On October 1, 2013 Asterias Biotherapeutics and BioTime jointly reported the closing of the transactions under the Asset Contribution Agreement (the "Agreement") with Geron Corporation, previously announced on January 7, 2013, pursuant to which Asterias Biotherapeutics acquired Geron’s human embryonic stem (hES) cell assets, as well as rights to use certain human embryonic stem cell lines, minority stakes in two of BioTime’s subsidiaries and stock from BioTime (Press release Asterias Biotherapeutics, OCT 1, 2013, View Source;p=irol-newsArticle&ID=1860378&highlight= [SID:1234500507]).
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Assets Contributed to Asterias by Geron
Under the terms of the Agreement, Geron has contributed to Asterias its stem cell intellectual property, multiple lots of OPC1 drug product (hES cell-derived oligodendrocytes) used in the world’s first human clinical trial of hES-derived cells in subacute spinal cord injury, multiple lots of hESC manufacturing cell banks – the starting material to manufacture additional lots of OPC1 drug product and to produce dendritric cells for cancer immunotherapy, chondrocytes for cartilage and disc repair, and cardiomyocytes for heart disease. Geron has also contributed all of the clinical and regulatory documents pertaining to the OPC1 and VAC1 (autologous dendritic cells) clinical trials, as well as a series of stem-cell-related out-licenses. Asterias has entered into an exclusive sublicense with Geron for using telomerase as an antigen for the VAC1 and VAC2 (hES-derived dendritic cells) product candidates.
Assets Contributed to Asterias by BioTime
BioTime has previously loaned Asterias $5 million in cash, which indebtedness was cancelled as part of the closing of the transaction. Under the terms of the Agreement, BioTime contributed to Asterias 8,902,077 BioTime common shares, rights to use certain clinical grade hES cell lines, a sublicense to use certain patents for stem cell differentiation and minority stakes in two of BioTime’s subsidiaries, Orthocyte Corporation and Cell Cure Neurosciences Ltd. In addition, BioTime has contributed to Asterias 5-year warrants to purchase 5,000,000 common shares of BioTime at an exercise price of $5.00 per share ("BioTime Warrants") which will be distributed by Asterias on a pro rata basis to holders of its Series A common stock, as further described below.
The assets contributed under the Agreement provide Asterias with four cell lines, each with animal proof of concept, from which multiple therapeutic product candidates may be selected for development indications as summarized below.
Neurology – An initial Phase 1 safety study in spinal cord injury has been completed with follow-on opportunities in larger indications in Multiple Sclerosis and stroke.
Oncology – A Phase 2/3 ready cancer vaccine (VAC1) with an opportunity to continue the development of a second approach using dendritic cells derived from hESCs (VAC2).
Orthopedics – Opportunity to continue the development of hESC derived chondrocytes to regenerate articular cartilage to address osteoarthritis.
Cardiovascular – Opportunity to continue the development of hESC-derived cardiomyocytes for heart failure and myocardial infarction.
Consideration to Geron and BioTime from Asterias; Distributions by Geron and Asterias
Under the terms of the Agreement, Geron has received from Asterias 6,537,779 shares of Asterias Series A common stock. Subject to applicable law, Geron will distribute these shares on a pro rata basis to Geron stockholders as promptly as practicable, other than with respect to fractional shares and with respect to stockholders residing in certain to-be-determined excluded jurisdictions, who will instead receive cash on a pro rata basis. As promptly as practicable following the distribution of the Asterias Series A common stock by Geron to its stockholders, Asterias will distribute the BioTime Warrants on a pro rata basis to the holders of Asterias Series A common stock.
Asterias will also pay to Geron royalties on the sale of products that are commercialized, if any, in reliance on Geron patents contributed or licensed to Asterias.
Asterias has issued to BioTime 21,773,340 shares of Asterias Series B common stock and 3-year warrants to purchase 3,150,000 additional shares of Asterias Series B common stock at an exercise price of $5.00 per share.
The Romulus Films, Ltd. Investment
In a related transaction, Asterias has obtained $5 million in equity financing pursuant to a Stock and Warrant Purchase Agreement with Romulus Films, Ltd., in exchange for 2,136,000 shares of Asterias Series B common stock, plus warrants to purchase approximately 350,000 additional shares of Asterias Series B common shares at an exercise price of $5.00 per share, with a three year term. Earlier this year, Romulus invested $5 million in BioTime, which BioTime used to fund the loan to Asterias for its operations.
Ownership of Asterias Terms of Asterias Series A and Series B Common Stock; Trading Markets
Upon the distributions of the Series A common stock to Geron’s stockholders described above, BioTime will own approximately 71.6%, Geron stockholders will own approximately 21.4%, and Romulus will own approximately 7% of the outstanding Asterias common stock. BioTime and Romulus could increase their collective ownership in Asterias by approximately 2.2% if they choose to exercise all of their warrants, which would reduce the Geron stockholders’ ownership in Asterias to approximately 19.2%.
The terms of the Asterias Series A and Series B common stock are identical, except that Asterias is entitled to make certain distributions or pay dividends on its Series A common stock without making a distribution or paying a dividend on its Series B common stock. The Series B common stock will be convertible into Series A common stock following the distribution of the BioTime Warrants described above.
Asterias expects that prices for the Asterias Series A common stock will be quoted on the OTC Bulletin Board following the distribution of the Asterias Series A common stock to Geron’s stockholders. BioTime has applied to list the BioTime Warrants for trading on the NYSE MKT, where BioTime common shares are traded.