Oncocyte Corp - Annual Report: 2015 (Form 10-K)

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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, 2015

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 1-37648

OncoCyte Corporation

 (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) 775-0515

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 ☐

 

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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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 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 Registrant's common stock did not have a market price as of the last day of the Registrant's second fiscal quarter, therefore the aggregate market value of the outstanding shares of common stock as of such date cannot be calculated.

As of March 23, 2016, there were outstanding 25,411,800 shares of common stock, no par value.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the registrant's Proxy Statement for 2016 Annual Meeting of Shareholders are incorporated by reference in Part III

 

OncoCyte Corporation

Table of Contents

 

PART I

Certain statements contained herein are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements pertaining to future financial and/or operating results, future growth in research, technology, clinical development, and potential opportunities for OncoCyte, along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management constitute forward-looking statements. Any statements that are not historical fact (including, but not limited to statements that contain words such as “will,” “believes,” “plans,” “anticipates,” “expects,” “estimates”) should also be considered to be forward-looking statements. Forward-looking statements involve risks and uncertainties, including, without limitation, risks inherent in the development and/or commercialization of potential products, uncertainty in the results of clinical trials or regulatory approvals, need and ability to obtain future capital, and maintenance of intellectual property rights. Actual results may differ materially from the results anticipated in these forward-looking statements and as such should be evaluated together with the many uncertainties that affect the businesses of OncoCyte, particularly those mentioned in the cautionary statements found in OncoCyte’s filings with the Securities and Exchange Commission. OncoCyte disclaims any intent or obligation to update these forward-looking statements.

References to “OncoCyte,” “our” or “us” mean OncoCyte Corporation.

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 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.

PRELIMINARY NOTE ABOUT OWNERSHIP OF OUR COMMON STOCK

As of March 23, 2016, we had 289 shareholders of record and there were 25,411,800 shares of our common stock outstanding, of which 14,674,244 shares were held by our parent BioTime, Inc. ("BioTime"). These shares held by BioTime account for 57.7% of our common stock outstanding as a whole. Accordingly, we are a consolidated subsidiary of BioTime.

REVERSE STOCK SPLIT

On November 18, 2015, OncoCyte effected a 1-for-2 reverse stock split of its common stock. All references to common stock, warrants, and options to purchase common stock, and all per share data and related information, including the price at which shares of common stock have been sold or may be issued, have been retroactively adjusted, where applicable, to reflect the reverse stock split of OncoCyte common stock as if it had occurred at the beginning of the earliest period presented.

 

Item 1.

Business

Overview

Our mission is to develop highly accurate, easy to administer, non-invasive molecular diagnostic tests to reduce unnecessary and risky medical procedures and, thereby reduce cost to the healthcare system, while improving patient outcomes. Our initial focus will be confirmatory diagnostics, utilizing novel liquid biopsy technology, for use in conjunction with imaging to confirm initial diagnoses within certain oncology indications. In addition, we will be developing screening diagnostics as potential replacements for screening imaging procedures that do not meet the needs of patients, health care providers or payers. For some indications, we will also be pursuing the probability of recurrence of a specific cancer through the development of prognostics; or companion diagnostics that help a physician determine which therapy is the optimal treatment for the patient.

Our initial liquid biopsy diagnostic tests will be confirmatory diagnostics and are being developed to reduce false positive results associated with current diagnostic techniques. These new diagnostic tests are intended to:

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Improve health outcomes through early diagnoses and better prognostic capabilities;

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Reduce the cost of care through the avoidance of more costlier diagnostic procedures, including invasive biopsy and cystoscopic procedures; and

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Improve the quality of life for cancer patients by reducing the anxiety associated with non-definitive diagnoses.

We are currently developing diagnostic tests for three types of cancer: lung cancer, breast cancer, and bladder cancer.

OncoCyte Corporation is a majority-owned subsidiary of BioTime, Inc. We were incorporated in 2009 in the state of California. Our principal executive offices are located at 1010 Atlantic Avenue, Suite 102, Alameda, California 94501. Our telephone number is (510) 775-0515.

Business Strategy

Our strategy is to identify medical indications where current screening technology is insufficient, leading to poor early detection or excessive false positives, requiring the patient to endure unnecessary, costly and risky additional confirmatory procedures. By focusing on what we believe to be the biggest unmet needs with the lowest technological hurdles and potential shortest time to market, we believe our strategy is an efficient and risk-balanced use of capital and human resources.

We are developing liquid biopsy molecular cancer diagnostics utilizing a discovery platform that focuses on identifying genetic markers broadly expressed in numerous types of cancer. The diagnostic markers we have discovered thus far may address unmet needs in cancer diagnostic indications that have a strong potential to generate short- to mid-term revenues.

 

Our current development strategy for cancer diagnostic tests is to evaluate and validate specific diagnostics using methods of detecting proteins, messenger RNA (“mRNA”) or micro RNA (“miRNA”) approach based on unmet medical need, market size and ease of use. We believe that this approach allows us to have a broader look into the genetic markers that differentially express in cancer. Our development strategy will be matched to our market planning strategy to determine which:

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Diagnostic tests to prioritize in our development program;

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Diagnostic tests we should market ourselves;

 

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Diagnostic tests we should co-market through an alliance with one or more other companies; and

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Diagnostic tests we should out-license to third parties for development and/or commercialization.

For the near term, we plan to devote most of our financial resources to the development and commercialization of our initial laboratory diagnostic tests for certain types of cancer. While diagnostics are presently our primary focus, we may devote a portion of our resources to cancer therapeutic development based on technology, pertaining to homing peptides and the derivation of vascular cells engineered to deliver a toxic payload to the developing blood vessels of a malignant tumor to destroy the tumor. The extent of our work in the cancer therapeutics field will depend in part on the financial resources available to us, whether from revenues from the development and commercialization of cancer diagnostics, or from funds obtained through capital transactions. Because the development of cancer therapeutics will be a longer term and more capital intensive project than diagnostic test development, in lieu of completing the development of therapeutics products ourselves, we may seek to license out the development of potential cancer therapeutics to biopharmaceutical companies focused on therapeutic development and commercialization.

Additional Information

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.0 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”); (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or the SEC. We refer to the Jumpstart Our Business Startups Act of 2012 herein as the “JOBS Act,” and references herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.

As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not emerging growth companies. These provisions include:

 

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Reduced disclosure about our executive compensation arrangements;

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No non-binding shareholder advisory votes on executive compensation or golden parachute arrangements; and

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Exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

 

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company.

Diagnostic Tests

Based on substantial unmet needs, large markets, and data generated thus far from patient serum or urine screening, we are focusing our efforts on biomarkers associated with lung, breast and bladder cancers. Our approach is based on utilizing detectable amounts of cancer-associated biomarkers in patients with early-stage disease. Our identification of certain combinations of biomarkers in lung, breast and bladder cancer has led us to identify these three diseases as promising initial targets.

 

The relative ease of administering a liquid biopsy diagnostic and cost savings due to the elimination of costlier and invasive biopsy procedures, we believe, will make liquid biopsy diagnostic tests useful as routine tests that could be performed in men and women of any age and at any desired frequency to detect lung, breast or bladder cancer. If successful, our tests will initially reduce diagnosis uncertainty and eliminate unnecessary down-stream procedures resulting from indeterminate low dose computed tomography (“LDCT”), cytology or mammogram tests.

We intend to initially develop and market a lung cancer diagnostic test in the United States before seeking regulatory approvals required to market the diagnostic test in other countries. The test developed will be a blood screening test for cancer markers, which will be regulated under the Clinical Laboratory Improvements Amendment (“CLIA”) as a laboratory diagnostic test (“LDT”). We may also pursue approvals from the United States Food and Drug Administration (the “FDA”) or through the European Directive on in vitro diagnostics (“IVDs”) for any IVDs that we may develop.

We plan to start the process to establish a laboratory in mid-2016, including ordering the equipment and hiring the personnel, for which we will apply for CLIA registration and certification.

Types of Diagnostic Use

Once we have completed development of a liquid biopsy diagnostic test, we may commence marketing that diagnostic test for one or more specific kinds of use which relate to the kind of diagnostic evaluation that a physician is performing for a patient. Our diagnostics may have one or more of four different types of use depending on the type of cancer and the performance of the diagnostic. These intended uses include:

 

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Confirmatory diagnostics – confirmatory diagnostics are used in conjunction with a current standard of care screening procedure. For example, our lung confirmatory diagnostic would be used in conjunction with LDCT to confirm a suspicious result by yielding a secondary suspicious versus benign result. In the case of the benign results, patients would not need additional invasive procedures to determine the presence of cancer. In the case of the suspicious results, additional procedures would be highly warranted;

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Screening diagnostics – screening diagnostics would replace or be used as an alternative to existing screening procedures. A screener diagnostic for breast cancer could be used as an alternative to MRIs for women with a family history of breast cancer, BRCA mutations or dense breast tissue. This test could become part of a routine annual or other periodic physical examination;

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Recurrence diagnostics also known as prognostics – are used for patients who had previously been diagnosed with cancer but are currently in remission. In the case of our bladder diagnostic, the test could be used in lieu of a painful, costly cystoscopy to confirm whether the cancer has returned. This test could become part of the follow-up examination of bladder cancer patients; and

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Companion diagnostics – used by physicians to help determine an optimal therapy for a specific patient. An example of this would be HER2+ and Herceptin.

Currently we are focused on diagnostics to initially detect cancer due to the market opportunity associated with these types of diagnostics. Piper Jaffrey estimated that the domestic revenue opportunity for initial diagnosis diagnostics was $15 billion. This is over twice the size of companion/treatment monitoring diagnostics or recurrence diagnostics.

 

Revenue by Diagnostic Type

 

Source:  The 2015 Liquid Biopsy Report Piper Jaffrey September 2015

 

Oncology Diagnostic Tests Progress to Date

We first announced the development of our confirmatory and screening diagnostics in December 2011 and have achieved several key advances since then, including:

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Evaluated over 50 potential cancer biomarkers discovered by OncoCyte and BioTime using antibody-based ELISA technology in blood serum samples from a proprietary sample bank derived from over 600 donors, including patients with cancers of the breast, colon, and pancreas, as well as healthy volunteers;

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Presentation of preliminary findings at American Thoracic Society in May 2015 showing a ROC score of 0.88 for a lung confirmatory mRNA and miRNA classifier;

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Initiated a clinical study in 2015 collecting blood samples from patients undergoing LDCTs for the detection of lung cancer;

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Initiated a first and second clinical study collecting urine samples from patients undergoing cystoscopies to support development of confirmatory and recurrence diagnostics for bladder cancer;

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Presented preliminary findings at American Association for Cancer Research in April 2015 showing a ROC score of 0.91 for our bladder cancer confirmatory and recurrence diagnostic;

 

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Developed a preliminary classifier diagnostic for breast cancer based on a number of mRNA biomarkers; and

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Filed several patent applications in the United States and worldwide with claims covering use of various cancer markers in the diagnosis and/or prognosis of various cancers.

The Development Pathway

Our liquid biopsy diagnostic tests for cancer will each go through four stages of development prior to commercialization: the research stage; assay development; validation studies; and CLIA validation. Clinical utility studies will also be conducted after commencement of the marketing of a diagnostic test.

 

The first stage of the development of a CLIA LDT is the research stage. In the research stage of a molecular diagnostic, biological markers are analyzed to determine if specific markers are differentially expressed in certain diseases. We are developing blood and urine tests that differentiate malignant patient samples from benign patient samples by looking at differences in the amount of specific mRNA and miRNA expressed in whole blood or urine. The objective of this phase of the development process is to delineate promising biomarkers.

 

Diagnostic Development Stages

 

 

In the second stage, assay development, the best performing mRNA and miRNA biomarkers are combined into an assay. The optimal combination of biomarkers that are to be utilized in the final diagnostic are determined through bioinformatics and machine learning software strategies, and assay/marker reliability and usability. The end result of this stage is a “locked down” assay.

The locked down assay is first engineered and tested for reliability, reproducibility, accuracy, precision and stability in series of research and development studies, which we referred to as R&D validation studies that result in the validation of the assay. In these R&D validation studies, blinded samples are run through the assay to confirm that the results reported by the assay are consistent across an appropriate range of real world, day to day variables including operating temperature variances and sample differences.

 

After the completion of the R&D validation study, studies and analysis are run in the CLIA laboratory – the laboratory where the diagnostic will be performed after commercial launch – in order to confirm the reliability of the diagnostic test and the full test system in the clinical environment. The CLIA validation phase confirms that the diagnostic test being used routinely in the clinical oncology market meets the appropriate regulatory and clinical standards. Successful completion of this stage results in the finalization and lockdown of the commercial diagnostic test system. At this point, the laboratory undergoes the inspection and certification process, which allows the marketing of the diagnostic in specific states or countries.

The final phase of the diagnostic pathway occurs after the final diagnostic test has been launched and consists of carrying out one or more clinical utility studies. These studies are important for obtaining coverage and reimbursement by payers such as Medicare, Medicaid, third party commercial insurers, health maintenance organizations (“HMOs”), and large corporations that self-insure. Clinical utility studies analyze the healthcare economics associated with a diagnostic test, and in particular whether it results in overall patient benefits and decreased expenditures for the healthcare system. These studies track the progress of patients who have had the diagnostic test administered; where the diagnostic test has ruled out the possibility of a disease, downstream procedures are tracked to see if physician behavior has changed. The results of this phase may be published in peer review journals and are generally compiled in dossiers to share with managed care groups, including both public and commercial payers. Obtaining positive results in clinical utility studies is very important in obtaining positive coverage and reimbursement decisions by payers.

 

For example, in our first product candidate - the lung confirmatory diagnostic - patients who have received a suspicious finding in LDCT screening will be tested with our diagnostic. During our post marketing clinical utility studies, we will be tracking patients with a benign result to see if any unnecessary downstream procedures (bronchoscopy or surgical biopsy) are still performed. In other words, we will track whether our diagnostic test prevents unnecessary procedures and reduce the overall cost of diagnosing lung cancer, or whether it is used in addition to downstream procedures, and thereby increases overall costs.

Our three most advanced diagnostic tests (lung, breast and bladder cancer tests) are in the assay development stage. We anticipate that our lung cancer diagnostic test will move into the R&D validation stage in 2016 and finish the CLIA validation stage by early 2017 but there can be no assurance that the development of that diagnostic test will advance in that time frame.

OncoCyte Product Pipeline

 

Lung Cancer Diagnostic Test

Current Standard of Care

The current standard of care for diagnosing lung cancer in high risk patients is LDCT scanning. The United States Preventive Services Task force (“USPSTF”) guidelines recommend annual LDCTs for patients at high risk for lung cancer. The USPSTF was created in 1984 as an independent, volunteer panel of national experts in prevention and evidence-based medicine. The USPSTF works to improve the health of all Americans by making evidence-based recommendations about clinical preventive services such as screenings, counseling services, and preventive medications.

The guidelines, released in December of 2013, recommend annual LDCT scans for all Americans aged 55 to 80 years old who have a 30 pack-year smoking history and currently smoke or have quit within the past 15 years. A 30 pack-year smoking history is defined as the number of cigarette packs smoked per day times the number of years smoked. A 30 pack-year patient would include the following types of patients:

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Person who has smoked a pack a day (20 cigarettes) for 30 years;

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Person who has smoked 15 cigarettes a day for 40 years; and/or

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Person who has smoked 40 cigarettes a day for 15 years.

 

These guidelines were driven by a need to improve the standard of care for diagnosing lung cancer. Currently, the survival rate for lung cancer is very low – only 17% of people are still alive five years after a lung cancer diagnosis. These low survival rates result in one of the highest mortality rates for lung cancer, which is projected to kill 158,000 Americans in 2015.

Moreover, the survival rate, unlike many other types of cancer, has not increased significantly in the last 30 years. The low probability of surviving lung cancer is significantly affected by the late diagnosis – with more than half of all patients diagnosed after the point that the cancer has spread. USPSTF guidelines were developed to increase the probability of detecting lung cancer in earlier stages, which can significantly improve the survival rates.

However, the earlier detection of lung cancer will not come without risks. LDCTs are highly sensitive imaging procedures and they result in many false positives. Clinical studies have shown that 26% of LDCTs are indeterminate of which 96% are shown to be false positives. This results in patients being referred for risky downstream procedures including bronchoscopies, needle biopsies and surgery. These invasive procedures have been shown to result in morbidity and mortality including:

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0.5 to 1% mortality and

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4-20% major complications.

Source: Evaluation of Individuals with Pulmonary Nodules: When is it Lung Cancer? Chest 2013 May: 143 (Suppl):e83-e120.

Market for Lung Cancer Diagnostic Tests

Lung cancer is a primary cause of cancer-related death, in part because there is no effective diagnostic test to screen patients for lung cancer at an early stage.

 

USPSTF guidelines, which recommend LDCT scans for patients at high risk for lung cancer, may impact up to 10 million Americans who fit the criteria of 30 pack-year smokers. Research has shown that 26% of patients will have suspicious LDCT results, and around 96% of those indeterminate results will be false positives which could result in as many as 2 million unnecessary lung biopsy procedures.

 

We will initially focus on patients with indeterminate diagnoses of larger nodules over 8 millimeters, which is shown as Intended Use 1 in the graph below. These nodules are most likely to be sent for downstream biopsies. This potential market is estimated to include between 180,000 and 250,000 patients annually. We intend to expand the use of our lung cancer diagnostic into Intended Use 2 which targets patients with smaller nodules, who currently are put into a wait and hold pattern and can be scheduled for repeated LDCTs, risking the increase radiation exposure and incurring incremental costs to determine whether the nodule is growing. This will increase the potential patient population to 1.8 to 2.5 million patients. Finally, we will work on a diagnostic that could be used as a screening diagnostic and potentially replace LDCTs for the 7-10 million patients who meet the USPSTF guidelines for high risk, which is represented as Intended Use 3 in the following graph.

Market Opportunity for Lung Diagnostics

 

Clinical Trials

We are collaborating with The Wistar Institute of Anatomy and Biology (“Wistar”) to develop the confirmatory lung cancer diagnostic test in a large, multi-site clinical study evaluating the blood-based lung cancer diagnostic test. This collaboration involves the development of a prototype assay and a clinical study with over 2,000 blood samples obtained at six clinical sites from patients with a high-risk profile for development of lung cancer. Enrollment has continued since 2014 with all sites meeting or exceeding their collection goals. We started enrolling patients in clinical trials to supplement the Wistar sample collection and to provide the data needed for our analytical and clinical validations. As of March 2016, the clinical trial was being conducted at 20 sites and we anticipate adding additional sites in 2016. We anticipate that we will complete clinical trial enrollment by the third quarter of 2016.

Large clinical trials are needed to produce patient subsamples that ensure the development of a highly reliable, accurate diagnostic test. In the case of the lung cancer trials, samples are being collected from patients who are at risk for lung cancer, based on having positive or suspicious results from LDCT screening, and who have undergone biopsies to determine the pathology results or who have undergone a series of imaging procedures (LDCT or Petscans) to determine if the nodule is continuing to grow. Additionally, we will be collecting samples from patients who used alternative screening procedures such as chest x-rays and who were referred for biopsies.

 

Wistar investigators and OncoCyte are currently assessing gene expression patterns in blood cells of patients with malignant lung disease and patients with non-malignant lung disease. Preliminary analysis of patient data from this study was completed during the first quarter of 2015 and preliminary findings from the research showed a sensitivity of 76% and a specificity of 88%. Sensitivity refers to the probability of detecting the presence of the disease accurately; while specificity refers to the probability of accurately predicting not having the disease. Data concerning the OncoCyte/Wistar preliminary lung assay performance with initial biomarkers and classifiers was presented at the American Thoracic Society (“ATS”) in May of 2015. The OncoCyte/Wistar preliminary lung assay had a false positive rate of only 12%. In comparison, National Lung Screening Test results reported in the New England Journal of Medicine (August 2011) showed that LDCTs have a very high false positive rate of approximately 96%. The study presented at ATS included both nodules and non-nodules and is the proof of concept for both our confirmatory and screening lung cancer diagnostic. We and Wistar are now assessing additional data, and we plan to analyze additional patient samples, for verification of the earlier preliminary analysis.

The lung confirmatory diagnostic is currently in the assay development stage. We anticipate that if our analysis of the most current data from the Wistar study and additional patient samples verify the Wistar preliminary data or support sufficient levels of sensitivity and specificity, the assay will move into the R&D validation study stage in mid-2016 and complete the CLIA validation stage in early 2017 but there can be no assurance that the development of that diagnostic test will advance in that time frame.

 

Wistar ATS Presentation

The ATS presentation data shows sensitivity of 76% and specificity of 88%. Sensitivity is the probability of detecting the presence of the disease accurately. A sensitivity of 76% means that three out of four cancers were detected. Specificity is the probability of accurately predicting not having the disease. In this case, approximately 9 out of 10 people without the disease were predicted. A false positive rate is a function of specificity and is equal to 1 minus specificity or 12% in this case.

Breast Cancer Diagnostic Tests

Current Standard of Care

The early detection of cancer is associated with improved outcomes for patients. Mammography has been widely used since the 1970s for breast cancer screening in asymptomatic women; in 2013 over 38 million screening mammograms were performed in the US alone. Current US National Cancer Institute (“NCI”) guidelines recommend screening mammograms every one to two years in women 40 years and older, while the American Cancer Society and the National Comprehensive Cancer Network both recommend screening mammography every year starting at age 40. However in November of 2009, USPSTF revised their screening recommendations increasing the age to 50 and length of time between screenings from annual to biennial. This was partially driven by the concerns around false positives. Approximately 10% of women are recalled from screening mammography for further testing and approximately 95% of those women’s test results end up as false positives. Over the course of 10 years of screening, one out of every two women will experience a false positive with 7% to 17% of those women having unnecessary biopsies.

 

At the same time, mammogram screening in women aged 40 to 74 has been associated with relative reduction in breast cancer mortality of 15% to 20%. However, the NCI estimates that approximately 20% of all breast cancers are not detected by mammography during screening. These false negatives or missed diagnoses, together with the false positives or over diagnoses, indicate a strong unmet need for a breast cancer screening test with superior specificity and sensitivity when compared to standard screening mammography.

Additionally guidelines recommend MRI screening for approximately 6 million women who either have a family history, a BRCA gene mutation or dense breast tissue, since mammograms have been shown to miss cases of cancer in patients that meet these profiles.

Breast Cancer Screening Protocol

OncoCyte is developing a confirmatory diagnostic test that could be used with women who have an indeterminate mammogram result (BI-RADS 3 or 4). In the case of a mammogram BI-RADS 3 score, repeat imaging is recommended, which means that women may have to schedule another mammogram or they may be referred to a more costly MRI procedure. In the case of a mammogram BI-RADS 4 score, women are often referred for a biopsy. Our breast confirmatory diagnostic could be incorporated into breast screening protocols to confirm whether women with BI-RADS 3 or 4 scores need to undergo additional costly imaging or an invasive biopsy.

Market Opportunity

Each year approximately 5% of women have mammograms that are suspicious and many of these women are sent on to biopsies (Geller et al Radiology 222:2 2002). Currently it is estimated that about 16% or 250,000 of these biopsies will be cancerous. This is the focus of our initial research for our breast cancer confirmatory diagnostic as shown in the following graph. We are planning to expand our research efforts to include the second intended use – women who meet the guidelines for MRIs. There are over 6 million women in the U.S. for whom the guidelines recommend both a mammogram and a MRI yearly.

 

We plan to expand the use of our diagnostic in the future to meet the needs for a better breast cancer screening diagnostic, which could impact up to 38 million women each year. Research over the last 25 years has shown that large numbers of women are having unnecessary biopsies resulting in estimates of $4 billion a year being spent on false positives (Health Affairs, 34, no.4 (2015):576-583).

 

Market Opportunity for Breast Cancer Diagnostic Tests

Breast Cancer Diagnostic Clinical Trials

We tested the performance of our cancer markers in detecting breast cancer in a set of 134 samples from patients with confirmed cases of breast cancer. The outcome of this initial experiment led us to start prospective clinical trials during the first quarter of 2014 with our sponsorship of a 600 patient study at Scottsdale Medical Imaging Laboratories. As of March 2016, we had collected over 900 patient blood samples and acquired an additional 100 samples from biobanks. We will continue enrollment through 2016 until we meet the numbers needed to lock down an assay and validate the assay in a clinical environment. Data from this and ongoing studies will be used to support an initial use of the breast cancer diagnostic test by radiologists to aid in determining the malignancy potential of suspicious mammography findings. As part of the initial collaboration, we have retained all rights to develop and market our proprietary breast cancer diagnostic tests.

 

Bladder Cancer Diagnostic Tests

Current Standard of Care

The current standard of care for bladder cancer diagnosis is cytology and cystoscopies. Urine cytology is a test to look for abnormal cells in a patient’s urine. Urine cytology is used along with other tests and procedures to diagnose urinary tract cancers. Cystoscopy is a procedure that allows a doctor to examine the lining of the bladder and the urethra, tube that carries urine out of the body. A hollow tube called a cystoscope, equipped with a lens, is inserted into the patient’s urethra and slowly advanced into the bladder. Increasingly over the years, cystoscopies have been used in conjunction with cytology which has resulted in increasing costs for the detection of bladder cancer.

Current Bladder Diagnostic Protocol

Market Opportunity

Bladder cancer has the highest lifetime treatment costs per patient of all cancers. The high recurrence rate and ongoing invasive monitoring requirement are the key contributors to the economic and human toll of this disease.

Urothelial carcinoma constitutes more than 90% of bladder cancers in the Americas, Europe and Asia. Although most patients with bladder cancer can be treated with organ-sparing chemotherapy, UC has a relapse rate of nearly 70% and can progress to invasive, metastatic, and lethal disease. The regular surveillance and treatment of recurrent disease from the time of diagnosis for the remainder of a patient’s life makes urothelial Carcinoma the most costly malignancy on a per patient basis. The problem is amplified because the two standard methods for surveillance - microscopic assessment of urinary cytology specimens and bladder cystoscopy – which possess significant limitations with respect to both performance and cost. Although urine cytology does have a very high positive predictive value and low false positive rate, it has a low negative predictive value and a high indeterminate rate. Patients who have indeterminate urine cytology results commonly undergo cystoscopy, which is painful, time consuming, costly, and unnecessary in many cases since a neoplasm is often not present. In urothelial carcinoma, as in virtually all other cancers, earlier and more accurate diagnosis, including diagnosis of disease recurrence, is generally associated with better outcomes and lower cost.

Overall markets for bladder cancer diagnostics are large and growing. Based on National Cancer Institute statistics released in 2012, it was estimated that in 2013 over 72,000 new cases of bladder cancer would occur in the United States and a total of over 550,000 men and women alive would have a history of bladder cancer and be subject to recurrence surveillance testing using cystoscopy or urine cytology. Additionally, another 3 million patients present yearly with hematuria (blood in urine), an early symptom of bladder cancer and 500,000 patients have indeterminate cytology findings. These three patient profiles: indeterminate cytology, hematuria and surveillance, could result in a potential market opportunity of approximately 4.5 million tests yearly.

Sending urine specimens to us for analysis using our diagnostic tests instead of performing a cystoscopy procedure would be a significant departure from the current standard of care in the diagnosis of bladder cancer. Urologists may be reluctant or unwilling to change their practices and utilize our diagnostic test for bladder cancer even if our test is proven to have a high rate of accuracy in detecting the presence or absence of cancer.

 

The potential resistance of urologists to adopt the use of our bladder cancer diagnostic test means that marketing that test could require a substantial effort by a sales force. Due to this concern and our limited financial and marketing resources, we may seek to enter into an agreement with a larger company that has greater marketing resources for the marketing of our bladder cancer test. We may license out both completion of development and marketing to another company, retaining rights to receive a royalty on sales and possibly some sales related milestone payments, or we may complete the development of the test and seek to co-market the test with another company in an arrangement that might provide for a sharing of marketing costs and revenues. There is no assurance that we will be successful in entering into a licensing or co-marketing arrangement or that a licensee or co-marketing partner will succeed in marketing our bladder cancer diagnostic test. If we enter into a license or co-marketing agreement, our revenues from the sale of our bladder cancer diagnostic test may be substantially less than the amount of revenues and gross profits that we might receive if we were to market that diagnostic test ourselves.

Bladder Cancer Diagnostic Test Clinical Trials

As part of our clinical development of a urine-based bladder cancer diagnostic test, we initiated a clinical trial in January 2014 that has been expanded to a multi-site trial. The trial will involve up to 1,400 patient samples obtained from at least nine large urology clinics located throughout the United States. As of March 2016, we had approximately 1,275 samples in house. The clinical trial is designed to expand the potential use of our bladder cancer test beyond pathology laboratories and into urologic practices at the point of cystoscopy. The goal of the current clinical trial is to compare the performance of our bladder cancer markers to the performance of cystoscopy. Investigators in the trial are collecting urine samples from patients undergoing cystoscopy for the diagnosis of either primary or recurrent bladder cancer. Cystoscopy and biopsy results will be compared with the results of our proprietary diagnostic test panel in determining the overall performance of our classifier and markers.

In May of 2015, we presented preliminary findings of our bladder research at the American Association of Cancer Research. Preliminary findings 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. We expect that the inclusion of additional markers will improve the diagnostics sensitivity and specificity further.

Future Diagnostic Development Milestones

Over the next two years, our goal is to achieve the following milestones relating to the development and commercialization of our cancer diagnostic tests:

·

Out-licensing or co-marketing partnership for our bladder cancer confirmatory and recurrence diagnostic;

·

Completion of a prospective patient study for analytical validation of our lung cancer diagnostic;

·

Analytical validation of our lung and breast confirmatory diagnostics (analytical validation is a series of experiments with the same samples to ensure that the test results can be replicated under different circumstances);

·

Launch of a confirmatory diagnostic test for lung cancer;

·

Locked down assay concept for a screening diagnostic test for lung cancer;

·

Completion of a prospective patient study for analytical validation of our breast cancer diagnostic;

·

Analytical validation of our breast confirmatory diagnostics;

·

Proof of concept for a screening diagnostic or confirmatory diagnostic test for breast cancer;

 

·

Establish a CLIA laboratory and obtain a certificate of registration, a certificate of compliance and inspection for all 50 states.

Achieving the milestones will require expanding our research team to include diagnostic development personnel as well as sufficient clinical trial samples to conduct all the validation tests required.

Technology for Diagnostic Tests

In our liquid biopsy tests for lung, breast and bladder cancer, we are using the same general strategy for the identification of mRNA and miRNA biomarkers and are developing a gene expression classifier to interpret the differential gene expression or miRNA expression and yield a malignant versus benign determination. Ultimately our research may rely on only one type of biomarker in a specific indication. In the case of lung cancer, our test will be developed on mRNA biomarkers only. In the case of breast cancer, our study includes the use of both RNA markers and monoclonal antibodies directed to proteins.

Blood samples are collected by venipuncture into tubes and total RNA is isolated. mRNA biomarkers were identified using microarray equipment. The best performing mRNA biomarkers will be transferred to the commercial platform we will use in our CLIA laboratory. Differentially expressed miRNAs will be identified by screening the human V3 miRNA panel or alternative RNA detection methods. The optimal combination and final panel of mRNA and miRNA biomarkers together with potential protein-based assays will be determined using bioinformatics and machine learning strategies. The optimal classifier will be developed that yields the best discrimination between malignant and benign. The performance of the final biomarker panel and classifier will be tested on an independent set of samples to determine performance characteristics.

For bladder cancer, we are developing a urine test for use in recurrence screening and hematuria. The bladder cancer diagnostic is based on differential mRNA expression in urine samples. mRNA biomarkers were identified using microarray and top biomarkers were transferred to the commercial platform. A streamlined assay was developed that uses crude urine sediment lysates rather than purified RNA, eliminating the need for RNA isolation and amplification. The optimal classifier will be developed that yields the best discrimination between malignant and benign. The performance of the final biomarker panel and classifier will be tested on an independent set of samples to determine performance characteristics.

 

Biomarkers are important to the diagnosis of cancer in that their presence or absence in a specific patient sample drives the sensitivity and specificity scores of a molecular diagnostic. For example if a specific mRNA is only seen expressed in patients with cancer, it can be used to help make a malignant call on that sample. The use of biomarkers with a classifier can help ensure that the sensitivity score, which is a measure of correcting identifying the disease is sufficiently high to reduce false positives, ensuring that patients with the disease are correctly diagnosed. At the same time, biomarkers can be used to hone the specificity measure, which is a measure of correctly identifying patients without the disease, which reduces the number of patients who are unnecessarily referred to biopsy.

 

Sponsored Research Agreement with Wistar

We have entered into a Sponsored Research Agreement (“SRA”), with Wistar pursuant to which Wistar investigators are conducting a multi-center patient study in which they are assessing gene expression patterns in blood cells of patients with malignant versus non-malignant lung disease. We have agreed to provide funding for the research that Wistar is conducting for us under the SRA.

We have agreed to indemnify Wistar, certain related persons, and the principal investigator against liabilities, damages, losses and expenses due to claims by any third party which result or arise out of the SRA, or any licenses of Wistar inventions.

The SRA will terminate on July 16, 2016 or upon the earlier completion of the sponsored research. The SRA may be terminated at an earlier date (a) by a party if the other party breaches the terms of the SRA and fails to timely cure the breach, (b) by Wistar in the event of certain insolvency or bankruptcy proceedings or similar events pertaining to us, or (c) by either party for any reason, subject to a specified period of prior written notice. Wistar will be entitled to retain payments made prior to the early termination of the SRA to the extent of its reasonable costs of work performed prior to the termination, plus the costs of non-cancellable commitments incurred by Wistar prior to the notice of termination.

Licensed Technology from Wistar

We have entered into a License Agreement with Wistar that entitles us to use certain patents, know-how and data belonging to Wistar, including technology and data developed under the SRA.

Licenses Granted

Under the License Agreement, we have obtained an exclusive, worldwide license under certain patents, and under certain know-how and data (“Technical Information”) belonging to Wistar, for use in the field of molecular diagnostics for lung cancer, including, but not limited to confirmatory, companion and recurrence diagnostics for any type of lung cancer with detection through whole blood, fractionated blood, plasma, serum and/or other biological samples (the “Licensed Field”).

We have the right to grant sublicenses of the licensed patents and Technical Information. The sublicensee will be subject to Wistar’s approval, which will not be unreasonably withheld, if we are not selling a “Licensed Product.” As used in the License Agreement, a Licensed Product means any product that cannot be made, used, or sold, or any service, process or method that cannot be performed or provided, without infringing at least one pending or issued valid claim under the licensed patents in a particular country, or that incorporates or is made, identified, developed, optimized, characterized, selected, derived or determined to have utility, in whole or in part, by the use or modification of any licensed patent or any technology or invention covered thereby, any licensed Technical Information, or any other Licensed Product.

Royalties, License Fees and Other Payment Obligations

We have paid Wistar an initial license fee and will pay Wistar royalties on net sales, as defined in the License Agreement, of Licensed Products. The royalty rates will range from 3% to 5% depending upon the amount of our cumulative net sales of Licensed Products. If we are required to pay to royalties to a third party in order to manufacture or sell a Licensed Product in a particular country, the amount of royalties that we must pay Wistar on net sales of the Licensed Product will be reduced by the amount of royalties that we must pay to the third party, but subject to a maximum reduction of 50%. Our obligation to pay royalties to Wistar will terminate on a Licensed Product by-Licensed Product and country-by-country basis until the later of (i) the date a valid claim of a licensed patent covering the Licensed Product no longer exists, or (ii) the tenth (10th) anniversary of the first commercial sale of the Licensed Product in each country.

 

Plan Category	Number of Shares to be Issued upon Exercise of Outstanding Options, Warrants, and Rights				Weighted Average Exercise Price of the Outstanding Options, Warrants, and Rights				Number of Shares Remaining Available for Future Issuance under Equity Compensation Plans
OncoCyte Stock Option Plans Approved by Shareholders			2,240			$	2.03				1,757

		Year Ended December 31,
		2015				2014				2013
OPERATING EXPENSES
Research and development		$	4,527			$	3,962			$	2,943
General and administrative			4,191				1,011				552
Total operating expenses			8,718				4,973				3,495
Loss from operations			(8,718	)			(4,973	)			(3,495	)
OTHER EXPENSES, NET
Interest expense, net			(19	)			(2	)			-
Other income (expense), net			2				(11	)			-
Total other expense, net			(17	)			(13	)			-
NET LOSS		$	(8,735	)		$	(4,986	)		$	(3,495	)
Basic and diluted net loss per share		$	(0.42	)		$	(0.27	)		$	(0.19	)
Weighted average shares outstanding: basic and diluted			21,009				18,200				18,200

		December 31,
		2015				2014
Balance Sheet Data (in thousands):
Cash and cash equivalents		$	7,996			$	257
BioTime shares held as available-for-sale securities, at fair value			2,541				3,280
Intangible assets, net			1,230				1,472
Total assets			12,731				5,241
Total liabilities			2,314				6,315
Total stockholders’ equity (deficit)		$	10,417			$	(1,074	)

		Amount(1)								Percent
Program		2015				2014				2015				2014
General		$	1,719			$	1,621				38.0	%			40.9	%
Bladder Cancer Confirmatory Diagnostic		$	895			$	1,143				19.8	%			28.9	%
Breast Cancer Confirmatory Diagnostic		$	1,105			$	1,057				24.4	%			26.7	%
Lung Cancer Confirmatory Diagnostic		$	763			$	76				16.8	%			1.9	%
COLX		$	45			$	65				1.0	%			1.6	%
Total		$	4,527			$	3,962				100	%			100	%

		Year Ended December 31,
		2014				2013				$ Increase				% Increase
Research and development expenses		$	3,962			$	2,943			$	+1,019				+35	%
General and administrative expenses		$	1,011			$	552			$	+459				+83	%

		Amount(1)								Percent
Program		2014				2013				2014				2013
General		$	1,621			$	2,852				40.9	%			96.9	%
Bladder Cancer Confirmatory Diagnostic		$	1,143			$	27				28.9	%			0.9	%
Breast Cancer Confirmatory Diagnostic		$	1,057			$	49				26.7	%			1.7	%
Lung Cancer Confirmatory Diagnostic		$	76			$	-				1.9	%			-	%
COLX		$	65			$	15				1.6	%			0.5	%
Total		$	3,962			$	2,943				100	%			100	%

		December 31,
		2015				2014
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	7,996			$	257
BioTime shares held as available-for-sale securities, at fair value			2,541				3,280
Prepaid expenses and other current assets			388				114
Total current assets			10,925				3,651
NONCURRENT ASSETS
Intangible assets, net			1,230				1,472
Equipment and furniture, net			576				118
TOTAL ASSETS		$	12,731			$	5,241
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Amount due to parent, BioTime		$	807			$	5,735
Amount due to affiliates			40				154
Accounts payable			285				144
Accrued expenses and other current liabilities			1,182				282
Total current liabilities			2,314				6,315
TOTAL LIABILITIES			2,314				6,315
Commitments and contingencies (see Note 9)
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock, no par value, 5,000 shares authorized; none issued and outstanding			-				-
Common stock, no par value, 50,000 shares authorized; 25,391 and 18,200 shares issued and outstanding at December 31, 2015 and 2014, respectively			34,901				15,147
Accumulated other comprehensive loss on available-for-sale securities			(350	)			(822	)
Accumulated deficit			(24,134	)			(15,399	)
Total stockholders’ equity (deficit)			10,417				(1,074	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	12,731			$	5,241

		Year Ended December 31,
		2015				2014					2013
OPERATING EXPENSES
Research and development		$	4,527			$	3,962			$	2,943
General and administrative			4,191				1,011				552
Total operating expenses			8,718				4,973				3,495
Loss from operations			(8,718	)			(4,973	)			(3,495	)
OTHER EXPENSES, NET
Interest expense, net			(19	)			(2	)			-
Other expenses, net			2				(11	)			-
Total other expenses, net			(17	)			(13	)			-
NET LOSS		$	(8,735	)		$	(4,986	)		$	(3,495	)
Basic and diluted net loss per share		$	(0.42	)		$	(0.27	)		$	(0.19	)
Weighted average shares outstanding: basic and diluted			21,009				18,200				18,200

		Year Ended December 31,
		2015				2014					2013
NET LOSS		$	(8,735	)		$	(4,986	)		$	(3,495	)
Other comprehensive loss, net of tax:
Realized loss on sale of BioTime shares			397				569				-
Unrealized gain (loss) on BioTime shares held as available-for-sale securities			75				(21	)			592
COMPREHENSIVE LOSS		$	(8,263	)		$	(4,438	)		$	(2,903	)

		Common Stock								Accumulated Other Comprehensive Loss				Accumulated Deficit				Total Shareholders’ Equity (Deficit)
		Shares				Amount
BALANCE AT JANUARY 1, 2013			18,200			$	15,072			$	(1,962	)		$	(6,918	)		$	6,192
Net Loss			-				-				-				(3,495	)			(3,495	)
Unrealized gain on BioTime shares held as available-for-sale securities			-				-				592				-				592
Stock-based compensation			-				326				-				-				326
BALANCE AT DECEMBER 31, 2013			18,200			$	15,398			$	(1,370	)		$	(10,413	)		$	3,615
Net loss			-				-				-				(4,986	)			(4,986	)
Unrealized gain on BioTime shares held as available-for-sale securities			-				-				(21	)			-				(21	)
Stock-based compensation			-				318				-				-				318
Transfer of realized loss into equity from sale of BioTime shares			-				(569	)			569				-				-
BALANCE AT DECEMBER 31, 2014			18,200				15,147				(822	)			(15,399	)			(1,074	)
Net loss			-				-				-				(8,735	)			(8,735	)
Unrealized gain on BioTime shares held as available-for-sale securities			-				-				75				-				75
Stock-based compensation			-				1,815				-				-				1,815
Common stock issued to BioTime for extinguishment of debt			1,500				3,300				-				-				3,300
Common stock issued to investors for cash			1,500				3,300				-				-				3,300
Common stock issued to BioTime upon conversion of BioTime convertible note payable and accrued interest of $18			1,508				3,318				-				-				3,318
Common stock issued to BioTime for cash			2,711				8,349				-				-				8,349
Exercise of stock options			3				4				-				-				4
Fair value of contingently issuable warrant			-				65				-				-				65
OncoCyte common stock received as a dividend in kind from BioTime			(31	)			-				-				-				-
Transfer of realized loss into equity from sale of BioTime shares			-				(397	)			397				-				-
BALANCE AT DECEMBER 31, 2015			25,391			$	34,901			$	(350	)		$	(24,134	)		$	10,417

		Year Ended December 31
		2015				2014					2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(8,735	)		$	(4,986	)		$	(3,495	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			41				39				35
Amortization of intangible assets			242				242				242
Stock-based compensation			1,815				318				326
Contingently issuable warrant expense to investors			65				-				-
Interest expense			18				-				-
Changes in operating assets and liabilities:
Amount due to parent, BioTime			1,672				2,823				2,136
Amount due to affiliates			(115	)			103				72
Prepaid expenses and other current assets			(274	)			6				(74	)
Accounts payable and accrued liabilities			1,042				291				48
Net cash used in operating activities			(4,229	)			(1,164	)			(710	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment			(500	)			(9	)			(25	)
Proceeds from sale of BioTime shares			815				1,329				-
Net cash provided by (used in) investing activities			315				1,320				(25	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options			4				-				-
Proceeds from sale of common shares			11,649				-				-
Net cash provided by financing activities			11,653				-				-
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			7,739				156				(735	)
CASH AND CASH EQUIVALENTS:
At beginning of the period			257				101				836
At end of the period		$	7,996			$	257			$	101
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES
Common stock issued to BioTime for extinguishment of debt		$	3,300			$	-			$	-
Common stock issued to BioTime upon conversion of convertible note payable and accrued interest			3,318				-				-
Realized loss on sale of BioTime shares			397				569				-

		2015				2014				2013
Net loss		$	(8,735	)		$	(4,986	)		$	(3,495	)
Weighted average common shares outstanding – basic and diluted			21,009				18,200				18,200	)
Net loss per common share – basic and diluted		$	(0.42	)		$	(0.27	)		$	(0.19	)

		2015				2014				2013
Stock options under Stock Option Plan			2,240				1,361				1,375

		2015				2014
Prepaid license fees		$	19			$	111
Outside research			366				-
Other prepaid expenses and current asset			3				3
Prepaid expenses and other current assets		$	388			$	114

		2015				2014
Accrued bonuses and payroll related expenses		$	325			$	147
Other accrued expenses			857				135
Accrued expenses and other current liabilities		$	1,182			$	282

		2015				2014
Intangible assets		$	$2,419			$	$2,419
Accumulated amortization			(1,189	)			(947	)
Intangible assets, net		$	$1,230			$	$1,472

		2015				2014
Equipment and furniture		$	750			$	251
Accumulated depreciation			(174	)			(133	)
Equipment and furniture, net		$	576			$	118

Options		Available for Grant					Number of Shares					Weighted Average Exercise Price
Outstanding at January 1, 2014			625					1,375				$	1.53
Granted			-					-					-
Options forfeited or cancelled			14					(14)					2.00
Outstanding at December 31, 2014			639					1,361				$	1.52
Increase in option pool			2,000
Options granted			(1,448)					1,448					2.21
Options exercised			-					(3)					1.34
Options forfeited or cancelled			566					(566)					1.59
Outstanding at December 31, 2015			1,757					2,240				$	2.03
Exercisable at December 31, 2015								972				$	1.61

		2015				2014				2013
Research and development		$	456			$	177			$	183
General and administrative			1,359				141				143
Total stock-based compensation expense		$	1,815			$	318			$	326

		2015				2014(1)				2013
Expected life (in years)			6.83				-				4.13
Risk-free interest rates			1.87	%			-	%			1.28	%
Volatility			74.15	%			-	%			70.68	%
Dividend yield			-	%			-	%			-	%