/recellularization[87] - THI must achieve milestones, including developing the cardiac process, completing preclinical studies, and filing an IND for a Phase 1 trial. Upon completion of the first-in-human trial, licensing rights revert to Miromatrix, with THI receiving a 5.0% royalty on commercial sales[87] University of Minnesota Miromatrix holds an exclusive license from the University of Minnesota for organ and tissue decellularization and recellularization, with annual minimum royalty payments of $500,000 - Miromatrix holds an exclusive license from the University of Minnesota (EPLA) for decellularization and recellularization of organs and tissues, with patents providing exclusivity in multiple jurisdictions[88] - The company is required to make annual minimum royalty payments of $500,000 or 6.5% of net sales, whichever is greater, to the University[88] - As of December 31, 2021, Miromatrix had paid $1,125,081 under the EPLA[88] Reprise Biomedical, Inc. Miromatrix spun out its Miromesh and Miroderm products to Reprise Biomedical, Inc., retaining an exclusive license for acellular products and an annual payment entitlement - In June 2019, Miromatrix spun out its Miromesh and Miroderm products to Reprise Biomedical, Inc., retaining an exclusive license for acellular products derived from perfusion decellularization technology[90] - Miromatrix is entitled to an annual payment from Reprise equal to the greater of $500,000 or 6.5% of sales[90] - A long-term receivable for minimum royalties from Reprise ($920,404 in 2021 and $453,470 in 2020) was fully reserved due to collectability uncertainty[90] Royalties from Reprise Biomedical, Inc. | Year Ended December 31, | Royalty Payments | | :---------------------- | :--------------- | | 2021 | $33,066 | | 2020 | $46,530 | Intellectual Property Miromatrix protects its proprietary technologies through patents, data exclusivity, market exclusivity, and patent term extensions - Miromatrix protects its proprietary technologies through patents, data exclusivity, market exclusivity, and patent term extensions[91] Patents The company owns or licenses numerous U.S. and foreign patents and applications, with expected expiration dates between 2026 and 2040 - As of December 31, 2021, the company wholly owns or exclusively licenses 8 issued U.S. patents and 14 pending U.S. patent applications, expected to expire between 2026 and 2036 (issued) or 2026 and 2040 (pending, if issued)[92][93] - Additionally, it owns or licenses 115 foreign patents and 24 pending foreign patent applications, with patents expected to expire between 2026 and 2036[92] - The company expects to seek 5-year patent term extensions (PTE) under the Hatch-Waxman Act and may seek FDA exclusivity under Orphan Drug Exclusivity (7 years) or the Patient Protection and Affordable Care Act (12 years)[94][96] Employees As of February 28, 2022, Miromatrix had 61 employees worldwide, none of whom are represented by a collective bargaining agreement - As of February 28, 2022, Miromatrix had 61 employees worldwide, none of whom are represented by a collective bargaining agreement[97] Properties The company leases a 42,000 square foot corporate headquarters in Eden Prairie, Minnesota, including 11,000 square feet for in-house manufacturing - The company leases its corporate headquarters in Eden Prairie, Minnesota, a 42,000 square foot facility that includes 11,000 square feet dedicated to in-house manufacturing[98] - This facility is believed to provide adequate capacity for manufacturing bioengineered organs through clinical trials[98] Manufacturing and Suppliers Miromatrix maintains 11,000 square feet of in-house manufacturing for bioengineered organs, sourcing porcine materials and human cells from specialized suppliers - Miromatrix maintains 11,000 square feet of in-house manufacturing capabilities at its headquarters for producing bioengineered organs, adhering to standards similar to cGMP manufacturing[99] - Porcine raw materials are sourced from two long-term suppliers, and human kidneys and livers (not placed for transplant) are obtained from Organ Procurement Organizations (OPOs) to isolate cells for recellularization[100] Government Regulation The company's activities are subject to extensive U.S. and international governmental regulations, with bioengineered organs expected to be classified as biologics or combination products - The company's activities are subject to extensive U.S. and international governmental regulations, including those from the FDA for drugs, biologics, and medical devices[101] - The regulatory classification of MiroliverELAP and bioengineered organ transplant products is not yet established but is expected to be biologics or combination products, requiring BLA approval[102][103] - Commercial production must comply with cGMP requirements for biologics, and potentially additional requirements for medical devices or xenotransplants depending on FDA classification[103][104] Regulatory Process Obtaining BLA approval for biological products is a lengthy, expensive, and uncertain process, with noncompliance leading to severe penalties - Obtaining BLA approval for biological products is a lengthy, expensive, and uncertain process involving extensive preclinical and clinical testing[105] - Noncompliance with regulations can lead to severe penalties, including civil penalties, product recalls, injunctions, and criminal prosecution[106] Product Approval FDA approval requires proof of safety, purity, and potency through nonclinical studies and multi-phase human clinical trials, preceded by an Investigational New Drug (IND) application - FDA approval requires proof of safety, purity, and potency through nonclinical studies and well-controlled human clinical trials, which are typically conducted in three phases (Phase 1, 2, and 3)[107][111] - An Investigational New Drug (IND) application must be submitted and become effective before human clinical trials can commence[108] - Post-approval clinical trials (Phase 4) may be required by the FDA to gather additional safety and efficacy data[113] Regulation of Combination Products in the U.S. Combination products, comprising components regulated under different authorities, are assigned a lead FDA center based on their primary mode of action - Combination products, comprising components regulated under different authorities (e.g., device-biologic), are assigned a lead FDA center based on the 'primary mode of action'[127] - The FDA's Office of Combination Products addresses related issues and provides guidance[127] Regenerative Advanced Therapies The 21st Century Cures Act created a pathway for Regenerative Advanced Therapies (RMATs) to facilitate development and expedite review for serious or life-threatening conditions - The 21st Century Cures Act created a pathway for Regenerative Advanced Therapies (RMATs) to facilitate development and expedite review for serious or life-threatening conditions[128] - RMAT designation allows for priority review, accelerated approval via surrogate endpoints, and meeting post-approval requirements through real-world evidence or patient registries[130][131] FDA Post-Approval Requirements Post-approval, biological and combination products are subject to rigorous FDA regulation, including cGMP compliance, quality control, and adverse event reporting - Post-approval, biological products and combination products are subject to rigorous and extensive FDA regulation, including cGMP compliance, quality control, and adverse event reporting[132] - Changes to approved products (e.g., indications, manufacturing) require submission and FDA approval of new BLAs or supplements[135][136] - Non-compliance can lead to severe sanctions, including marketing restrictions, product withdrawal, refusal of applications, and civil or criminal penalties[137] Pediatric Research Equity Act (PREA) PREA requires BLAs for new indications to include pediatric safety and effectiveness data, with exemptions for orphan-designated products - PREA requires BLAs for new indications to include data on safety and effectiveness in relevant pediatric subpopulations, though exemptions exist for orphan-designated products[139] U.S. Patent Term Restoration and Marketing Exclusivity U.S. patents may be eligible for up to five years of Patent Term Extension (PTE) to compensate for regulatory review time, not exceeding 14 years from product approval - U.S. patents may be eligible for up to five years of Patent Term Extension (PTE) under the Hatch-Waxman Amendments to compensate for regulatory review time, not exceeding 14 years from product approval[140] - Biological products can also obtain six-month pediatric market exclusivity based on voluntary pediatric studies[141] Biosimilars The Biologics Price Competition and Innovation Act created an approval pathway for biosimilars, which could increase competition for Miromatrix's products - The Biologics Price Competition and Innovation Act created an approval pathway for biosimilars, which are 'highly similar' to approved biologics and could increase competition for Miromatrix's products[142] - Reference biologics are granted 12 years of exclusivity from first licensure, but this could be shortened[142] Advertising and Promotion The FDA and FTC strictly regulate post-approval marketing and promotion of biologics, prohibiting off-label promotion and requiring balanced safety information - The FDA and FTC strictly regulate post-approval marketing and promotion of biologics, prohibiting off-label promotion and requiring claims to be balanced with safety information[143][144] - Violations can lead to adverse publicity, significant penalties, and corrective actions[143] Orphan Drug Orphan drug designation is granted for products treating rare diseases, offering benefits like tax credits, user fee waivers, and seven years of exclusive marketing - Orphan drug designation is granted for products treating rare diseases (fewer than 200,000 U.S. individuals) and offers benefits like tax credits and BLA user fee waivers[145] - The first applicant to receive FDA approval for an orphan-designated product for a specific indication receives seven years of exclusive marketing[145] Anti-Kickback and False Claims Laws The company's operations are subject to federal and state anti-kickback, fraud and abuse, and false claims laws, with potential for substantial penalties - The company's operations are subject to federal and state anti-kickback, fraud and abuse, and false claims laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA)[147][148][149] - Violations can result in substantial penalties, including fines, imprisonment, exclusion from federal healthcare programs, and reputational harm[148][149] - The Sunshine Act requires reporting of payments to physicians and teaching hospitals, with expanded reporting obligations starting in 2022[150] International Regulation Foreign regulations for clinical trials and commercial sales vary by country, with potentially unclear pathways for regenerative medicines, and the company currently focuses on U.S. development - Foreign regulations for clinical trials, development, and commercial sales vary by country, with potentially unclear pathways for regenerative medicines[152] - The company is currently focused on product development in the U.S.[152] Pharmaceutical Coverage, Pricing, and Reimbursement Commercial success depends on reimbursement availability from third-party payers, who increasingly scrutinize medical necessity and cost-effectiveness, potentially impacting return on investment - Commercial success depends on reimbursement availability from third-party payers, who increasingly scrutinize medical necessity and cost-effectiveness[153] - Inadequate reimbursement could negatively impact the company's return on investment[153] Environmental Matters Operations involving hazardous materials subject the company to environmental and safety laws, with non-compliance potentially leading to substantial liabilities and operational restrictions - Operations involve hazardous materials, subjecting the company to federal, state, and local environmental and safety laws[154] - Non-compliance could result in substantial liabilities, fines, and operational restrictions[154] Legal Proceedings The company may be subject to legal proceedings in the ordinary course of business, which could have an adverse material impact due to diversion of management time and financial costs - The company may be subject to legal proceedings in the ordinary course of business, which could have an adverse material impact due to diversion of management time and financial costs[155] Corporate Information The company's website, www.miromatrix.com, provides access to its SEC filings - The company's website is www.miromatrix.com, where SEC filings are made available[156][157] - Miromatrix Medical Inc. is a life sciences company pioneering a novel technology for bioengineering fully transplantable organs, focusing initially on livers and kidneys[23] - The proprietary technology involves a two-step method of decellularization (removing porcine cells) and recellularization (replacing with unmodified human cells) to create bioengineered organs[23][25] - The company has collaborations with Mayo Clinic, Mount Sinai, and Texas Heart Institute, and strategic investments from Baxter, CareDx, and DaVita[23] Item 1A. Risk Factors This section outlines significant risks that could materially and adversely affect Miromatrix's business, financial condition, results of operations, and stock price - Investors should carefully consider the outlined risks before investing in Miromatrix common stock, as their realization could materially harm the business[158] Risks Related to Our Limited Operating History, Financial Position and Capital Requirements Miromatrix has incurred significant net losses and expects future losses, requiring substantial additional capital for R&D and commercialization - Miromatrix has incurred significant net losses since inception ($14,670,756 in 2021, $10,309,568 in 2020) and expects future losses, with an accumulated deficit of $74,051,914 as of December 31, 2021[171] - The company has a limited operating history, especially with commercialized whole organ products, making future success difficult to evaluate[172] - Substantial additional capital will be required for R&D and commercialization, and inability to secure financing could delay or discontinue product development[173][176] Risks Related to the Development and Commercialization of our Products The company faces challenges in product development and commercialization, including regulatory complexities, manufacturing issues, and competition, with no FDA-approved whole organ products yet - The company currently lacks FDA-approved or commercialized whole organ products, with lead candidates still in preclinical development and not yet tested in humans[177][178] - Successful development, manufacturing, and sale of biologics is a long, expensive, and uncertain process with unique risks, including regulatory complexities and manufacturing challenges[181] - Delays in clinical trials are possible due to various factors, including demonstrating sufficient safety/purity/potency, manufacturing issues, regulatory approvals, and patient enrollment difficulties[183][184][189] - Product candidates use animal-derived biological components, raising concerns about xenotransplantation classification and associated complex regulatory processes[187] - Bioengineered organs may be classified as combination products, potentially requiring multiple marketing applications and increasing regulatory risks[188] - The company may face competition from biosimilars and larger competitors with greater resources, and commercial success depends on significant market acceptance[196][203] - Reliance on third parties for preclinical and clinical development activities reduces control and poses risks if they fail to meet obligations or regulatory standards[205][208] Risks Related to Intellectual Property and Information Technology Matters Inability to obtain and maintain broad patent protection could allow competitors to commercialize similar products, adversely affecting the company's market position - Inability to obtain and maintain broad patent and intellectual property protection could allow competitors to commercialize similar products, adversely affecting the company's market position[209][211] - Patent prosecution is expensive, time-consuming, and complex, with uncertainties regarding issuance, validity, enforceability, and scope of patents[212][214] - The intellectual property landscape for new organs is constantly evolving, increasing the risk of litigation and challenges to patent rights[232][233] - Litigation to protect or enforce patents can be expensive, time-consuming, and may result in patents being invalidated or narrowed[237][240] - Non-compliance with patent agency requirements could lead to partial or complete loss of patent rights[241][243] - Changes in patent law (e.g., America Invents Act, Supreme Court rulings) could diminish patent value and increase uncertainties[244][246][248] - Patent terms may be inadequate to protect competitive position, and failure to obtain Patent Term Extensions (PTE) could allow earlier competitor entry[249][250] - Inability to protect trade secrets through confidentiality agreements and security measures could harm business and competitive position[251][255] - Risks exist from third parties asserting wrongful use or disclosure of confidential information by employees, consultants, or advisors[257] - Inadequate protection of trademarks and trade names could hinder brand recognition and adversely affect business[258][260] - Intellectual property rights have limitations and may not address all potential threats, such as biosimilar products or independent development by competitors[261] Risks Related to Governmental Regulations The company faces lengthy and unpredictable regulatory approval processes, ongoing compliance obligations, and risks from healthcare legislation and data protection laws - The regulatory approval process for biopharmaceutical products is lengthy, time-consuming, and unpredictable, with no guarantee of obtaining FDA approval for product candidates[264][266] - Even with approval, products are subject to ongoing regulatory obligations, including cGMPs, cGTPs, and GCPs, which entail significant expense and potential restrictions[271][272] - Disruptions at government agencies (e.g., FDA funding shortages, global health concerns like COVID-19) could delay product development and approval[280][284] - Compliance with animal treatment regulations in research could increase operating costs or impact technology commercialization[285][286] - Business operations are subject to anti-kickback, fraud and abuse, false claims, and physician payment transparency laws, with potential for substantial penalties and reputational harm[287][291] - Employee misconduct or noncompliance with regulatory standards could lead to investigations, sanctions, and adverse effects on business[292][293] - Current and future healthcare legislation (e.g., ACA) may increase costs and difficulty in obtaining marketing approval and commercializing products[295][297] - Coverage and adequate reimbursement from third-party payers may not be available or could be subject to unfavorable pricing regulations, harming business[302][303][307] - Potential liability related to protecting personal and health information under federal, state, and international data protection laws (e.g., HIPAA, GDPR) could result in litigation, fines, and reputational damage[308][310][314][315] - Use of hazardous materials necessitates compliance with environmental laws, which can be expensive and lead to liabilities for non-compliance[317][319] Risks Related to Our Business Financial results may fluctuate significantly due to clinical trial outcomes, new product introductions, regulatory clearances, pricing pressures, and changes in reimbursement policies - Financial results may fluctuate significantly due to factors like clinical trial outcomes, new product introductions, regulatory clearances, pricing pressures, and changes in reimbursement policies[322][323] - All operations are currently conducted at one facility, making the business vulnerable to disruptions from natural or man-made disasters[324] - The company faces product liability claims inherent in testing, manufacturing, and marketing medical products, especially for permanently implanted biological materials, with potential for patient injury, disease transmission, and substantial liabilities[325][327][328] - Estimates of addressable markets for future products may be smaller than anticipated, impacting revenue generation and inventory management[332] - Maintaining a competitive position depends on attracting and retaining highly qualified senior management and personnel, with intense competition for skilled individuals[335] - The company currently lacks a marketing and sales organization, and failure to establish one or secure third-party agreements could hinder future product revenue[336] - Adverse worldwide economic conditions, including the COVID-19 pandemic, may negatively impact business operations, supply chains, and access to capital[338][339][340][341] - Changes in U.S. tax law could adversely affect financial condition and results of operations[342] - Ability to use net operating loss carryforwards (NOLs) and other tax attributes may be limited by future ownership changes or tax law provisions[343][345][346][347] Risks Related to Our Common Stock A significant deficiency in internal control over financial reporting was identified, primarily due to small accounting staff and lack of segregation of duties, which could adversely affect financial reporting accuracy and stock price - A significant deficiency in internal control over financial reporting was identified, primarily due to small accounting staff and lack of segregation of duties, which could adversely affect financial reporting accuracy and stock price[348][349][351][352] - An active trading market for common stock may not develop or be sustained, impairing share value and ability to raise capital[353] - The price of common stock is likely to be highly volatile due to various factors, including clinical trial results, regulatory clearances, and market conditions[354] - The company does not intend to pay dividends, so returns will depend solely on stock value appreciation[356] - As an emerging growth company, reduced disclosure requirements may make common stock less attractive to investors, potentially leading to lower trading activity and increased volatility[357][361] - Significant additional costs are expected as a public company due to compliance with SEC, Sarbanes-Oxley, and Nasdaq rules[362] - Disclosure controls and procedures may not prevent or detect all errors or fraud due to inherent limitations[363][364] - The company is at risk of securities class action litigation, which could result in substantial costs and divert management attention[365] - Inaccurate or unfavorable research by securities analysts could cause stock price and trading volume to decline[367] - Provisions in corporate charter documents and Delaware law could discourage acquisitions and prevent stockholders from replacing management[368][370] - The exclusive forum provision in the certificate of incorporation for disputes with the company or its directors/officers could limit stockholders' ability to obtain a favorable judicial forum[371] Item 1B. Unresolved Staff Comments. There are no unresolved staff comments to report - The company has no unresolved staff comments[372] Item 2. Properties. Miromatrix leases its corporate headquarters in Eden Prairie, Minnesota, which serves as its research and development operations and office space - The company leases a 42,000 square foot corporate headquarters in Eden Prairie, Minnesota, for R&D and office space[373] - Current facilities are deemed adequate for needs through clinical trials, and additional space is expected to be available on commercially reasonable terms[373] Item 3. Legal Proceedings. Miromatrix is not currently involved in any material legal proceedings - The company is not currently party to any material legal proceedings[375] - Potential ordinary course legal proceedings could divert management time and incur financial costs, but the company believes it has adequate insurance or indemnification[375] Item 4. Mine Safety Disclosures. The company has no disclosures related to mine safety - There are no mine safety disclosures[376] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Miromatrix's common stock has been listed on the Nasdaq Capital Market under 'MIRO' since June 24, 2021, with IPO proceeds allocated to R&D and a new facility - Miromatrix common stock (MIRO) has been listed on the Nasdaq Capital Market since June 24, 2021[379] - As of March 24, 2022, there were 215 holders of record of the company's common stock[379] - The company does not intend to pay cash dividends in the foreseeable future, prioritizing reinvestment in business development[380] - The IPO in June 2021 raised approximately $44.5 million in net proceeds[382] IPO Net Proceeds Allocation | Allocation | Amount (approx.) | | :---------------------------------------------------------------------- | :--------------- | | Research and development (Phase I MiroliverELAP, preclinical bioengineered organs) | $34.8M - $40.0M | | New facility construction | $3.0M - $4.0M | | Working capital and general corporate purposes | Remaining funds | Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides an overview of Miromatrix's financial condition and operational results, highlighting its focus on bioengineered organs and consistent net losses - Miromatrix is a life sciences company pioneering bioengineering fully transplantable organs, with a focus on livers and kidneys[384] - The company has not been profitable since inception, reporting net losses of $14,670,756 in 2021 and $10,309,568 in 2020, with an accumulated deficit of $74,051,914 as of December 31, 2021[385] - Revenue primarily consists of licensing royalties from the sale of Miromesh and Miroderm products by Reprise Biomedical, Inc.[385] Overview The company's proprietary technology uses a two-step method of decellularization and recellularization to create bioengineered organs, supported by collaborations and strategic investments - The company's proprietary technology uses a two-step method of decellularization and recellularization to remove porcine cells and replace them with unmodified human cells[384] - Collaborations include Mayo Clinic, Mount Sinai, and Texas Heart Institute, with strategic investments from Baxter, CareDx, and DaVita[384] Components of Our Results of Operations Licensing revenue is recognized from the Reprise License Agreement, while R&D, regulatory, clinical, quality, and G&A expenses are expected to increase - Licensing revenue is recognized from the Reprise License Agreement, based on sales after minimum guarantees are met and performance obligations are satisfied[386] - Cost of goods sold primarily relates to minimum royalty payments due to the University of Minnesota under the licensing agreement[387] - Research and development expenses are expected to increase as product candidates advance, while regulatory, clinical, and quality expenses will also rise in absolute dollars[390][392][393] - General and administrative expenses are projected to increase due to headcount expansion and costs associated with operating as a public company[395] Results of Operations The company experienced a net loss of $14,670,756 in 2021, an increase of 42.3% from 2020, driven by higher operating expenses Key Financial Data (Years Ended December 31) | Metric | 2021 | 2020 | Change (Dollar) | Change (%) | | :-------------------------- | :------------- | :------------- | :-------------- | :--------- | | Licensing revenue | $33,066 | $46,530 | $(13,464) | (28.9)% | | Cost of goods sold | $500,000 | $500,000 | $0 | 0% | | Gross loss | $(466,934) | $(453,470) | $(13,464) | (3.0)% | | Research and development | $10,750,500 | $7,280,798 | $3,469,702 | 47.7% | | Regulatory and clinical | $551,494 | $265,885 | $285,609 | 107.4% | | Quality | $547,129 | $149,199 | $397,930 | 266.7% | | General and administrative | $4,643,473 | $2,109,196 | $2,534,277 | 120.2% | | Total operating expenses | $16,492,596 | $9,805,078 | $6,687,518 | 68.2% | | Operating loss | $(16,959,530) | $(10,258,548) | $(6,700,982) | (65.3)% | | Net loss | $(14,670,756) | $(10,309,568) | $(4,361,188) | (42.3)% | | Net loss per share (basic & diluted) | $(1.28) | $(4.76) | | | | Weighted average shares | 11,484,598 | 2,165,105 | | | Licensing Revenue Licensing revenue decreased by $13,464 (28.9%) in 2021, primarily due to deferred minimum royalties from Reprise Biomedical, Inc. and a full reservation against the receivable - Licensing revenue decreased by $13,464 (28.9%) from $46,530 in 2020 to $33,066 in 2021, primarily due to deferred minimum royalties from Reprise Biomedical, Inc. and a full reservation against the receivable[399] Cost of Goods Sold Cost of goods sold remained constant at $500,000 for both 2021 and 2020, representing the minimum royalty due to the University of Minnesota - Cost of goods sold remained constant at $500,000 for both 2021 and 2020, representing the minimum royalty due to the University of Minnesota[400] Gross Loss Gross loss increased by $13,464 (3.0%) in 2021, mainly due to the uncertainty of collecting deferred minimum royalties from Reprise - Gross loss increased by $13,464 (3.0%) from $453,470 in 2020 to $466,934 in 2021, mainly due to the uncertainty of collecting deferred minimum royalties from Reprise[401] Research and Development Research and development expenses increased by $3,469,702 (47.7%) in 2021, driven by higher lab supplies, additional employee hiring, and increased consulting expenses - Research and development expenses increased by $3,469,702 (47.7%) to $10,750,500 in 2021, driven by higher lab supplies ($2,045,138), additional employee hiring ($1,101,760), and increased consulting expenses ($331,808)[402] Regulatory and Clinical Regulatory and clinical expenses increased by $285,609 (107.4%) in 2021, primarily due to additional employee hiring and increased regulatory consulting expenses - Regulatory and clinical expenses increased by $285,609 (107.4%) to $551,494 in 2021, primarily due to additional employee hiring ($212,427) and increased regulatory consulting expenses ($50,720)[404] Quality Expenses Quality expenses increased by $397,930 (266.7%) in 2021, mainly due to the hiring of additional employees - Quality expenses increased by $397,930 (266.7%) to $547,129 in 2021, mainly due to the hiring of additional employees[405] General and Administrative General and administrative expenses increased by $2,534,277 (120.2%) in 2021, largely attributable to costs of being a public company, including insurance and additional employees - General and administrative expenses increased by $2,534,277 (120.2%) to $4,643,473 in 2021, largely attributable to costs of being a public company, including insurance ($688,390), additional employees ($644,545), and public company expenses ($491,705)[406] Interest Income Interest income decreased by $6,760 (77.4%) in 2021, primarily due to lower interest rates on cash balances - Interest income decreased by $6,760 (77.4%) to $1,973 in 2021, primarily due to lower interest rates on cash balances[407] Interest Expense Interest expense decreased by $42,670 (6.5%) in 2021, mainly because the Cheshire Note was converted to equity in June 2021 - Interest expense decreased by $42,670 (6.5%) to $613,882 in 2021, mainly because the Cheshire Note was converted to equity in June 2021[408] Loss on Disposal of Property and Equipment A loss of $5,459 was recognized in 2021 from the disposal of lab equipment no longer in use, compared to no loss in 2020 - A loss of $5,459 was recognized in 2021 from the disposal of lab equipment no longer in use, compared to no loss in 2020[409] Amortization of Discount on Note Amortization expense on the Cheshire Note discount decreased by $45,982 (42.3%) in 2021, due to the note's conversion to equity in June 2021 - Amortization expense on the Cheshire Note discount decreased by $45,982 (42.3%) to $62,638 in 2021, due to the note's conversion to equity in June 2021[410] Change in Fair Value of Derivative The change in fair value of the embedded derivative related to the Cheshire Note resulted in a gain of $246,962 in 2021, compared to a loss of $51,446 in 2020, due to the note's conversion to equity - The change in fair value of the embedded derivative related to the Cheshire Note resulted in a gain of $246,962 in 2021, compared to a loss of $51,446 in 2020, due to the note's conversion to equity[411] Research Grants Research grants decreased by $599,110 (60.4%) in 2021, primarily due to decreases in preclinical contracting - Research grants decreased by $599,110 (60.4%) to $393,034 in 2021, primarily due to decreases in preclinical contracting[412] Equity Loss in Affiliate Equity loss in affiliate decreased by $2,134,759 (90.5%) in 2021, due to the company owning a smaller percentage of Reprise and selling its remaining ownership in March 2021 - Equity loss in affiliate decreased by $2,134,759 (90.5%) to $223,633 in 2021, due to the company owning a smaller percentage of Reprise and selling its remaining ownership in March 2021[413] Gain on Sale of Equity Investment A gain of $1,983,912 was recognized in 2021 from the sale of remaining Reprise shares, compared to $2,123,113 in 2020 from an earlier sale - A gain of $1,983,912 was recognized in 2021 from the sale of remaining Reprise shares, compared to $2,123,113 in 2020 from an earlier sale[414] Gain on Debt Extinguishment A gain of $568,505 was recognized in 2021 due to the forgiveness of the Paycheck Protection Program loan - A gain of $568,505 was recognized in 2021 due to the forgiveness of the Paycheck Protection Program loan[415] Liquidity and Capital Resources Miromatrix has incurred net losses since inception and expects increased expenses, with cash and cash equivalents of $52,811,531 as of December 31, 2021, expected to fund operations for at least the next twelve months - Miromatrix has incurred net losses since inception, with an accumulated deficit of $74,051,914 as of December 31, 2021[416] - The company expects increased expenses for developing bioengineered organs, conducting clinical trials, seeking regulatory approvals, and operating as a public company[417] - As of December 31, 2021, cash and cash equivalents totaled $52,811,531, estimated to fund operations for at least the next twelve months[419] - Future cash needs are expected to be financed through equity offerings and debt financings, with risks of dilution or restrictive covenants[420] - The Cheshire Note ($6,000,000) and accrued interest were converted to Series C Convertible Preferred Stock in June 2021[426][428] - The Paycheck Protection Program loan ($563,397) was fully forgiven in March and August 2021[429] - The IPO in June 2021 generated $44,528,060 in net proceeds[430] Debt and Capital Lease Obligations (as of December 31, 2021) | Type of Obligation | Principal Outstanding | | :----------------------------------------------- | :-------------------- | | Promissory note (University of Minnesota, 2012) | $83,849 | | Loan (Minnesota Dept. of Employment & Economic Development, 2015) | $250,000 | | Capitalized lease (equipment, 2018) | $38,271 | | Promissory note (University, 2019) | $385,997 | | Capitalized lease (equipment, 2021) | $33,597 | | Capitalized lease (equipment, 2021) | $38,937 | Cash Flows Net cash used in operating activities increased significantly in 2021, while financing activities provided substantial cash from stock sales Summary of Cash Flows (Years Ended December 31) | Cash Flow Activity | 2021 | 2020 | | :------------------------ | :------------- | :------------- | | Operating activities | $(14,809,229) | $(8,037,751) | | Investing activities | $(1,383,116) | $2,876,834 | | Financing activities | $65,359,581 | $6,355,298 | | Net increase in cash | $49,167,236 | $1,194,381 | | Cash, cash equivalents and restricted cash at end of period | $53,611,631 | $4,444,395 | Operating Activities Net cash used in operating activities increased from $8,037,751 in 2020 to $14,809,229 in 2021, primarily due to the net loss and non-cash adjustments - Net cash used in operating activities increased from $8,037,751 in 2020 to $14,809,229 in 2021, primarily due to the net loss and non-cash adjustments[437][438] - In 2021, significant non-cash items included a gain on stock sale ($1,983,912) and PPP loan forgiveness ($563,397), partially offset by stock-based compensation ($622,159) and equity loss in affiliate ($223,633)[437] Investing Activities Net cash used in investing activities was $1,383,116 in 2021, driven by property and equipment purchases partially offset by Reprise stock sale proceeds - Net cash used in investing activities was $1,383,116 in 2021, driven by property and equipment purchases ($3,383,116) partially offset by Reprise stock sale proceeds ($2,000,000)[439] - In 2020, net cash provided by investing activities was $2,876,834, mainly from Reprise stock sale proceeds ($3,000,000) offset by equipment purchases ($123,166)[439] Financing Activities Net cash provided by financing activities significantly increased to $65,359,581 in 2021, primarily from the sale of common and preferred stock - Net cash provided by financing activities significantly increased to $65,359,581 in 2021, primarily from the sale of common and preferred stock[440] - In 2020, net cash provided by financing activities was $6,355,298, mainly from long-term debt issuance[440] Critical Accounting Policies and Estimates The preparation of financial statements requires management to make significant estimates and assumptions, particularly for stock-based compensation, equity method investments, and revenue recognition - The preparation of financial statements requires management to make significant estimates and assumptions, particularly for stock-based compensation, equity method investments, and revenue recognition[441][442] Stock-Based Compensation Stock options and restricted stock units are recognized as compensation costs based on estimated fair value at grant date, expensed over the vesting period - Stock options and restricted stock units are recognized as compensation costs based on estimated fair value at grant date, expensed over the vesting period[444][453] - The Black-Scholes option-pricing model is used, requiring subjective assumptions for expected term, volatility, risk-free interest rate, and expected dividends[446] Stock-Based Compensation Expense | Year Ended December 31, | St