Orgenesis(ORGS) - 2022 Q4 - Annual Report

FORM 10-K Annual Report Registrant Information ORGENESIS INC. filed its 2022 Annual Report on Form 10-K, with common stock (ORGS) traded on The Nasdaq Capital Market and 27,493,123 shares outstanding as of March 22, 2023 - ORGENESIS INC. filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2022[1] Registrant Details | Indicator | Value | | :---------- | :---- | | Trading Symbol | ORGS | | Exchange | The Nasdaq Capital Market | | Shares Outstanding (as of March 22, 2023) | 27,493,123 | | Market Value of Non-Affiliate Common Stock (June 30, 2022) | $54,809,919 | - The registrant is classified as a Non-accelerated filer and a Smaller reporting company, and is not a well-known seasoned issuer or an emerging growth company[2][3] Table of Contents PART I Part I covers Orgenesis Inc.'s business operations, risk factors, properties, and legal proceedings, detailing core activities and challenges - Part I includes sections on Business, Risk Factors, Unresolved Staff Comments, Properties, Legal Proceedings, and Mine Safety Disclosures[9] PART II Part II details market information, management's discussion and analysis, market risk disclosures, financial statements, and controls and procedures - Part II covers Market for Registrant's Common Equity, Management's Discussion and Analysis of Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures About Market Risk, Financial Statements and Supplementary Data, Changes in and Disagreements with Accountants on Accounting and Financial Disclosure, Controls and Procedures, and Other Information[9] PART III Part III provides information on directors, executive officers, corporate governance, executive compensation, security ownership, and principal accountant fees - Part III includes sections on Directors, Executive Officers and Corporate Governance, Executive Compensation, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Certain Relationships and Related Transactions, and Director Independence, and Principal Accountant Fees and Services[9] PART IV Part IV lists exhibits and financial statement schedules, concluding the annual report - Part IV contains Exhibits and Financial Statement Schedules and the Form 10-K Summary[9] Special Cautionary Note Regarding Forward-Looking Statements Forward-Looking Statements Disclaimer This section cautions that the report contains forward-looking statements subject to risks, with actual results potentially differing materially - Statements in this report are 'forward-looking statements' under the Securities Act of 1933 and the Securities Exchange Act of 1934, based on management's current beliefs, estimates, and assumptions[11] - Readers are cautioned not to place undue reliance on these statements, as actual results may differ significantly due to various risks and uncertainties[11] - The company does not intend to update forward-looking statements to conform to actual results, except as required by applicable law[12] Key Forward-Looking Statements The company's forward-looking statements cover revenue generation, R&D, collaborations, operational management, and specific Metalmark Investment risks - Corporate and Financial: * Ability to generate and increase revenue from POCare cell therapy commercialization * Ability to achieve profitability * Ability to manage R&D programs based on novel technologies * Ability to grow the organization through collaborations and strategic alliances * Ability to control key elements of therapeutic product candidate development and commercialization with third parties * Ability to manage potential disruptions from the coronavirus outbreak * Accuracy of estimates regarding expenses, future revenue, capital requirements, profitability, and additional financing needs * Belief that therapeutic related developments have competitive advantages and can compete favorably and profitably in the cell and gene therapy industry[15][18] - Cell & Gene Therapy Business (CGT): * Ability to adequately fund and scale collaboration, license, partnership, and joint venture agreements * Ability to advance therapeutic collaborations through industrial, clinical, regulatory, commercial, and manufacturing stages * Ability to implement POCare strategy for autologous therapies * Expectations regarding obtaining and maintaining intellectual property protection * Ability to commercialize products despite others' IP rights * Ability to obtain funding for clinical trials * Ability to further CGT development projects and fulfill obligations under agreements * Belief that systems and therapies are safe and effective * Risks related to the relationship with Tel Hashomer Medical Research Infrastructure and Services Ltd. (THM) and potential cancellation or challenge of the License Agreement * Outcome of legal proceedings * Dependence on POCare business financial results * Ability to complete development, processing, and rollout of Orgenesis Mobile Processing Units and Labs (OMPULs) and generate sufficient revenue from POCare Services * Ability to grow POCare business and develop additional joint venture relationships for demonstrable revenues[18] - Metalmark Investment Risks: * Morgenesis may not receive future payments from MM OS Holdings, L.P. (MM) * MM may force the sale of Morgenesis under certain conditions, potentially benefiting MM more than Orgenesis and its shareholders * MM may assume control of Morgenesis' Board of Managers, leading to Orgenesis' inability to control the subsidiary * MM has the right to buy Orgenesis' units in Morgenesis upon certain events, potentially resulting in Orgenesis holding no equity in Morgenesis * Orgenesis may be forced to redeem MM's units in Morgenesis, requiring substantial cash outlay * If MM exchanges Morgenesis units for Orgenesis common stock, significant dilution to existing stockholders could occur (up to 5,106,596 shares)[18] PART I ITEM 1. BUSINESS Orgenesis Inc. is a global biotech company focused on making cell and gene therapies affordable and accessible through its decentralized POCare Platform - Orgenesis is a global biotech company focused on unlocking the potential of cell and gene therapies (CGTs) in an affordable and accessible format, primarily through autologous therapies manufactured at the point of care (POCare)[22] - The company's POCare Platform is a scalable infrastructure of technology and services designed to standardize and decentralize CGT production, utilizing POCare Centers and Orgenesis Mobile Processing Units & Labs (OMPULs)[27] - In November 2022, Orgenesis separated its operations into two segments: Morgenesis (POCare Services) and Therapies (POCare Therapies), following a significant investment from Metalmark Capital Partners[284] Business Overview Orgenesis is a global biotech company making cell and gene therapies affordable and accessible via its decentralized POCare Platform - Orgenesis is a global biotech company focused on unlocking the potential of cell and gene therapies (CGTs) in an affordable and accessible format, primarily autologous therapies[22] - The company's POCare Platform aims to overcome limitations of traditional centralized manufacturing by enabling closed and automated production near the patient, reducing cost and complex logistics[22][24] - Advanced Therapy Medicinal Products (ATMPs) include: * Somatic cell therapy medicinal products (STMP) * Tissue engineered products (TEP) * Gene therapy medicinal products (GTMP)[24] POCare Services Orgenesis provides POCare Services through a decentralized network, offering process development, automation, GMP compliance, and CRO services - POCare Services include: * Process development, adaptation, and optimization (OMPULization) * Adaptation of automation and closed systems * Incorporation of serviced therapies compliant with GMP in OMPULs * Tech transfers and training of local teams at POCare Centers * Processing and supply of therapies and required supplies under GMP conditions * Contract Research Organization (CRO) services for clinical trials[29] - The POCare Platform aims to standardize infrastructure using flexible building blocks (POCare Centers and OMPULs) to allow quick expansion and reduce costs associated with traditional cleanroom facilities[36] - OMPULs can shorten implementation time from 18-24 months to 3-9 months, offer a more cost-effective environment, and enable local scalability[37] POCare Services Operations via Subsidiaries Orgenesis conducts POCare Services through Morgenesis LLC, a subsidiary with a 76.9% ownership stake, which received a $30.2 million investment from Metalmark Capital Partners - Morgenesis LLC was formed in August 2022 to streamline POCare Services, with Orgenesis owning 76.9% of the subsidiary[30] - In November 2022, Metalmark Capital Partners invested $30.2 million in Morgenesis, acquiring 22.31% of its equity interests, through $20 million cash and conversion of $10.2 million in senior secured convertible loans[31] - Subsidiaries transferred to Morgenesis: * Orgenesis Maryland LLC (North America POCare Services) * Tissue Genesis International LLC (technology and therapy development) * Orgenesis Services SRL (Belgium POCare Network expansion) * Orgenesis Germany GmbH (CRO services) * Orgenesis Korea Co. Ltd. (cell-processing and pre-clinical services in Korea) * Orgenesis Biotech Israel Ltd. (process development and cell-processing services in Israel)[33] Integration of Custom Fit Solutions within the POCare Center The POCare Platform integrates custom solutions within POCare Centers and OMPULs to decentralize ATMP production, minimizing risks and costs - The POCare Platform aims to bring ATMPs from research to patients worldwide by decentralizing processing, minimizing cell transportation, and reducing costs and timelines associated with traditional cleanroom facilities[35][36] - Orgenesis has developed proprietary equipment and OMPULs for validation, clinical trials, manufacturing, and processing of cell and gene therapy products in a safe, reliable, and cost-effective manner at the point of care[37][40] - Established POCare Centers globally, including: * Israel: Process development and QC labs, OMPULs at hospital sites, manufacturing TILs and CAR-T therapies * Greece: Three OMPULs installed, process development lab, servicing two customers * Maryland, USA: Operating process development lab, establishing cleanroom facility with government grant * Spain: OMPUL producing a clinical grade product[44] POCare Services Development Facilities Orgenesis operates specialized facilities like OBI for process development, the Korean Subsidiary for cell therapies, and Tissue Genesis for Icellator™ technology - Orgenesis Biotech Israel Ltd. (OBI) is a wholly-owned subsidiary specializing in custom process development, upscaling, innovation, and automation procedures for cell therapy industrialization, operating out of a 1,300 square meter facility[45] - Tissue Genesis International develops the Icellator™ for isolating stromal and vascular fraction cells (SVF) from adipose tissue and is integrating automation for Cell and Gene Therapy into OMPULs[47][48] - Theracell Laboratories in Greece, now controlled by Orgenesis through Morgenesis, has been designated a 'Priority Investment of Strategic National Importance' by Enterprise Greece, accelerating its development and clinical use of CGT at POCare[33][52] - Notable 2022 POCare Services Activities: * Setup of regional POCare Centers overseeing development and GMP services, OMPUL deployment, and product supply * Expansion of POCare Centers in Maryland, Boston, California, Belgium, Greece, Slovenia, Israel, Italy, Spain, and Korea * Development of GMP processes for CAR-T, TILs, NK, and MSC-based therapies, with production already in OMPULs * Collaboration with UC Davis for GMP grade lentivirus production and decentralized OMPUL model validation * Partnership with Johns Hopkins University for a GMP facility with grant support from Maryland * Expansion of POCare Services to include CRO services[53][55][56] POCare Therapies Orgenesis' POCare Therapies division develops and out-licenses advanced cell and gene therapies, leveraging its global network to expedite development - The global CGT market is rapidly growing, with over 2,000 active clinical trials and significant acquisitions by large pharma companies, indicating high potential but also high costs and logistical challenges for traditional centralized production[59][60] - Orgenesis' POCare Network offers an alternative drug development pathway, partnering with hospitals and research institutes to in-license promising therapies, adapt them to a point-of-care approach, and out-license for market approval, thereby lowering development costs and expediting the process[64][65][66] - Therapies in Development (summarized): * HiCAR-T: IND enabling studies for B-ALL, B-cell Lymphoma * CeCART: Pre-clinical for Solid Tumors * T-LOOP: IND enabling studies for Solid Tumors * Intra Nasal Delivery of Cell based Immunotherapy: Pre-Clinical for Drug delivery technology, Glioblastoma * MSCP: Pre-clinical for Wound healing and Psoriasis * EVRD: Pre-clinical for CKD * MDVAC: IND enabling studies for Pancreatic Cancer * AutoSVF: Clinical development for Systemic ARDS, vascular disorders * CellFix: Clinical use for Cartilage Defects * KYSLECEL (Autologous Pancreatic Islets): Market approval in the US for TP-IAT * KT-DM-103 and KT-CP-203 (3D-Printed Pancreatic Islets): Own development for Type 1 diabetes and chronic pancreatitis * RanTop, Ranpirnase Topical Formulation: Clinical Stage for Anti-viral/Immune oncology * Autovac: Pre-clinical for Autologous viral vaccine * Bioxomes: Pre-clinical for Drug Delivery Technology * MSPP: Pre-clinical for Urinary Incontinence[70] - KYSLECEL, an autologous cell-based product for chronic or acute recurrent pancreatitis patients after total pancreatectomy (TP-IAT), is available in the United States and regulated by the FDA[72] Strategic CGT Therapeutics Collaborations Collaborations, partnerships, and license agreements are central to Orgenesis' POCare strategy, spanning technology and therapeutic development globally - Collaborations, partnerships, joint ventures, and license agreements are key components of Orgenesis' POCare strategy[81] - POCare technology collaborators and partners include: * Ori Biotech * Accellix * Columbia University in the City of New York * Caerus Therapeutics Corporation * UC Davis * The Johns Hopkins University * The Weizman Institute of Science[81] - The company has collaborations and joint ventures for developing POCare Therapies in North America, Europe, Latin America, Asia, and Australia, involving in-licensing, out-licensing, service contracts, and manufacturing agreements[82] Current POCare Therapies Development Facilities Orgenesis maintains facilities like Koligo for KYSLECEL production, a Belgian Subsidiary for CGT development, and Mida for IPS-based therapies - Koligo maintains commercial production facilities for KYSLECEL in Indiana and develops new technologies such as bio-degradable 3D structures for cell/tissue delivery[83] - The Belgian Subsidiary specializes in developing and validating proprietary and licensed advanced cell and gene therapies, including Muscle-derived Mesenchymal Stem Cells therapy for SUI, leveraging its location in the Walloon biotech cluster[84] - Mida specializes in developing and validating IPS-based therapies and AI, while the Israel subsidiary focuses on R&D and R&D management services[86][87] Revenue Model, Business Development and Licenses Orgenesis' revenue model integrates licensed therapies, automated technology, and a collaborative network, generating revenue from out-licensing, services, and product sales - Orgenesis' POCare Platform revenue model involves in-licensing technology and therapeutic collaborations, followed by out-licensing marketing and manufacturing rights to partners and JVs, typically earning a 10% royalty on net sales[89][90] - Revenue streams include: * R&D development services provided to out-licensing partners * Hospital supply (sale or lease of products and processing services) * Cell process development services for third-party customers * POCare cell processing services at decentralized centers[91][92][93][94] Revenue Breakdown (Years Ended December 31, in thousands) | Revenue stream | 2022 ($) | 2021 ($) | | :-------------------------- | :------- | :------- | | POCare development services | 14,894 | 32,192 | | Cell process development services and hospital services | 11,212 | 3,310 | | POCare cell processing | 9,919 | - | | Total | 36,025 | 35,502 | Competition in the Cell Therapy Field The cell therapy industry is intensely competitive, with Orgenesis facing larger, better-resourced competitors who could adopt similar strategies - The biopharmaceutical industry is intensely competitive, with continuous demand for innovation and speed in the evolving cell-based therapies market[96] - Competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities, and research institutions, many with substantially greater financial and technical resources[96] - While Orgenesis is not aware of direct competitors pursuing an identical POCare Platform business model, larger, better-capitalized entities could adopt similar strategies and develop them more rapidly[97] Intellectual Property Orgenesis protects its technology and products through a portfolio of 36 U.S. patents, 75 foreign-issued patents, and numerous pending applications - Orgenesis protects its technology and products through valid and enforceable patents and by maintaining trade secrets[98] - Intellectual Property Portfolio: * 36 United States patents * 75 foreign-issued patents * 18 pending patent applications in the United States * 71 pending patent applications in foreign jurisdictions (e.g., Australia, Brazil, Canada, China, Europe, India, Israel, Japan, Mexico, New Zealand, North Korea, Panama, Russia, Singapore, South Africa, South Korea) * 11 international Patent Cooperation Treaty (PCT) patent applications[100] - Patents and applications cover diverse areas including dendritic cell-based vaccines, Ranpirnase compositions, tumor infiltrating lymphocytes (TILs), exosomes/bioxomes, bioreactors for cell culture, chimeric antigen receptors (CARs), and mobile processing laboratories[100] Government Regulation Orgenesis' operations are subject to extensive and complex government regulations from bodies like the FDA and EMA, with non-compliance leading to severe penalties - Orgenesis must comply with regulatory requirements from local, state, national, and international bodies concerning R&D, testing, manufacturing (GMPs), labeling, distribution, import/export, and facility registration[119] - U.S. Regulatory Process (FDA): * Pre-clinical tests (GLP) * Investigational New Drug (IND) application * Institutional Review Board (IRB) approval * Clinical trials (GCP) * Current GMP regulations * Biologics License Application (BLA) * FDA review and approval, including manufacturing facility inspection * Potential post-marketing testing and surveillance[126][130] - European Regulatory Process (EMA): * Compliance with current GMP regulations * Clinical Trial Application (CTA) via CTIS * Ethic committee approval * Clinical trials (GCP) * Centralized submission for Marketing Authorization * Review and approval of Marketing Authorization Application[131] - The FDA has granted Orphan Drug designation for Orgenesis' AIP cells for severe hypoglycemia-prone diabetes, providing incentives like 7 years of market exclusivity and reduced fees[133] Human Capital Resources As of December 31, 2022, Orgenesis had 167 employees and is committed to diversity, equity, and inclusion, with 53% women in its workforce - As of December 31, 2022, Orgenesis had 167 employees and utilized outside consultants for clinical, finance, accounting, and business development services[134] - The company offers a total rewards package (base salary, cash bonus, equity compensation) to attract and retain highly skilled employees in a competitive biotechnology market[135] - Orgenesis is committed to diversity, equity, and inclusion, with its total workforce comprising approximately 53% women, 11% ethnically diverse, and 50% over the age of 40[136] Health, Wellness and Safety Orgenesis prioritizes employee safety and health, implementing clear COVID-19 policies, encouraging remote work, and expanding benefits - Orgenesis prioritizes employee safety and health, particularly in response to the COVID-19 pandemic, by implementing clear policies, encouraging remote work, and providing resources[138] - COVID-19 response measures included: * Establishing clear and regular COVID-19 policies, safety protocols, and updates * Strongly encouraging office-based employees to work from home * Implementing protocols for actual and suspected COVID-19 cases and potential exposure * Expanding financial, medical, and mental health benefits, including mindfulness sessions[138][143] Environmental, Social and Governance Orgenesis integrates sustainability, with the Board overseeing ESG strategy and employees adhering to a Code of Ethics and Business Conduct - The Board of Directors' Nominating and Governance Committee oversees Environmental, Social and Governance (ESG) strategy and risk management[139] - Employees are responsible for upholding core values and adhering to the Code of Ethics and Business Conduct, which includes policies on bribery, corruption, conflicts of interest, and a whistleblower program[139] - Orgenesis is committed to environmental protection by monitoring resource use, improving efficiency, reducing emissions and waste, and using third-party vendors for biohazardous and chemical waste disposal[140] Corporate and Available Information Orgenesis provides SEC filings free on its website, with common stock traded on the Nasdaq Capital Market under 'ORGS' - Orgenesis makes its SEC filings (10-K, 10-Q, 8-K) available free of charge on its website (http://www.orgenesis.com)[141](index=141&type=chunk) - The company's common stock is listed and traded on the Nasdaq Capital Market under the symbol 'ORGS'[142] ITEM 1A. RISK FACTORS This section outlines significant risks impacting investment in Orgenesis, including business model uncertainty, going concern doubts, unprofitability, and Metalmark Investment risks - Investment in Orgenesis common stock is speculative due to the limited operating history and unproven business model of its POCare business, and the rapidly evolving cell therapy industry[145][149] - Management and independent auditors have concluded there is substantial doubt about the company's ability to continue as a going concern as of December 31, 2022, due to recurring losses and negative cash flows[145][150] - The company is not profitable as of December 31, 2022, has limited cash flow, and its future success is highly dependent on successful development of novel cell-based therapy technology and effective management of growth[145][151][152] Summary of Risk Factors Key risks include the speculative nature of the POCare business, going concern doubts, unprofitability, R&D challenges, and Metalmark Investment risks - Key risks include: * Limited operating history and unproven business model of POCare business * Substantial doubt about ability to continue as a going concern * Unprofitability and limited cash flow * Risks inherent in novel cell-based therapy R&D * Challenges in collaborations and strategic alliances * Impact of COVID-19 pandemic * Dependence on intellectual property protection * Risks related to OMPUL development and operation * Product liability lawsuits * Dependence on information technology and cybersecurity risks * Inability to develop in-house sales/commercial distribution or maintain third-party collaborations * Undesirable side effects of product candidates * Complex manufacturing of biologics and scaling difficulties * Reliance on sole/limited source vendors for reagents and equipment * Significant competition * High dependence on key personnel * Extensive industry regulation * Risks related to the Metalmark Investment (future payments, forced sale, control of Morgenesis, dilution)[145][146] Risks Related to Our Company and POCare Business Orgenesis faces significant risks from its unproven POCare business model, going concern doubts, unprofitability, R&D challenges, and need for capital - Orgenesis' POCare business has a limited operating history and unproven business model, making its prospects speculative and its ability to execute its strategy uncertain[149] - The company's management and auditors have expressed substantial doubt about its ability to continue as a going concern due to expected operating losses and negative cash flows, necessitating additional capital or increased revenues[150][151] - Risks in novel technology R&D include: * Obtaining regulatory approval from agencies with limited cell therapy experience * Developing consistent and reliable processes for cell engineering and administration * Sourcing clinical and commercial supplies * Developing cost-effective manufacturing and distribution networks * Establishing sales and marketing capabilities * Maintaining post-marketing surveillance[152][157] - The therapeutic efficacy of Ranpirnase and other product candidates is unproven in humans, and successful development and commercialization are not guaranteed[158] - The company needs to grow its organization significantly, which poses management challenges in recruiting, integrating, and motivating personnel, as well as managing outsourced activities[160][161] - Additional capital may be required to support business growth, and financing may not be available on acceptable terms, potentially leading to dilution for existing stockholders[163][165] - Operations may be adversely affected by ongoing developments in Ukraine and Russia, and currency exchange fluctuations, particularly the euro-to-U.S. dollar rate, can impact financial results[166][167] - Risks in collaborations and strategic alliances: * Collaborators may not perform as expected or commit sufficient resources * Delays in clinical trials or regulatory submissions * Disputes or termination of collaborations * Collaborators developing competing products or failing to maintain intellectual property rights[168][170] - COVID-19 pandemic impacts include: * Delays in supply chain and manufacturing * Disruptions to discovery and preclinical efforts * Changes or shutdowns at clinical trial sites * Limited patient access and enrollment * Changes in regulatory requirements[173][176] Risks Related to Our OMPULs OMPUL operations face risks from local regulations, facility damage, supply chain issues, skilled labor shortages, and security concerns - OMPUL operations may be restricted by local zoning, environmental, medical waste, or other licensing regulations, potentially limiting their location, size, and use[201] - Damage or inoperability of OMPUL facilities due to natural or man-made disasters could disrupt testing and R&D, leading to loss of customers or reputational harm[202][203] - Operational risks for OMPULs include: * Changes in price and availability of raw materials * Dependence on skilled human capital and potential shortages * Security concerns in certain locations impacting safety of OMPULs, employees, and patients * Heavy industry regulation, with changes or violations potentially reducing revenue and harming business[205][206][207][208] Risks Related to Our Trans-Differentiation Technologies for Diabetes and the THM License Agreement Orgenesis faces risks with its diabetes trans-differentiation technology, including potential THM License Agreement cancellation and an ongoing royalty dispute - THM is entitled to cancel the License Agreement if the Israeli Subsidiary fails to fulfill development plan terms or breaches obligations, with cure periods of one year or 180 days, respectively[209] - An ongoing legal proceeding initiated by THM alleges that Orgenesis and its Israeli Subsidiary owe royalties for using Sheba's know-how and technology in cell therapy, including the point-of-care platform and CDMO activities[209][269] - Challenges in developing and commercializing trans-differentiating technology for diabetes include: * Obtaining regulatory approval from authorities with limited experience in this technology * Developing consistent and reliable processes for engineering and infusing patient's liver cells * Ensuring safe administration and long-term follow-up for patients * Sourcing clinical and commercial supplies * Developing cost-effective manufacturing and distribution networks * Establishing sales and marketing capabilities * Maintaining post-marketing surveillance and risk assessment programs[210][212] Risks Related to Development and Regulatory Approval of Our Therapies and Product Candidates Biopharmaceutical development is inherently risky, facing extensive regulations, clinical trial failures, manufacturing complexities, and market acceptance challenges - Biopharmaceutical product development is inherently risky, with no guarantee of successful product candidates or commercial viability, and limited resources may be expended on unsuccessful programs[211] - Reasons for R&D program failure include: * Inability to identify additional product candidates * Failure in preclinical or clinical testing * Harmful side effects or lack of efficacy * Competitor alternatives * Third-party patent infringement * Unfavorable market changes * Inability to produce in commercial quantities at acceptable cost * Lack of acceptance by patients, medical community, or payers[213] - Extensive, complex, and costly government regulations (FDA, EMA) significantly impact product development, manufacturing (GMPs), and distribution, with non-compliance leading to severe sanctions and delays[215][216][217] - Factors affecting revenue generation and profitability: * Completion of R&D and nonclinical/clinical development * Obtaining regulatory approvals and marketing authorizations * Developing sustainable and scalable manufacturing processes and supply relationships * Launching and commercializing product candidates * Achieving market acceptance * Addressing competing technological and market developments * Protecting intellectual property * Attracting and retaining qualified personnel[220][223] - Clinical trial risks include: * Inability to generate sufficient preclinical data * Delays in regulatory consensus on study design or IRB approval * Imposition of clinical holds * Difficulties in patient recruitment or retention * Failure to comply with GCP requirements * Adverse events outweighing benefits * Changes in regulatory requirements or standard of care * High costs or negative/inconclusive results * Manufacturing, testing, or supply delays[222][227] - Manufacturing of biologics is complex, highly regulated, and susceptible to product loss, contamination, equipment failure, and logistical issues, making process development and scaling challenging and costly[231][232][234][235][236] - Reliance on sole or limited source vendors for reagents, specialized equipment, and other specialty materials poses a risk to manufacturing and supply, potentially causing delays or disruptions[237][238] - Risks associated with international operations: * Differing regulatory requirements, tariffs, trade barriers, and exchange controls * Economic weakness or political instability * Compliance with foreign tax, employment, immigration, and labor laws * Foreign currency fluctuations * Difficulties in staffing and managing foreign operations * Potential liability under foreign anti-corruption laws * Challenges in enforcing intellectual property rights * Production shortages or business interruptions from geopolitical actions or disease outbreaks[240][243] Risks Related to the Metalmark Investment The Metalmark Investment in Morgenesis LLC carries risks including uncertain future payments, MM's control rights, potential forced sale, and significant stockholder dilution - Morgenesis may not receive future payments of up to $20 million from MM, which are contingent on achieving specific Net Revenue targets for 2022 and 2023, and Orgenesis stockholder approval of LLC Agreement Terms[247][248][249] - MM may force the sale of Morgenesis under certain conditions (e.g., after two years or a Material Governance Event), potentially resulting in MM receiving greater value than Orgenesis and its shareholders[250][251] - MM may assume control of Morgenesis' Board of Managers under specific circumstances (e.g., Material Underperformance Event, Material Governance Event, failure to pay redemption price), leading to Orgenesis' inability to control the subsidiary's activities[252][253][255] - MM has the right to buy Orgenesis' units in Morgenesis (MM Call Option) upon a Material Governance Event or failure of stockholder approval, potentially resulting in Orgenesis holding no equity in Morgenesis[256] - Orgenesis may be forced to redeem all of MM's Preferred Units in Morgenesis under certain conditions, requiring substantial cash outlay and adversely affecting its financial position[257][258] - If MM exercises its Stock Exchange Option, Orgenesis could issue up to 5,106,596 shares of common stock to MM, potentially causing significant dilution to existing stockholders[259] Risks Related to our Common Stock Risks related to Orgenesis' common stock include potential dilution from future share issuances, stock price volatility, and no foreseeable dividend payments - Future issuances of additional shares (up to 145,833,334 authorized) could result in significant dilution for existing stockholders and potentially a change of control[261] - The company's stock price and trading volume may be volatile due to factors such as: * Quarterly variations in operating results * Changes in future financial performance expectations * Announcements related to the business * Conditions affecting the biotechnology industry * Success of operating strategy * Performance of comparable companies[262] - Orgenesis does not intend to pay dividends on its common stock in the foreseeable future, meaning investment gains depend solely on stock price appreciation[265] ITEM 1B. UNRESOLVED STAFF COMMENTS This section states that there are no unresolved staff comments from the SEC - Not applicable, indicating no unresolved staff comments[266] ITEM 2. PROPERTIES Orgenesis Inc. leases various global facilities for its principal office, laboratories, and production, believing them suitable for its business operations - Orgenesis Inc. does not own real property but leases facilities for its operations[267] - Leased properties include: * Orgenesis Inc.: Principal office in Germantown, MD * Orgenesis Maryland LLC.: FastForward laboratory and office in Baltimore, MD * Orgenesis Korea Co. Ltd: Operational production laboratory and office in Gwanggyo, South Korea * Orgenesis Ltd.: Laboratory and office in Nes Ziona, Israel * Koligo Therapeutics Inc.: Production facility and development labs in New Albany, Indiana * Tissue Genesis International LLC: Production facility and development labs in Leander, Texas * Orgenesis Biotech Israel Ltd.: Laboratories and offices in Bar Lev Industrial Park, Israel * Mida Biotech BV: Laboratories and offices in Leiden, The Netherlands * Orgenesis Belgium and Orgenesis Services SRL: Laboratories and offices near Namur, Belgium * Theracell Laboratories: Laboratory and offices in Koropi, Greece[267] - The company believes its facilities are in good condition and suitable for its business, with suitable alternative or additional space expected to be available on commercially reasonable terms if needed[268] ITEM 3. LEGAL PROCEEDINGS Orgenesis is involved in a legal dispute with THM in Tel Aviv District Court, seeking NIS 10 million and royalties for alleged technology use - A complaint was filed on January 18, 2022, in the Tel Aviv District Court against Orgenesis Inc. and its Israeli Subsidiary by Tel Hashomer Medical Research, Infrastructure and Services Ltd. (THM)[269] - Plaintiffs seek declaratory relief for royalties (7% of sales, 24% of sublicense revenues) and NIS 10 million in payments, alleging use of THM's know-how and technology in cell therapy and point-of-care platform activities[269] - Orgenesis believes the allegations are without merit, intends to vigorously defend itself, and has made no provision in financial statements as a material loss is not considered probable[269] ITEM 4. MINE SAFETY DISCLOSURES This section states that mine safety disclosures are not applicable to Orgenesis Inc. - Not applicable, indicating no mine safety disclosures[271] PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Orgenesis common stock (ORGS) trades on Nasdaq, with 305 holders as of March 22, 2023; the company does not anticipate paying dividends - Orgenesis common stock has been listed on the Nasdaq Capital Market under the symbol 'ORGS' since March 13, 2018[273] - As of March 22, 2023, there were 305 holders of record of the company's common stock, with a closing price of $1.43[273] - The company has never paid cash dividends and does not intend to in the foreseeable future, planning to retain all earnings for business operations and expansion[274][265] - In October 2023, the company issued additional warrants to purchase 174,460 shares of Common Stock to Ricky Neumann and 41,042 additional warrants to other investors, as part of an amendment to a Securities Purchase Agreement and Registration Rights Agreement[276] - No shares were repurchased under the $10 million Stock Repurchase Plan during the year ended December 31, 2022[277][278] 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 analyzes Orgenesis' financial condition and results for 2022 and 2021, focusing on its CGT business, POCare Platform, and segment separation - The discussion analyzes financial condition and results of operations for the years ended December 31, 2022, and 2021, in conjunction with consolidated financial statements[279][280] - Orgenesis is a global biotech company focused on affordable and accessible cell and gene therapies (CGTs), primarily autologous therapies, through its Point-of-Care (POCare) Platform[281] - Following the Metalmark Investment in November 2022, operations were separated into two segments: Morgenesis (POCare Services) and Therapies (therapeutic development operations)[284] Corporate Overview Orgenesis is a global biotech company making CGTs affordable and accessible via its POCare Platform, which includes POCare Services and Therapies segments - Orgenesis is a global biotech company focused on unlocking the potential of CGTs in an affordable and accessible format, primarily through autologous therapies manufactured at the point of care (POCare)[281] - The company's POCare Platform, operated by Morgenesis, provides a scalable infrastructure of technology and services, including OMPULs, to ensure standardized, GMP-compliant production near the patient[282][285] - POCare Services include: * Process development, adaptation, and optimization (OMPULization) * Adaptation of automation and closed systems * Incorporation of serviced therapies compliant with GMP in OMPULs * Tech transfers and training of local teams for serviced therapies * Processing and supply of therapies and required supplies under GMP conditions * Contract Research Organization (CRO) services for clinical trials[285][289] - The Therapies segment focuses on in-licensing promising therapies from academic institutions, adapting them to a point-of-care approach, and out-licensing for market approval, aiming to lower development costs and expedite the process[286][288][290][291] Significant Developments During Fiscal 2022 Fiscal 2022 saw significant financing, including a $2.175 million private placement, $9.15 million in convertible loans, and a $30.2 million Metalmark Investment in Morgenesis - Financing Activities (2022): * Equity: Sold 724,999 shares of Common Stock and warrants for 146,959 shares in a private placement, raising $2.175 million * Convertible Loan Agreements: Entered into three agreements for an aggregate of $9.15 million at 6% interest, issuing warrants for 408,335 shares. Two loans totaling $8 million were later extended to Q1 2024, with interest increased to 10% and conversion price amended to $2.50 per share, issuing additional warrants for 1,777,777 shares * Loan Repayments: Repaid four loans totaling $2.3 million[292][293][294][295] - Metalmark Capital Partners invested $30.2 million in Morgenesis LLC, acquiring 22.31% of its equity, comprising $20 million cash and conversion of $10.2 million in existing convertible loans. Future payments of up to $20 million and a $10 million Earnout Payment are contingent on Morgenesis' performance[296][298][299] - Orgenesis acquired Mida Biotech BV for $100 thousand, paid via issuance of company common stock[302] - Entered into an exclusive, worldwide royalty-bearing license and research agreement with Yeda Research and Development Company Limited for TIL and CAR T-cell immunotherapy platforms[303] Results of Operations Orgenesis reported $36,025 thousand in total revenues for 2022, a 1% increase, with operating loss decreasing by 48.8% due to reduced costs Consolidated Statements of Comprehensive Loss (Income) (in thousands) | Indicator | 2022 ($) | 2021 ($) | | :--------------------------------------------------- | :------- | :------- | | Total revenues | 36,025 | 35,502 | | Cost of revenues, development services and R&D expenses | 27,066 | 36,644 | | Amortization of intangible assets | 911 | 948 | | Selling, general and administrative expenses | 15,589 | 14,710 | | Impairment expenses | 1,061 | - | | Operating loss | 8,602 | 16,800 | | Other income | (173) | (2,278) | | Loss from extinguishment in connection with convertible loan | 52 | 1,865 | | Financial expense, net | 1,971 | 1,292 | | Share in income of associated company | 1,508 | 272 | | Loss before income taxes | 11,960 | 17,951 | | Tax expense | 209 | 108 | | Net loss | 12,169 | 18,059 | Revenue by Stream (Years Ended December 31, in thousands) | Revenue stream | 2022 ($) | 2021 ($) | | :------------------------------------------ | :------- | :------- | | POCare development services | 14,894 | 32,192 | | Cell process development services and hospital services | 11,212 | 3,310 | | POCare cell processing | 9,919 | - | | Total | 36,025 | 35,502 | - Revenue changes (2022 vs. 2021): * POCare development services: Declined due to completion of most performance obligations in 2021 * Cell process development services and hospital services: Increased due to new agreements with third-party customers * POCare cell processing: New revenue stream from signed cell processing agreements[309] Cost of Revenues, Development Services and R&D Expenses (in thousands) | Expense Category | 2022 ($) | 2021 ($) | | :--------------------------------------- | :------- | :------- | | Salaries and related expenses | 11,206 | 10,977 | | Stock-based compensation | 616 | 729 | | Subcontracting, professional and consulting services | 5,655 | 12,796 | | Lab expenses | 2,685 | 3,513 | | Depreciation expenses, net | 1,017 | 874 | | Other research and development expenses | 6,010 | 7,755 | | Less – grant | (123) | - | | Total | 27,066 | 36,644 | - Cost of revenues, development services and R&D expenses decreased by 26% in 2022, primarily due to the completion of the majority of development work on OMPULs, leading to a 40% decline in subcontracting, professional, consulting, lab, and other R&D expenses[311] Selling, General and Administrative Expenses (in thousands) | Expense Category | 2022 ($) | 2021 ($) | | :--------------------------------- | :------- | :------- | | Salaries and related expenses | 4,008 | 6,277 | | Stock-based compensation | 362 | 945 | | Accounting and legal fees | 5,527 | 3,293 | | Professional fees | 3,080 | 1,107 | | Rent and related expenses | 199 | 249 | | Business development | 474 | 577 | | Depreciation expenses, net | 50 | 42 | | Other general and administrative expenses | 1,889 | 2,220 | | Total | 15,589 | 14,710 | - Selling, general and administrative expenses increased by 6% in 2022, mainly due to higher accounting and legal fees and professional services related to investment activities (e.g., Metalmark Investment), offset by a decline in salaries (no $3.6 million bonus for CEO in 2022)[312] - Impairment expenses of $1,061 thousand were recorded in 2022 (vs. $0 in 2021) due to the write-off of customer relationships and IPR&D intangible assets[313][314] - Financial expenses, net, increased by 53% to $1,971 thousand in 2022, primarily due to increased interest and related expenses on new and existing convertible loans[315] - Tax expense increased by 94% to $209 thousand in 2022, mainly due to increased tax liabilities in the U.S. following changes in Internal Revenue Code Section 174 regarding R&E expenditures[316] Liquidity and Capital Resources Orgenesis reported an accumulated deficit of $121,261 thousand and negative operating cash flows, raising substantial doubt about its going concern ability Working Capital (in thousands) | Indicator | December 31, 2022 ($) | December 31, 2021 ($) | | :---------------- | :-------------------- | :-------------------- | | Current assets | 46,318 | 25,758 | | Current liabilities | 15,910 | 15,365 | | Working capital | 30,408 | 10,393 | - Current assets increased by $20,560 thousand, mainly due to increased accounts receivable from higher POCare revenues. Current liabilities increased by $545 thousand, primarily from higher accounts payable and accrued expenses, offset by reduced current maturities of convertible loans[317][318] Cash Flow Summary (Years Ended December 31, in thousands) | Cash Flow Activity | 2022 ($) | 2021 ($) | | :------------------------------------------ | :------- | :------- | | Net loss | (12,169) | (18,059) | | Net cash used in operating activities | (24,924) | (26,866) | | Net cash used in investing activities | (14,133) | (12,384) | | Net cash provided by (used in) financing activities | 39,578 | (106) | | Net change in cash and cash equivalents and restricted cash | 521 | (39,356) | - Net cash used in operating activities decreased due to a lower net loss and reduced stock-based compensation, partially offset by increased accounts receivable[320][322] - Net cash used in investing activities increased due to additional loans to associated companies and purchases of property, plants, and equipment for POCare facilities[320] - Net cash provided by financing activities significantly increased due to proceeds from equity investments ($2.181 million), loans ($19.150 million), and the Metalmark investment ($20 million)[321][323] - Subsequent to year-end, the company extended convertible loan maturities, increased interest rates, amended conversion prices, entered new convertible loan agreements for $5 million, and completed a registered direct offering for $3.7 million, with proceeds for working capital and therapy activities[324] Off-Balance Sheet Arrangements Orgenesis Inc. has no material off-balance sheet arrangements that would significantly impact its financial condition or results of operations - Orgenesis has no material off-balance sheet arrangements that would significantly impact its financial condition or results of operations[325] Critical Accounting Policies and Estimates Orgenesis' critical accounting policies involve significant judgment for income taxes, revenue recognition, and estimating standalone selling prices - Critical accounting policies and estimates include: * Income Taxes: Deferred income tax assets and liabilities are computed based on differences between financial statement and tax bases, with valuation allowances established when realization is not probable. Uncertain tax positions are evaluated using a 'more likely than not' standard * Revenue from Contracts with Customers: Revenue is recognized when control of services is transferred, based on transaction price. The company has three main revenue streams: POCare development services, cell process development services (including hospital supplies), and POCare cell processing * Significant Judgement and Estimates: Required for identifying distinct performance obligations, estimating standalone selling prices, and determining revenue recognition timing (over time or at a point in time)[326][327][328][329][330][331][332][333][334][335][336][337][338][339] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section states that quantitative and qualitative disclosures about market risk are not applicable to Orgenesis Inc. - Not applicable, indicating no quantitative and qualitative disclosures about market risk[340] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This item refers to the consolidated financial statements and supplementary data, included elsewhere in the Annual Report on Form 10-K - The financial statements and supplementary data are included following the 'Index to Financial Statements' on page F-1 of this Annual Report on Form 10-K[341] ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE This section states that there have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[342] ITEM 9A. CONTROLS AND PROCEDURES Orgenesis management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of December 31, 2022[343] - Management assessed the effectiveness of internal control over financial reporting using the COSO framework and concluded it was effective as of December 31, 2022[344][345][346] - No material changes in internal control over financial reporting occurred during the fourth quarter of 2022[347] ITEM 9B. OTHER INFORMATION This section states that there is no other information to report - None, indicating no other information to report[348] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This section states that there is no disclosure regarding foreign jurisdictions that prevent inspections - None, indicating no disclosure regarding foreign jurisdictions that prevent inspections[349] PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE This section provides information on Orgenesis Inc.'s directors and executive officers, including their professional backgrounds and board committee structures Directors and Executive Officers (as of March 22, 2023) | Name | Age | Position | | :--------------- | :-- | :-------------------------------------------- | | Vered Caplan | 54 | Chief Executive Officer and Chairperson of the Board of Directors | | Neil Reithinger | 53 | Chief Financial Officer, Secretary and Treasurer | | Efrat Assa Kunik | 48 | Chief Development Officer | | David Sidransky | 62 | Director | | Guy Yachin | 55 | Director | | Yaron Adler | 52 | Director | | Ashish Nanda | 57 | Director | | Mario Philips | 53 | Director | - The Board of Directors consists of six members, with a majority deemed independent according to Nasdaq Stock Market listing standards[370][372][373] - Board Committees: * Audit Committee: Members are Dr. Sidransky, Mr. Yachin, and Mr. Philips. Dr. Sidransky is designated as an 'audit committee financial expert' * Compensation Committee: Members are Dr. Sidransky, Mr. Adler, and Mr. Yachin * Nominating and Corporate Governance Committee: Members are Mr. Nanda, Mr. Adler, and Mr. Yachin * Research and Development Committee: Members are Mr. Yachin and Dr. Sidransky[374] - All committees operate under written charters and are comprised of independent direc