DESCRIPTION OF BUSINESS
|3 Months Ended|
Mar. 31, 2019
|DESCRIPTION OF BUSINESS [Text Block]||
NOTE 1 – DESCRIPTION OF BUSINESS
Orgenesis Inc., a Nevada corporation (the “Company”), is a biotechnology company specializing in the development, manufacturing and provision of services in the cell and gene therapy industry. The Company operates through two independent business units: (i) a point-of-care (“POCare”) cell therapy (“POC or “PT”) unit and (ii) a Contract Development and Manufacturing Organization (“CDMO”) which provides contract manufacturing and development services for biopharmaceutical companies (the “CDMO Business”) conducted through its subsidiary, Masthercell Global Inc., a Delaware corporation (“Masthercell Global”). Through the POC business, the Company’s aim is to further the development of Advanced Therapy Medicinal Products (“ATMPs”) through collaborations and in-licensing with other pre-clinical and clinical-stage biopharmaceutical companies and research and healthcare institutes to bring such ATMPs to patients. The Company out-licenses these ATMPs through regional partners to whom the Company also provides regulatory, pre-clinical and training services to support their activity in order to reach patients in a point-of-care hospital setting. Through the CDMO platform, the Company is focused on providing contract manufacturing and development services for biopharmaceutical companies.
Activities in the POC business include a multitude of cell therapies, including autoimmune, oncologic, neurologic and metabolic diseases and other indications. The Company plans to provide services for its joint venture (“JV”) partners, pharmaceutical and biotech companies as well as research institutions and hospitals that have cell therapies in clinical development. Each of these customers and collaborations represents a revenue and growth opportunity upon regulatory approval. Furthermore, the Company’s trans-differentiation technology demonstrates the capacity to induce a shift in the developmental fate of cells from the liver or other tissues and transdifferentiating them into “pancreatic beta cell-like” Autologous Insulin Producing (“AIP”) cells for patients with Type 1 Diabetes, acute pancreatitis and other insulin deficient diseases. This technology, which has yet to be proven in human clinical trials, has shown in pre-clinical animal models that the human derived AIP cells produce insulin in a glucose-sensitive manner. This trans-differentiation technology is licensed by Orgenesis Ltd. (the “Israeli Subsidiary”) and is based on the work of Prof. Sarah Ferber, the Company’s Chief Science Officer and a researcher at Tel Hashomer Medical Research Infrastructure and Services Ltd. (“THM”) in Israel. The development plan calls for conducting additional pre-clinical safety and efficacy studies with respect to diabetes and other potential indications prior to initiating human clinical trials.
The Company conducts POC business through three wholly-owned subsidiaries. The subsidiaries are as follows:
The CDMO platform operates through Masthercell Global Inc. (“Masthercell Global”), which currently consists of the following subsidiaries: MaSTherCell S.A (“MaSTherCell”) in Belgium, Atvio Biotech Ltd. (“Atvio”) in Israel, CureCell Co., Ltd. (“CureCell”) in South Korea and Masthercell U.S. LLC in the United States (collectively, the “ Masthercell Global Subsidiaries”), having unique know-how and expertise for manufacturing in a multitude of cell types. Masthercell Global strives to provide services that are all compliant with GMP requirements, ensuring identity, purity, stability, potency and robustness of cell therapy products for clinical phase I, II, III and through commercialization.
The Company operates its CDMO and POC business as two separate business segments.
These condensed consolidated financial statements include the accounts of Orgenesis Inc. and its subsidiaries, including the U.S. Subsidiary, the Belgian Subsidiary, the Israeli Subsidiary, and the Masthercell Global Subsidiaries.
As used in this report and unless otherwise indicated, the term “Company” refers to Orgenesis Inc. and its subsidiaries (“Subsidiaries”). Unless otherwise specified, all amounts are expressed in United States Dollars.
b. Change in Fiscal Year End
On October 22, 2018, the Board of Directors of the Company approved a change in the Company’s fiscal year end from November 30 to December 31 of each year. This change to the calendar year reporting cycle became effective on January 1, 2019. As a result of the change, the Company is reporting a December 2018 fiscal month transition period, the results of which are separately reported in this Quarterly Report on Form 10-Q for the calendar quarter ended March 31, 2019, and will be separately reported in future Quarterly Reports as of June 30, 2019, September 30, 2019 and in the Company’s Annual Report on Form 10-K for the calendar year ending December 31, 2019.
The Company has included its unaudited condensed consolidated financial statements for the Transition Period in this report on Form 10-Q. As permitted under SEC rules, prior-period financial statements have not been recast as management believes (i) the three months ended March 31, 2019 are comparable to the three months ended February 28, 2018; and (ii) recasting prior-period results is not practicable or cost justified.
As of March 31, 2019, the Company has accumulated losses of approximately $73 million. Although the Company is showing positive revenues and gross profit trends on the CDMO platform, the Company expects to incur further losses in the POC business.
To date, the Company has been funding operations primarily from proceeds raised from private placements of the Company’s equity securities and convertible debt, and from operating cash flows generated from POC business and CDMO platform. From December 1, 2018 through March 31, 2019, the Company received proceeds of approximately $9.6 million in revenues and accounts receivable from customers, $6.6 million from GPP, and $250 thousand from convertible loans. In addition, from April 1, 2019 through May 7, 2019, the Company raised approximately $500 thousand from a convertible loan ageement with a non-U.S. investor, and proceeds of approximately $4.6 million in accounts receivable from customers of Masthercell Global subsidiaries. In May 2019, the Company entered into a convertible loan agreement with an investor for an aggregate amount of $5 million (see Note 10).
Based on its current cash resources and commitments, the Company believes it will be able to maintain its current planned development activities and expected level of expenditures for at least 12 months from the date of the issuance of the financial statements, although no assurance can be given that it will not need additional funds prior to such time. If there are unexpected increases in general and administrative expenses or research and development expenses, or decreases in revenues from customers, the Company will need to seek additional financing.
Basis of Presentation
These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial statements. Accordingly, they do not contain all information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, the unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s consolidated financial position as of March 31, 2019, and December 31, 2018, and the consolidated statements of comprehensive loss for the three months ended March 31, 2019 and one month transition period ended December 31, 2018, and the changes in equity and cash flows for the three-month period ended March 31, 2019 and one-month transition period ended December 31, 2018. The interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2019. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended November 30, 2018.
The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef