Advanced Cell Technology Inc. (OTCBB: ACTC)

Advanced Cell Technology Inc. (ACTC) is a biotechnology company focused on developing and commercializing human embryonic and adult stem cell technology in the field of regenerative medicine. The Company has acquired, developed and maintain a portfolio of patents and patent applications that form the base for its research and development efforts in the area of embryonic and adult stem cell research. The Company’s technology base, in combination with its know-how, provides an advantage and will facilitate the successful development and commercialization of products for use in the treatment of an array of chronic degenerative diseases and in regenerative repair of acute disease, such as trauma, myocardial infarction and burns. The Company’s embryonic stem (ES) cell research programs are divided into three core categories: cellular reprogramming, reduced complexity program and stem cell differentiation.

Advanced Cell Technology Inc. is headquartered in Worcester, Massachusetts.

Source: Reuters.com, SEC Filings.

Financial Summary

Revenue for the three months ended September 30, 2009, and 2008, was $248,141 and $242,195, respectively, which represents an increase of $5,946.  These amounts relate primarily to license fees and royalties collected that are being amortized over the period of the license granted, and are therefore typically consistent between periods. The increase in revenue during the three months ended September 30, 2009, was due to more new licenses being granted during the year as compared to the three months ended September 30, 2008.

Of the revenue recognized during the three months ended September 30, 2009, ACTC recognized $51,470 in license fee revenue from Transition Holdings, Inc. On December 18, 2008, the Company entered into a license agreement with Transition for certain of its non-core technology. Under the agreement, Transition agreed to acquire a license to the technology for a total of $3.5 million in cash. ACTC is recognizing revenue from this agreement over its 17-year patent useful life.

Research and development expenses (”R&D”) for the three months ended September 30, 2009, and 2008, were $700,818 and $1,434,896, respectively, a decrease of $734,078.  R&D consists mainly of facility costs, payroll and payroll related expenses, research supplies and costs incurred in connection with specific research grants, and for scientific research.  The decline in R&D expenditures during the three months ended September 30, 2009, as compared to the same period in 2008 is primarily due to the fact that ACTC has exercised efforts to reduce its operating expenditures.

Research and development expenses consist primarily of costs associated with basic and pre-clinical research exclusively in the field of human stem cell therapies and regenerative medicine, with focus on development of technologies in cellular reprogramming, reduced complexity applications and stem cell differentiation. These expenses represent both pre-clinical development costs and costs associated with non-clinical support activities such as quality control and regulatory processes. The cost of research and development personnel is the most significant category of expense; however, ACTC also incurs expenses with third parties, including license agreements, sponsored research programs and consulting expenses.

ACTC does not segregate research and development costs by project because its research is focused exclusively on human stem cell therapies as a unitary field of study. Although ACTC has three principal areas of focus for its research, these areas are completely intertwined and have not yet matured to the point where they are separate and distinct projects. The intellectual property, scientists and other resources dedicated to these efforts are not separately allocated to individual projects, but rather are conducting research on an integrated basis.

ACTC expects that research and development expenses will continue to increase in the foreseeable future as it adds personnel, expands its pre-clinical research, begins clinical trial activities, and increases its regulatory compliance capabilities. The amount of these increases is difficult to predict due to the uncertainty inherent in the timing and extent of progress in its research programs, and initiation of clinical trials. In addition, the results from basic research and pre-clinical trials, as well as the results of trials of similar therapeutics under development by others, will influence the number, size and duration of planned and unplanned trials. As research efforts mature, ACTC will continue to review the direction of its research based on an assessment of the value of possible commercial applications emerging from these efforts. Based on this continuing review, the Company expects to establish discrete research programs and evaluate the cost and potential for cash inflows from commercializing products, partnering with others in the biotechnology or pharmaceutical industry, or licensing the technologies associated with these programs to third parties.

ACTC believes that it is not possible at this stage to provide a meaningful estimate of the total cost to complete its ongoing projects and bring any proposed products to market. The use of human embryonic stem cells as a therapy is an emerging area of medicine, and it is not known what clinical trials will be required by the FDA in order to gain marketing approval. Costs to complete could vary substantially depending upon the projects selected for development, the number of clinical trials required and the number of patients needed for each study. It is possible that the completion of these studies could be delayed for a variety of reasons, including difficulties in enrolling patients, delays in manufacturing, incomplete or inconsistent data from the pre-clinical or clinical trials, and difficulties evaluating the trial results. Any delay in completion of a trial would increase the cost of that trial, which would harm results of operations. Due to these uncertainties, ACTC cannot reasonably estimate the size, nature nor timing of the costs to complete, or the amount or timing of the net cash inflows from its current activities. Until it obtains further relevant pre-clinical and clinical data, the Company will not be able to estimate future expenses related to these programs or when, if ever, and to what extent it will receive cash inflows from resulting products.

Grant reimbursements for the three months ended September 30, 2009, and 2008, were $0 and $0, respectively.  The Company did not receive any grant reimbursements during the three months ended September 30, 2009, or 2008.

Net loss for the three months ended September 30, 2009, and 2008, was $1,204,274 and $12,601,642, respectively. The change in loss in each period is the result of changes to the fair value of derivatives and interest charges related to convertible debentures, and during the three months ended September 30, 2009, is offset by the loss on extinguishment of convertible debentures and note.

Loss on settlement for the three months ended September 30, 2009, and 2008, was $110,000 and $740,849, respectively. On July 6, 2009, ACTC settled a lawsuit with an investor whereby we agreed to provide the investor with an additional $110,000 principal, which is to be upon the same terms and conditions as the original April 2008 debenture. Accordingly, ACTC recognized a loss on settlement in the amount of $110,000 during the three months ended September 30, 2009, for the amount of principal that was added to the April 2008 convertible debenture.

In September 2008, ACTC was ordered by the Circuit Court of the Twelfth Judicial District Court for Sarasosa County, Florida to settle certain past due accounts payable in the amount of $82,317 due to CEOCast Inc. for past due investor relations services. On September 29, 2008, the Company settled this account by issuing 16,463,302 shares of its common stock. The Company recorded a loss on settlement of $740,849 in its accompanying statements of operations for the three months ended September 30, 2008.

Other income (loss) for the three months ended September 30, 2009, and 2008, were ($79,987) and ($9,978,249), respectively, which represents an increase of $9,898,262 in income. The change in other income (loss) in the three months ended September 30, 2009, compared to that of the earlier period, relates primarily to adjustments to loss on extinguishment of convertible debentures and note, change in fair value of derivatives related to the debt financings, default interest charges on all debt, and amortization of debt issuance costs and debt discounts.

Source: Reuters.com, SEC Filings.

Analyst Consensus

No chart available.

Source: www.ft.com

No consensus analysis data available.

Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=ACTC.OB

Investment Highlights

ACTC this week announced that the U.S. Food and Drug Administration (FDA) has granted orphan drug designation for the Company’s MA09-hRPE cells for use in the treatment of Stargardt’s Macular Dystrophy (SMD). As a result, the Company is eligible to receive a number of benefits, including tax credits, access to grant funding for clinical trials, accelerated FDA approval and allowance for marketing exclusivity after drug approval for a period of as long as seven years.

U.S. orphan drug designation is granted to companies with products aimed at treatment of a rare disease or condition that affects fewer than 200,000 Americans. The National Institutes of Health (NIH) recently proposed broadening the definition of a human embryonic stem cell to include ACTC’s “single blastomere technology platform”, which was used to derive ACTC’s MA09-hRPE cells. The Company believes that the SMD program should be eligible for federal funding once the change is published in the Federal Register.

Degenerative diseases of the retina are among the most common causes of untreatable blindness in the world, and as many as ten million people in the United States have photoreceptor degenerative disease. While most of these patients have Age-Related Macular Degeneration (AMD), a smaller number have Stargardt’s, an Orphan disease, and to date an untreatable form of juvenile macular degeneration leading to blindness in a much younger group of patients than are affected by AMD. ACTC’s treatment for eye disease uses stem cells to re-create a type of cell in the retina that supports the photoreceptors needed for vision. These cells, called retinal pigment epithelium (RPE), are often the first to die off in SMD and AMD, which in turn leads to loss of vision. While there is currently no treatment for SMD, several years ago ACTC and its collaborators discovered that human embryonic stem cells could be a source of RPE cells. Subsequent studies found that the cells could restore vision in animal models of macular degeneration. In a Royal College of Surgeons (RCS) rat model, implantation of RPE cells resulted in 100% improvement in visual performance over untreated controls, without any adverse effects. The cells survived for more than 220 days and sustained extensive photoreceptor rescue. Functional rescue was also achieved in the ‘Stargardt’s’ mouse with near-normal functional measurements recorded at more than 70 days.

The U.S. National Institutes of Health (NIH) is proposing to extend the human embryonic stem cell (human ES cell) lines eligible for federal funding to include those from earlier-stage embryos than currently allowed. In an online notice on February 19, the agency proposed revising its definition of fundable human ES cell lines to include lines derived from embryos “up to and including the blastocyst stage”. By contrast, the current guidelines, published last summer, define human ES cells as cells derived from “the inner cell mass of blastocyst stage human embryos”. The proposed change to the rules will be out for public consultation for 30 days from February 23 when it is formally published in the Federal Register, which publishes government notices.

Source: http://www.advancedcell.com/

Technical Analysis

Source: http://stockcharts.com

ACTC is trading above its 50-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

ACTC is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

The MACD for ACTC currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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