Lineage Cell Therapeutics, Inc. - Annual Report: 2017 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from___________ to __________

Commission file number 1-12830

BioTime, Inc.

(Exact name of registrant as specified in its charter)

1010 Atlantic Avenue, Suite 102

Alameda, California 94501

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (510) 521-3390

Securities registered pursuant to Section 12(b) of the Act

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

The approximate aggregate market value of voting common shares held by non-affiliates computed by reference to the price at which common shares were last sold as of June 30, 2017 was $223,153,000. Shares held by each executive officer and director and by each person who beneficially owns more than 5% of the outstanding common shares have been excluded in that such persons may under certain circumstances be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of common shares outstanding as of March 13, 2018 was 126,869,152.

Documents Incorporated by Reference

Portions of the registrant’s Proxy Statement for 2018 Annual Meeting of Shareholders are incorporated by reference in Part III

BioTime, Inc.

Table of Contents

PART I

Statements made in this Form 10-K that are not historical facts may constitute forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed. Words such as “expects,” “may,” “will,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions identify forward-looking statements. See “Risk Factors.”

References to “BioTime”, “we” and “our” means BioTime, Inc. and its subsidiaries and affiliates unless the context otherwise indicates.

The description or discussion, in this Form 10-K, of any contract or agreement is a summary only and is qualified in all respects by reference to the full text of the applicable contract or agreement.

INDUSTRY AND MARKET DATA

This Annual Report (“Report”) on Form 10-K contains market data and industry forecasts that were obtained from industry publications, third party market research and publicly available information. These publications generally state that the information contained therein has been obtained from sources believed to be reliable. While we believe that the information from these publications is reliable, we have not independently verified such information.

This Annual Report on Form 10-K also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. We obtained the industry and market data in this Report from our own research as well as from industry and general publications, surveys and studies conducted by third parties, some of which may not be publicly available. Such data involves a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty. We caution you not to give undue weight to such projections, assumptions and estimates.

Deconsolidation of OncoCyte Corporation Effective February 17, 2017

Effective February 17, 2017, BioTime deconsolidated OncoCyte Corporation (“OncoCyte”) financial statements and results of operations from those of BioTime under applicable generally accepted accounting principles due to the decrease in BioTime’s percentage ownership in OncoCyte below 50% as a result of the issuance of 625,000 shares of OncoCyte common stock to certain investors who exercised OncoCyte warrants. Prior to that date, OncoCyte was a majority-owned and consolidated subsidiary of BioTime. Since February 17, 2017, BioTime has accounted for OncoCyte using the equity method of accounting, electing the fair value option, with all subsequent changes in fair value included in BioTime’s consolidated statements of operations in other income and expenses, net. As of, and for each reporting period after February 17, 2017, the fair value of BioTime’s interest in OncoCyte is determined by the number of shares of OncoCyte held by BioTime and the closing price of the OncoCyte common stock as quoted on NYSE American: OCX.

OncoCyte’s assets and liabilities are not included in BioTime’s audited consolidated balance sheet at December 31, 2017 due to the deconsolidation. The fair value of OncoCyte shares owned by BioTime is shown on BioTime’s audited consolidated balance sheet as of December 31, 2017. BioTime’s audited consolidated balance sheet at December 31, 2016 includes OncoCyte’s assets and liabilities, after intercompany eliminations. BioTime’s audited consolidated statements of operations for the year ended December 31, 2017 include OncoCyte’s results from January 1, 2017 through February 16, 2017, the day immediately preceding the deconsolidation.

The deconsolidation of OncoCyte is sometimes referred to as the “OncoCyte Deconsolidation” in this Report. 

Audited financial statements of OncoCyte for the year ended December 31, 2017 will be included as financial statement schedules in Part IV, Item 15 and will be filed as an exhibit by an amendment to this Report.

Deconsolidation of Asterias Biotherapeutics, Inc. Effective May 13, 2016

Effective May 13, 2016, BioTime deconsolidated Asterias Biotherapeutics, Inc. (“Asterias”) financial statements and results of operations from those of BioTime under applicable generally accepted accounting principles due to the decrease in BioTime’s percentage ownership in Asterias from 57.1% to 48.7% as a result of a sale of common stock by Asterias in a public offering. Prior to that date, Asterias was a majority-owned and consolidated subsidiary of BioTime. Since May 13, 2016, BioTime has accounted for Asterias using the equity method of accounting, electing the fair value option, with all subsequent changes in fair value included in BioTime’s consolidated statements of operations in other income and expenses, net. As of, and for each reporting period after May 13, 2016, the fair value of BioTime’s interest in Asterias is determined by the number of shares of Asterias held by BioTime and the closing price of the Asterias common stock as quoted on NYSE American: AST. Asterias’ assets and liabilities are not included in BioTime’s audited consolidated balance sheet at December 31, 2016 due to the deconsolidation. The fair value of Asterias shares owned by BioTime is shown on BioTime’s consolidated balance sheets as of December 31, 2017 and 2016. BioTime’s audited consolidated statements of operations for the year ended December 31, 2016 include Asterias’ results from January 1, 2016 through May 12, 2016, the day immediately preceding the deconsolidation. Asterias’ results are not included in BioTime’s audited consolidated statements of operations for the year ended December 31, 2017.

The deconsolidation of Asterias is sometimes referred to as the “Asterias Deconsolidation” in this Report. 

Audited financial statements of Asterias for the years ended December 31, 2017 and 2016 are included as financial statement schedules in Part IV, Item 15, and are filed as an exhibit to this Report.

For further discussion see the Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Report.

Overview

Overview of Business

BioTime is a clinical-stage biotechnology company targeting degenerative diseases. Our programs are based on two core proprietary technology platforms: cell replacement and cell/drug delivery. With our cell replacement platform, we are creating new cells and tissues with our pluripotent and progenitor cell technologies. These cells and tissues are developed to replace those that are either rendered dysfunctional or lost due to degenerative diseases. Our cell/drug delivery programs are based upon our proprietary HyStem^® cell and drug delivery matrix technology. HyStem^® was designed to provide for the transfer, retention, engraftment and metabolic support of cellular replacement therapy.

Our lead cell replacement clinical program is OpRegen^®, a retinal pigment epithelium cell replacement therapy, is in a Phase I/IIa, multicenter trial for the treatment of late-stage, dry age-related macular degeneration (dry-AMD). There are currently no FDA-approved therapies for dry-AMD, which accounts for approximately 90% of all age-related macular degeneration cases, and is the leading cause of blindness in people over the age of 60.

Our lead cell delivery clinical program is Renevia^®, which met its primary endpoint in a European pivotal clinical trial in patients with HIV-associated facial lipoatrophy. On March 13, 2018 we submitted a design dossier for EU market clearance (CE Mark) for the use of Renevia^® as a device to aid in transferring a patient’s own adipose tissue to treat certain forms of facial lipoatrophy, or fat loss. We believe this European CE Mark submission is a gateway to the much larger, multi-billion dollar market opportunity of cosmetic facial aesthetics.

BioTime's research has created numerous promising technologies. We are creating value for shareholders by developing some of these technologies ourselves through our clinical development programs, while also unlocking the value of others through partnering and strategic transactions. As a result, we have significant equity holdings in two publicly-traded companies, Asterias Biotherapeutics, Inc. (“Asterias”) and OncoCyte Corporation (“OncoCyte”), which we founded and which, until recently, were our majority-owned, consolidated subsidiaries. Asterias (NYSE American: AST) is presently focused on advancing three clinical-stage programs that have the potential to address areas of very high, unmet medical need in the fields of neurology (spinal cord injury) and oncology (acute myeloid leukemia and lung cancer). OncoCyte (NYSE American: OCX) is developing confirmatory diagnostic tests for lung cancer, breast cancer, and bladder cancer utilizing novel liquid biopsy technology. The combined market value of BioTime’s holdings in Asterias and OncoCyte was approximately $95.2 million as of February 28, 2018.

We also have a new majority-owned subsidiary, AgeX Therapeutics, Inc. (“AgeX”), which we formed in 2017 to continue development of early-stage programs focusing on the development of technology relating to cell immortality, regenerative biology, and aging and age-related diseases. AgeX’s initial programs focus on utilizing brown adipose tissue in targeting diabetes, obesity, and heart disease; and induced tissue regeneration (“iTR”) in utilizing the human body’s own abilities to scarlessly regenerate tissues damaged from age or trauma. AgeX has raised more than $10.7 million in equity funding from institutional and private investors, which has allowed BioTime to focus its resources on its clinical programs in its core therapeutic sectors. On August 2, 2017, AgeX initially raised approximately $10.0 million from the sale of its common stock at a price of $2.00 per share. BioTime continues to hold 28.8 million shares of AgeX. Our management and Board of Directors are exploring a number of options for having AgeX become a publicly-traded company, including a potential tax-free pro rata distribution of all AgeX shares to BioTime shareholders.

The technologies being developed by BioTime, our affiliates and our subsidiaries have the potential to significantly improve the treatment of degenerative diseases, which affect large numbers of people. We and our affiliates currently have multiple product candidates in human clinical trials: one met its primary endpoint in a pivotal study in Europe and could be approved by the end of this year, one is a blood test to help diagnose lung cancer, one may be helping spinal cord injury victims regain full or partial use of their hands and one may be the first treatment for the leading cause of blindness in people over 60. We also have several other promising programs that may help to address some of the biggest unmet medical needs faced by the world's aging population.

BioTime is incorporated in the State of California. Our common shares trade on the NYSE American and the Tel Aviv Stock Exchange under the symbol “BTX.” Our principal executive offices are located at 1010 Atlantic Avenue, Suite 102, Alameda, CA 94501, and our phone number at that address is (510) 521-3390. Our website address is www.biotime.com. The information on, or that can be accessed through our website is not part of this Report. We also make available, free of charge through our website, our most recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after the reports are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”).

Overview of Product Candidates Being Developed by BioTime

Pipeline

Our clinical programs are based on two proprietary, core technology platforms: cell/drug delivery and cell replacement.

The near-term clinical development focus for our two lead clinical programs is in two therapeutic fields: Aesthetics and Ophthalmology.

Cell Replacement:

Ophthalmology:

OpRegen^®

OpRegen^® is our lead ophthalmic product for the treatment of the dry form of age-related macular degeneration. It is a suspension of terminally differentiated retinal pigment epithelial (RPE) cells that are derived from pluripotent cells. RPE cells form the back lining of the retina and support the function of photoreceptors (rods and cones). RPE cells can be damaged and lost in various forms of retinal degeneration. The OpRegen^® therapeutic approach is to replace damaged or lost RPE cells with the goals of slowing disease progression in order to preserve vision, and/or restore visual function. OpRegen^® is currently in a Phase I/IIa clinical trial for the treatment of late-stage dry-AMD. Age-related macular degeneration (AMD) affects more than 30 million people worldwide and is the leading cause of blindness in people over the age of 60. Approximately 90 percent of AMD patients suffer from the dry form, also referred to as dry-AMD, for which there is no therapy approved by the United States Food and Drug Administration (FDA). This program is currently being conducted by our 98.8% owned subsidiary Cell Cure Neurosciences, Ltd. (“Cell Cure”). Further references to this program may be described as being conducted by BioTime. More detail on OpRegen^® and the trial data to date can be found below under THERAPEUTIC PRODUCT CANDIDATES BEING DEVELOPED BY BIOTIME – Cell Replacement – Ophthalmology—”OpRegen^®.”

Retinal restoration

In 2017, we expanded our ophthalmology portfolio through the acquisition of exclusive global rights to technology that allows the generation of three-dimensional human retinal tissue derived from human pluripotent cells. This tissue contains all the cell types and layers of the human retina and has shown evidence of functional integration in proof of concept animal models for advanced retinal degeneration. The technology is being developed to potentially treat or prevent a variety of retinal degenerative diseases and injuries. In 2017, the National Institutes of Health (NIH) awarded us a grant of up to $1.56 million to further develop this innovative, next generation vision restoration program for retinal diseases and injuries, which severely impact the quality of life for millions of people who have limited treatment options.

Cell/Drug Delivery:

Aesthetics:

Renevia^®

Renevia^®, our lead facial aesthetics product, is being developed as a potential treatment for facial lipoatrophy. “Lipoatrophy” means the loss of fat tissue which may be caused by several factors, including trauma, aging or drug side effects such as those that cause HIV-associated lipoatrophy. Renevia^® consists of our proprietary cell and drug delivery matrix (HyStem^®) combined with the patient’s own fat or adipose progenitor cells. As a potential alternative to traditional fat transfer procedures, Renevia^® is designed to mimic the naturally-occurring extracellular matrix in the body and provide a 3-D scaffold that supports effective cell transplant, retention, engraftment and metabolic support. Renevia^® is being developed with the goal of providing a natural looking and feeling, long-lasting option for facial volume restoration. Additional information about HyStem^® can be found below under TECHNOLOGY PLATFORMS — HyStem^® Delivery Technology.

In 2017 Renevia^® met the primary endpoint of implanted volume retention in a pivotal clinical trial in Europe to assess its safety and efficacy in restoring facial volume in patients whose subcutaneous fat, or adipose tissue, has been lost due to a side effect of certain drugs used to treat some patients with HIV. Based on these clinical trial results, on March 13, 2018 we filed for marketing authorization in the European Union (EU) for certain forms of facial lipoatrophy. We anticipate approval later this year. For more detail on Renevia^® and the trial data to date, please see THERAPEUTIC PRODUCT CANDIDATES BEING DEVELOPED BY BIOTIME — Cell/Drug Delivery – Aesthetics – “Renevia^®”, below.

We view our European clinical trials of Renevia^® as being supportive of the U.S. development of Renevia^®, for treating facial lipoatrophy, whether from drugs, trauma or aging. A U.S. investigator-led trial of Premvia™ began in late 2017 for use in the treatment of age-related facial lipoatrophy. Premvia™ has the same composition as Renevia^®. Results of this investigator-led trial are expected later this year. A company sponsored exploratory study of Renevia^® for use in treating age-related facial atrophy is expected to commence in Europe later this year. Premvia™, is a HyStem^® hydrogel formulation that has already received FDA 510(k) clearance for the management of wounds, including partial and full-thickness wounds, ulcers, tunneled/undermined wounds, surgical wounds, and burns.

Other Cell/Drug Delivery:

We are also developing HyStem^® for the delivery of therapeutic drugs and cells to localized areas of the body, including for sustained drug release in the targeted area.

ReGlyde™

ReGlyde™ is another HyStem^® product in preclinical development as a device for viscosupplementation and as a platform for intraarticular drug delivery in osteoarthritis (OA). The viscosupplementation device program aims to administer ReGlyde™ directly into OA affected joints to provide joint lubrication to reduce pain and improve quality of life. The drug delivery program seeks to enable the sustained release of therapeutics in affected OA joints to help slow or reverse disease progression, in addition to alleviating pain and improving joint function.

Products for Orthopedic Indications

We are developing a bone grafting product under a research and development agreement and a licensing agreement with Heraeus Medical GmbH. The goal of this program is to develop innovative bone grafting products that could potentially address difficult to heal or compromised bone fractures based on the use of our proprietary PureStem^® progenitor cell technology. This program is currently being conducted by our 99.8% owned subsidiary OrthoCyte Corporation (“OrthoCyte”), as such, further herein, references to this project may be described as being conducted by BioTime.

Products Enhancements

As part of our therapeutic and delivery program, we are also developing HyStem^® product enhancements, including a frozen liquid product format, which, if successful, will make HyStem^® products significantly easier for physicians to administer.

Overview of Product Candidates of Public Affiliates

Asterias is a clinical-stage biotechnology company dedicated to developing cell-based therapeutics to treat neurological conditions associated with demyelination and cellular immunotherapies to treat cancer. OncoCyte is developing confirmatory diagnostic tests for lung cancer, breast cancer, and bladder cancer utilizing novel liquid biopsy technology. The combined market value of BioTime’s holdings in Asterias and OncoCyte was approximately $95.2 million as of February 28, 2018.

Therapeutic Products in Neurology and Oncology

Asterias currently has three clinical programs:

Liquid Biopsies for Diagnosis of Cancer

Our affiliate OncoCyte is focused on the discovery, development, and commercialization of innovative, biopsy tests that improve diagnosis and reduce healthcare costs for some of the most common and deadly cancers. They are developing confirmatory diagnostic tests for areas of high unmet need including lung cancer, breast cancer, and bladder cancer utilizing novel liquid biopsy technology. While current biopsy tests use invasive surgical procedures to provide tissue samples to determine if a tumor is benign or malignant, OncoCyte is developing a next generation of diagnostic tests that will be based on liquid biopsies using blood or urine samples.

Overview of AgeX Product Candidates

AgeX is applying technology relating to cellular immortality and regenerative biology to aging and age-related diseases. AgeX has three initial areas of product development:

Strategy

As we transition into a clinical and commercial-ready company, our near-term focus continues to be on three primary objectives: Clinical Progress, Simplification and Unlocking Value.

Clinical Progress

Our efforts are focused on progressing our therapeutic products through clinical development. Our organizational capabilities are being aligned to execute on this objective to better position us to design, execute and oversee trials, with the goal of generating significant value-creating data in the near-term, and enabling future commercialization of our product candidates. Clinical progress success will allow the company to create greater value for our shareholders, as well as allow us to better resource several other programs that are based on our core technologies.

Simplification

Because our research created numerous promising technologies that we developed in part through a range of subsidiaries and partnership relationships, BioTime's structure became complex over time. Over the last two years we have focused on simplification. We will continue to work on simplifying our corporate, financial and organizational structure to allow us to execute our objectives more efficiently, while also making it much easier for shareholders and potential investors to better understand our company.

Unlocking Value

Our purpose is to deliver therapies to patients with significant unmet, or under-met, needs, while creating value for our investors. BioTime’s research has created numerous valuable technologies. We are creating value for shareholders by developing some of these technologies ourselves through our clinical development programs while unlocking the value of others through the execution of various strategies, including partnering, sale of non-core assets, creation of companies, spinoffs, and the implementation of our simplification plans. We expect to continue to do so when we deem it in the best interest of our shareholders.

Technology Platforms

Cell Replacement Technology:

BioTime believes that it and its subsidiaries and affiliates have the world’s premier collection of pluripotent cell assets. Pluripotent cells, which we believe are capable of becoming any of the cell types of the human body, have potential applications in many areas of medicine with large unmet patient needs, including various age-related degenerative diseases and degenerative conditions for which there are presently no cures.   Unlike pharmaceuticals that require a molecular target, therapeutic strategies based on the use of pluripotent cells are generally aimed at regenerating or replacing affected cells and tissues, and therefore, may have broader applicability than many pharmaceutical products. Pharmaceuticals and therapies that require systemic delivery into the body often have unexpected results, or side effects, that can limit the usefulness on the particular therapy. Many times, the side effects are so detrimental that the therapy cannot be approved. Cell replacement, on the other hand, is locally administered, so systemic side effects are not a primary concern in therapeutic development. The risk profile more closely resembles that of transplant medicine, focused more on whether the transplanted cells are rejected by the body and whether the cells do what they are expected to do.

BioTime has two proprietary cell therapy platforms, PureStem^® progenitor cells and pluripotent cell lines. PureStem^® cells address significant challenges in regenerative medicine through their purity, proliferative capacity and ability to better predictably acquire tissue specificity or “differentiate,” into a broad spectrum of cell types in a simplified and controlled fashion. These advantages may allow the production, on a commercial scale, of pure cultures of potentially therapeutic cell types that do not contain uncharacterized “undifferentiated” cell types. The pluripotent cell lines derived under current Good Manufacturing Practice (cGMP) conditions, are NIH-registered and are among the best-characterized and documented human stem cell lines available today, with donor medical history, adventitious agents testing, complete genome sequence, STR-fingerprint and HLA-type data available.

HyStem^® Delivery Technology:

		The patented technology underlying our HyStem® hydrogel products in development, such as Renevia®, Premvia® and ReGlyde™, was developed at the University of Utah and has been exclusively licensed to BioTime for human therapeutic uses. The HyStem® technology is based on a unique thiol cross-linking chemistry to prepare hyaluronan-based hydrogels. Since the first published report in 2002, there have been over 200 academic scientific publications supporting the biocompatibility of thiol cross-linked hyaluronan-based hydrogels and their applications as medical devices and in cell culture, tissue engineering, and animal models of cell-based therapies.
		Due to the unique cross-linking chemistry, HyStem® hydrogels have the ability to mix cells and can be injected or applied as a gel which allows the hydrogel to conform to a cavity or space. This property of HyStem® hydrogels offers several distinct advantages over other hydrogels, including the possibility of combining bioactive materials with the hydrogel at the point of use. Building upon this platform, we are developing the HyStem® family of unique, biocompatible resorbable hydrogel products.

Therapeutic Product Candidates Being Developed By BioTime

Cell Replacement

Ophthalmology

OpRegen^®

Age-related macular degeneration, also known as “AMD”, is a gradual, progressive, deterioration of the macula, the small sensitive area in the center of the retina that provides clear central vision. Damage to the macula makes facial recognition, reading and driving difficult or impossible. There are two forms of AMD, the dry form and the wet form. The dry form, or “dry-AMD”, advances slowly toward geographic atrophy (GA) in which RPE cells and photoreceptors degenerate, or are lost. Once the atrophy involves the fovea (the center of the macula), patients lose their central vision and may develop into legal blindness. Its cause is unknown. It tends to progress more slowly than the wet type, and there is not an approved treatment or cure, other than nutritional supplements, which have shown limited efficacy in longer-term studies.

AMD affects more than 30 million people worldwide and approximately 1.6 million people are newly diagnosed annually in the U.S. It is the leading cause of vision loss in people over the age of 60. Approximately 90 percent of AMD patients suffer from the dry form, for which there are no FDA approved medical therapies.

We believe one of the most promising future therapies for dry-AMD is the replacement of the layer of damaged RPE cells that support and nourish the retina.

		Our lead ophthalmology product, OpRegen®, is a cell replacement therapy derived from our pluripotent cell technology. It is currently in a Phase I/IIa clinical trial for the treatment of dry-AMD. OpRegen® is a proprietary formulation of RPE cells developed to be transplanted into the patient’s eye, where the patient’s own RPE cells are missing or compromised. OpRegen® consists of animal-free RPE cells with high purity and potency using a proprietary directed differentiated method. OpRegen® is formulated as a suspension of RPE cells and it was developed to address the significant unmet medical need of people suffering from dry aged-related macular degeneration.

Preclinical studies in rats have shown that following a single subretinal injection of OpRegen^® as a suspension of cells, the cells rapidly organized into their natural monolayer structure and survive throughout the lifetime of the rat, which we believe is critical to the potential success of OpRegen^® in humans.

OpRegen^® is intended to be an allogeneic, “off-the-shelf,” product provided to retinal surgeons in an “easy-to-use” form for transplantation. Unlike other investigational treatments for dry-AMD, and currently-marketed treatments for wet-AMD (Ranibizumab (Lucentis^®) and Aflibercept (Eylea^®)), that require multiple, frequent injections into the eye, we expect OpRegen^® would potentially be administered in a single procedure, or once every several years.

The patients in our current Phase I/IIa study are or will be 50 years of age or older, whose dry-AMD has advanced to the GA stage, with absence of additional concomitant ocular disorders. The eye in which the disease has progressed the most will be treated, while the other eye will serve as a control. Following injection, the patients will be followed for 12 months at specified intervals, to evaluate the safety and tolerability of OpRegen^®. Currently there are four study sites in Israel and two sites in the U.S. Enrollment in the third cohort was completed in January 2018. Cohort 4 enrollment is expected to begin in the second quarter of 2018. The fourth cohort will also include patients with better vision and a wide range of preliminary functional assessments, such as best corrected visual acuity.

Following the initial 12-month period, patients will continue to be evaluated at longer intervals for up to an additional five years following injection. A secondary objective of the clinical trial will be to examine the ability of transplanted OpRegen^® to engraft, survive, and modulate disease progression in the patients. In addition to thorough characterization of visual function, several vision tests will be used to quantify improvements in reducing the progression of the disease.

Interim data from the nine subjects, with large areas of GA treated in Cohorts 1-3, represent an initial review of this ongoing Phase I/IIa open-label study and suggest that RPE cells are generally well-tolerated when administered by subretinal injection. Findings using a variety of imaging modalities suggest presence of cells in the subretinal space, an observation that is consistent with, and supported by, the data from the preclinical studies of OpRegen^®. The surgical procedures were generally well-tolerated, with spectral domain optical coherence tomography (SD-OCT) images showing absorption of the subretinal fluid in the bleb within less than 48 hours after surgery and healing of the site of retinal penetration by the cannula within a few weeks. Fundus findings on clinical examination and by different imaging modalities evolved over the first few weeks and months, then largely stabilized. Best corrected visual acuity (BCVA) has remained stable in both the treated and fellow eyes of these advanced AMD patients. Subretinal pigmentation that correlates with irregular subretinal hyperreflectance on SD-OCT have been observed, suggesting the presence of cells in the subretinal space. Though it is not definitively known at this time whether these changes represent engraftment and survival of the transplanted cells, data from the preclinical studies suggest this is the most likely scenario.

Importantly, in this safety-focused study, no unexpected ocular AEs have been observed and those events expected to occur based on the procedures involved in OpRegen^® administration, such as vitrectomy, have been mild in severity. The majority of these subjects had pre-existing epiretinal membranes (ERMs) at the time of study enrollment and several have experienced new or worsening ERM following the surgical procedure and OpRegen^® injection. These subjects are being monitored during study follow-up, however, none have required surgical intervention to date. The independent data safety monitoring board (DSMB) has approved moving to the 4th Cohort based on the safety data from the first 3 cohorts. Cohort 4 will incorporate an additional variety of objective and subjective assessments to look for signs of potential efficacy as well as potential anatomical changes indicative of OpRegen^® cell function following implantation.

We are currently actively enrolling additional subjects at a number of clinical trial sites in the United States and Israel. We currently have two active clinical trial sites the U.S. Both sites are headed by well-renowned physicians, David S. Boyer, MD of Retina-Vitreous Associates in Los Angeles and Dr. H. Richard McDonald of West Coast Retina Medical Group in San Francisco. We expect to open additional clinical trial sites in the U.S. later this year.

We have established an innovative cell therapy manufacturing facility located in the Jerusalem Bio Park on the campus of Hadassah University Hospital in Jerusalem, Israel. Our facility is equipped to produce OpRegen^® and a range of other cell therapy products for human use in clinical trials as well as at a grade suitable for commercial use.

Retinal Restoration

We have acquired exclusive global rights to ophthalmology-related technology that was developed, in part, in collaboration with BioTime scientists, and includes composition and methodologies to develop 3-D retinal tissue constructs from pluripotent cells for implantation in patients with advanced stages of retinal degeneration.

This technology may allow generation of three-dimensional laminated human retinal tissue in a controlled manufacturing process. This could lead to retinal restoration treatments for a variety of advanced retinal degenerative diseases and ocular injuries, such as retinitis pigmentosa, macular degeneration, and diabetic retinopathy.

In September 2017, BioTime was awarded a grant of up to $1.56 million from the Small Business Innovation Research program of the National Institutes of Health. The grant provides funding to further develop BioTime’s innovative, next generation vision restoration program for more advanced retinal diseases and injuries, which severely impact the quality of life for millions of people with no treatment option. This initiative aims at improving vision in people affected by blindness, whether caused by retinal injuries, age-related macular degeneration, retinitis pigmentosa or other causes.

Cell/Drug Delivery

Aesthetics

Renevia^®

Renevia® consists of our proprietary cell-transplantation delivery matrix (HyStem®) combined with the patient’s own adipose progenitor cells from their own fat. We are developing Renevia® as an injectable product to address needs in facial aesthetic procedures, and potentially certain reconstructive surgeries, such as breast reconstruction after cystectomy or lumpectomy. Our goal is to improve the process of transplanting a patient’s own fat cells to potentially provide longer lasting volume, while maintaining a natural look and feel.
Lipoatrophy is the loss of fat tissue which can be caused by several factors, including trauma, aging or drug side effects such as in HIV-associated lipoatrophy. Cells obtained from a patient, such as adipose progenitor cells obtained through liposuction, can be transplanted back into the same patient at another location in the body without the risk of potential rejection or transmission of diseases associated with the transplant of allogenic donor tissues. However, the transplantation of cells alone, without the molecular matrix in which cells normally reside, often leads to widespread cell death, or the failure of the transplanted cells to remain at the transplant site. The transfer of cells in Renevia® may resolve this issue by maintaining the transplanted cells at the intended site and by providing a three-dimensional scaffold upon which cells can attach and rebuild normal tissue.

We conducted a multi-site pivotal clinical study in Europe to assess the efficacy of Renevia^® as a delivery matrix for fat progenitor cells to restore skin volume in HIV patients whose subcutaneous adipose tissue has been lost as a side effect of their use of certain anti-retroviral drugs, like Stavudine and Zidovudine. The resulting facial wasting ages the individual’s appearance prematurely and, along with a thinning of the skin, allows musculature and vasculature to be easily seen. Treatment of the condition improves the individual’s self-esteem and quality of life.

Renevia^® has met the primary endpoint of implanted volume retention in its pivotal European clinical trial. Based on these clinical trial results, we have filed for marketing authorization in the EU for certain forms of facial lipoatrophy. We anticipate approval later this year.

In the EU pivotal clinical trial, Renevia^® treated patients retained approximately 100% of transplanted volume at six months (p<0.001), based on 3-D volume measurement of the implanted area, achieving the primary endpoint of the study (see Chart below). In addition to meeting the primary endpoint, treated patients retained an average 70% of the transplanted volume at 12 months and those patients that were observed after 18 months retained 64% of the transplanted volume. The data from additional patients at this time point are expected later this year. All Renevia^® transplants were shown to be generally well tolerated and there were no device-related serious adverse events noted during this trial.

3-D Volume Measurement of the EU Pivotal Renevia Trial - Primary Endpoint (p<0.001)

In addition to serving as the basis for our European filing for marketing authorization, we also plan to use this trial to support initial safety findings for U.S. development of Renevia^® for multiple forms of facial lipoatrophy.

The rapidly-growing global facial aesthetics market is estimated to be over $5 billion. Execution of our label expansion plans into this broader market has already begun with an investigator-led trial in the United States. In 2017, a U.S. investigator-led trial of our Premvia^™ HyStem^® product, which has 510 (k) clearance in the U.S. for wound management and is the same composition as Renevia^®, was initiated to study the utility of Premvia^™ for facial volume deficit in non-HIV patients. Although BioTime does not control execution of this trial, we expect preliminary data later this year. A company sponsored, exploratory study of Renevia^® for cosmetic use is expected to commence in Europe later this year to study more broadly the utility of Renevia^® for volume deficit in non-HIV patients.

BioTime plans to build upon this investigator-led trial and the EU pivotal trial data with additional studies, including an additional company-sponsored study in Europe and a pivotal trial in the U.S. We will continue our discussions with the FDA regarding a potential development pathway for Renevia^® in the U.S. Renevia^® is manufactured in the U.S. in compliance with cGMP requirements and has been tested pursuant to ISO 10993 standards for implantable medical devices.

Other Cell/Drug Delivery

ReGlyde™

ReGlyde™ is a proprietary formulation of the HyStem^® hydrogel platform and is currently in preclinical development for viscosupplementation and drug delivery in osteoarthritis. Pre-clinical results are encouraging and have shown biocompatibility and preclinical efficacy signals in animal models.

Research and Development and License Agreements with Heraeus Medical GmbH

We are developing cellular therapeutics for orthopedic disorders with Heraeus Medical GmbH (“Heraeus”). The initial goal of this project is to develop innovative bone grafting therapies based on the use of our proprietary PureStem^® human embryonic progenitor cell technology. Pursuant to the terms of our research and development agreement with Heraeus, BioTime is responsible for research and development of a cell-based bone grafting product using PureStem^® technology and either HyStem^® scaffold technology for delivery of bio-active components or scaffold technology owned by Heraeus or licensed to Heraeus from third parties.

AgeX Product Candidates

Brown Fat Technology for Treatment of Metabolic Disorders

Brown adipose tissue (BAT) cells, or as they are sometimes called “brown fat cells,” have only recently become the subject of intense study by medical researchers. Unlike normal white adipose tissue which is the fat we normally associate with obesity and disorders correlated with obesity such as Type II Diabetes (T2D), BAT cells don’t simply store calories. BAT cells burn calories in the process of generating body heat. In addition, the cells secrete biologically-active molecules that are believed to play an important role in maintaining the body in a state of metabolic health. Recently it has also been reported that humans lose BAT as a function of age and the loss of these cells are implicated in unhealthy age-related changes in metabolism such as obesity, T2D, and metabolic syndrome. This recent discovery may have important consequences for regenerative medicine, since pluripotent cells provide a means of manufacturing all human cell types on an industrial scale, including BAT cells. AgeX’s research team has invented a technology to manufacture BAT cells and filed certain patent applications that it believes provides it with a path to develop BAT cells for the potentially large and growing markets associated with obesity, T2D, and cardiovascular disease. Prior to initiating human clinical trials, AgeX will be required to successfully perform extensive preclinical testing of the cells to determine their safety and efficacy in non-human model systems.

Treatment of Vascular Disorders

AgeX is using vascular cells derived from pluripotent stem cells, and other technologies, to develop treatments for vascular disorders. The therapeutic indications AgeX is targeting include age-related cardiovascular diseases such as coronary artery disease, heart failure, and peripheral artery disease. Therapeutics for age-related vascular disease represent some of the largest, fastest-growing actual and potential markets in the U.S. due to the aging baby boom generation. Cardiovascular disease is among the leading causes of death and disability in the U.S., and consumes a major and ever-increasing proportion of health care costs. The National Academy of Sciences has estimated that a potential 58 million Americans are currently afflicted with cardiovascular disease. AgeX is using technology for the differentiation of pluripotent stem cells into vascular endothelial cells in combination with the PureStem^® technology to produce highly purified monoclonal embryonic vascular endothelial progenitor stem cells.

iTR

When tissues in the human body are damaged as a result of degenerative disease, injury, or surgery, there is generally a very limited capacity of the body to regenerate the tissue back to its original state. Exceptions to this rule are blood and the liver, both of which both show a remarkable capacity to restore equilibrium after the loss of cells. Other exceptions are tissues in the human body when it is first being formed. Early in development tissues such as the skin can repair itself scarlessly, but this ability is lost even before we are born. Another example in the animal kingdom is the Mexican salamander which shows a profound capacity to regenerate damaged tissues, even restoring severed limbs. However, in the adult human, most tissues simply scar rather than regenerate. AgeX’s scientists have been performing certain research to understand the molecular mechanisms regulating this loss of regenerative potential after the human body is formed based on its expertise in pluripotent stem cell technology. As a result, these scientists have invented a novel technology called “induced Tissue Regeneration” or “iTR.” iTR is designed to eventually facilitate the identification of therapies to induce scarless regeneration of tissues in the body that currently cannot naturally repair themselves. Examples of potential applications are numerous, but AgeX plans to initially focus on the regeneration of the heart following infection or heart failure, and scarless skin regeneration. iTR is a revolutionary new approach to medicine.

Product Candidates of Public Affiliates Asterias Biotherapeutics and OncoCyte

Therapeutic Products in Neurology and Oncology

Asterias currently has three clinical-stage programs which have the potential to address areas of very high unmet medical need in the fields of neurology and oncology.

AST-OPC1 Oligodendrocyte Progenitor Cells for Spinal Cord Injury and Other Neurodegenerative Diseases

AST-OPC1 is an oligodendrocyte progenitor cell population. Oligodendrocyte progenitor cells are cells that become oligodendrocytes after injection. It has been shown preclinically to have three potentially reparative functions that address the complex pathologies observed at the injury site of a spinal cord injury. These activities of AST-OPC1 include production of neurotrophic factors, stimulation of vascularization, and induction of remyelination of denuded axons, all of which are critical for survival, regrowth and conduction of nerve impulses through axons at the injury site.

AST-OPC1 was tested in patients with acute spinal cord injury in a Phase I trial and is being tested in a Phase I/IIa dose escalation (“SCIStar study”) trial. Asterias completed enrollment of the entire SCiStar study in December 2017. Asterias has enrolled a total of 25 subjects in the SCiStar study, plus five subjects from the previous Phase 1 safety trial. In October 2017, Asterias reported 12-month data from the SCiStar study’s Cohort 2 (AIS-A 10 million-cell cohort), which included six subjects. At 12 months, 67% (4 out of 6) of Cohort two subjects recovered two or more motor levels on at least one side, exceeding the company’s 12-month target of 45-50% of subjects achieving this level of improvement. In February 2018, Asterias provided a clinical trial update that highlighted the following:

Asterias will have various SCiStar study data readouts in 2018.

There are approximately 17,000 new spinal cord injuries annually (NSCIC SCI Facts and Figures at a Glance (2016)). There are currently no drugs approved by the United States Food and Drug Administration (“FDA”) specifically for the treatment of spinal cord injury. As of 2016, the National Spinal Cord Injury Statistical Center reported that approximately 4,500 of these new spinal cord injuries annually in the U. S. are AIS-A, AIS-B, or AIS-C patients with C-4 to C-7 spinal cord injuries (https://www.nscisc.uab.edu/).

The FDA has granted Orphan Drug Designation of AST-OPC1 and designated AST-OPC1 a Regenerative Medicine Advanced Therapy for the treatment of acute SCI.

AST-VAC1: Autologous Telomerase-loaded Dendritic Cells

AST-VAC1 is an Asterias autologous (patient-specific) cancer vaccine designed to stimulate a patient’s immune system to attack telomerase. Asterias is developing AST-VAC1 for the treatment of Acute Myeloid Leukemia (“AML”), the most common form of acute leukemia in adults. A Phase II clinical trial of AST-VAC1 was conducted and demonstrated that AST-VAC1 was successfully manufactured and released in 24 out of the 33 patients enrolled in the study. Twenty-one patients received AST-VAC1 in the study, including 19 in clinical remission and two in early relapse. AST-VAC1 was found to have a favorable safety and tolerability profile. Asterias has performed follow-up data collection on the 19 patients who were treated while in complete remission to determine the long-term effects of the AST-VAC1 administration on remission duration and disease-free survival. The results of this data collection were reported in an oral presentation in May 2015. Eleven of 19 patients (58%) remained in complete remission at a median follow-up of 52 months. These results compare to historical data suggesting that between 20-40% of patients would be expected to be relapse free at 3-4 years. Additionally, of the 7 patients in the higher risk over 60-year-old group, 4 (57%) remained relapse free at a median follow up of 54 months. Historically, relapse free survival rates in this population have been 10-20% at 3-4 years. Asterias has conducted an End of Phase II meeting with the FDA with the goal of reviewing the proposed clinical development plan for AST-VAC1.

The next major step in clinical development for AST-VAC1 would be to conduct a confirmatory Phase 2b study in higher risk patients over 60 years old.

AST-VAC2: hES Cell-Derived Allogeneic Dendritic Cells

AST-VAC2 is being developed by Asterias as an allogeneic, or non-patient specific, cancer vaccine candidate designed to stimulate patient immune responses to telomerase. AST-VAC2 is produced from human embryonic stem (“hES’) cells that can be modified with any antigen. In September 2014, Asterias entered into a Clinical Trial and Option Agreement (the “CRUK Agreement”) with Cancer Research UK (“CRUK”) and Cancer Research Technology Limited, (“CRT”), a wholly-owned subsidiary of CRUK, pursuant to which CRUK has agreed to fund Phase I/II clinical development of AST-VAC2 loaded with the same LAMP-telomerase construct used in AST-VAC1. Under the terms of the CRUK Agreement, Asterias is responsible, at their own cost, for completing process development and manufacturing scale-up of the AST-VAC2 manufacturing process and transferring the resulting cGMP-compatible process to CRUK. CRUK is responsible, at its own cost, for manufacturing clinical grade AST-VAC2 and for carrying out the Phase I/II clinical trial of AST-VAC2. The Asterias technology transfer to CRUK has been completed and CRUK has received the necessary regulatory approvals to initiate the first-in-human (FIH) clinical trial of AST-VAC2 in the United Kingdom. Patient enrollment for this study is expected to begin in 2018.

Liquid Biopsies for Cancer Diagnostics

OncoCyte is developing diagnostic tests for lung cancer, breast cancer, and bladder cancer utilizing novel liquid biopsy technology. While current biopsy tests use invasive surgical procedures to provide tissue samples to determine if a tumor is benign or malignant, OncoCyte is developing highly accurate, easy to administer, non-invasive molecular diagnostic tests that will be based on liquid biopsies using blood or urine samples.

Clinical Trials-Lung Cancer Diagnostic

OncoCyte collaborated with the Wistar Institute of Anatomy and Biology (“Wistar”) to develop one of the components of the confirmatory lung cancer diagnostic test in a large, multi-site clinical study. This collaboration involved a clinical study with over 2,000 blood samples obtained from patients with a high-risk profile for development of lung cancer, which led to the discovery of biomarkers that differentially express in lung cancer patients.

Confirmatory diagnostics are used in conjunction with a current standard of care screening procedure. A lung confirmatory diagnostic would be used in conjunction with Low Dose CAT Scan (LDCT) to confirm a suspicious nodule by yielding a secondary suspicious versus benign result. In the case of a benign result, the patient would not need additional invasive procedures to determine the presence of cancer. In the case of a suspicious result, additional procedures would be highly warranted.

Both Wistar and OncoCyte have presented data at several international and regional medical conferences including: American Thoracic Society in 2016 (Wistar proof of concept study); CHEST in 2016 (Wistar larger proof of concept study, which validated the results of the ATS study); American Thoracic Society in 2017 (OncoCyte research and validation study of 299 patients that resulted in a 95% sensitivity and 73% specificity and was an independent validation); and IASLC Chicago Multidisciplinary Symposium in Thoracic Oncology in 2017 (OncoCyte analytical validation).

Based on these study results, OncoCyte announced that it will initiate a clinical validation phase as well as start to ramp up its commercial capabilities in anticipation of the potential commercial launch of the test. When the CLIA lab was certified OncoCyte successfully conduced a small CLIA lab validation study to demonstrate that the full assay system utilized in the CLIA lab provides the same results on clinical samples as those obtained in the R&D lab. OncoCyte began a clinical validation study on a new set of approximately 300 blinded prospectively collected blood samples to confirm whether the sensitivity and specificity of the test remain within commercial parameters in a CLIA operational setting. In November of 2017, OncoCyte announced that during the process of running initial samples for the Clinical Validation Study, inconsistent analytic results were observed by OncoCyte’s technical team. OncoCyte believes this was caused by a variance in a recently received lot of consumables used in the processing system that analyzes blood samples for the genetic markers that indicate whether lung nodules found in patients are benign or suspicious. To address this issue, OncoCyte has worked to resolve the causes of the inconsistent analytic results. In addition to seeking a solution to the problems it has encountered with the current analytic system, OncoCyte has announced that it is actively evaluating alternative analytic platforms that might be used to run DetermaVu™ diagnostic tests. At the conclusion of this process, data will be available to determine which platform delivers the most accurate, consistent and robust test results and acceptable cost. OncoCyte has announced that once it makes a final decision regarding analytic platforms, it plans to complete product development by carrying out a research and development verification study followed by an analytical validation study, and if those studies are successfully completed, a clinical validation study will be conducted, with a target of completing clinical validation for commercialization in 2018. OncoCyte has collected all the samples necessary for carrying out all these studies.

Clinical Trials—Breast Cancer Diagnostic

OncoCyte completed a strong proof of concept study for its breast cancer confirmatory test, and presented data at the San Antonio Breast Cancer Symposium (SABCS) in December of 2016. The study looked at serum from 100 women who had a mammogram with a result of BIRADs 3 or 4. The results of this analysis were promising, with a 15-marker model producing a sensitivity of 90% and a specificity of 76%.

OncoCyte is continuing development of a breast cancer confirmatory diagnostic by conducting a larger study that it expects will analyze blood samples from approximately 300 patients with benign or malignant nodules.

Clinical Trials—Bladder Cancer Diagnostic

As part of the clinical development of a urine-based bladder cancer diagnostic test, OncoCyte initiated a clinical trial in January 2014 and in May of 2015, they presented preliminary findings of their bladder research, which showed a sensitivity of 90% and a specificity of 83%. Sensitivity is the probability of detecting the presence of the disease accurately. A sensitivity of 90% means that 9 out of 10 cancers were detected. Specificity is the probability of accurately predicting not having the disease. OncoCyte has decided to pursue a co-development partner for its bladder cancer test.

2017 Highlights

BioTime achieved numerous strategic accomplishments during 2017, including advancing clinical trials and product development in several key programs.

Clinical Progress

Simplification

Unlocking Value

Patent Portfolio

Non-dilutive Funding

Other Company News

Additional Information

HyStem^®, Hextend^®, PureStem^® and Renevia^® are registered trademarks of BioTime, Inc., and ReGlyde™ and Premvia™ are trademarks of BioTime, Inc. ReCyte™ is a trademark of ReCyte Therapeutics, Inc. OpRegen^® is a registered trademark of Cell Cure Neurosciences, Ltd., and GeneCards^® is a registered trademark of Yeda Research and Development Co. Ltd.

In 2017, BioTime was led by the Co-CEO leadership team of Adi Mohanty, who is responsible for human clinical development, product commercialization, corporate and administrative functions and Dr. Michael D. West, one of the world’s foremost experts on therapies derived from stem cells, who is responsible for research, product discovery, and preclinical product development.

To efficiently advance product candidates through the clinical trial process, we have historically created operating subsidiaries for each program and product line. Management believes this approach has fostered efficient use of resources and reduced shareholder dilution as compared to strategies commonly deployed by the biotechnology industry in advancing various programs and product lines through development. However, operating our business through multiple subsidiaries and affiliated companies results in certain administrative expenses that we would not incur if all our operations were conducted within BioTime itself. On the other hand, this organizational structure has facilitated our fundraising efforts and has allowed BioTime to develop multiple clinical-stage products, rather than being dependent on a single product program. We, and some of the other members of BioTime, have also received substantial amounts of non-dilutive financial support from government and nonprofit organizations that are seeking, based on rigorous scientific review processes, to identify and accelerate the development of potential breakthroughs in the treatment of various major diseases.

Affiliate & Subsidiary Ownership

The following table shows the companies within BioTime, their respective principal fields of business, our percentage ownership, directly and through subsidiaries, including unconsolidated affiliates as of December 31, 2017, and the country where their principal business is located:

Our Ownership of Cell Cure

During June and July of 2017 we increased our ownership of Cell Cure by acquiring all of the Cell Cure ordinary shares and Cell Cure convertible promissory notes held by its second largest shareholder, Hadasit Bio-Holdings Ltd., and all of the Cell Cure ordinary shares held by its third largest shareholder, Teva Pharmaceutical Industries, Ltd. As a result of this acquisition, we now own, directly and through a wholly-owned subsidiary, approximately 99% of the outstanding Cell Cure ordinary shares.

Cell Cure has adopted stock option plans under which it may issue up to 125,363 of its ordinary shares to officers, directors, employees, and consultants. As of December 31, 2017, options to purchase 80,792 ordinary shares of common stock were granted and outstanding.

Our Ownership of Asterias – Affiliate

As of February 7, 2018, we owned 40.2% of the outstanding Asterias common stock. Asterias common stock is listed for trading on the NYSE American under the symbol AST. Asterias has adopted an Equity Incentive Plan under which Asterias has reserved 13,500,000 shares of common stock for the grant of stock options, and other equity-based awards to officers, directors, employees, and consultants. As of December 31, 2017, Asterias had outstanding warrants to purchase 2,813,159 shares of Asterias common stock, options to purchase a total of 6,375,828 shares of Asterias common stock and 690,000 restricted stock units. Since the deconsolidation of Asterias on May 13, 2016, Asterias ceased being a consolidated subsidiary but has remained a significant affiliate of BioTime.

Our Ownership of OncoCyte – Affiliate

Beginning February 17, 2017, BioTime deconsolidated OncoCyte and OncoCyte is no longer a consolidated subsidiary of BioTime as of that date, but remains a significant affiliate of BioTime. As of February 7, 2018, we owned 46.7% of the OncoCyte common stock outstanding. OncoCyte common stock is listed for trading on the NYSE American under the symbol OCX. OncoCyte has adopted a stock option plan under which it may issue up to 5,200,000 shares of its common stock to its officers, directors, employees, and consultants. As of December 31, 2017, options to purchase 3,390,287 shares of OncoCyte common stock had been granted.

Our Ownership of OrthoCyte

As of February 22, 2018, we owned 99.8% of the outstanding common stock of OrthoCyte. OrthoCyte has adopted a stock option plan under which it may issue up to 4,000,000 shares of its common stock to officers, directors, employees, and consultants of OrthoCyte and BioTime employees, including officers. As of December 31, 2017, options to purchase 1,249,000 shares of OrthoCyte common stock had been granted.

Our Ownership of AgeX

As of February 22, 2018, we owned 85.4% of the outstanding common stock of AgeX. AgeX has adopted a stock option plan under which it may issue up to 4,000,000 shares of its common stock to officers, directors, employees, and consultants of AgeX and BioTime employees, including officers. As of December 31, 2017, options to purchase 1,239,000 shares of AgeX common stock had been granted.

AgeX has issued warrants to purchase 1,473,600 shares of its common stock that expire the earlier to occur of (i) the third anniversary from the date of issuance, (ii) on or after January 31, 2019, after notice from AgeX, if the AgeX shares are publicly traded and the price of AgeX common stock exceeds $3.75 per share for 20 trading days (on a volume weighted average price basis, as defined), and (iii) a change of control, as defined in warrant agreement.

Our Ownership of ReCyte Therapeutics

As of February 22, 2018, AgeX owned 94.8% of the outstanding common stock of ReCyte Therapeutics, Inc. (“ReCyte Therapeutics”). ReCyte Therapeutics has adopted a stock option plan under which it may issue up to 4,000,000 shares of its common stock to officers, directors, employees, and consultants of ReCyte Therapeutics and BioTime employees, including officers. As of December 31, 2017, options to purchase 1,199,975 shares of ReCyte Therapeutics common stock had been granted.

Our Ownership of LifeMap Sciences

As of February 22, 2018, AgeX owned approximately 82% of the outstanding common stock of LifeMap Sciences, Inc. (“LifeMap Sciences”). LifeMap Sciences has adopted a stock option plan under which it may issue up to 2,342,269 shares of its common stock to officers, directors, employees, and consultants of LifeMap Sciences and BioTime employees, including officers. As of December 31, 2017, options to purchase 904,571 shares of LifeMap Sciences common stock had been granted.

Patents and Trade Secrets

We rely primarily on patents and contractual obligations with employees and third parties to protect our proprietary rights. We have sought, and intend to continue to seek, appropriate patent protection for important and strategic components of our proprietary technologies by filing patent applications in the U.S. and certain foreign countries. There are no assurances that any of our intellectual property rights will guarantee protection or market exclusivity for our products and product candidates. We also use license agreements both to access technologies developed by other companies and universities and to convey certain intellectual property rights to others. Our financial success will be dependent, in part, on our ability to obtain commercially valuable patent claims, to protect and enforce our intellectual property rights, and to operate without infringing upon the proprietary rights of others if we are unable to obtain enabling licenses.

As of February 28, 2018, we owned or controlled or licensed directly or through our subsidiaries approximately 800 patents and pending patent applications worldwide including more than 170 issued or pending U.S. patents or patent applications. This number also includes the over 140 patents and applications licensed from WARF.

OpRegen^®

We and our subsidiary, Cell Cure, have issued patents that will provide protection to OpRegen^® until about 2033, and pending applications that if issued, will provide protection to OpRegen^® until December 2038.

Cell Cure was a party to two pending opposition proceedings in the European Patent Office (EPO) involving EP Patent Numbers 2147094 (issued 08-Oct-2014) and 2554661 (issued 19-Nov-2014), both entitled, “Stem Cell-Derived Retinal Pigment Epithelial Cells”. The Oral Proceedings took place on March 16, 2017 and March 17, 2017, respectively. Both patents were upheld by the EPO. The decisions were both appealed and the detailed grounds for appeal were due on September 9, 2017 and September 11, 2017, respectively, however, both appeals were withdrawn prior to those dates and the patents will be issued as amended in the opposition proceedings. Both patents relate to our OpRegen^® product and provide protection until April 2028. There are additional patent applications pending that if issued will provide further protection for OpRegen^®.

Renevia^®

We have patent protection for Renevia^® until about August 2027, and pending applications that if issued, will provide protection to Renevia^® until June 2038.

Asterias Patents

The patent positions for Asterias’ core programs are summarized below.

Neural cells: This portfolio is related to Asterias’ AST-OPC1 product. The patent rights relevant to neural cells, such as oligodendrocyte progenitor cells, include various patent families acquired from Geron that are directed to the differentiation of pluripotent stem cells (including hES cells) into various neural cell types, as well as various culture and purification methods. These patent rights also include rights licensed from the Regents of the University of California. There are issued patents in the United States, Australia, Canada, Europe, Japan, China, Hong Kong, India, Korea, Singapore and Israel. Additionally, there are five new pending patent families owned by us directed to improved methods of producing oligodendrocyte progenitor cells, oligodendrocyte progenitor cell compositions and methods of treatment of spinal cord injury and stroke using oligodendrocyte progenitor cells. The stroke family is jointly owned with the Regents of the University of California; the other four new pending families are solely owned by Asterias. The expiration dates of the patents acquired from Geron and in-licensed from the Regents of the University of California will be within 2021 to 2030. The potential expiry dates of the four new patent families with applications pending will be within 2036 to 2038. The commercial success of AST-OPC1 product depends, in part, upon the ability of Asterias to exclude competition for this product with the existing patent portfolio, regulatory exclusivity, or a combination of both.

Dendritic cells: This portfolio is related to Asterias’AST-VAC1 and AST-VAC2 products. The patent rights relevant to dendritic cells include various patent families acquired by Asterias from Geron or in-licensed from third parties that are directed to the differentiation of pluripotent stem cells (including hES cells) into hematopoietic progenitor cells and immature and mature dendritic cells. In addition, these patent rights include a patent family with claims directed to immunogenic compositions comprising antigen-presenting dendritic cells and methods of eliciting an anti-telomerase immune response in a subject by administering to the subject such compositions. There are issued patents in the United States, Australia, Europe, Canada, China, Hong Kong, Japan, Korea, Israel and Singapore. The expiration dates of the patents acquired from Geron and in-licensed to us range from 2019 to 2029. Additionally, there is a new pending patent family owned by Asterias with claims directed to immunotherapeutic compositions comprising immunogenic peptides and methods of eliciting a cellular mediated immune response in a subject, with a provisional patent application filed in 2017. The potential expiry date of the new patent family with a pending provisional application will be in 2038. The commercial success of AST-VAC1 and AST-VAC2 products depends, in part, upon the ability of Asterias to exclude competition in these products with this patent portfolio, regulatory exclusivity, or a combination of both.

In addition, Asterias has issued patents in the Unites States and various other jurisdictions for producing cardiomyocytes, pancreatic islet cells, hepatocytes, chondrocytes, and osteoblasts. The expiration dates of these patents range from 2020 to 2032.

Patents Used by OncoCyte

OncoCyte’s diagnostic patent portfolio includes 6 patent families owned by OncoCyte with claims directed to compositions of matter and methods useful for detection and treatment of breast and bladder, cancers using specific biomarkers or a panel of specific biomarkers. Patents are pending in various jurisdictions, including the United States, Europe, Australia, Canada, China, Hong Kong, Japan and Republic of Korea, with projected expiration dates ranging from 2032 to 2037. Additionally, they have one issued patent in Australia, with claims directed to a method of detecting breast cancer; and one accepted patent application in China, with claims directed to a method of detecting bladder cancer. The issued patents will expire in 2032.

OncoCyte has also obtained an exclusive license from Wistar to certain pending patent applications in the field of molecular diagnostics for lung cancer. The pending claims are directed to compositions of matter and methods useful for detection of lung cancer using specific biomarkers or a panel of specific biomarkers, with projected expiration dates in 2036 and 2037. Additionally, we have obtained from Wistar an exclusive option under which we may obtain licenses to additional issued and pending patents in the field of molecular diagnostics for lung cancer. Patents covered by the exclusive option have issued in the United States, Europe, and India and patent applications are pending in the United States, Canada and India. Those patents are projected to expire in 2028 - 2030.

Patents Used in Our Plasma Volume Expander Business

We currently hold three issued U. S. patents with methods-of-use claims covering Hextend^®. Our patents in the U.S., which include claims directed to methods-of-use of Hextend^®, are expected to remain in force until 2019. Patents covering certain proprietary solutions have also issued in several countries and remain in force in Canada, China, Israel, Japan, New Zealand, and Taiwan.

General Risks Related to Obtaining and Enforcing Patent Protection

There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and be declared invalid or infringing on third party claims. Litigation, interferences, oppositions, inter partes reviews or other proceedings are, have been and may in the future be necessary in some instances to determine the validity and scope of certain of our proprietary rights, and in other instances to determine the validity, scope or non-infringement of certain patent rights claimed by third parties to be pertinent to the manufacture, use or sale of our products. We may also face challenges to our patent and regulatory protections covering our products by third parties, including manufacturers of generics and biosimilars that may choose to launch or attempt to launch their products before the expiration of our patent or regulatory exclusivity. Litigation, interference, oppositions, inter partes reviews, administrative challenges or other similar types of proceedings are unpredictable and may be protracted, expensive and distracting to management. The outcome of such proceedings could adversely affect the validity and scope of our patent or other proprietary rights, hinder our ability to manufacture and market our products, require us to seek a license for the infringed product or technology or result in the assessment of significant monetary damages against us that may exceed any amounts that we may accrue on our financial statements as a reserve for contingent liabilities. An adverse determination in a judicial or administrative proceeding or a failure to obtain necessary licenses could prevent us from manufacturing or selling our products. Furthermore, payments under any licenses that we are able to obtain would reduce our profits derived from the covered products and services.

The enforcement of patent rights often requires litigation against third-party infringers, and such litigation can be costly to pursue. Even if we succeed in having new patents issued or in defending any challenge to issued patents, there is no assurance that our patents will be comprehensive enough to provide us with meaningful patent protection against our competitors.

In addition to relying on patents, we rely on trade secrets, know-how, and continuing technological advancement to maintain our competitive position. We have entered into intellectual property, invention, and non-disclosure agreements with our employees, and it is our practice to enter into confidentiality agreements with our consultants. There can be no assurance, however, that these measures will prevent the unauthorized disclosure or use of our trade secrets and know-how, or that others may not independently develop similar trade secrets and know-how or obtain access to our trade secrets, know-how, or proprietary technology.

Employees

As of December 31, 2017, we employed 95 employees, of which 46 are BioTime employees and 49 are employees of our subsidiaries, including foreign subsidiaries. Ninety-two employees are employed on a full-time basis and three persons are employed on a part-time basis. Twenty-three full-time employees hold Ph.D. degrees in one or more fields of science. None of our employees are covered by a collective bargaining agreement.

Manufacturing

Facilities Required—Cell Products

We lease approximately 30,795 square feet of rentable space in two buildings located in an office park setting in Alameda, California. Our subsidiaries or affiliates, OncoCyte, OrthoCyte, AgeX and ReCyte Therapeutics are also conducting their operations at our Alameda facility.

Cell Cure leases approximately 2,060 square meters (approximately 22,200 square feet) of office, laboratory, warehousing and cGMP production space located in Jerusalem, Israel.

Facilities Required—HyStem^® Hydrogel Products

We hold a California Device Manufacturing License and has registered with the FDA as a Device Manufacturer in support of our Premvia^® product. We have ISO 13485:2003 certification for the design, development, manufacture, and distribution of hydrogels for therapeutic delivery applications. While BioTime holds these certifications, licenses, and registrations, all product manufacturing occurs at contract facilities located in Pennsylvania and California. Our contractors have the necessary registrations and certifications to perform this manufacturing. Our current suppliers have the capacity to meet current and commercial requirements. We maintain laboratories for product, process, and analytical development work for HyStem^® hydrogel products at our Alameda facility.

Facilities Required—Laboratory Diagnostic Tests

OncoCyte constructed a CLIA compliant laboratory at our Alameda facility for the performance of any cancer diagnostic tests that it may successfully develop and commercialize. OncoCyte will be required to hold certain federal, state and local licenses, certifications and permits to operate its diagnostic test laboratory, including certification, under the laws of the states from which it receives blood samples for testing, in addition to certification by California where the diagnostic laboratory is located. See “Government Regulation — Clinical Laboratory Improvement Amendments of 1988 and State Regulation.”

Facilities Required—Plasma Volume Expanders

Hospira, Inc., a subsidiary of Pfizer, Inc., manufactures our synthetic blood volume expander solution Hextend^® for use in the United States and CJ Healthcare manufactures Hextend^® for use in South Korea. If Hospira and CJ Health were to discontinue manufacturing Hextend^®, we would need to find a replacement manufacturer willing to manufacture Hextend^® us as we do not have facilities to manufacture Hextend^® in commercial quantities, or under cGMP.

Raw Materials— Cell Products and HyStem^® Products

Most of the ingredients in the HyStem^® products we are developing are readily obtainable from multiple sources. Two critical ingredients, gelatin and sodium hyaluronate, are readily available from multiple sources but would require significant testing in order to qualify new vendors as sources of those ingredients for our products.

Raw Materials—Plasma Volume Expanders

Although most ingredients in the products we are developing are readily obtainable from multiple sources, we know of only a few manufacturers of the hydroxyethyl starches that serve as the primary drug substance in Hextend^®. Hospira and CJ Health presently have a source of supply of the hydroxyethyl starch used in Hextend^® and have agreed to maintain a supply sufficient to meet market demand for Hextend^® in the countries in which they market the product. We believe that we will be able to obtain a sufficient supply of starch for our needs in the foreseeable future, although we do not have supply agreements in place. If for any reason a sufficient supply of hydroxyethyl starch could not be obtained, a licensee would have to acquire or obtain by contract the use of a manufacturing facility and the technology to produce the hydroxyethyl starch according to cGMP if the licensee were to elect to continue manufacturing Hextend^®.

Licensed Technology and Product Development Agreements

BioTime and other members of BioTime have obtained the right to use technology that we believe has great potential in our product development efforts, and that may be useful to other companies that are engaged in the research and development of products for human therapeutic and diagnostic use.

Wisconsin Alumni Research Foundation—Research Products

We have entered into a Commercial License and Option Agreement with Wisconsin Alumni Research Foundation (“WARF”). The WARF license permits us and our subsidiaries to use certain patented and patent pending technology belonging to WARF, as well as certain stem cell materials, for research and development purposes, and for the production and marketing of “research products” and “related products.” “Research products” are products used as research tools, including in drug discovery and development. “Related products” are products other than research products, diagnostic products, or therapeutic products. “Diagnostic products” are products or services used in the diagnosis, prognosis, screening or detection of disease in humans. “Therapeutic products” are products or services used in the treatment of disease in humans.

We will pay WARF a 4% royalty on the sale of research products and services and 2% on the sale of related products under the WARF license. The royalty rate is subject to certain reductions if we also become obligated to pay royalties to a third party to sell a product. We have certain options to negotiate with WARF to obtain a license to manufacture and market therapeutic products, excluding products in certain fields of use. The WARF license shall remain in effect until the last licensed patent expires, however, we may terminate prior to the expiration by giving WARF at least 90 days written notice, and WARF has industry standard termination rights.

PureStem^® Technology

ReCyte Therapeutics entered into a license agreement with Advanced Cell Technology, Inc., which later became Ocata Therapeutics, Inc. (“Ocata”) that was subsequently assigned to us and under which we acquired exclusive world-wide rights to use Ocata’s technology for methods to accelerate the isolation of novel cell strains from pluripotent stem cells. The licensed rights include pending patent applications, know-how, and existing cells and cell lines developed using the technology.

The licensed technology is designed to provide a large-scale and reproducible method of isolating clonally purified human embryonic progenitor cells or hEPCs, many of which may be capable of extended propagation in vitro. Initial testing suggests that the technology may be used to isolate at least 200 distinct clones that contain many previously uncharacterized cell types derived from all germ layers that display diverse embryo- and site-specific homeobox gene expression. Despite the expression of many oncofetal genes, none of the hEPC tested led to tumor formation when transplanted into immunocompromised mice. The cells studied appear to have a finite replicative lifespan but have longer telomeres than most fetal- or adult-derived cells, which may facilitate their use in the manufacture of purified lineages for research and human therapy. Information concerning the technology was published in the May 2008 edition of the journal Regenerative Medicine.

We have the right to use the licensed technology and cell lines for research purposes and for the development of therapeutic and diagnostic products for human and veterinary use, and we also have the right to grant sublicenses. We paid Ocata a $250,000 license fee as well as an 8% royalty on sales of products, services, and processes that utilize the licensed technology. Once a total of $1.0 million of royalties has been paid, no further royalties will be due.

Ocata may reacquire royalty-free, worldwide licenses to use the technology for RPE cells, hemangioblasts, and myocardial cells, on an exclusive basis, and for hepatocytes, on a non-exclusive basis, for human therapeutic use. Ocata will pay us $5,000 for each license that it elects to reacquire.

The term of the licenses from Ocata expire on the later of July 9, 2028 or the expiration of the last to expire of the licensed patents. The latest expiration date of patents issued is October 12, 2026, but the expiration date of the licenses could be extended if the patent expiration dates are extended. Ocata may terminate the license agreement if we commit a breach or default in the performance of our obligations under the agreement and fail to cure the breach or default within the permitted cure periods. BioTime has the right to terminate the license agreement at any time by giving Ocata three months’ prior notice and paying all amounts due to Ocata through the effective date of the termination.

HyStem^® Hydrogel Technology

We have acquired an exclusive worldwide license from the University of Utah to use certain patents in the production and sale of hydrogel products, including our HyStem^® products, excluding certain veterinary and animal health uses. Our licensed field of use includes, but is not limited to, all human pharmaceutical and medical device applications, all tissue engineering and regenerative medicine uses, and all research applications.

Under the License Agreement, we will pay a 3% royalty on sales of products and services performed that utilize the licensed patents. We are obligated to pay minimum royalties to the extent that actual royalties on products sales and services utilizing the patents are less than the minimum royalty amount. The minimum royalty amounts are $30,000 per annum during the term of the License Agreement. We will also pay the University of Utah 30% of any sublicense fees or royalties received under any sublicense of the licensed patents.

We will also pay a $225,000 milestone fee within six months after the first sale of a “tissue engineered product” that utilizes a licensed patent. A tissue engineered product is defined as living human tissues or cells on a polymer platform, created at a place other than the point-of-care facility, for transplantation into a human patient.

We agreed to pay an additional license fee for the additional rights licensed to us during August 2012, and the costs of filing, prosecuting, enforcing and maintaining the patents exclusively licensed to us, and a portion of those costs for patents that have been licensed to a third party for a different field of use.

Commencing in August 2017, we may, under certain circumstances, be obligated to sublicense to one or more third parties, on commercially reasonable terms to be negotiated between us and each prospective sublicensee, or re-grant to the University of Utah, rights to use the licensed patents for products and services outside the general industry in which we or any of our affiliates or sublicensees is then developing or commercializing, or has plans to develop or commercialize, a product using the licensed technology.

Research and Development Agreement and License Agreement with Heraeus

OrthoCyte has entered into a License Agreement and a Research and Development Agreement with Heraeus for the development of innovative bone grafting therapies based on the use of our proprietary PureStem^® human embryonic progenitor cell technology. Pursuant to the terms of the Research and Development Agreement, OrthoCyte will carry out a research and development project aimed at producing a cell therapy bone grafting product, using PureStem^® technology and either HyStem^® scaffold technology for delivery of bioactives, referred to as the OrthoCyte Technology, or scaffold technology owned by Heraeus or licensed to it by third parties, referred to as the Heraeus Technology. The OrthoCyte Technology includes technology owned by it or BioTime or licensed from third parties.

Under the terms of the Research and Development Agreement, Heraeus agreed to make certain payments to OrthoCyte upon achieving certain milestones, and will reimburse OrthoCyte for all costs and expenses incurred in connection with the project. The Research and Development Agreement is effective until the completion and payment of the last milestone set forth in the project plan, but may be terminated by either party immediately upon written notice to the other party if the other party fails to remedy any material breach of the agreement within 90 days following receipt of written notice of such breach. Heraeus had additional industry standard termination rights. OrthoCyte has also licensed the OrthoCyte Technology to Heraeus, and Heraeus has licensed the Heraeus Technology to OrthoCyte. The license grant by OrthoCyte to Heraeus is exclusive and worldwide in the field of bone grafting for all osteoskelton diseases and injuries, except oral maxilla-facial. The license grant by Heraeus to OrthoCyte is exclusive and worldwide in all other fields. Pursuant to the License Agreement, each of Heraeus and OrthoCyte will pay certain specified royalties to each other based on their respective net sales of the product developed in the research and development project. The License Agreement contains customary confidentiality obligations, and representations and warranties, and termination provisions.

Hadasit Research and License Agreement

Cell Cure has a Second Amended and Restated License Agreement (the “License Agreement”) with Hadasit Medical Research Services and Development Ltd. (“Hadasit”), the commercial arm and a wholly-owned subsidiary of Hadassah Medical Organization. Pursuant to the License Agreement, Hadasit granted Cell Cure an exclusive, worldwide, royalty bearing license (with the right to grant sublicenses) in its intellectual property portfolio of materials and technology related to human stem cell derived photoreceptor cells and retinal pigment epithelial cells (the “Licensed IP”), to use, commercialize and exploit any part thereof, in any manner whatsoever in the fields of the development and exploitation of (i) human stem cell derived photoreceptor cells, solely for use in cell therapy for the diagnosis, amelioration, prevention and treatment of eye disorders, and (ii) human stem cell derived retinal pigment epithelial cells, solely for use in cell therapy for the diagnosis, amelioration, prevention and treatment of eye disorders.

As consideration for the Licensed IP, Cell Cure will pay a small one-time lump sum payment, a royalty in the mid-single digits of net sales from sales of Licensed IP by any invoicing entity, and a royalty of between 15 and 25 percent of sublicensing receipts. In addition, Cell Cure will pay Hadasit an annual minimal non-refundable royalty, which will become due and payable the first January 1 following the completion of services to Cell Cure by a research laboratory.

Cell Cure agreed to pay Hadasit non-refundable milestone payments upon the recruitment of the first patient for the first Phase IIB clinical trial, upon the enrollment of the first patient in the first Phase III clinical trials, upon delivery of the report for the first Phase III clinical trials, upon the receipt of an NDA or marketing approval in the European Union, whichever is the first to occur, and upon the first commercial sale in the United States or European Union, whichever is the first to occur. Such milestones, in the aggregate, may be up to $3.5 million. As of December 31, 2017, Cell Cure had not accrued any milestone payments under the License Agreement.

The License Agreement terminates upon the expiration of Cell Cure’s obligation to pay royalties for all licensed products, unless earlier terminated. In addition, the License Agreement may be terminated by (i) Hadasit if, among other reasons, Cell Cure fails to continue the clinical development of the Licensed IP or fails to take actions to commercialize or sell the Licensed IP over any consecutive 12 month period, and (ii) by either party for (a) a material breach which remains uncured following a cure period, or (b) the granting of a winding-up order in respect of the other party, or upon an order being granted against the other party for the appointment of a receiver or a liquidator in respect of a substantial portion of such other party’s assets. The License Agreement also contains mutual confidentiality obligations of Cell Cure and Hadasit, and indemnification obligations of Cell Cure.

AgeX License Agreement

Concurrently with the contribution of assets to AgeX under an Asset Contribution Agreement, BioTime and AgeX entered into a License and Sublicense Agreements pursuant to which BioTime has licensed to AgeX, with rights to sublicense, certain intellectual property, including patents and patent applications and know-how for use in the development, manufacture and commercialization of products or services for the prevention, treatment, amelioration, diagnosis or monitoring of all human and non-human animal diseases and conditions except for the field of medical products, devices and services for the reserved BioTime fields of orthopedic, ophthalmic and medical aesthetic uses. In addition, BioTime retained an option right to license, on terms to be negotiated, certain patents in research, development, manufacturing and commercialization of treatments in the reserved BioTime fields. The licensed patents and know-how relate generally to (a) BioTime’s PureStem^® human embryonic progenitor cell lines, and (b) telomere length and DNA quality control analysis in pluripotent stem cells.

The BioTime patent rights licensed to AgeX are exclusive and worldwide except for existing third-party licenses, and for medical products, devices, and services related to tendon. AgeX additionally received an option to license certain BioTime retained patent rights outside of orthopedic indications unless a license grant would compete with a BioTime program or products in the retained BioTime field.

BioTime and a subsidiary have also agreed to license or sublicense to AgeX certain additional patents and patent rights and know-how relating to BioTime HyStem^® hydrogel technology, human embryonic progenitor cell technology, and human pluripotent stem cell lines and technology for use outside the fields reserved to BioTime or in the case of certain sublicense rights in fields previously licensed to third parties.

Asterias Cross-License Agreement

Under the terms of a Cross-License Agreement (the “Cross-License”) entered into by Asterias, BioTime, and BioTime’s subsidiary ES Cell International Pte Ltd (“ESI”), BioTime and ESI received a fully-paid, non-royalty-bearing, world-wide, non-exclusive, sub-licensable license in, to, and under the certain Asterias patents and related patent rights for all purposes in the BioTime/ESI Licensed Field during the term of the license. The BioTime/ESI Licensed Field includes all fields of use except any and all applications (a) to treat disorders of the nervous system, (b) utilizing the immune system to prevent, treat, or cure cancer, and (c) involving the use of cells comprising, derived from, or manufactured using, human embryonic stem cells or human induced pluripotent stem cells for in vitro assay applications, including but not limited to drug discovery and development, drug monitoring, drug toxicology testing, and consumer products testing. BioTime has sublicensed its rights to certain subsidiaries.

Under the terms of the Cross-License, Asterias received a fully-paid, non-royalty-bearing, world-wide, non-exclusive, sub-licensable license under certain BioTime patents and related patent rights and ESI patents and related patent rights specified in the Cross-License, for all purposes in the Asterias Licensed Field during the term of the license. The Asterias Licensed Field includes all therapeutic applications of use for certain BioTime patents and ESI patents except all therapeutic applications of use involving pluripotent stem cell-derived cells of the following lineages: (a) bone and orthopedic soft tissues, including but not limited to ligament, tendon, meniscus, cartilage, and intervertebral disc; (b) vascular endothelium and perivascular cells including vascular smooth muscle and vascular pericytes; (c) adipose tissue; and (d) retinal pigment epithelium. The Asterias Licensed Field also includes all applications of use for certain other BioTime patents involving live human pluripotent stem cell-derived cell therapies directed to the neural spinal cord (excluding cartilage and bone of the spine) and the myocardium; and also live human pluripotent stem cell-derived glial cell therapies directed to the central nervous system.

The term of the Cross-License shall expire on the expiration of the last claim within the Asterias patents rights or BioTime patent rights, as applicable, unless terminated earlier for a material breach by a party.

Government Regulation

Government authorities at the federal, state and local level, and in other countries, extensively regulate among other things, the development, testing, manufacture, quality, approval, safety, efficacy, distribution, labeling, packaging, storage, record keeping, marketing, import/export and promotion of drugs, biologics, and medical devices. Laboratories performing diagnostic tests such as those being developed by OncoCyte are also subject to regulation at both the federal and state level. Authorities also heavily regulate many of these activities for human cells, tissues, and cellular and tissue-based products or HCT/Ps.

FDA and Foreign Regulation of Therapeutic Products

The FDA and foreign regulatory authorities will regulate our proposed products as drugs, biologicals, or medical devices, depending upon such factors as the use to which the product will be put, the chemical composition, and the interaction of the product with the human body. In the United States, the FDA regulates drugs and biologicals under the Federal Food, Drug and Cosmetic Act, or FDCA, the Public Health Service Act, or PHSA, and implementing regulations. In addition, establishments that manufacture human cells, tissues, and HCT/Ps are subject to additional registration and listing requirements, including current good tissue practice regulations. Certain cell therapy proposed products will be reviewed by the FDA staff in its Center for Biologics Evaluation and Research (“CBER”) Office of Cellular, Tissue and Gene Therapies.

Our domestic human drug and biological products will be subject to rigorous FDA review and approval procedures. After testing in animals to evaluate the potential efficacy and safety of the product candidate, an investigational new drug (“IND”) submission must be made to the FDA to obtain authorization for human testing. Extensive clinical testing, which is generally done in three phases, must then be undertaken at a hospital or medical center to demonstrate optimal use, safety, and efficacy of each product in humans. Each clinical study is conducted under the auspices of an independent Institutional Review Board (“IRB”). The IRB will consider, among other things, ethical factors, the safety of human subjects, and the possible liability of the institution.

Clinical trials are generally conducted in three “phases.” Phase I clinical trials are conducted in a small number of healthy volunteers or volunteers with the target disease or condition to assess safety. Phase II clinical trials are conducted with groups of patients afflicted with the target disease or condition in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. In some cases, an initial trial is conducted in diseased patients to assess both preliminary efficacy and preliminary safety, in which case it is referred to as a Phase I/II trial. Phase III trials are large-scale, multi-center, comparative trials and are conducted with patients afflicted with the target disease or condition in order to provide enough data to demonstrate the efficacy and safety required by the FDA. The FDA closely monitors the progress of each of the three phases of clinical testing and may, at its discretion, re-evaluate, alter, suspend, or terminate the clinical trial based upon the data which have been accumulated to that point and its assessment of the risk/benefit ratio to the intended patient population. All adverse events must be reported to the FDA. Monitoring of all aspects of the study to minimize risks is a continuing process. The time and expense required to perform this clinical testing can far exceed the time and expense of the research and development initially required to create the product.

No action can be taken to market any therapeutic product in the U.S. until an appropriate New Drug Application (“NDA”) or Biologics License Application (BLA) has been approved by the FDA. Submission of the application is not a guarantee that the FDA will find it complete and accept it for filing. If an application is accepted for filing, following the FDA’s review, the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not provide an adequate basis for approval. FDA regulations also restrict the export of therapeutic products for clinical use prior to FDA approval. To date, the FDA has not granted marketing approval to any pluripotent stem-based therapeutic products and it is possible that the FDA or foreign regulatory agencies may subject our product candidates to additional or more stringent review than drugs or biologicals derived from other technologies.

The FDA offers several programs to expedite development of products that treat serious or life-threatening illnesses and that provide meaningful therapeutic benefits to patients over existing treatments. A product may be eligible for breakthrough therapy designation if it treats a serious or life-threatening disease or condition and preliminary clinical evidence indicates it may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. In December 2016, in the 21^st Century Cures Act adopted a new designation of Regenerative Medicine Advanced Therapy Designation. Under the 21st Century Cures Act, a drug is eligible for designation as a regenerative medicine advanced therapy (“RMAT,” formerly known as “Regenerative Advanced Therapy”) if: the drug is a regenerative medicine therapy, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, except for those regulated solely under certain other sections; the drug is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such disease or condition. Some of our current and future products may be eligible for RMAT designation. RMAT designation allows for similar benefits as the breakthrough therapy designation. There is no assurance that the FDA will grant breakthrough therapy, accelerated approval or RMAT status to any of our product candidates.

Certain Medical Devices

Obtaining regulatory approval of Renevia^® or a similar implantable matrix for tissue transplant or stem cell therapy in Europe will require the preparation of a design dossier containing details on the product manufacturing and production methods, analytical controls to assure that the product meets its release specification, data from analytical assay and process validations, ISO 10993 biocompatibility testing, as well as pre-clinical and clinical safety and efficacy data. Completion of the manufacturing, analytical, biocompatibility, and clinical trials represents a majority of the expenses associated with the regulatory application process in Europe. The procedures for obtaining FDA approval to sell products in the U.S. are likely to be more stringent, and the cost greater, than would be the case in an application for approval in Europe.

Combination Products

If we develop any products that are used with medical devices, they may be considered combination products, which are defined by the FDA to include products comprised of two or more regulated components or parts such as a biologic and a device. For example, our HyStem^® hydrogel products such as Renevia^® may be used to administer one or more pluripotent stem cell-based therapy products. When regulated independently, biologics and devices each have their own regulatory requirements. However, the regulatory requirements for a combination product comprised of a biologic administered with a delivery device can be more complex, because in addition to the individual regulatory requirements for each component, additional combination product regulatory requirements may apply. There is an Office of Combination Products at the FDA that coordinates the review of such products and determines the primary mode of action of a combination product. The definition and regulatory requirements for combination products may differ significantly among countries in which we may seek approval of our product candidates.

FDA Regulation of Manufacturing

The FDA regulates the manufacturing process of pharmaceutical products, human tissue and cell products, and medical devices, requiring that they be produced in compliance with cGMP. See “Manufacturing.” The FDA regulates and inspects equipment, facilities, laboratories and processes used in the manufacturing and testing of products prior to providing approval to market products. If after receiving approval from the FDA, a material change is made to manufacturing equipment or to the location or manufacturing process, additional regulatory review may be required. The FDA also conducts regular, periodic visits to re-inspect the equipment, facilities, laboratories and processes of manufacturers following an initial approval. If, as a result of those inspections, the FDA determines that that equipment, facilities, laboratories or processes do not comply with applicable FDA regulations and conditions of product approval, the FDA may seek civil, criminal or administrative sanctions and/or remedies against the manufacturer, including suspension of manufacturing operations. Issues pertaining to manufacturing equipment, facilities or processes may also delay the approval of new products undergoing FDA review.

FDA Regulation of Advertising and Product Promotion

The FDA also regulates the content of advertisements used to market pharmaceutical and biological products. Claims made in advertisements concerning the safety and efficacy of a product, or any advantages of a product over another product, must be supported by clinical data filed as part of an NDA, a BLA, or a pre-market notification or pre-market approval application for a medical device (“PMA”), or an amendment to an NDA, a BLA, or a pre-market notification or PMA, and must be consistent with the FDA approved labeling and dosage information for that product.

Foreign Regulation

Sales of pharmaceutical products outside the U.S. are subject to foreign regulatory requirements that vary widely from country to country. Even if FDA approval has been obtained, approval of a product by comparable regulatory authorities of foreign countries must be obtained prior to the commencement of marketing the product in those countries. The time required to obtain such approval may be longer or shorter than that required for FDA approval.

Federal Funding of Research

The United States government and its agencies have until relatively recently refused to fund research which involves the use of human embryonic tissue. President Bush issued Executive Orders on August 9, 2001 and June 20, 2007 that permitted federal funding of research on hES cells using only the limited number of hES cell lines that had already been created as of August 9, 2001. On March 9, 2009, President Obama issued an Executive Order rescinding President Bush’s August 9, 2001 and June 20, 2007 Executive Orders. President Obama’s Executive Order also instructed the NIH to review existing guidance on human stem cell research and to issue new guidance on the use of hES cells in federally funded research, consistent with President’s new Executive Order and existing law. The NIH has adopted new guidelines that went into effect July 7, 2009. The central focus of the new guidelines is to assure that hES cells used in federally funded research were derived from human embryos that were created for reproductive purposes, were no longer needed for this purpose, and were voluntarily donated for research purposes with the informed written consent of the donors. Those hES cells that were derived from embryos created for research purposes rather than reproductive purposes, and other hES cells that were not derived in compliance with the guidelines, are not eligible for use in federally funded research.

In addition to President Obama’s Executive Order, a bipartisan bill has been introduced in the U.S. Senate that would allow Federal funding of hES research. The Senate bill is identical to one that was previously approved by both Houses of Congress but vetoed by President Bush. The Senate Bill provides that hES cells will be eligible for use in research conducted or supported by federal funding if the cells meet each of the following guidelines: (1) the stem cells were derived from human embryos that have been donated from IVF clinics, were created for the purposes of fertility treatment, and were in excess of the clinical need of the individuals seeking such treatment, (2) prior to the consideration of embryo donation and through consultation with the individuals seeking fertility treatment, it was determined that the embryos would never be implanted in a woman and would otherwise be discarded, and (3) the individuals seeking fertility treatment donated the embryos with written informed consent and without receiving any financial or other inducements to make the donation. The Senate Bill authorizes the NIH to adopt further guidelines consistent with the legislation.

California State Regulations

The state of California has adopted legislation and regulations that require institutions that conduct stem cell research to notify, and in certain cases obtain approval from, a Stem Cell Research Oversight Committee (“SCRO Committee”) before conducting the research. Under certain California regulations, all hES cell lines that will be used in our research must be acceptably derived.

We also comply with certain California regulations that require certain records to be maintained with respect to stem cell research and the materials used.

We have formed a SCRO Committee which reviews each of BioTime’s projects that involve the use of pluripotent stem cells. The committee reviews and confirms that we are using only hES cell lines that have been acceptably derived and that the research conducted using these cells lines is both scientifically and ethically justified under existing California regulations. The OpRegen^® program has been reviewed by the SCRO Committee and we believe that we comply with applicable federal and state guidelines. The hES cell lines that we use are all on the National Institutes of Health (“NIH”) registry of lines that have been reviewed and meet standards for federal funding grants.

Regulation of Diagnostic Tests

Clinical Laboratory Improvement Amendments of 1988 and State Regulation

As a provider of laboratory testing on human specimens for the purpose of disease diagnosis, prevention, or treatment, OncoCyte is required to hold certain federal, state and local licenses, certifications and permits to conduct its business. In 1988, Congress enacted the Clinical Laboratory Improvement Amendments of 1988, (“CLIA”), which established quality standards for all laboratories providing testing to ensure the accuracy, reliability, and timeliness of patient test results regardless of where the test was performed. OncoCyte’s laboratory has obtained a CLIA certificate of accreditation and is currently licensed in California. OncoCyte will be required to meet laboratory licensing and other requirements under laws of additional states in which it will operate or from which OncoCyte will receive blood samples for testing. OncoCyte will be subject to regular surveys and inspections to assess compliance with applicable regulatory standards. If OncoCyte’s CLIA laboratory were to fall out of compliance with California standards, the California Department of Health Services (“DHS”) may suspend, restrict or revoke the license to operate the laboratory, assess substantial civil money penalties, or impose specific corrective action plans.

FDA Regulation of Diagnostic Tests

OncoCyte’s diagnostic tests will likely be classified as laboratory diagnostic tests (“LDTs”), and consequently be governed under the CLIA regulations, as administered by The Centers for Medicare and Medicaid Services (“CMS”), as well as by applicable state laws. Historically, the FDA has exercised enforcement restraint with respect to most LDTs and has not required laboratories that offer LDTs to comply with FDA requirements for medical devices, such as registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls. In recent years, however, the FDA has stated it intends to end its policy of enforcement restraint and begin regulating certain LDTs as medical devices. On October 3, 2014, the FDA issued two draft guidance documents, entitled “Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs)” and “FDA Notification and Medical Device Reporting for Laboratory Developed Tests (LDTs)”, respectively, that set forth a proposed risk-based regulatory framework that would apply varying levels of FDA oversight to LDTs. The FDA has indicated that it does not intend to modify its policy of enforcement restraint until the draft guidance documents are finalized. It is unclear at this time when, or if, the draft guidance documents will be finalized, and even then, the new regulatory requirements are proposed to be phased-in consistent with the schedule set forth in the guidance, which may happen in as little as 12 months after the draft guidance is finalized for certain high-priority LDTs. Nevertheless, the FDA may decide to regulate certain LDTs on a case-by-case basis at any time.

On January 13, 2017, the FDA issued a Discussion Paper on LDTs (“Discussion Paper”), which follows the FDA’s late 2016 announcement that contrary to its earlier reports, it would not issue a final guidance on its proposed oversight of LDTs and allow for further public discussion on appropriate oversight. As it did in its 2014 guidance documents, the FDA continues to advocate a risk-based approach to LDT oversight and proposes focusing on new and significantly modified high and moderate risk LDTs; however, new and significantly modified LDTs in certain categories would not be expected to comply with premarket review, quality systems, and registration and listing requirements unless necessary to protect public health. These exempt categories include low risk LDTs, LDTs for rare diseases, traditional LDTs, LDTs intended solely for public health surveillance, certain LDTs used in CLIA certified labs, and LDTs intended solely for forensic use. Based on the FDA’s guidance in the Discussion Paper, our products will likely not require FDA filing before launch. With respect to the post market surveillance of LDTs, the FDA’s Discussion Paper recommends that laboratories initially report serious adverse events for all tests except the exempted categories if tests, which include LDTs intended for public health surveillance, some stem cell/tissue/organ transplantation LDTs, and LDTs intended solely for forensic use. The Discussion Paper notes that while the report neither represents the formal position of the FDA nor is it a final version of the LDT guidance documents published in 2014, it is hoped that its publication will continue to advance further public disclosure.

In Vitro Diagnostics

In the future, OncoCyte may elect to develop IVDs, which are regulated by the FDA as medical devices. Medical devices marketed in the United States are subject to the regulatory controls under CLIA, the Federal Food, Drug, and Cosmetic Act, and regulations adopted by the FDA. Some requirements, known as premarket requirements, apply to medical devices before they are marketed, and other requirements, known as post-market requirements, apply to medical devices after they are marketed.

The premarket requirements that must be met to market a medical device in the United States will depend on the classification of the device under FDA regulations. Medical devices are categorized into one of three classes, based on the degree of risk they present. Devices that pose the lowest risk are designated as Class I devices, devices that pose moderate risk are designated as Class II devices and are subject to general controls and special controls, and the devices that pose the highest risk are designated as Class III devices and are subject to general controls and premarket approval.

A premarket submission to the FDA will be required for some Class I devices, most Class II devices, and all Class III devices. Most Class I and some Class II devices are exempt from premarket submission requirements. Some Class I and most Class II devices may only be marketed after a 510(k) premarket notification, while a more extensive PMA or Premarket Approval is required to market Class III devices.

Until all regulatory requirements are phased in OncoCyte’s initial confirmatory diagnostics will not require FDA filing before launch, and instead will be subject to CLIA certification and inspection requirements. If the new requirements are phased in or if OncoCyte elects to develop IVDs, those future screenings diagnostics may require a 510(k) submission or a PMA. In a 510(k) submission, the device sponsor must demonstrate that the new device is “substantially equivalent” to a predicate device in terms of intended use, technological characteristics, and performance testing. A 510(k) requires demonstration of substantial equivalence to another device that is legally marketed in the United States. Substantial equivalence means that the new device is at least as safe and effective as the predicate. A device is substantially equivalent if, in comparison to a predicate it (a) has the same intended use as the predicate; has the same technological characteristics as the predicate; or (b) has the same intended use as the predicate; and has different technological characteristics and the information submitted to FDA; does not raise new questions of safety and effectiveness; and is demonstrated to be at least as safe and effective as the legally marketed predicate device.

A claim of substantial equivalence does not mean the new and predicate devices must be identical. Substantial equivalence is established with respect to intended use, design, energy used or delivered, materials, chemical composition, manufacturing process, performance, safety, effectiveness, labeling, biocompatibility, standards, and other characteristics. A device may not be marketed in the United States until the submitter receives a letter declaring the device substantially equivalent. If the FDA determines that a device is not substantially equivalent, the applicant may resubmit another 510(k) with new data, or request a Class I or II designation through the FDA’s de novo process that allows a new device without a valid predicate to be classified into Class I or II if it meets certain criteria, or file a reclassification petition, or submit a PMA.

A new 510(k) submission is required for changes or modifications to an existing approved device, where the modifications could significantly affect the safety or effectiveness of the device or the device, is to be marketed for a new or different indication for use.

A PMA for Class III devices is the most stringent type of premarket submission. Before the FDA approves a PMA, the sponsor must provide valid scientific evidence demonstrating reasonable assurance of safety and effectiveness for the device’s intended use.

Submission of an application is no guarantee that CMS or FDA will find it complete and accept it for filing. If an application is accepted for filing or licensing, following CMS or FDA’s review, CMS or FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not provide an adequate basis for approval.

Health Insurance Portability and Accountability Act

Under the Health Insurance Portability and Accountability Act (“HIPAA”), the Department of Health and Human Services (“HHS”) has issued regulations to protect the privacy and security of protected health information. HIPAA also regulates standardization of data content, codes and formats used in health care transactions and standardization of identifiers for health plans and providers. Penalties for violations of HIPAA regulations include civil and criminal penalties.

CMS and the Office of Civil Rights issued a final rule in February 2014 to amend both the HIPAA and CLIA regulations. The final rule amended the HIPAA privacy rule to remove the CLIA laboratory exceptions, and as a result, HIPAA-covered laboratories are now required to provide individuals, upon request, with access to their completed test reports. Under the 2014 rules CLIA laboratories and CLIA-exempt laboratories may provide copies of a patient’s completed test reports that, using the laboratory’s authentication process, can be identified as belonging to that patient. These changes to the CLIA regulations and the HIPAA Privacy Rule provide individuals with a greater ability to access their health information, empowering them to take a more active role in managing their healthcare. CLIA laboratories must create and maintain policies, procedures, and other documentation necessary to inform patients of the right to access laboratory test reports and how to exercise that right.

The requirements under these regulations may periodically change and could have an effect on OncoCyte’s business operations if compliance becomes substantially more costly than under current requirements. New laws governing privacy may also be adopted in the future. We can provide no assurance that OncoCyte will remain in compliance with diverse privacy requirements in all of the jurisdictions in which it does business. Failure to comply with privacy requirements could result in civil or criminal penalties, which could have a materially adverse effect on OncoCyte’s business.

Physician Referral Prohibitions

Under a federal law directed at “self-referral,” commonly known as the Stark Law, there are prohibitions, with certain exceptions, on Medicare and Medicaid payments for laboratory tests referred by physicians who personally, or through a family member, have a “financial relationship”—including an investment or ownership interest or a compensation arrangement—with the clinical laboratory performing the tests. Several Stark Law exceptions are relevant to arrangements involving clinical laboratories, including: (1) fair market value compensation for the provision of items or services; (2) payments by physicians to a laboratory for clinical laboratory services; (3) certain space and equipment rental arrangements that satisfy certain requirements, and (4) personal services arrangements that satisfy certain requirements. The laboratory cannot submit claims to the Medicare Part B program for services furnished in violation of the Stark Law, and Medicaid reimbursements may be at risk as well. Penalties for violating the Stark Law include the return of funds received for all prohibited referrals, fines, civil monetary penalties and possible exclusion from the federal health care programs. Many states have comparable laws that are not limited to Medicare and Medicaid referrals.

Corporate Practice of Medicine

A number of states, including California, do not allow business corporations to employ physicians to provide professional services. This prohibition against the “corporate practice of medicine” is aimed at preventing corporations such as OncoCyte from exercising control over the medical judgments or decisions of physicians. The state licensure statutes and regulations and agency and court decisions that enumerate the specific corporate practice rules vary considerably from state to state and are enforced by both the courts and regulatory authorities, each with broad discretion. If regulatory authorities or other parties in any jurisdiction successfully assert that OncoCyte is engaged in the unauthorized corporate practice of medicine, OncoCyte could be required to restructure its contractual and other arrangements. In addition, violation of these laws may result in sanctions imposed against OncoCyte and/or the professional through licensure proceedings, and OncoCyte could be subject to civil and criminal penalties that could result in exclusion from state and federal health care programs.

Federal and State Fraud and Abuse Laws

A variety of federal and state laws prohibit fraud and abuse. These laws are interpreted broadly and enforced aggressively by various state and federal agencies, including CMS, the Department of Justice, the Office of Inspector General for HHS, and various state agencies. In addition, the Medicare and Medicaid programs increasingly use a variety of contractors to review claims data and to identify improper payments as well as fraud and abuse. These contractors include Recovery Audit Contractors, Medicaid Integrity Contractors and Zone Program Integrity Contractors. In addition, CMS conducts Comprehensive Error Rate Testing audits, the purpose of which is to detect improper Medicare payments. Any overpayments identified must be repaid unless a favorable decision is obtained on appeal. In some cases, these overpayments can be used as the basis for an extrapolation, by which the error rate is applied to a larger universe of claims, and which can result in even higher repayments.

The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting, receiving, or providing remuneration, directly or indirectly, to induce or in return for either the referral of an individual, or the furnishing, recommending, or arranging for the purchase, lease or order of any health care item or service reimbursable, in whole or in part, under a federal health care program. The definition of “remuneration” has been broadly interpreted to include anything of value, including gifts, discounts, credit arrangements, payments of cash, ownership interests and providing anything at less than its fair market value. Recognizing that the Anti- Kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements within the health care industry, the Office of Inspector General for HHS has issued a series of regulatory “safe harbors.” These safe harbor regulations set forth certain requirements that, if met, will assure immunity from prosecution under the federal Anti-Kickback Statute. Although full compliance with these provisions ensures against prosecution under the federal Anti-Kickback Statute, the failure of a transaction or arrangement to fit within a specific safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued.

HIPAA also created new federal crimes, including health care fraud and false statements relating to health care matters. The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including private third-party payers. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from federal health care programs, such as the Medicare and Medicaid programs. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from federal health care programs.

Many states have laws similar to the federal laws described above and the state laws may be broader in scope and may apply regardless of payor.

Additionally, the U.S. Foreign Corrupt Practices Act (“FCPA”) prohibits U.S. corporations and their representatives from offering, promising, authorizing or making payments to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business abroad. The scope of the FCPA includes interactions with certain healthcare professionals in many countries. Other countries have enacted similar anti-corruption laws and/or regulations.

Major Customers and Sources of Revenues

Major Sources of Revenues

The following table shows our major sources of revenues, as a percentage of total revenues, that were recognized during the years ended December 31, 2017, 2016, and 2015:

By Geographic Area

Marketing

Online Database Products

LifeMap Sciences sells subscriptions primarily through the internet to its database products to biotech and pharmaceutical companies worldwide. The GeneCards^® Suite, includes GeneCards^®, the leading human gene database, and MalaCards™, the human disease database.

Plasma Volume Expanders

Hextend^® is being distributed in the U.S. by Hospira and in South Korea by CJ Healthcare under exclusive licenses from us. Because Hextend^® is a surgical product, sales efforts are directed to physicians and hospitals. Hextend^® competes with other products used to treat or prevent hypovolemia, including albumin, generic 6% hetastarch solutions, and crystalloid solutions. The competing products have been commonly used in surgery and trauma care for many years, and in order to sell Hextend^®, physicians must be convinced to change their product loyalties. The market price of albumin has declined and generic 6% hetastarch solutions sell at low prices, which has caused Hospira and CJ Healthcare to lower the prices at which they sell Hextend^®.

In addition to price competition, sales of Hextend^® have been adversely affected if certain safety labeling changes required by the FDA for the entire class of hydroxyethyl starch products, including Hextend^®. The labeling changes were approved by the FDA in November 2013 and include a boxed warning stating that the use of hydroxyethyl starch products, including Hextend^®, increases the risk of mortality and renal injury requiring renal replacement therapy in critically ill adult patients, including patients with sepsis, and that Hextend^® should not be used in critically ill adult patients, including patients with sepsis. Warning and precaution information is required along with information about contraindications, adverse reactions, and certain recent studies. The warning and precautions include avoiding the use of Hextend^® in patients with pre-existing renal dysfunction, that the coagulation status of patients undergoing open heart surgery in association with cardiopulmonary bypass should be monitored as excess bleeding has been reported with hydroxyethyl starch solutions in that population, that the use of Hextend^® should be discontinued at the first sign of coagulopathy, and that the liver function of patients receiving hydroxyethyl starch products, including Hextend^® should also be monitored.

Therapeutic Products and Medical Devices

Because our planned therapeutic products and medical devices are still in the research and development stage, we will not initially need to have our own marketing personnel. If we or our subsidiaries are successful in developing marketable therapeutic products and medical devices we will need to build our own marketing and distribution capability for those products, which would require the investment of significant financial and management resources, or we and our subsidiaries will need to find collaborative marketing partners, independent sales representatives, or wholesale distributors for the commercial sale of those products.

If we market products through arrangements with third parties, we may pay sales commissions to sales representatives or we may sell or consign products to distributors at wholesale prices. This means that our gross profit from product sales may be less than would be the case if we were to sell our products directly to end users at retail prices through our own sales force. On the other hand, selling to distributors or through independent sales representatives would allow us to avoid the cost of hiring and training our own sales employees. There can be no assurance we will be able to negotiate distribution or sales agreements with third parties on favorable terms to justify our investment in our products or achieve sufficient revenues to support our operations.

Laboratory Diagnostic Tests

Following completion of clinical validation, OncoCyte will market its diagnostic tests directly to health care providers working in the areas of cancer for which OncoCyte develops liquid biopsy tests. The health care providers will collect blood samples or send patients to laboratories to have blood samples collected. The blood samples will be sent to OncoCyte’s CLIA laboratory, either by the health care provider or the laboratory, where the sample will be run through an assay and a gene expression classifier to determine a binary result, either benign or suspicious. That result will be presented to the physician ordering the procedure in a standardized report. OncoCyte expects to ramp up sales and marketing teams in coordination with progress in the development of its diagnostic tests and over time will continue to grow its sales, market access and marketing organizations to increase the awareness and utilization of its diagnostic tests.

Competition

We face substantial competition in all of fields of business in which we engage. That competition is likely to intensify as new products and technologies reach the market. Superior new products are likely to sell for higher prices and generate higher profit margins if acceptance by the medical community is achieved. Those companies that are successful at being the first to introduce new products and technologies to the market may gain significant economic advantages over their competitors in the establishment of a customer base and track record for the performance of their products and technologies. Such companies will also benefit from revenues from sales that could be used to strengthen their research and development, production, and marketing resources. Companies engaged in the medical products industry face the risk of obsolescence of their products and technologies as more advanced or cost-effective products and technologies are developed by competitors. As the industry matures, companies will compete based upon the performance and cost-effectiveness of their products.

Products for Regenerative Medicine

The cell therapy industry is characterized by rapidly evolving technology and intense competition. Our competitors include major multinational pharmaceutical companies, specialty biotechnology companies, and chemical and medical products companies operating in the fields of regenerative medicine, cell therapy, tissue engineering, and tissue regeneration. Many of these companies are well established and possess technical, research and development, financial, and sales and marketing resources significantly greater than ours. In addition, certain smaller biotech companies have formed strategic collaborations, partnerships, and other types of joint ventures with larger, well-established industry competitors that afford the smaller companies’ potential research and development as well as commercialization advantages. Academic institutions, governmental agencies, and other public and private research organizations are also conducting and financing research activities, which may produce products directly competitive to those we are developing.

We believe that some of our competitors are trying to develop pluripotent cells and hEPC-based technologies and products that may compete with our stem cell products based on efficacy, safety, cost, and intellectual property positions. We are aware that Ocata, which was recently acquired by a subsidiary of Astellas Pharma Inc., and Retinal Patch Technologies Inc., are conducting clinical trials of a hES cell products designed to treat age-related macular degeneration. If their products are proven to be safe and effective, they may reach the market ahead of OpRegen^®.

We may also face competition from companies that have filed patent applications relating to the propagation and differentiation of stem cells. Those companies include Ocata, which in 2015 had certain U.S. patents issue with claims directed to methods of producing RPE cells and isolating and purifying such cells. We may be required to seek licenses from these competitors in order to commercialize certain products proposed by us, and such licenses may not be granted.

Cancer Diagnostic Testing

The cancer diagnostic test industry is characterized by rapidly evolving technology and intense competition. OncoCyte’s competitors include major multinational diagnostic companies and specialty biotechnology companies. Many of these companies are well-established and possess technical, research and development, financial, and sales and marketing resources significantly greater than OncoCyte’s. In addition, smaller biotech companies may form strategic collaborations, partnerships, and other types of joint ventures with larger, well established industry competitors that afford these companies’ potential research and development and commercialization advantages. Academic institutions, governmental agencies, and other public and private research organizations are also conducting and financing research activities which may produce diagnostic tests directly competitive to those OncoCyte is developing.

Molecular diagnostic competitors in the category of OncoCyte’s first planned diagnostic test launch (lung confirmatory) include two currently marketed diagnostic tests. Xpresys Lung was launched in late 2013 by Integrated Diagnostics and that company has recently announced coverage by major payers. The other currently marketed diagnostic test is Early CDT lung, which was launched in 2012 by a European diagnostics company OncImmune Ltd. OncImmune has sold its U.S. assets to a CLIA laboratory, operating under the name OncImmune USA, LLC. Additionally, OncoCyte anticipates competition from Exact Sciences Corp, Gensignia Life Sciences, Inc. and Veracyte, Inc. which have diagnostic tests in the pipeline. Gensignia announced the certification of its CLIA lab in October 2015.

In addition to molecular diagnostics, an imaging competitor has a diagnostic test that may compete directly in confirmatory lung diagnostic testing. VisionGate, Inc. has a sputum test that is read by their proprietary system, which takes an optical CT scan of individual cells to generate 3D images of each cell.

Plasma Volume Expanders

Our plasma volume expander solution, Hextend^®, competes with products currently used to treat or prevent hypovolemia, including albumin, other colloid solutions, and crystalloid solutions presently manufactured by established pharmaceutical companies, and with human blood products. To compete with new and existing plasma expanders, we have developed products that contain constituents that may prevent or reduce the physiological imbalances, bleeding, fluid overload, edema, poor oxygenation, and organ failure that can occur when competing products are used.

Hextend^® competes with products that are commonly used in surgery and trauma care, and some, especially crystalloids, sell at low prices. The competing products are being manufactured and marketed by established pharmaceutical companies with large research facilities, technical staffs, and financial and marketing resources. B. Braun presently markets Hespan^®, an artificial plasma volume expander containing 6% hetastarch in saline solution. Hospira and Teva Pharmaceutical Industries sell a generic equivalent of Hespan^®. Hospira, also markets Voluven^®, a plasma volume expander containing a 6% low molecular weight hydroxyethyl starch in saline solution. Sanofi-Aventis, Baxter International, and Alpha Therapeutics sell albumin, and Hospira, Baxter International, and B. Braun sell crystalloid solutions. As a result of the introduction of generic plasma expanders and new proprietary products, competition in the plasma expander market has intensified, and wholesale prices of both hetastarch products and albumin have declined which has forced Hospira and CJ Healthcare to make reduce the price at which they sell Hextend^® in order to maintain their share of the market.

Our business is subject to various risks, including those described below. You should consider the following risk factors, together with all of the other information included in this report, which could materially adversely affect our proposed operations, our business prospects, and financial condition, and the value of an investment in our business. There may be other factors that are not mentioned here or of which we are not presently aware that could also affect our business operations and prospects. Those of our subsidiaries and other affiliates within BioTime that are developing therapeutic products derived from pluripotent stem cells will face substantially the same kind of risks that affect our business, as well as the risks related to our industry generally.

Risks Related to Our Business Operations and Capital Requirements

We have incurred operating losses since inception and we do not know if we will attain profitability.

Our total operating losses for the fiscal years ended December 31, 2017, 2016, and 2015 were $38.9, $59.0 million, and $65.8 million respectively, and we had an accumulated deficit of $216.3 million, as of December 31, 2017. We primarily finance our operations through the sale of equity securities, research grants, licensing fees, royalties on product sales by our licensees, and subscription fees and advertising revenue from database products. Ultimately, our ability to generate sufficient operating revenue to earn a profit depends upon our success in developing and marketing or licensing our products, diagnostic tests, and technology. As a developer of therapeutic products derived from pluripotent stem cells, Asterias will face substantially the same kind of risks that affect our business, as well as the risks related to our industry generally.

We will spend a substantial amount of our capital on research and development but we might not succeed in developing products and technologies that are useful in medicine.

We are attempting to develop new medical products and technology. None of our experimental products and technologies has received regulatory approval for commercialization and have only been used in laboratory studies in vitro or in animals. These new products and technologies might not prove to be safe and efficacious in the human medical applications for which they are being developed. The experimentation we are doing is costly, time consuming, and uncertain as to its results. We incurred research and development expenses amounting to $24.0 million, $36.1 million and $42.6 million during the fiscal years ended December 31, 2017, 2016 and 2015, respectively. If we are successful in developing a new technology or products, refinement of the new technology or product and definition of the practical applications and limitations of the technology or product may take years and require the expenditure of large sums of money. Future clinical trials of new therapeutic products, particularly those products that are regulated as drugs or devices, will be very expensive and will take years to complete. We may not have the financial resources to fund clinical trials on our own and we may have to enter into licensing or collaborative arrangements with other companies. Any such arrangements may be dilutive to our ownership or economic interest in the products we develop, and we might have to accept royalty payments on the sale of products rather than receiving the gross revenues from product sales. In addition, we may discontinue one or more of the research or product development programs. Other programs slated for development including those we consolidate in a new subsidiary, AgeX Therapeutics, Inc., may be delayed or discontinued should adequate funding on acceptable terms not be available.

The amount and pace of research and development work that we and our subsidiaries can do or sponsor, and our ability to commence and complete clinical trials required to obtain regulatory approval to market our therapeutic and medical device products, depends upon the amount of money we have.

At December 31, 2017, we had $38.2 million of cash, cash equivalents and available-for-sale securities on hand, including $7.4 million held by AgeX. Although BioTime and subsidiaries combined have raised a total of approximately $55.0 million of net proceeds through the sale of equity securities in 2017, there can be no assurance that we or subsidiaries will be able to raise additional funds on favorable terms or at all, or that any funds raised will be sufficient to permit us or our subsidiaries to develop and market our products and technology. Unless we and our subsidiaries are able to generate sufficient revenue or raise additional funds when needed, it is likely that we will be unable to continue our planned activities, even if we make progress in our research and development projects. We may have to postpone or limit the pace of our research and development work and planned clinical trials of our product candidates unless our cash resources increase through a growth in revenues or additional equity investment or borrowing.

We will need to issue additional equity or debt securities in order to raise additional capital needed to pay our operating expenses.

We and our subsidiaries and affiliates, including Asterias and OncoCyte, expect to continue to incur substantial research and product development expenses, and will need to raise additional capital to pay operating expenses until we are able to generate sufficient revenues from product sales, royalties and license fees. Our ability, and the ability of Asterias and OncoCyte, to raise additional equity or debt capital will depend, not only on progress made in developing new products and technologies, but also on access to capital and conditions in the capital markets. There can be no assurance that we, Asterias and OncoCyte will be able to raise capital on favorable terms or at times and in amounts needed to successfully finance product development, clinical trials, and general operations. Sales of additional equity securities by us or our subsidiaries could result in the dilution of the interests of shareholders or may otherwise limit our ability to finance further in the future, which may negatively impact our business and operations.

In addition to our own research and development expenses we may need to support to the research and development efforts of our affiliates if they are unable to independently raise sufficient capital

We have in the past supported the operations of our affiliates OncoCyte and Asterias while they were consolidated subsidiaries. We still own substantial equity interests in those companies, though less than a majority interest, and if either or both of those affiliates were unable to obtain sufficient funding to continue their respective operations we may agree to provide financial support to them in order to preserve or increase the value of the significant equity stakes we continue to hold. However, there is no assurance that we would elect to provide additional financing to our affiliates and if we determine not to do so our equity ownership may be diluted and value of the shares of our affiliates may decrease significantly.

Comprehensive tax reform legislation could adversely affect our business and financial condition.

The U.S. government has recently enacted comprehensive tax legislation that includes significant changes to the taxation of business entities. This newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the newly enacted federal tax law.

Our ability to use net operating losses to offset future taxable income may be subject to limitations.

As of December 31, 2017, we had federal and state gross net operating loss carryforwards of approximately $258 million. The federal and state net operating loss carryforwards will begin to expire, if not utilized, in varying amounts between 2018 and 2036. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under the newly enacted federal income tax law, federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It is uncertain if and to what extent various states will conform to the newly enacted federal tax law. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

Failure in our information technology and storage systems could significantly disrupt the operation of our business.

Our ability to execute our business plan and maintain operations depends on the continued and uninterrupted performance of our information technology (“IT”) systems. IT systems are vulnerable to risks and damages from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. Moreover, despite network security and back-up measures, some of our and our vendors’ servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Despite precautionary measures to prevent unanticipated problems that could affect our IT systems, sustained or repeated system failures that interrupt our ability to generate and maintain data could adversely affect our ability to operate our business.

Our business could be adversely affected if we lose the services of the key personnel upon whom we depend.

We believe that our continued success depends to a significant extent upon our efforts and ability to retain highly qualified personnel, including our Co-Chief Executive Officers, Dr. Michael West and Adi Mohanty. All of our officers and other employees are at-will employees, and therefore may terminate employment with us at any time with no advance notice. The loss of the services of Dr. West, Mr. Mohanty or other members of senior management of BioTime or of our subsidiaries could have a material adverse effect on us. Further, the replacement of any of such individuals likely would involve significant time and costs and may significantly delay or prevent the achievement of our business and clinical objectives and would harm our business.

Failure of our internal control over financial reporting could harm our business and financial results.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Our growth and entry into new products, technologies and markets will place significant additional pressure on our system of internal control over financial reporting. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. Operating our business through subsidiaries, some of which are located in foreign countries, also adds to the complexity of our internal control over financial reporting and adds to the risk of a system failure, an undetected improper use or expenditure of funds or other resources by a subsidiary, or a failure to properly report a transaction or financial results of a subsidiary. We allocate certain expenses among BioTime itself and one or more of our subsidiaries, which creates a risk that the allocations we make may not accurately reflect the benefit of an expenditure or use of financial or other resources by BioTime as the parent company and the subsidiaries among which the allocations are made. An inaccurate allocation may impact our consolidated financial results, particularly in the case of subsidiaries that we do not wholly own since our financial statements include adjustments to reflect the minority ownership interests in our subsidiaries held by others.

Risks Related to Government Regulation

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy and security laws. If we are unable to comply, or has not fully complied, with such laws, it could face substantial penalties.

If we obtain FDA approval for any of our product candidates or technologies and begin commercializing those products or technologies in the United States, our operations may be subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations. These laws may impact, among other things, our proposed sales, marketing, and education programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

If we do not receive regulatory approvals we will not be permitted to sell our therapeutic and medical device products.

The therapeutic and medical device products that we and our subsidiaries develop cannot be sold until the FDA and corresponding foreign regulatory authorities approve the products for medical use. The need to obtain regulatory approval to market a new product means that:

Government-imposed bans or restrictions and religious, moral, and ethical concerns about the use of hES cells could prevent us from developing and successfully marketing stem cell products.

Government-imposed bans or restrictions on the use of embryos or hES cells in research and development in the United States and abroad could generally constrain stem cell research, thereby limiting the market and demand for our products. During March 2009, President Obama lifted certain restrictions on federal funding of research involving the use of hES cells, and in accordance with President Obama’s Executive Order, the National Institutes of Health (NIH) has adopted new guidelines for determining the eligibility of hES cell lines for use in federally funded research. The central focus of the proposed guidelines is to assure that hES cells used in federally funded research were derived from human embryos that were created for reproductive purposes, were no longer needed for this purpose, and were voluntarily donated for research purposes with the informed written consent of the donors. The hES cells that were derived from embryos created for research purposes rather than reproductive purposes, and other hES cells that were not derived in compliance with the guidelines, are not eligible for use in federally funded research. California law requires that stem cell research be conducted under the oversight of a stem cell review oversight committee (SCRO). Many kinds of stem cell research, including the derivation of new hES cell lines, may only be conducted in California with the prior written approval of the SCRO. A SCRO could prohibit or impose restrictions on the research that we plan to do. The use of hES cells may give rise to religious, moral, and ethical issues. These considerations could lead to more restrictive government regulations or could generally constrain stem cell research, thereby limiting the market and demand for our products.

There is a risk that OncoCyte’s planned diagnostic tests could become subject to FDA regulation

We cannot provide any assurance that FDA regulation, including premarket review, will not be required in the future for OncoCyte’s diagnostic tests, whether through additional guidance or regulations issued by the FDA, new enforcement policies adopted by the FDA or new legislation enacted by Congress. If premarket review, including approval, is required, OncoCyte’s business could be negatively affected until such review is completed and clearance to market or approval is obtained. If OncoCyte is selling diagnostic tests when new FDA approval requirements are implemented, OncoCyte may be required to suspend sales until premarket clearance or approval is obtained. If OncoCyte’s diagnostic tests are allowed to remain on the market but there is uncertainty about the legal status of those tests.

FDA regulations could also require, among other things, additional clinical studies and submission of a premarket notification or filing a PMA with the FDA. For example, LDTs with the same intended use as a cleared or approved companion diagnostic are defined in the FDA’s draft guidance as “high-risk LDTs (Class III medical devices)” for which premarket review would be required. This may include the use of LDTs for screening patients for cancer. If a PMA review is required by the FDA, there can be no assurance that OncoCyte’s diagnostic tests will be cleared or approved on a timely basis, if at all, nor can there any be assurance that labeling claims allowed by the FDA will be consistent with OncoCyte’s intended claims or will be sufficient to support continued adoption of and reimbursement for the tests.

The price and sale of our products and OncoCyte’s diagnostic tests may be limited by health insurance coverage and government regulation.

Success in selling our pharmaceutical and cell-based products, medical devices, and diagnostic tests may depend in part on the extent to which health insurance companies, HMOs, and government health administration authorities such as Medicare and Medicaid will pay for the cost of the products, tests, and related treatment. Until we introduce a new product or diagnostic test into the medical marketplace, we will not know with certainty whether adequate health insurance, HMO, and government coverage will be available to permit the product or test to be sold at a price high enough for us to generate a profit. In some foreign countries, pricing or profitability of health care products is subject to government control, which may result in low prices for our products. In the United States, there have been a number of federal and state proposals to implement similar government controls, and new proposals are likely to be made in the future.

We expect that the commercial opportunity for some of our products may depend on our ability to obtain reimbursement and continued coverage from various payors, including government entities and insurance companies. Reimbursement Programs

If these third-party payors do not consider our products to be cost-effective compared to other therapies or diagnostic tests, they may not cover our products or diagnostic tests as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.

For example, in the United States, healthcare providers are reimbursed for covered services and products they deliver through Medicare, Medicaid and other government healthcare programs, as well as through private payers. Pharmacies are also reimbursed in a similar manner for drug products they dispense. We may be required to provide specified rebates or discounts on the products we sell to certain government funded programs, including Medicare and Medicaid, and those rebates or discounts have increased over time. The Patient Protection and Affordable Care Act (ACA), enacted in 2010, increased many of the mandatory discounts and rebates required of us and imposed a new Branded Prescription Pharmaceutical Manufacturers and Importers fee payable each year by us and other manufacturers. The new U.S. presidential administration has identified repealing and replacing the ACA as a priority. The timing and method of repeal of the ACA remains uncertain, but impending changes will likely impact the number of patient lives covered, the quality of the insurance and potentially the available reimbursement, Medicaid eligibility and the level of patient protections provided.

We face similar issues outside of the United States. In some non-U.S. jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the EU do not follow price structures of the United States and generally tend to be significantly lower.

The ACA and future changes to that law may adversely affect our business.

As a result of the adoption of the ACA, in the United States, substantial changes have been made to the system for paying for healthcare in the United States. The changes contemplated by the ACA are subject to rule-making and implementation timelines that extend for several years, as well as initiatives in Congress to amend or repeal the law, and this uncertainty limits our ability to forecast changes that may occur in the future. Certain provisions related to cost-savings and reimbursement measures could adversely affect our future financial performance.

If we fail to comply with the extensive legal and regulatory requirements affecting the health care industry, we could face increased costs, penalties and a loss of business.

Our activities, and the activities of the BioTime Group, our collaborators, distributors and other third-party providers, are subject to extensive government regulation and oversight both in the U.S. and in foreign jurisdictions. The FDA and comparable agencies in other jurisdictions will directly regulate many of our most critical business activities, including the conduct of preclinical and clinical studies, product manufacturing, advertising and promotion, product distribution, adverse event reporting and product risk management. Our interactions in the U.S. or abroad with physicians and other health care providers that may prescribe or purchase our products are also subject to government regulation designed to prevent fraud and abuse in the sale and use of the products and place greater restrictions on the marketing practices of health care companies. Health care companies are facing heightened scrutiny of their relationships with health care providers from anti-corruption enforcement officials. In addition, health care companies have been the target of lawsuits and investigations alleging violations of government regulation, including claims asserting submission of incorrect pricing information, impermissible off-label promotion of pharmaceutical products, payments intended to influence the referral of health care business, submission of false claims for government reimbursement, antitrust violations or violations related to environmental matters. Risks relating to compliance with laws and regulations may be heightened as we bring products to the market globally.

Regulations governing the health care industry are subject to change, with possibly retroactive effect, including:

Violations of governmental regulation may be punishable by criminal and civil sanctions against us, including fines and civil monetary penalties and exclusion from participation in government programs, including Medicare and Medicaid, as well as against executives overseeing our business. In addition to penalties for violation of laws and regulations, we could be required to repay amounts we received from government payors, or pay additional rebates and interest if we are found to have miscalculated the pricing information we have submitted to the government. We cannot ensure that our compliance controls, policies and procedures will in every instance protect us from acts committed by our employees, collaborators, partners or third-party providers that would violate the laws or regulations of the jurisdictions in which we operate. Whether or not we have complied with the law, an investigation into alleged unlawful conduct could increase our expenses, damage our reputation, divert management time and attention and adversely affect our business.

Even if we receive approval for our products, we may be subject to extensive regulatory obligations in order to commercialize our products.

Even after initial FDA or foreign regulatory agency approval has been obtained, further studies may be required to provide additional data on safety or to gain approval for the use of a product as a treatment for clinical indications other than those initially targeted. Use of a product during testing and after marketing could reveal side effects that could delay, impede, or prevent marketing approval, result in a regulatory agency-ordered product recall, or in regulatory agency-imposed limitations on permissible uses or in withdrawal of approval. For example, if the FDA or foreign regulatory agency becomes aware of new safety information after approval of a product, it may require us to conduct further clinical trials to assess a known or potential serious risk and to assure that the benefit of the product outweigh the risks. If we are required to conduct such a post-approval study, periodic status reports must be submitted to the FDA or foreign regulatory agency. Failure to conduct such post-approval studies in a timely manner may result in substantial civil or criminal penalties. Data resulting from these clinical trials may result in expansions or restrictions to the labeled indications for which a product has already been approved. Any of these requirements or actions may negatively impact our business or operations.

If we are deemed to be an investment company, we may be required to institute burdensome compliance requirements and our activities may be restricted.

An entity that, among other things, is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, owning, trading or holding certain types of securities would be deemed an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). Based on the securities we hold, including our equity ownership in our publicly traded subsidiaries, we may not meet the requirements for an exemption promulgated under the 1940 Act and as a result we may be unable finance and subject to additional limitations on the operation of our business.

Risks Related to Our Clinical Development and Commercial Operations

Clinical studies are costly, time consuming and are subject to risks that could delay or prevent commercialization of our current or future product candidates.

We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical studies can occur at any stage of development. Events that may prevent successful or timely completion of clinical development include but are not limited to:

Any inability to successfully complete clinical development and obtain regulatory approval could result in additional costs to us or impair our ability to generate revenue. Clinical study delays could also shorten any periods during which our products have patent protection and may allow competitors to develop and bring products to market before we do and may harm our business and results of operations.

The commercial success of any of our current or future product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community.

Even with the approvals from the FDA and comparable foreign regulatory authorities, the commercial success of our products will depend in part on the health care providers, patients, and third-party payors accepting our product candidates as medically useful, cost-effective, and safe. Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and other health care providers. The degree of market acceptance of any of our products will depend on a number of factors, including without limitation:

Even if a product displays a favorable efficacy and safety profile upon approval, market acceptance of the product remains uncertain. Efforts to educate the medical community and third-party payors on the benefits of the products may require significant investment and resources and may never be successful. If our products fail to achieve an adequate level of acceptance by physicians, patients, third-party payors, and other health care providers, we will not be able to generate sufficient revenue to become or remain profitable.

If the market opportunities for our product candidates are smaller than we believe they are, we may not meet our revenue expectations and, even assuming approval of a product candidate, our business may suffer.

Our projections of both the number of potential users in the markets we are attempting to address are based on our beliefs and estimates. You should bear in mind the following:

Sales of the products we may develop will be adversely impacted by the availability of competing products.

Our products and product candidates will face substantial competition, whether through the development of safer and more effective alternatives to our products, lower costs to administer than our products or other forms of competition such as more favorable distribution, reimbursement and pricing or formulary and health care provider acceptance. For example, sales of Hextend^® have been adversely impacted by the availability of other products that are commonly used in surgery and trauma care and sell at low prices. Ocata, which was recently acquired by a subsidiary of Astellas Pharma, Inc. for $379 million, is conducting clinical trials of a pluripotent stem cell product designed to treat AMD. If the Ocata product is proven to be safe and effective, it may be approved and reach the market ahead of OpRegen^®. Moreover, Ocata was recently issued a patent in the U.S. with respect to the manufacture of RPE products that could adversely impact our rights to manufacture OpRegen^®. In addition, even if our products are approved, physicians and hospitals may be reluctant to try a new product due to the high degree of risk associated with the application of new technologies and products in the field of human medicine.

We will face risks related to the manufacture of medical products for any product candidates that we develop.

The manufacture of medical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. We are developing manufacturing capability through Cell Cure for OpRegen^® in Israel, but we will need to greater manufacturing capacity if we successfully commercialize those products. Unless we are able to raise the capital required to construct our own commercial scale manufacturing facilities, and are able to develop the expertise to manage and operate a manufacturing facility of our own, we may need to rely on third-party manufacturers to manufacture any products that we develop. There is no assurance that we will be able to identify manufacturers on acceptable terms or at all. Regardless of whether we do our own manufacturing or rely on third parties to manufacture products for us, we will face all risks related to the manufacture of therapeutic products for use in medicine including the following risks:

In addition, we may rely on third parties to perform release testing on our product candidates prior to delivery to patients. If these tests are not appropriately conducted and test data are not reliable, patients could be put at risk of serious harm which could result in product liability suits.

If we or any third-party manufacturers that we may engage were to encounter any of these difficulties, our ability to provide our product candidates to patients in clinical trials or to the medical market place would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, could require us to either commence new clinical trials at additional expense or terminate clinical trials completely. Each of these risks could delay our clinical trials, any approval of our product candidates by the FDA, or the commercialization of our product candidates, and could result in higher costs or deprive us of potential product revenue.

Our reliance on third parties to manufacture products, including Renevia^®, will subject us to risks over which we may have little or no control, and which could lead to excessive product acquisition costs, production delays, and supply shortages that could impair our ability to complete the development and commercialization of our product candidates.

We do not currently have nor do we plan to acquire the infrastructure or capability internally to manufacture our clinical supplies for Renevia and our other HyStem^® products on a clinical or commercial scale. In addition to the risks associated with manufacturing our products generally, discussed above, our reliance on third-party manufacturers for products, including Renevia^® will expose us to the following additional risks:

Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our product candidates to patients in clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to commence new clinical trials at additional expense or terminate clinical trials completely.

Each of these risks could delay our clinical trials, the approval, if any of our product candidates by the FDA or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenue. In addition, we rely on third parties to perform release testing on our product candidates prior to delivery to patients. If these tests are not appropriately conducted and test data are not reliable, patients could be put at risk of serious harm and could result in product liability suits.

Any cell-based products that receive regulatory approval may be difficult and expensive to manufacture profitably.

Cell-based products are among the more expensive biological products to manufacture in accordance with cGMP. We do not yet have sufficient information to reliably estimate the cost of commercially manufacturing any of our product candidates. Excessive manufacturing costs could make our product candidates too expensive to compete in the medical market place with alternative products manufactured by our competitors, or might result in third party payors such as health insurers and Medicare, declining to cover our products or setting reimbursement levels too low for us to earn a profit from the commercialization of one or more of our products.

We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use or misuse of our product candidates harm patients, or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvals could be revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims.

We face the risk of incurring liabilities to clinical trial patients if they are injured as a result of their participation in our clinical trials. If any claims are made and if liability can be established, the amount of any liability that we or our affiliates may incur, could exceed any insurance coverage that is in effect, and the amount of the liability could be material to our financial condition.

The use or misuse of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. There is a risk that our product candidates may induce adverse events. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

We believe our current product liability insurance coverage is appropriate in light of our clinical programs; however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for product candidates, we intend to increase our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business

Risks Related to our Intellectual Property

Our intellectual property may be insufficient to protect our products.

Our patents and patent applications are directed to compositions of matter, formulations, methods of use and/or methods of manufacturing, as appropriate. In addition to patenting our own technology and that of our subsidiaries, we and our subsidiaries have licensed patents and patent applications for certain stem cell technology, hEPC, and hES cell lines, diagnostic markers, hydrogel technology, and other technology from other companies.

The patent positions of pharmaceutical and biotechnology companies, including ours, are generally uncertain and involve complex legal and factual questions. Our business could be negatively impacted by any of the following:

In addition, others may independently develop similar or alternative technologies, duplicate any of our technologies and, if patents are licensed or issued to us, design around the patented technologies licensed to or developed by us. Moreover, we could incur substantial costs in litigation if we have to defend ourselves in patent lawsuits brought by third parties or if we initiate such lawsuits.

In Europe, there is uncertainty about the eligibility of hES cell subject matter for patent protection. The European Patent Convention prohibits the granting of European patents for inventions that concern “uses of human embryos for industrial or commercial purposes.” A recent decision at the Court of Justice of the European Union interpreted parthenogenetically produced hES cells as patentable subject matter. Consequently, the European Patent Office now recognizes that human pluripotent stem cells (including human ES cells) can be created without a destructive use of human embryos as of June 5, 2003, and patent applications relating to hES cell subject matter with a filing and priority date after that date are no longer automatically excluded from patentability under Article 53 (a) EPC and Rule 28(c) EPC.

In addition, the United States Supreme Court decisions in Mayo Collaborative Services v. Prometheus Laboratories, Inc. and Association for Molecular Pathology v. Myriad Genetics may limit OncoCyte’s ability to obtain patent protection on diagnostic methods that merely recite a correlation between a naturally occurring event and a diagnostic outcome associated with that event.

If we are unable to obtain and enforce patents and to protect our trade secrets, others could use our technology to compete with us, which could limit opportunities for us to generate revenues by licensing our technology and selling products.

Our success will depend in part on our ability to obtain and enforce patents and maintain trade secrets in the United States and in other countries. If we are unsuccessful at obtaining and enforcing patents, our competitors could use our technology and create products that compete with our products, without paying license fees or royalties to us. The preparation, filing, and prosecution of patent applications can be costly and time consuming. Our limited financial resources may not permit us to pursue patent protection of all of our technology and products in all key markets. Even if we are able to obtain issued patents covering our technology or products, we may have to incur substantial legal fees and other expenses to enforce our patent rights to protect our technology and products from infringing uses. We may not have the financial resources to finance the litigation required to preserve our patent and trade secret rights. Litigation, interferences, oppositions, inter partes reviews or other proceedings are, have been and may in the future be necessary in some instances to determine the validity and scope of certain of our proprietary rights, and in other instances to determine the validity, scope or non-infringement of certain patent rights claimed by third parties to be pertinent to the manufacture, use or sale of our products. This means that patents owned or licensed by us may be lost if the outcome of a proceeding is unfavorable to us.

There is no certainty that our pending or future patent applications will result in the issuance of patents.

Our success depends in part on our ability to obtain and defend patent and other intellectual property rights that are important to the commercialization of our products and product candidates. The degree of patent protection that will be afforded to our products and processes in the U.S. and in other important markets remains uncertain and is dependent upon the scope of protection decided upon by the patent offices, courts, administrative bodies and lawmakers in these countries. We can provide no assurance that we will successfully obtain or preserve patent protection for the technologies incorporated into our products and processes, or that the protection obtained will be of sufficient breadth and degree to protect our commercial interests in all countries where we conduct business. If we cannot prevent others from exploiting our inventions, we will not derive the benefit from them that we currently expect. Furthermore, we can provide no assurance that our products will not infringe patents or other intellectual property rights held by third parties.

In Europe, there is uncertainty about the eligibility of hES cell subject matter for patent protection. The European Patent Convention prohibits the granting of European patents for inventions that concern “uses of human embryos for industrial or commercial purposes.” A recent decision at the Court of Justice of the European Union interpreted parthenogenetically produced hES cells as patentable subject matter. Consequently, the European Patent Office now recognizes that human pluripotent stem cells (including human ES cells) can be created without a destructive use of human embryos as of June 5, 2003, and patent applications relating to hES cell subject matter with a filing and priority date after this date are no longer automatically excluded from patentability under Article 53 (a) EPC and Rule 28(c) EPC.

Intellectual property we may develop using grants received from governments are subject to rights maintained by those governments.

Research and development we perform that is funded by grants from government, and any intellectual property that we create using those grants, is subject to certain rights of the government entities to require that we license or grant rights to the intellectual property developed using government funding in certain circumstances.

There is no certainty that we will be able to obtain licenses to intellectual property rights owned by third-parties.

There are no assurances that any of our intellectual property rights will guarantee protection or market exclusivity for our products and product candidates. In such cases, we may need to obtain enabling licenses from third parties to protect our products and product candidates, try to secure market exclusivity or avoid infringing on the intellectual property rights of third parties. If we are unable to fully protect our product candidates or achieve market exclusivity for our products and product candidates, our financial success will be dependent, in part, on our ability to protect and enforce our intellectual property rights, to operate without infringing upon the proprietary rights of others, or, when necessary, our ability to obtain enabling licenses.

If we fail to meet our obligations under license agreements, we may lose our rights to key technologies on which our business depends.

Our business depends on several critical technologies that are based in part on technology licensed from third parties. Those third-party license agreements impose obligations on us, including payment obligations and obligations to pursue development of commercial products under the licensed patents or technology. If a licensor believes that we have failed to meet our obligations under a license agreement, the licensor could seek to limit or terminate our license rights, which could lead to costly and time-consuming litigation and, potentially, a loss of the licensed rights. During the period of any such litigation, our ability to carry out the development and commercialization of potential products, and our ability to raise any capital that we might then need, could be significantly and negatively affected. If our license rights were restricted or ultimately lost, we would not be able to continue to use the licensed technology in our business.

Risks Related to our Dependence on Third Parties

Asterias could lose its CIRM grant if Asterias fails to meet the clinical trial milestones that are a condition to CIRM’s obligation to provide funding.

Asterias depends on its grant from CIRM as a source of financing for the costs of conducting its Phase I/IIa clinical trial and process development of AST-OPC1. Under the terms of the CIRM grant, Asterias must meet certain efficacy and progress milestones pertaining to the clinical trial. If Asterias fails to meet any of the milestones within the specified time frame, CIRM may discontinue providing grant funds to Asterias, which could force Asterias to postpone, delay, or discontinue the clinical trial and development work for the product.

We may become dependent on possible future collaborations to develop and commercialize many of our product candidates and to provide the regulatory compliance, sales, marketing and distribution capabilities required for the success of our business.

We may enter into various kinds of collaborative research and development and product marketing agreements to develop and commercialize our products. The expected future milestone payments and cost reimbursements from collaboration agreements could provide an important source of financing for our research and development programs, thereby facilitating the application of our technology to the development and commercialization of our products, but there are risks associated with entering into collaboration arrangements.

There is a risk that we could become dependent upon one or more collaborative arrangements. A collaborative arrangement upon which we might depend might be terminated by our collaboration partner or a partner might determine not to actively pursue the development or commercialization of our products. A collaboration partner also may not be precluded from independently pursuing competing products and drug delivery approaches or technologies.

There is a risk that a collaboration partner might fail to perform its obligations under the collaborative arrangements or may be slow in performing its obligations. In addition, a collaboration partner may experience financial difficulties at any time that could prevent it from having available funds to contribute to the collaboration. If a collaboration partner fails to conduct its product development, commercialization, regulatory compliance, sales and marketing or distribution activities successfully and in a timely manner, or if it terminates or materially modifies its agreements with us, the development and commercialization of one or more product candidates could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue such development and commercialization on our own.

We do not have the ability to independently conduct clinical trials required to obtain regulatory approvals for our product candidates.

We will need to rely on third parties, such as contract research organizations, data management companies, contract clinical research associates, medical institutions, clinical investigators and contract laboratories to conduct any clinical trials that we may undertake for our products. We may also rely on third parties to assist with our preclinical development of product candidates. If we outsource clinical trials we may be unable to directly control the timing, conduct and expense of our clinical trials. If we enlist third parties to conduct clinical trials and they fail to successfully carry out their contractual duties or regulatory obligations or fail to meet expected deadlines, if the third parties need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates.

We may need to rely on marketing partners or contract sales companies.

If we are able to develop our products and obtain necessary regulatory approvals, we may choose to partner on one or more products for marketing, selling or distributing our products. If we do not partner for commercial services, we and our subsidiaries will be dependent on our ability to build our own marketing and distribution capability for our new products, which would require the investment of significant financial and management resources, or we will need to find collaborative marketing partners or sales representatives, or wholesale distributors for the commercial sale of our products.

If we market products through arrangements with third parties, we may pay sales commissions to sales representatives or we may sell or consign products to distributors at wholesale prices. As a result, our gross profit from product sales may be lower than it would be if we were to sell our products directly to end users at retail prices through our own sales force. There can be no assurance we will able to negotiate distribution or sales agreements with third parties on favorable terms to justify our investment in our products or achieve sufficient revenues to support our operations.

Risks Related to Our Affiliates

Delays in the successful completion of the clinical validation study and commercialization of DetermaVu™ would negatively affect OncoCyte’s business operations.

OncoCyte is experiencing a delay in conducting the clinical validation study of its confirmatory lung cancer diagnostic text DetermaVu™. During the process of running initial blood samples for the DetermaVu™ clinical validation study, inconsistent analytic results were observed. OncoCyte believes that the cause was a variance in a recently received lot of consumables used in the processing equipment that analyzes blood samples. OncoCyte anticipates that completion of the clinical validation study necessary for the commercial launch of DetermaVu™ will be delayed into the fourth quarter of 2018, subject to the successful rectification of the cause of the inconsistent analytic results. Clinical validation studies can fail for a variety of reasons. Accordingly, a resolution of the issue that caused the inconsistent analytic results that was observed will not necessarily assure a successful outcome of the clinical validation study of DetermaVu™.

It is not yet known whether OncoCyte will be able to resolve the issue that has caused the delay in the clinical validation study or whether a successful resolution will result in additional costs to OncoCyte, other than a loss of productivity during the period of the delay. There is a risk that OncoCyte could incur additional quality control and analytic platform related costs on an ongoing basis in conducting DetermaVu™ tests if the issue is resolved and the test is commercialized. OncoCyte is also considering changing analytic platforms, which would entail the incurrence of additional cost and delay in acquiring the new analytic equipment and reagents from a different manufacturer, training OncoCyte personnel in the use of the new platform, and re-testing clinical blood samples to validate or adjust the algorithm and to validate, if feasible, the past results of OncoCyte’s previous research and development studies before undertaking the clinical validation study on the new platform. There is no assurance that OncoCyte will be able to replicate its past research and development study results on a new analytic platform, or that if those results are replicated that the results of its clinical validation study will support commercialization of DetermaVu™.

Delays in the successful completion of the clinical validation study and commercialization of DetermaVu™ could prevent OncoCyte from raising, when needed, sufficient additional capital to finance its operations, including completion of development and commercial launch of DetermaVu™ or the other cancer diagnostic tests that it is developing.

The FDA may impose additional regulations for laboratory developed tests such as the ones OncoCyte is developing.

The FDA issued two draft guidance documents and a discussion paper that set forth a proposed risk-based regulatory framework that would apply varying levels of FDA oversight to LDTs such as those OncoCyte is developing. If the FDA implements the new regulatory measures set forth in these documents:

OncoCyte will depend on Medicare and a limited number of private payers for a significant portion of its revenues, and its revenues could decline if these payers fail to provide timely and adequate payment for its diagnostic tests.

OncoCyte expects that a substantial portion of the patients for whom it will perform diagnostic tests will have Medicare as their primary medical insurance. Even if OncoCyte’s planned tests are otherwise successful, reimbursement for the Medicare-covered portions of its planned tests might not, without Medicare reimbursement, produce sufficient revenues to enable it to reach profitability and achieve its other commercial objectives. It generally takes two to three years to obtain Medicare coverage and other third party reimbursement approvals for a new LDT and there can be no assurance OncoCyte will obtain such approvals for any of the cancer diagnostics that it is developing. Until a new cancer diagnostic test is accepted by third party payers for reimbursement, OncoCyte will have to market the test to physicians on a patient pay basis. In the absence of reimbursement by Medicare, patients who would be candidates for the use of OncoCyte’s diagnostic tests and who rely on Medicare coverage may decline to use those tests, and physicians may be reluctant to prescribe the tests, due to the cost of the test to the patients. Because of this patient cost factor, revenues from any new cancer test that OncoCyte markets will experience slow growth until the test is approved for reimbursement in an amount commensurate with the cost to the patient.

Medicare and other third-party payers may change their coverage policies or cancel future contracts with OncoCyte at any time; review and adjust the rate of reimbursement; or stop paying for OncoCyte’s tests altogether, which would reduce OncoCyte’s total revenues. Payers have increased their efforts to control the cost, utilization, and delivery of health care services, and have undertaken measures to reduce payment rates for and decrease utilization of clinical laboratory testing. Because of the cost-trimming trends, any third-party payers that will cover and provide reimbursement for diagnostic tests may suspend, revoke or discontinue coverage at any time, or may reduce the reimbursement rates payable to OncoCyte. Any such action could have a negative impact on OncoCyte’s revenues, which may have a material adverse effect on its financial condition, results of operations and cash flows.

Changes in healthcare laws and policies may have a material adverse effect on OncoCyte’s financial condition, results of operations and cash flows.

The ACA substantially changed the way health care is financed by both governmental and private insurers. Among the ACA’s key changes, the ACA reduced payment rates under the Medicare Clinical Laboratory Fee Schedule and established an Independent Payment Advisory Board to reduce the per capita rate of growth in Medicare spending if spending exceeds a target growth rate. Such provisions may negatively impact payment rates for OncoCyte’s diagnostic tests. The new U.S. presidential administration has identified repealing and replacing the ACA as a priority. On March 6, 2017, the American Health Care Act (“AHCA”) was introduced as the new administration’s proposed replacement of ACA. The timing and method of repeal of ACA and adoption of the AHCA remains uncertain, but impending changes will likely impact the number of patient lives covered, the quality of the insurance, Medicaid eligibility and the level of patient protections provide.

The Protecting Access to Medicare Act of 2014 (“PAMA”) significantly altered the payment methodology under the Clinical Laboratory Fee Schedule that determines Medicare coverage for laboratory tests. Under PAMA, clinical laboratories are required to report test payment data for each Medicare-covered clinical diagnostic lab test and beginning in 2017, the Medicare payment rate for each clinical diagnostic lab test will be equal to the weighted median amount for the test from the most recent data collection period.

Congress has proposed on several occasions to impose a 20% coinsurance payment requirement on patients for clinical laboratory tests reimbursed under the Medicare Clinical Laboratory Fee Schedule, which would require OncoCyte to bill patients for these amounts. In the event that Congress were to ever enact such legislation, the cost of billing and collecting for OncoCyte’s tests could often exceed the amount actually received from the patient.

Beginning January 1, 2017, Medicare payment for any new advanced diagnostic test will be based on the list price or charge. After the test is commercially available for three quarters, the laboratory will be required to report payment and volume information and that data will be used to set payment for the test for the following year.

We cannot predict whether future health care initiatives will be implemented at the federal or state level, or how any future legislation or regulation may affect OncoCyte. The expansion of government’s role in the U.S. health care industry as a result of the ACA, and changes to the reimbursement amounts paid by Medicare and other payers for diagnostic tests may have a materially adverse effect on OncoCyte’s business, financial condition, results of operations and cash flows.

Because of certain Medicare billing policies, OncoCyte may not receive complete reimbursement for tests provided to Medicare patients.

Medicare has coverage policies that can be national or regional in scope. Coverage means that the test or assay is approved as a benefit for Medicare beneficiaries. If there is no coverage, neither the supplier nor any other party, such as a diagnostic laboratory, may receive reimbursement from Medicare for the service. Regional policies are directed by Medicare’s regional Medicare Administrative Contractors (“MACs”). Reimbursement for diagnostic testing may be negatively impacted by California MAC policies.

Long payment cycles of Medicare, Medicaid and other third-party payors, or other payment delays, could hurt OncoCyte’s cash flows and increase its need for working capital.

Medicare and Medicaid have complex billing and documentation requirements that OncoCyte will have to satisfy in order to receive payment. Failure to comply with these requirements and other laws applicable to billing may result in, among other things, non-payment, refunds, exclusion from government healthcare programs, and civil or criminal liabilities, any of which may have a material adverse effect on OncoCyte’s revenues and earnings. Similarly, the failure of private health insurers or other private third-party payers to properly process OncoCyte’s payment claims in a timely manner could delay its receipt of payment for its diagnostic tests and services, which may have a material adverse effect on its cash flows.

Private health insurance company policies may deny coverage or limit the amount they will reimburse OncoCyte for the performance of its diagnostic tests.

Patients who are not covered by Medicare will generally rely on health insurance provided by private health insurance companies. If OncoCyte is considered a “non-contracted provider” by a third-party payer, that payer may not reimburse patients for diagnostic tests performed by OncoCyte or doctors within the payer’s network of covered physicians may not use its services to perform diagnostic tests for their patients. As a result, OncoCyte may need to enter into contracts with health insurance companies or other private payers to provide diagnostic tests to their insured patients at specified rates of reimbursement which may be lower than the rates OncoCyte might otherwise collect.

Risks Pertaining to Our Common Shares

The market price of our common shares may be impacted if we spinoff AgeX.

Our Board of Directors has initiated plans for BioTime to distribute to our shareholders, on a pro rata basis, all or a portion of the AgeX common stock we hold. We expect that after the distribution the AgeX shares will be publicly traded but we cannot assure that a public market for AgeX shares will develop or be sustained or that the prices at which the AgeX shares may trade will reflect the actual value of AgeX’s business, assets, and prospects. If the distribution is completed, the market price of BioTime common shares should decline by an amount that reflects the market value of the AgeX shares distributed, but it is not possible to predict the actual market value of AgeX shares or the exact amount of the initial reduction in the BioTime share price, and it is possible that the change in price might be greater than the price at which the AgeX shares received by our shareholders in the distribution will trade in the public market. Accordingly, there is a risk that if the distribution is effected, after the distribution the combined market value of BioTime shareholders’ BioTime common shares and the AgeX common stock the shareholders receive in the distribution could be less than the market value of the BioTime common shares immediately before the distribution.

Further, if the distribution of AgeX shares occurs before the October 1, 2018 expiration date of our outstanding, publicly traded, common share purchase warrants, we will be required by the warrant agreement to reduce the exercise price of the warrants and increase the number of shares that may be purchased through the exercise of the warrants based on the fair market value of the distributed AgeX shares as determined by our Board of Directors. The impact of those adjustments could have a dilutive effect on the interests of holders of our common shares, depending on the value of the AgeX shares and the relationship between the reduced exercise price of the warrants and the prices at which our common shares trade after the exercise price reduction.

The implementation of a new FASB accounting standard could increase the risk that our future consolidated financial statements could be qualified by going concern uncertainty.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU No. 2014-15 defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures. ASU No. 2014-15 was effective for us for the year ended December 31, 2016, and all annual and interim periods thereafter. In connection with preparing consolidated financial statements for each annual and interim reporting period, ASU No. 2014-15 requires that an entity’s management evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued (or within one year after the date that the consolidated financial statements are available to be issued when applicable). As a result of the implementation of ASU No. 2014-15, we will be required to have more cash, cash equivalents, and liquid investments on hand on the date we issue or file our consolidated financial statements than had been the case during prior years in order to avoid a going concern qualification in our auditor’s report and in the footnotes to our consolidated financial statements. If our consolidated financial statements were to become subject to a going concern qualification or uncertainty or if we are unable to alleviate substantial doubt as part of our going concern assessment, or both, the market price of our common stock could decline.

Asterias and OncoCyte are also be impacted by ASU No. 2014-15 in much the same manner as us. If the financial statements of Asterias, or OncoCyte, or both, were to become subject to a going concern qualification or uncertainty, the market price of their common stock could decline, resulting in a loss or decline in value of the Asterias shares we own, the OncoCyte shares we own, or both, as equity method investments at fair value.

Our net income or loss will be impacted by changes in the market value of Asterias and OncoCyte common stock.

Because we use the equity method of accounting for the common stock of Asterias and OncoCyte that we hold at fair value, we will recognize gain or loss to the extent that the market value of Asterias and OncoCyte common stock changes from calendar quarter to calendar quarter, regardless of whether we sell any of those shares.

Because we are engaged in the development of pharmaceutical and stem cell therapy products and cancer diagnostic tests, the price of our common shares may rise and fall rapidly.

Current economic and stock market conditions may adversely affect the price of our common shares.

The stock market has been experiencing extreme price and volume fluctuations which have affected the market price of the equity securities without regard to the operating performance of the issuing companies. Broad market fluctuations, as well as general economic and political conditions, may adversely affect the market price of our common shares.

Because we do not pay dividends, our common shares may not be a suitable investment for anyone who needs to earn dividend income.

We do not pay cash dividends on our common shares. For the foreseeable future, we anticipate that any earnings generated in our business will be used to finance the growth of our business and will not be paid out as dividends to holders of our common shares. This means that our common shares may not be a suitable investment for anyone who needs to earn income from their investments.

Insiders continue to have substantial control over our company, which could limit your ability to influence the outcome of key transactions, including a change of control.

Our directors, executive officers and each of our shareholders who own greater than 5% of our outstanding common stock and their affiliates, in the aggregate, owned approximately 31% of the outstanding shares of our common stock as of December 31, 2017. As a result, these shareholders, if acting together, will be able to influence or control matters requiring approval by our shareholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deter certain public investors from purchasing our common stock and might ultimately affect the market price of our common stock.

Securities analysts may not initiate coverage or continue to cover our common shares and this may have a negative impact on the market price of our common shares.

The trading market for our common shares will depend, in part, on the research and reports that securities analysts publish about our business and our common shares. We do not have any control over these analysts. There is no guarantee that securities analysts will cover our common shares. If securities analysts do not cover our common shares, the lack of research coverage may adversely affect the market price of those shares. If securities analysts do cover our common shares, they could issue reports or recommendations that are unfavorable to the price of our common shares, and they could downgrade a previously favorable report or recommendation, and in either case our share prices could decline as a result of the report. If one or more of these analysts does not initiate coverage, ceases to cover our common shares or fails to publish regular reports on our business, we could lose visibility in the financial markets, which could cause our share prices or trading volume to decline.

If we or our subsidiaries issue additional common shares or preferred shares, investors in our common shares may experience dilution of their ownership interests.

We and our subsidiaries may issue additional common shares or other securities that are convertible into or exercisable for common shares in order to raise additional capital, or in connection with hiring or retaining employees or consultants, or in connection with future acquisitions of licenses to technology or rights to acquire products, or in connection with future business acquisitions, or for other business purposes. The future issuance of any such additional common shares or other securities may be dilutive to our current shareholders and may create downward pressure on the trading price of our common shares.

We plan to ask our shareholders approve an increase in the number of our authorized shares to make available for issues a sufficient number of additional shares to meet our financing needs. We are currently authorized to issue an aggregate of 152,000,000 shares of capital stock consisting of 150,000,000 common shares and 2,000,000 “blank check” preferred shares. As of December 31, 2017, there were 126,865,634 issued and outstanding common shares, 8,043,229 common shares reserved for issuance upon the exercise of outstanding options under our employee stock option plans; 62,500 common shares reserved for issuance upon the lapse of restricted stock units (RSUs) under our Equity Incentive Plan; and 9,394,862 shares reserved for issuance upon the exercise of common share purchase warrants, including the publicly traded warrants.

The operation of some of our subsidiaries has been financed in part through the sale of capital stock in those subsidiaries to private investors. Sales of additional subsidiary shares could reduce our ownership interest in the subsidiaries, and correspondingly dilute our shareholder’s ownership interests in our consolidated enterprise. Our subsidiaries also have their own stock option plans and the exercise of subsidiary stock options or the sale of restricted stock under those plans would also reduce our ownership interest in the subsidiaries, with a resulting dilutive effect on the ownership interest of our shareholders in our consolidated enterprise.

We may also issue preferred shares having rights, preferences, and privileges senior to the rights of our common shares with respect to dividends, rights to share in distributions of our assets if we liquidate our company, or voting rights. Any preferred shares may also be convertible into common shares on terms that would be dilutive to holders of common shares. Our subsidiaries may also issue their own preferred shares with a similar dilutive impact on our ownership of the subsidiaries.

The market price of our common shares could be impacted by prices at which we sell shares in our subsidiaries.

The operation of some our subsidiaries has been financed in part through the sale of capital stock in those subsidiaries, and our subsidiaries may sell shares of their capital stock in the future for financing purposes. The prices at which our subsidiaries may sell shares of their capital stock could impact the value of our company as a whole and could impact the price at which our common shares trade in the market. A sale of capital stock of one of our subsidiaries at a price that the market perceives as low could adversely impact the market price of our common shares. Even if our subsidiaries sell their capital stock at prices that reflect arm’s length negotiation with investors, there is no assurance that those prices will reflect a true fair market value or that the ascribed value of the subsidiaries based on those share prices will be fully reflected in the market value of our common shares.

None

BioTime Facilities

Our principal offices and laboratory facilities comprise 30,795 square feet of rentable space in two buildings located in an office park setting at 1010 and 1020 Atlantic Avenue, in Alameda, California. AgeX, ReCyte Therapeutics, OrthoCyte, and OncoCyte share this space with us and it is where OncoCyte plans to operate its CLIA lab.

Base rent during the initial seven-year term of the lease, which commenced on February 1, 2016 is shown in the following table:

In addition to base rent, we will pay a pro rata portion of increases in certain expenses, including real property taxes, utilities (to the extent not separately metered to our leased space) and the landlord’s operating expenses, over the amounts of those expenses incurred by the landlord.

We also currently pay $5,050 per month for the use of approximately 900 square feet of office space in New York City, which is made available to us by one of our directors at his cost for use in conducting meetings and other business affairs.

Cell Cure Facilities

Cell Cure has leased 1,128 square meters (approximately 12,142 square feet) of office and laboratory space in Jerusalem, Israel under leases that expire between May 30, 2019 and December 31, 2020, with two additional options to extend the leases for 5 years each. Base monthly rent is NIS 63,402 (approximately US $18,247 per month using the December 31, 2017 exchange rate). In addition to base rent, Cell Cure pays a pro rata share of real property taxes and certain costs related to the operation and maintenance of the building in which the leased premises are located.

On January 28, 2018, Cell Cure entered into another lease agreement with its current landlord for an additional 934 square meters (approximately 10,054 square feet) of office space in the same facility in Jerusalem, Israel under a lease that expires on December 31, 2025, with two additional options to extend the lease for 5 years each (“the January 2018 Lease”). The January 2018 Lease will commence on April 1, 2018, and includes a leasehold improvement construction allowance of up to NIS 4,000,000 (approximately up to $1.2 million) from the landlord. The leasehold improvements are expected to be completed by September 30, 2018. Combined base rent and construction allowance payments for the January 2018 Lease, assuming full utilization of the construction allowance, will be NIS 93,470 per month (approximately $27,000 per month) beginning on October 1, 2018.

From time to time, we and our subsidiaries may be involved in routine litigation incidental to the conduct of our business. We are not presently a party to any pending litigation. Cell Cure was a party to two pending opposition proceedings in the European Patent Office (EPO) involving EP Patent Numbers 2147094 (issued 08-Oct-2014) and 2554661 (issued 19-Nov-2014), both entitled, “Stem Cell-Derived Retinal Pigment Epithelial Cells”. The Oral Proceedings took place on March 16, 2017 and March 17, 2017, respectively. Both patents were upheld by the EPO. The decisions were both appealed and the detailed grounds for appeal were due on September 9, 2017 and September 11, 2017, respectively, however, both appeals were withdrawn prior to those dates and the patents will be issued as amended in the opposition proceedings. Both patents relate to our OpRegen^® product and provide protection until April 2028. There are additional patent applications pending that if issued will provide further protection for OpRegen^®.

Not applicable

PART II

Our common shares are traded on the NYSE American and on the TASE under the ticker symbol BTX. The following table sets forth the range of high and low closing prices for our common shares for the fiscal years ended December 31, 2016 and 2017, as reported by the NYSE American:

As of February 28, 2018, there were 16,866 holders of the common shares based on the share position listing.

The following table shows certain information concerning the options outstanding and available for issuance under all of our compensation plans and agreements as of December 31, 2017 (in thousands, except weighted average exercise prices):

The following table shows certain information concerning the options outstanding and available for issuance under all of the compensation plans and agreements for our consolidated subsidiary companies as of December 31, 2017 (in thousands, except weighted average exercise price per share):

Additional information concerning our 2012 Equity Incentive Plan may be found in Note 11 to the Consolidated Financial Statements included elsewhere in this Report.

Dividend Policy

We have never paid cash dividends on our common shares and we do not anticipate paying cash dividends in the foreseeable future, but intend to retain our capital resources for reinvestment in our business. Any future determination to pay cash dividends on our common shares will be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and other factors as the Board of Directors deems relevant.

We have in the past distributed common stock of a subsidiary to our shareholders, on a pro rata basis, as a dividend in kind. We may distribute shares of subsidiaries or affiliated companies again in the future and any such distribution will be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, income tax consequences, and other factors as the Board of Directors deems relevant.

Performance Measurement Comparison⁽¹⁾

The following graph compares total stockholder returns of BioTime, Inc. for the last five fiscal years beginning December 31, 2011 to two indices: the NYSE Amex Market Value – U.S. Companies (Amex Market Value) and the NYSE Arca Biotechnology Index (NYSE Arca Biotechnology Index). The total return for our stock and for each index assumes the reinvestment of dividends, although we have never declared dividends on BioTime stock, and is based on the returns of the component companies weighted according to their capitalizations as of the end of each quarterly period. The NYSE Amex Market Value tracks the aggregate price performance of equity securities of U.S. companies listed therein. The NYSE Arca Biotechnology Index represents biotechnology companies, trading on NYSE American under the Standard Industrial Classification (SIC) Code Nos. 283 (Drugs) and 382 (Laboratory Apparatus and Analytical, Optical) main categories (2834: Pharmaceutical Preparations; 2835: Diagnostic Substances; 2836: Biological Products; 3826: Laboratory Analytical Instruments; and 3829: Measuring & Controlling Devices). BioTime common stock trades on the NYSE American and is a component of the NYSE Amex Market Value – US Companies.

Comparison of Five-Year Cumulative Total Return on Investment

BioTime, Inc., the Amex Market Value and NYSE Arca Biotechnology Index

BIOTIME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)