ALAMEDA, Calif.--(BUSINESS WIRE)--AgeX Therapeutics, Inc. (AgeX; NYSE American: AGE), a biotechnology company developing therapeutics for human aging and regeneration, reported financial and operating results for the second quarter ended June 30, 2020.
AgeX made strides with respect to its newly established licensing and collaboration model, which aims to embed its technology platforms across the cell therapy industry. AgeX has entered into a research license for the use of its immunotolerance UniverCyteTM technology by Sernova Corp. (Sernova), a publicly-listed Canadian regenerative medicine therapeutics company. It also entered a Manufacturing, Marketing, and Distribution Agreement with Pluristyx, Inc. (Pluristyx), an advanced therapy tools and services company serving customers in the fields of regenerative medicine and cellular and gene therapies. In addition, AgeX signed a letter of intent with ImStem Biotechnology (ImStem), for ImStem to utilize AgeXs ESI-brand pluripotent stem cells to derive a cell therapy product for potential use in the treatment of COVID-19 and as well acute respiratory distress syndrome (ARDS) from non-COVID-19 causes.
We are working diligently to position our subsidiary Reverse Bioengineering to optimize the potential of induced tissue regeneration (iTR) technology, said Michael West, CEO of AgeX. We believe this technology offers a powerful new modality to treat age-related degenerative diseases by reversing developmental aging in a tissue, thereby unlocking an innate capacity of tissues to regenerate scarlessly.
AgeX completed its restructuring to streamline its operations to allow efficient usage of capital in the current pandemic environment as well to meet near-term strategic company priorities of deriving value and generating preclinical and ultimately clinical data from our technology platforms through external licensing and collaboration agreements. In the longer-term, AgeX remains committed to in-house product development of AgeX-BAT1 and AgeX-VASC1. AgeX is considering options to bring capital into the company.
AgeX has made excellent progress in terms of its collaboration and licensing model, closing five deals since the beginning of the year so far, said Greg Bailey M.D., Chairman of AgeX. The deals have spanned all three of our technology platforms of UniverCyte for the generation of universal cells, PureStem for the derivation and manufacturing of therapeutic cells, and AgeX ESI pluripotent stem cells to act as a source material for cellular therapies. All these deals show the value industry and academia see in our offerings.
Liquidity and Capital Resources
AgeX is in need of additional capital to finance its operations. On March 30, 2020, AgeX entered into a Secured Convertible Facility Agreement (the New Loan Agreement) with Juvenescence Limited pursuant to which AgeX may borrow funds from time to time. As of August 14, 2020, AgeX has borrowed $3.5 million and may draw additional funds from time to time subject to Juvenescences discretion, prior to the contractual repayment date on March 30, 2023. AgeX may not draw down more than $1.0 million in any single draw. More information about the New Loan Agreement can be found in AgeXs Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the periods ended March 31, 2020 and June 30, 2020 filed with the Securities and Exchange Commission on March 30, 2020, May 14, 2020, and August 14, 2020 respectively.
On April 13, 2020, AgeX obtained a loan in the amount of $432,952 from Axos Bank under the Paycheck Protection Program (the PPP Loan). The PPP Loan bears interest at a rate of 1% per annum. No payments will be due on the PPP Loan during a six month deferral period commencing on the date of the promissory note. Commencing one month after the expiration of the deferral period, and continuing on the same day of each month thereafter until the maturity date of the PPP Loan, monthly payments of principal and interest will be due, in an amount required to fully amortize the principal amount outstanding on the PPP Loan by the maturity date. The maturity date is April 13, 2022. The principal amount of the PPP Loan is subject to forgiveness under the Paycheck Protection Program (PPP) to the extent that PPP Loan proceeds are used to pay expense permitted by the PPP, including payroll, rent, and utilities (collectively, Qualifying Expenses), during the time frame permitted by the PPP. AgeX believes that it has used the PPP Loan amount for Qualifying Expenses. However, no assurance is provided that AgeX will obtain forgiveness of the PPP Loan in whole or in part.
In May 2020, AgeX laid off 11 research and development personnel and consequently paid approximately $105,000 in accrued payroll and unused paid time off and other benefits and recognized approximately $194,800 in restructuring charges in connection with the reduction in staffing, consisting of contractual severance and other employee termination benefits, substantially all of which have been settled in cash. The staff reductions followed AgeXs strategic review of its operations, giving consideration to the status of its product development programs, human resources, capital needs and resources, and current conditions in the capital markets resulting from the COVID-19 pandemic.
Going Concern Considerations
As required under Accounting Standards Update 2014-15, Presentation of Financial Statements-Going Concern (ASC 205-40), AgeX evaluates whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date its financial statements are issued. Based on AgeXs most recent projected cash flows, and considering that loans from Juvenescence under the New Loan Agreement will be subject to Juvenescences discretion, AgeX believes that its cash and cash equivalents, the remaining $5.5 million available under the New Loan Agreement and reduction in staff in May 2020 would not be sufficient to satisfy its anticipated operating and other funding requirements for the twelve months following the filing of AgeXs Quarterly Report on Form 10-Q for the three and six months ended June 30, 2020. These factors raise substantial doubt regarding the ability of AgeX to continue as a going concern.
Second Quarter 2020 Operating Results
Revenues: Total revenues for the second quarter of 2020 were $414,000 as compared with $380,000 for the second quarter of 2019. AgeX revenues are primarily generated from subscription and advertising revenues from the GeneCards online database through its subsidiary LifeMap Sciences, Inc. Revenues in 2020 also included approximately $36,000 of allowable expenses under its research grant from the NIH as compared with $47,000 in the same period in 2019.
Operating expenses: Operating expenses for the three months ended June 30, 2020 were $3.0 million as compared to $3.8 million for the same period in 2019. On an as-adjusted basis, operating expenses for the three months ended June 30, 2020 were $2.5 million as compared to $3.1 million for the same period in 2019.
The reconciliation between GAAP and non-GAAP operating expenses is provided in the financial tables included with this earnings release.
Research and development expenses decreased by $0.3 million to $1.4 million during the three months ended June 30, 2020 from $1.7 million during the same period in 2019. The decrease was primarily attributable to the layoff of 11 research and development personnel in May 2020 and decrease in shared services from Lineage Cell Therapeutics, Inc. (Lineage) with the termination of our Shared Facilities and Services Agreement on September 30, 2019.
General and administrative expenses decreased by $0.4 million to $1.7 million during the three months ended June 30, 2020 from $2.1 million during the same period in 2019 despite an increase in head count with the employment of AgeXs own finance team since October 1, 2019. These increases were offset by a decrease in travel and related expenses with the shelter in place mandates since March 15, 2020 resulting from the COVID-19 pandemic, and the elimination of shared facilities and services fees from Lineage following the termination of the Shared Facilities and Services Agreement on September 30, 2019.
About AgeX Therapeutics
AgeX Therapeutics, Inc. (NYSE American: AGE) is focused on developing and commercializing innovative therapeutics for human aging. Its PureStem and UniverCyte manufacturing and immunotolerance technologies are designed to work together to generate highly defined, universal, allogeneic, off-the-shelf pluripotent stem cell-derived young cells of any type for application in a variety of diseases with a high unmet medical need. AgeX has two preclinical cell therapy programs: AGEX-VASC1 (vascular progenitor cells) for tissue ischemia and AGEX-BAT1 (brown fat cells) for Type II diabetes. AgeXs revolutionary longevity platform induced Tissue Regeneration (iTR) aims to unlock cellular immortality and regenerative capacity to reverse age-related changes within tissues. AGEX-iTR1547 is an iTR-based formulation in preclinical development. HyStem is AgeXs delivery technology to stably engraft PureStem cell therapies in the body. AgeXs core product pipeline is intended to extend human healthspan. AgeX is seeking opportunities to establish licensing and collaboration arrangements around its broad IP estate and proprietary technology platforms and therapy product candidates.
For more information, please visit http://www.agexinc.com or connect with the company on Twitter, LinkedIn, Facebook, and YouTube.
Certain statements contained in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not historical fact including, but not limited to statements that contain words such as will, believes, plans, anticipates, expects, estimates should also be considered forward-looking statements. Forward-looking statements involve risks and uncertainties. Actual results may differ materially from the results anticipated in these forward-looking statements and as such should be evaluated together with the many uncertainties that affect the business of AgeX Therapeutics, Inc. and its subsidiaries, particularly those mentioned in the cautionary statements found in more detail in the Risk Factors section of AgeXs most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commissions (copies of which may be obtained at http://www.sec.gov). Subsequent events and developments may cause these forward-looking statements to change. In addition, with respect to AgeXs Manufacturing, Marketing and Distribution Agreement with Pluristyx there is no assurance that (i) Pluristyx will generate significant sales of AgeX ESI hESC lines, or (ii) AgeX will derive significant revenue from sales of ESI hESC lines by Pluristyx. AgeX specifically disclaims any obligation or intention to update or revise these forward-looking statements as a result of changed events or circumstances that occur after the date of this release, except as required by applicable law.
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