UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 20182021
☐ 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 001-31392
| PLURISTEM THERAPEUTICS INC. |
| (Exact name of registrant as specified in its charter) |
| Nevada | 98-0351734 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
MATAM Advanced Technology Park, Building No. 5, Haifa, Israel | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number 011-972-74-7107259011-972-74-7108600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Common Shares, par value $0.00001 | PSTI | The Nasdaq |
Securities registered pursuant to Section 12(g) of the Act:
| None. |
| (Title of class) |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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).
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“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ |
| Smaller reporting company | ☒ | Emerging growth company | ☐ |
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 pursuant to Section 13(a) of the Exchange Act. Indicate☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant'sregistrant’s most recently completed second fiscal quarter.
$174,929,346
Indicate the number of shares outstanding of each of the registrant'sregistrant’s classes of common stock,shares, as of the latest practicable date.
32,004,785 as of September 2, 20183, 2021
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
Page | ||
| Item 1. | Business | 1 |
| Item 1A. | Risk Factors | 14 |
| Item 1B. | Unresolved Staff Comments | 32 |
| Item 2. | Properties | 32 |
| Item 3. | Legal Proceedings | 32 |
| Item 4. | Mine Safety Disclosures | 32 |
| PART II | 33 | |
| Item 5. | ||
| [Reserved] | 33 | |
| Item 7. | ||
| Item 7A. | ||
| Item 8. | ||
| Item 9. | ||
| Item 9A. | ||
| Other Information | 41 | |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 41 |
| PART III | 42 | |
| Item 10. | ||
| Executive Compensation | 49 | |
| Item 12. | ||
| Item 13. | ||
| Item 14. | ||
| PART IV | 63 | |
| Item | Exhibits | 63 |
| Item 16. | Form 10-K |
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Our financial statements are stated in thousands United States Dollars or US$, and are prepared in accordance with United States Generally Accepted Accounting Principles, or U.S. GAAP.
In this annual report, unless otherwise specified, all dollar, amounts are expressed in U.S. dollars.
As used in this annual report, the terms "we"“we”, "us"“us”, "our"“our”, "the Company"the “Company”, and "Pluristem"“Pluristem” mean Pluristem Therapeutics Inc., and our wholly owned Israeli subsidiary and the wholly owned subsidiary of our Israeli subsidiary in Germany, unless otherwise indicated or required by the context.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K, or Annual Report that are not historical facts are "forward-looking statements"“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "intends," "plans," "expects," "may," "will," "should,"“believes,” “intends,” “plans,” “expects,” “may,” “will,” “should,” or "anticipates"“anticipates” or the negative thereof or other variations thereon or comparable terminology, and similar expressions are intended to identify forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements, or industry results, expressed or implied by such forward-looking statements. Such forward-looking statements appear in Item 1 – "Business"“Business” and Item 7 – "Management's“Management’s discussion and Analysis of Financial Condition and Results of Operations,"” (especially in the section titled "Outlook"“Outlook”) as well as elsewhere in this Annual Report and include, among other statements, statements regarding the following:
| the expected development and potential benefits from our products in treating various medical conditions; |
| our plan to execute our strategy independently, using our own personnel, and through relationships with research and clinical institutions or in collaboration with other companies; |
| our entering into certain contracts with third parties; |
| ● | the prospects of entering into additional license agreements, or other forms of cooperation with other companies and medical institutions; |
| our pre-clinical and clinical trials plans, including timing of initiation, enrollment and conclusion of trials; |
| the expected timing of the release of data from our various studies; |
| ● | achieving regulatory approvals, including under accelerated paths; |
| receipt of future funding from the Israel Innovation |
ii
| the receipt of funds pursuant to our agreement with the European Investment Bank, or the EIB Finance Agreement and EIB, respectively, and whether we will achieve the milestones necessary to receive funds thereunder; |
| ● | our marketing plans, including timing of marketing our |
| developing capabilities for new clinical indications of placenta expanded (PLX) cells and new products; |
| our plan for the |
| our estimations regarding the size of the global market for our product candidates; |
| our expectations regarding our production |
| our expectation to demonstrate a real-world impact and value from our pipeline, technology platform and commercial-scale manufacturing capacity; |
| our expectations regarding our short- and long-term capital requirements; |
| our outlook for the coming months and future periods, including but not limited to our expectations regarding future revenue and expenses; |
| information with respect to any other plans and strategies for our |
| ● | our expectations regarding the impact of the COVID-19 pandemic, including on our clinical trials and operations. |
The factors discussed herein, including those risks described in Item 1A. "Risk Factors"“Risk Factors”, and expressed from time to time in our filings with the Securities and Exchange Commission, or SEC, could cause actual results and developments to be materially different from those expressed in or implied by such statements. In addition, historic results of scientific research, clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not suggest different conclusions. Also, historic results referred to in this Annual Report would be interpreted differently in light of additional research, clinical and preclinical trials results. The forward-looking statements are made only as of the date of this filing, and except as required by law we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
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PART I
Item 1.
Business.Our Current Business
We are a biotechnology company focused in the field of regenerative medicine, and a leading developer of placenta-based cell therapy product candidates for the treatment of multiple ischemic, inflammatory, muscle injuries and hematologic conditions. Our lead indications are critical limb ischemia, or CLI, recovery following surgery for hip fracture, and acute radiation syndrome, or ARS. Each of these indications is a severe unmet medical need. We were incorporated in Nevada in 2001, and have a wholly owned subsidiary in Israel called Pluristem Ltd., or the Subsidiary. We operate in one segment and our operations are focused on the research, development, manufacturing, conducting clinical trials and manufacturingbusiness development of cell therapeutics and related technologies.
Placental expanded, or PLX, cells are derived from a class of placental cells that are harvested from donated placenta at the time of full term healthy delivery of a baby. PLX cell products require noThe cells are grown using our proprietary three-dimensional expansion technology and can be administered to patients off the-shelf, without blood or tissue matching prior to administration. TheyPLX cells are produced using our proprietary three-dimensional expansion technology. believed to release a range of therapeutic proteins in response to the patient’s condition, such as inflammation, muscle trauma, hematological disorders and radiation damage.
We are conducting several multinational clinical studies which consist of a Phase III clinical study in muscle recovery following surgery for hip fracture and two Phase II clinical studies in Acute Respiratory Distress Syndrome, or ARDS, associated with COVID-19 in the United States, Europe and Israel. In addition, we are focusing on other clinical programs in the hematological field such as a Phase I clinical study for incomplete recovery following bone marrow transplantation in the United States and Israel, an investigator-led Phase I/II Chronic Graft versus Host Disease, or cGVHD, study in Israel, and Acute Radiation Syndrome, or ARS, under the U.S. Food and Drug Administration, or FDA, animal rule. We believe that each of these indications is a severe unmet medical need.
Our manufacturing facility complies with the European, Japanese, Israeli, South Korean and U.S. Food and Drug Administration, orthe FDA’s current Good Manufacturing Practice, or cGMP, requirements and has been inspected and approved by the European and Israeli regulators for production of PLX-PAD for late stage trials and marketing. In December 2017, after an audit of our facilities, we weretrials. We have also been granted manufacturer/importer authorization and Good Manufacturing PracticecGMP Certification by Israel’sthe Israeli Ministry of Health.Health, or MOH. If we obtain FDA and other regulatory approvals to market PLX cells, we expect to have in-house production capacity to grow clinical-grade PLX cells in commercial quantities.
Our goal is to make significant progress with our robust clinical pipeline and our anticipated pivotal trialsclinical studies in order to ultimately bring innovative, potent therapies to patients who need new treatment options. We expect to demonstrate a real-world impact and value from our pipeline, technology platform and commercial-scale manufacturing capacity. Our business model for commercialization and revenue generation includes, but is not limited to, licensing deals, joint ventures with pharmaceutical companies, direct sale of our products, partnerships, licensing deals, and joint ventures with pharmaceutical companies.partnerships.
We aim to shortenwere incorporated in Nevada in 2001, and we have a wholly owned subsidiary in Israel called Pluristem Ltd., or the time to commercialization of our product candidates by leveraging unique accelerated regulatory pathways that existIsraeli Subsidiary, and a wholly owned subsidiary in the United States, Europe and Japan to bring innovative products that address life-threatening diseases to the market efficiently. We believe that these accelerated pathways create substantial opportunities for us and for the cell therapy industry as a whole.Germany called Pluristem GmbH.
Scientific Background
Cell therapy is an emerging field within the regenerative medicine area. The characteristics and properties of cells vary as a function of tissue source and growth conditions. The human placenta from which our PLX cells are derived provides an uncontroversial source of non-embryonic, adult cells and represents an innovative approach in the cell therapy field. The different factors that PLX cells release suggest that the cells can be used therapeutically for a variety of ischemic, inflammatory, autoimmune and hematological disorders.deficiencies.
PLX cells do not require tissue matching prior to administration. Thisadministration, which allows for the development of ready-to-use / "off-the-shelf"“off-the-shelf” allogeneic products.
Our Technology
We develop, and intend to commercialize, cell therapy production technologies and products that are derived from the human placenta.placenta after a full-term delivery of a healthy baby. Our PLX cells are adherent stromal cells or ASCs, that are expanded using a proprietary three-dimensional, or 3D, process. This system utilizes a synthetic scaffold to create an artificial 3D environment where placental-derived stromal cells can grow. Our automated proprietary 3D, cGMP approved, process enables the large-scale monitored and controlled production of reproducible, high quality cell products and is capable of manufacturingcan manufacture a large number of PLX doses originating from different placentas.doses. Additionally, our current manufacturing process, which has scaled up as compared to previous years, has demonstrated batch-to-batch consistency, an important manufacturing challenge for biological products.
Product Candidates
Our primary objective is to be the leading provider of allogeneic placenta basedplacenta-based cell therapy products that are true off-the-shelf products that do not require any matching or additional manipulation prior to administration. From the physician’s and patient’s perspective, we believe that our PLX products are comparable to any other product delivered in a vial. OurCurrently, our PLX products are administered intramuscular, or IM, using a standard needle and syringe. Our PLX products are in clinical stage development for multiple indications.
PLX-PAD
Our first product candidate, PLX-PAD, is composed of maternal cells originating from the placenta. PLX-PAD is currently being used in a Phase III multinational clinical trial in CLI, and in a Phase III multinational clinical trialstudy in recovery following surgery for hip fracture.fracture, and in two Phase II clinical studies in ARDS associated with COVID-19 in the United States, Europe and Israel.
We have also conducted a pivotal Phase III multinational clinical study in the use of PLX-PAD for the treatment of Critical Limb Ischemia, or CLI, which we terminated in December 2020, and in a Phase II multinational clinical study in Intermittent Claudication, or IC.
PLX-PAD is also under clinical development in collaboration with Tel Aviv Sourasky Medical Center (Ichilov Hospital) through an investigator initiated study, and used in a Phase I/II for the treatment of Steroid-Refractory cGVHD.
PLX-R18
Our second product candidate, PLX-R18, is under developmentcomposed of fetal cells originated from the placenta.
We have completed enrollment in the United States for ARS via the FDA Animal Rule regulatory pathway, as well asour first in ahuman Phase I trialclinical study in the United States and Israel for incomplete hematopoietic recovery following hematopoietic cell transplantation, or HCT.HCT, in the United States and Israel.
Through our collaboration in the United States with the National Institutes of Health, or NIH, and the U.S. Department of Defense, or DoD, we are also developing a solution for ARS following or before exposure to massive radiation via the FDA Animal Rule regulatory pathway.
Modified PLX cells
In the last decade, we developed an allogeneic platform based on cells originated from the fetal and maternal cell from the placenta, and by using this platform we can produce large quantities of high-quality cells in automated and robust manufacturing suitable for cGMP environment. As a platform technology company, we are currently developing additional product candidates, which are modified or induced PLX cells:
Induced PLX cells: we are using cells from the placenta, induced with inflammatory cytokines, to transiently alter their secretion profile.
Modified PLX cells using CRISPR technology: CRISPR is a unique technology that opens the door for precise gene editing of cells. Using such technology can initiate the next evolution in cell therapy by allowing the reprograming of cells for specific needs. Our third product candidate, PLX-Immuneaim is under pre-clinical developmentto incorporate the genetic engineering techniques into our cell manufacturing platform in order to develop large scale allogenic engineered PLX products designed for treatment of certain human cancer types.specific indications.
We believe that using the placenta as a unique cell source, combined with our innovative research, development and high qualityhigh-quality manufacturing capabilities, will be the "engine"“engine” that drives this platform technology towards the successful development of additional PLX cell therapy products and indications.
Our Clinical Development Product Candidates
Orthopedic Indications. Following FDA and several EU regulatory agencies cleared our application to begin the pivotal Phase III trial of PLX-PAD cells in the treatment of CLI for patients who are unsuitable for revascularization. ThisEuropean Medicine Agency, or EMA, clearance, a multinational Phase III trialstudy is being conducted in the United States, Europe and Israel. In September 2017, we announced that the FDA granted a fast track designation to our ongoing Phase III study of PLX-PAD cells for the treatment of CLI in patients ineligible for revascularization. The FDA’s fast track designation is a process designed to facilitate the development and expedite the review of drug to treat serious conditions and unmet medical needs. With fast track designation, there is an increased possibility for a priority review by the FDA of PLX-PAD cells for the treatment of CLI.
Our Phase III trialstudy protocol and design was based on our phase I/II, randomized, double-blind, placebo‑controlledplacebo-controlled study (n=20) to assess the safety and efficacy of intramuscularIM injections of allogeneic PLX‑PADPLX-PAD cells for the regeneration of injured gluteal musculature after total hip replacement hashad been conducted in Germany under the approval of PEI. In this study, PLX-PAD cells or placebo were injectedadministered into the traumatized gluteal muscle during total hip replacement surgery. The study results met its primary efficacy endpoint, change in maximal voluntary isometric contraction force of the gluteal muscle at six months after total hip replacement. Patients treated with PLX-PAD had a significantly greater improvement of maximal voluntary muscle contraction force than the placebo group (p=0.0067). In addition, the study demonstrated that PLX-PAD was safe and well tolerated by patients.
COVID-19 Complicated by ARDS. In May 2020, the FDA cleared our Investigational New Drug Application, or IND, for a Phase II study of our PLX-PAD cells for treatment of severe COVID-19 cases complicated by ARDS and we initiated the study in June 2020. The U.S. study is a randomized, double-blind, placebo-controlled, multicenter, parallel-group intended to evaluate the efficacy and safety of IM injections of PLX-PAD for the treatment of severe COVID-19 cases complicated by ARDS. The primary endpoint is the number of ventilator free days during the 28-days following dosing. Secondary efficacy endpoints include all-cause mortality, duration of mechanical ventilation, ICU free-days, and hospitalization free-days. Safety and survival follow-up will be conducted until week 52. In addition, the FDA has cleared our Expanded Access Program, or EAP, for the use of our PLX-PAD cells to treat ARDS caused by COVID-19 outside of the Phase II COVID-19 complicated by ARDS study in the United States. The EAP approval was for up to 100 patients.
In August 2020, the PEI cleared our Phase II study in Germany titled, “A Randomized, Controlled, Multicenter, Parallel-Group Phase II Study to Evaluate the Efficacy and Safety of Intramuscular Injections of PLX PAD for the Treatment of severe COVID-19,” relating to the treatment of patients hospitalized with severe cases of COVID-19 complicated by ARDS. The primary efficacy endpoint of the study is the number of ventilator free days during the 28-days from day one through day 28 of the study. Secondary efficacy endpoints include all-cause mortality, duration of mechanical ventilation, ICU free-days, and hospitalization free-days. Safety and survival follow-up will be conducted until week 52. We enrolled patients in Europe and Israel under this protocol.
On July 8, 2021, we announced that we are bringing our COVID-19 complicated by ARDS Phase II studies in the United States, Europe and Israel to clinical readout. The analysis will be based on 89 patients enrolled. We expect to announce the topline results of the readout during the fourth quarter of 2021. We also announced that we will not pursue the previously announced plans in December 2020 to expand our COVID-19 program in Mexico in collaboration with Innovare R&D SA de CV.
Recovery following Hematopoietic cell transplantation, orFollowing HCT. This Phase I study of PLX-R18 in HCT, – In March 2015, we reported positive data from three independent preclinical studieshas completed enrollment of 21 patients in the United States and Israel. The study is designed to assess the safety of PLX-R18 by assessing adverse events, safety labs and vital signs in patients receiving different doses of PLX-R18. Results from these trials, as well as those from nineteen prior studies conducted by the NIAID, Case Western University, Cleveland, Ohio, and Hadassah Medical Center, Jerusalem, Israel, collectively suggest that PLX-R18 is safe and may improve outcomes after bone marrow failure and/or support hematopoietic cell transplantation. Data collected on the mechanismWe expect to complete one year follow up for all patients in September 2021. In April 2021, we announced topline results of action show that PLX-R18 acts by enhancing production of platelets and white and red blood cells in cases of severely damaged bone marrow, and may also accelerate engraftment of transplanted hematopoietic cells. With these capabilities, PLX-R18 could potentially treat a broad range of indications related to bone marrow function which, taken together, constitute a substantial global market.
Data from the six-month follow-up were available for incomplete hematopoietic recovery following HCT.14 of the 21 treated patients and demonstrated that (i) PLX-R18 was well-tolerated with a favorable safety profile; (ii) statistically significant improvement from baseline counts was observed in all cohorts for hemoglobin and platelet counts (p<0.05) and the patients in the high dose arm (4 million cells/kg) exhibited statistically significant improvements in all three blood cell lineages (p<0.01); (iii) approximately 60% of patients exhibited improvements in all three blood cell lineages: hemoglobin, neutrophil and platelet counts that are above the initial criteria for inclusion in the study and (iv) 13 patients were transfusion dependent at baseline; six of those became transfusion independent at 6 month follow-up and no patients who were transfusion independent at baseline became transfusion dependent.
Peripheral and Cardiovascular Diseases. We investigated the use of PLX-PAD cells for the treatment of peripheral arterial disease, or PAD, including IC and CLI.
We initiated the trial in fiscal year 2017completed two Phase I safety/dose-escalating clinical studies for CLI, one in the United States. In October 2017, we received an approval fromStates and one in Germany. These CLI studies demonstrated that no blood type or human leukocyte antigen matching is required, and that the Israeli Ministryadministration of HealthPLX-PAD cells is safe, even if two doses are administered to initiate thisa patient on two different occasions.
We conducted a pivotal Phase I trial in Israel as well. In February 2018, we announced that a peer-reviewed journal published key animal findings from aIII study of PLX-R18PLX-PAD cells in the treatment of CLI for patients with minor tissue loss (Rutherford Category 5) who are unsuitable for revascularization. This multinational Phase III study was conducted in the United States, Europe and Israel and enrolled 213 patients in total.
In December 2020, the independent Data Monitoring Committee, or DMC, issued its recommendation letter following an interim analysis relating to the CLI Phase III study. A clinical dataset was reviewed by the independent DMC for safety and analysis of the primary endpoint of amputation-free survival, defined as time to occurrence of major amputation of the index leg or death. Based on the review, the DMC concluded that demonstrate the cells’ efficacy in improving human hematopoietic engraftment.CLI study was unlikely to meet the primary endpoint by the time of the final analysis. Following the DMC’s recommendation, we decided to terminate the CLI study.
ARS –
We plan to continue the discussions with the different government agencies with the goal of receiving their support for pivotal studies in large animalsNHPs as well as conducting the safety studies required in order to file BLA for this indication.
In AugustOctober 2017, we announced that a pilot study ofthe FDA granted us an orphan drug designation for our PLX-R18 cell therapy will be initiated byfor the U.S. Departmentprevention and treatment of Defense’s Armed Forces Radiobiology Research Institute, part of the Uniformed Services University of Health Sciences. The study will examine the effectiveness of PLX-R18 as a treatment for ARS prior to, and within the first twenty four hours of, exposure to radiation.ARS.
In April 2018, we announced that the FDA approved our IND application for PLX-R18 cell therapy in the treatment of ARS. The IND allows us to treat victims who may have been acutely exposed to high dose radiation due to nuclear attack or accident.
In December 2015, we also signed a Memorandummemorandum of Understandingunderstanding, or MOU, for a collaboration with Fukushima Medical University, Fukushima Global Medical Science Center. The purpose of the collaboration is to develop our PLX-R18 cells for the treatment of ARS, and for morbidities following radiotherapy in cancer patients. In August 2017, we announced that a pilot study of our PLX-R18 cell therapy will be initiated by the U.S. Department of Defense’s Armed Forces Radiobiology Research Institute, part of the Uniformed Services University of Health Sciences. The studies are examining the effectiveness of PLX-R18 as a treatment for ARS prior to exposure to radiation. In June 2018, we reported positive animal data from studies conducted in collaboration with Fukushima Medical University evaluating PLX-R18 cells as a treatment for radiation damage to the gastrointestinal, or GI, tract and bone marrow. Data from these studies showed that PLX-R18 cells significantly increased survival rates, preserved GI stem cells activity that enhance the recovery of the GI system and prevented severe damage to the intestinal lining, suggesting PLX-R18 potential as a multi-organ therapy for ARS.
In October 2017,July 2019, we announced that the FDA granted us an orphan drug designation forpresented positive results from a series of studies of our PLX-R18 cell therapy forproduct conducted by the prevention and treatment of ARS.
Steroid-Refractory cGVHD. In September 2017, we signed an agreement with Tel Aviv Sourasky Medical Center (Ichilov Hospital) to conduct a clinical Phase I/II trialclinical study of PLX-PAD cell therapy for the treatment of Steroid-Refractory Chronic Graft-Versus-Host-Disease.cGVHD. This trialstudy is an investigator initiatedinvestigator-initiated study.
Regulatory and Clinical Affairs Strategy
Our cell therapy development strategy is to hold open and frequent discussions with regulators at all stages of development from preclinical trialsstudies to more advanced regulatory stages. We utilize this strategy in working with the FDA, the EMA, Japan’s PMDA, Germany’s PEI as well as other European national competent authorities, the MOH, Japan’s Pharmaceuticals and the Israeli Minister of Health,Medical Devices Agency, or MOH,PMDA, and we are also working with the Ministry of Food and Drug Safety, or MFDS, of South Korea authority via our collaborator, CHA.Korea.
Intellectual Property
We understand that our success will depend, in part, on maintaining our intellectual property, and therefore we are committed to protecting our technology and product candidates with patents and other methods described below.
We are the sole owner of 119133 issued patents and 93approximately 70 pending patent applications in the United States, Europe, China, Japan and Japan,Israel, as well as in additional countries worldwide, including Israel, countries in the Far East and South America (in calculating the number of issued patents, each European patent validated in multiple jurisdictions was counted as a single patent).
In April 2016, the SubsidiaryIsraeli subsidiary entered into a licensing agreement with TES Holdings Co., Ltd., a venture company derived from the University of Tokyo, to obtain a key patent in Japan to cover the treatment of ischemic diseases with placental cell therapy. This license is subject to future single low-digit royalties from sales of our product for treatment in the field of ischemic diseases in Japan, until expiry of the patent in 2023. This license followsis in addition to the grant of two key13 patents to us by the Japanese Patent Office, which address three dimensional methods for expanding placental and adipose cells, and specified cell therapies produced from placental tissue using these methods. methods and bedside thawing devices.
In February 2017, the Israeli Subsidiary signed an agreement with founders of a certain patent for a five yearfive-year option to purchase thea certain patent for an amount of 1 million Euro.€1 million. The agreement includes yearly payments of 75,000, 75,000€75,000, €75,000 and 100,000 Euros to be paid€100,000 in February 2017, 2018 and 2019, respectively. In case we decide to purchase the certain patent, until January 15, 2019, 50% of the yearly payments will be deducted from the amount of 1 million Euro.respectively, which have been paid. We are entitled to terminate the agreement for convenience upon providing the founders 30 days prior notice.
In April 2019, we filed a U.S. provisional patent application titled “Methods and Compositions for Producing Cannabinoids,” which covers the use of our state-of-the-art, proprietary 3D cell culturing technology for the potential manufacturing of cannabinoid-producing cells. In April 2020, we filed a Patent Cooperation Treaty, or PCT, application with respect to the technology. In June 2021, national or regional phase applications of the PCT were filed in the United States, Europe, Japan, Canada, and Israel.
In March 2020, we filed a U.S. provisional patent application titled “Methods and Compositions for Treating Viral Infections and Sequelae Thereof,” which covers the use of placental adherent stromal cells for treating coronavirus infections and sequelae thereof. In May 2020, a related Israeli patent application was filed, which was allowed in March 2021. In March 2021, a PCT application as well as national applications were filed in the United States and Israel. In June 2021, national or regional phase applications of the PCT were filed in Europe and Mexico.
Based on the well-established understanding that the characteristics and therapeutic potential of a cell product are largely determined by the source of the cells and by the methods and conditions used during their culturing, our patent portfolio includes different types of claims that protect the various unique aspects of our technology.
Our multi-national portfolio of patent and patent applications includes the following claims:
Through our experience with ASC-basedadherent stromal cell based product development, we have developed expertise and know-how in this field and have established procedures for manufacturing clinical-grade PLX cells in our facilities. Certain aspects of our manufacturing process are covered by patents and patent applications. In addition, specific aspects of our technology are retained as know-how and trade secrets that are protected by our confidentiality agreements with our employees, consultants, contractors, manufacturers and advisors. These agreements generally provide for protection of confidential information, restrictions on the use of materials, and an obligation to assign to us inventions conceived during the course of performing services for us.
The following table provides a description ofsets forth our key patents and patent applications and is not intended to represent an assessment of claims, limitations or scope. In some cases, a jurisdiction is listed as both pending and granted for a single patent family. This is due to pending continuation or divisional applications of the granted case.
The expiration dates of these patents, based on filing dates, range from 2027 to 2041. Actual expiration dates will be determined according to extensions received based on the Drug Price Competition and Patent Term Restoration Act of 1984 (P.L. 98-417), commonly known as the “Hatch-Waxman” Act, that permits extensions of pharmaceutical patents to reflect regulatory delays encountered in obtaining FDA market approval. The Hatch-Waxman Act is based on a U.S. federal law and therefore only relevant to U.S. patents.
There is a risk that our patents will be invalidated, and that our pending patent applications will not result in issued patents. We also cannot be certain that we will not infringe on any patents that may be issued to others. See "Risk“Risk Factors - We must further protect and develop our technology and products in order to become a profitable company". The expiration dates of these patents, based on filing dates, range from 2020 to 2036.company.”
Our Patent Portfolio
| Patent Name/ Int. App. No. | |||||||
| Granted Jurisdictions | Expiry Date | ||||||
METHODS FOR CELL EXPANSION AND USES OF CELLS AND CONDITIONED MEDIA PRODUCED THEREBY FOR THERAPY PCT/IL2007/000380 | China, Hong Kong | Australia, Canada, China, Hong Kong, | March 23, 2027 | ||||
ADHERENT CELLS FROM PLACENTA TISSUE AND USE THEREOF IN THERAPY PCT/IL2008/001185 | United States, Israel | Australia, Brazil, Canada, China, Europe, | United States, | September 2, 2028 | |||
METHODS OF TREATING INFLAMMATORY COLON DISEASES PCT/IL2009/000527 | United States, Israel, Russia | May 26, 2029 | |||||
METHODS OF SELECTION OF CELLS FOR TRANSPLANTATION PCT/IL2009/000844 | Europe, Israel | September 1, 2029 | |||||
ADHERENT CELLS FROM PLACENTA TISSUE AND USE THEREOF IN THERAPY PCT/IL2009/000846 | Australia, Canada, China, Europe, Hong Kong, | Israel, India, Mexico, Russia, Singapore, United States | September 1, 2029 |
ADHERENT CELLS FROM PLACENTA TISSUE AND USE THEREOF IN THERAPY PCT/IL2009/000845 | United States, Europe, Israel | September 1, 2029 | |||||
ADHERENT STROMAL CELLS DERIVED FROM PLANCENTAS OF MULTIPLE DONORS AND USES THEREOF PCT/IB2011/001413 | United States | Israel | Israel: April 21, 2031 U.S: March 22, 2027 | ||||
ADHERENT CELLS FROM PLACENTA AND USE OF SAME IN DISEASE TREATMENT PCT/IB2010/003219 | United States, Israel | Australia, Canada, China, Hong Kong, Europe, Israel, | November 29, 2030 |
METHODS AND SYSTEMS FOR HARVESTING ADHERENT STROMAL CELLS PCT/IB2012/000933 | China, Israel | Australia, Canada, Europe, | April 15, 2032 | ||||
METHODS FOR TREATING RADIATION OR CHEMICAL INJURY PCT/IB2012/000664 | United States | Europe, Hong Kong, Israel, | March 22, 2032 | ||||
SKELETAL MUSCLE REGENERATION USING MESENCHYMAL STEM CELLS PCT/EP2011/058730 | United States, Europe, Israel | May 27, 2031 | |||||
GENE AND PROTEIN EXPRESSION PROPERTIES OF ADHERENT STROMAL CELLS CULTURED IN 3D PCT/IB2014/059114 | Israel, United States | February 20, 2034 | |||||
DEVICES AND METHODS FOR CULTURE OF CELLS PCT/IB2013/058184 | United States, | August 31, 2033 | |||||
METHODS FOR PREVENTION AND TREATMENT OF PREECLAMPSIA PCT/IB2013/058186 | China, | Europe, Israel, Japan, South Korea, United States | August 31, 2033 |
METHOD AND DEVICE FOR THAWING BIOLOGICAL MATERIAL PCT/IB2013/059808 | China | Australia, Europe, | October 31, 2033 | ||||
SYSTEMS AND METHODS FOR GROWING AND HARVESTING CELLS PCT/IB2015/051559 | Israel, United States | March 3, 2035 | |||||
METHODS AND COMPOSITIONS FOR TREATING AND PREVENTING MUSCLE WASTING DISORDERS PCT/IB2015/059763 | Israel, United States | December 18, 2035 | |||||
USE OF ADHERENT STROMAL CELLS FOR ENHANCING HEMATOPOIESIS IN A SUBJECT IN NEED THEREOF PCT/IB2016/051585 | United States, China, Israel | March 21, 2036 | |||||
ALTERED ADHERENT STROMAL CELLS AND METHODS OF PRODUCING AND USING SAME PCT/IB2016/053310 | Europe, China, Israel | United States | June 6, 2036 | ||||
METHODS AND COMPOSITIONS FOR TREATING CANCERS AND NEOPLASMS PCT/IB2017/050868 | United States, Japan, Canada, Australia, Israel | Europe | February 16, 2037 | ||||
METHODS AND COMPOSITIONS FOR TREATING NEUROLOGICAL DISORDERS PCT/IB2018/052806 | Israel, United States | April 23, 2038 | |||||
METHODS AND COMPOSITIONS FOR TUMOR ASSESSMENT PCT/IB2018/050984 | United States, Israel | February 18, 2038 | |||||
METHODS AND COMPOSITIONS FOR TREATING ADDICTIONS PCT/IB2018/055473 | Israel, United States | July 23, 2038 |
METHODS AND COMPOSITIONS FOR DETACHING ADHERENT CELLS Germany 10 2018 115 360.0 | Germany | June 25-July 3, 2038 | ||||
| DRUG CONTAINING HUMAN PLACENTA-ORIGIN MESENCHYMAL CELLS AND PROCESS FOR PRODUCING VEGF USING THE CELLS JP20030579842 | Japan | March 28, 2023 | ||||
| METHODS AND COMPOSITIONS FOR PRODUCING CANNABINOIDS | PCT, Canada, Europe, Israel, Japan, United States | April 28, 2040 | ||||
METHODS FOR EXPANDING ADHERENT STROMAL CELLS AND CELLS OBTAINED THEREBY PCT/IB2019/052569 | Israel, Singapore, United States | March 28, 2039 | ||||
METHODS AND COMPOSITIONS FOR TREATING SUBJECTS EXPOSED TO VESICANTS AND OTHER CHEMICAL AGENTS PCT/IB2019/055074 | Israel, United States | June 18, 2039 | ||||
METHODS AND COMPOSITIONS FOR FORMULATING AND DISPENSING PHARMACEUTICAL FORMULATIONS PCT/IB2019/053115 | United States | Israel | United States: April 16, 2039 Israel: April 26, 2038 | |||
THERAPEUTIC DOSAGE REGIMENS COMPRISING ADHERENT STROMAL CELLS PCT/IB2019/054828 | Israel, United States | June 10, 2039 | ||||
MODULAR BIOREACTOR PCT/IB2019/058429 | Europe, Israel, South Korea, Singapore, United States | October 3, 2039 | ||||
THERAPEUTIC METHODS AND COMPOSITIONS PCT/IB2019/059544 | Israel, United States | November 6, 2039 | ||||
METHODS AND COMPOSITIONS FOR TREATING VIRAL INFECTIONS AND SEQUELAE THEREOF PCT/IL2021/050268 | PCT, United States, Europe, Israel, Mexico | Israel | First Israeli application: May 14, 2040 Other applications: March 11, 2041 | |||
METHODS AND COMPOSITIONS FOR AESTHETIC AND COSMETIC TREATMENT AND STIMULATING HAIR GROWTH PCT/IL2020/050363 | PCT, United States, Europe, Canada, China, Japan, Israel, Australia | March 26, 2040 | ||||
METHODS FOR EXPANDING ADHERENT STROMAL CELLS AND CELLS OBTAINED THEREBY IL277560 | Israel | September 23, 2040 |
Research and Development
Foundational Research
Our initial technology, the PluriX™ Bioreactor system, was invented at the Technion -– Israel Institute of Technology'sTechnology’s Rappaport Faculty of Medicine, in collaboration with researchers from the Weizmann Institute of Science. This technology was acquired by us and has been further significantly developed by our research and development teams over the ensuing years.
Collaborations and Ongoing Research and Development Plans
Charité Agreement
In July 2007, we entered into a five-year collaborative research agreement with the Berlin-Brandenburg Center for Regenerative Therapies at Charité -– University Medicine Berlin, or Charité. In August 2012, we, which was extended our collaborative research agreement with Charité for a period of five years through 2017. In June 2017, we extended our collaborative research agreement with Charité for a period of additional five 5 years,from time to time through June 2022. We and Charité are collaborating on a variety of indications utilizing PLX cells. According to the agreement, we will be the exclusive owner of the technology and any products produced as a result of the collaboration. Charité will receive between 1% to 2% royalties from net sales of new developments that have been achieved during the joint development.
Fukushima Medical University
We signed an MOU for a collaboration with Fukushima Medical University, Fukushima Global Medical Science Center. The purpose of the collaboration is to develop Pluristem'sPluristem’s PLX-R18 cells for the treatment of ARS, and for morbidities following radiotherapy in cancer patients.
CHA Agreement
On June 26, 2013, we entered into an exclusive out-licensing and commercialization agreement, or the CHA Agreement, with CHA for conducting clinical trialsstudies and commercialization of our PLX-PAD product candidate in South Korea in connection with two indications: the treatment of CLI and IC. We will continue to retain rights to our proprietary manufacturing technology and cell-related intellectual property.
The first clinical study that was performed as part of the CHA Agreement was a Phase II trialstudy in IC. Upon the first regulatory approval for a PLX product in South Korea, if granted, for the specified indications, we and CHA will establish an equally owned joint venture with the purpose of commercializing PLX cell products in South Korea. Additionally, we will be able to use the data generated by CHA to pursue the development of PLX product candidates outside of South Korea.
The term of the CHA Agreement extends from June 24, 2013 until the later of the expiration, lapse, cancellation, abandonment or invalidation of the last valid patent claim covering the development of the product indications. The CHA Agreement contains customary termination provisions, including in the event that the parties do not reach an agreement upon a development plan for conducting the clinical trials.studies.
Upon termination of the CHA Agreement, the license granted thereunder will terminate, and all rights included therein will revert to us, whereupon we will be free to enter into agreements with any other third parties for the granting of a license in or outside South Korea or to deal in any other manner with such rights as it shall see fit in our sole discretion.
Horizon 2020
The Phase III study of PLX-PAD in CLI was conducted as a collaborative project carried out by an international consortium led by the Berlin-Brandenburg Center for Regenerative Therapies, together with the Company and with the participation of additional third parties.
Our Phase III study of PLX-PAD cell therapy in the treatment of muscle recovery following surgery for hip fracture is a collaborative project carried out by an international consortium led by Charité, together with us and with the participation of additional third parties.
In October 2017, we entered into a collaborative project, the nTRACK, carried out by an international consortium led by Leitat. The aim of this project is to examine gold nano particles labeling of stem cells to enable assessment of cells’ in vivo persistence and distribution in correlation to biological efficacy. Under the project, PLX cells, labeled and non-labeled will be characterized and examined in animal models for muscle injury.
Indiana University
In April 2018, NIAID awarded a $2.5 million grant to Indiana University to conduct, together with us, studies of our PLX-R18 cell therapy in the treatment of ARS. The goal of this project is to extend the PLX-R18 ARS studies to include examination of survival in pediatric and geriatric populations as well as the ability of PLX-R18 to alleviate delayed effects of radiation in survivors.
Thermo Fisher
In July 2018, we entered into a strategic collaboration agreement with Thermo Fisher Scientific Inc., or Thermo Fisher, with the aim of advancing the fundamental knowledge of cell therapy industrialization and to improve quality control of the end-to-end supply chain. The collaboration willenables us to combine Thermo Fisher’s experience in cell therapy development and bioproduction scaleup with our expertise in cell therapy manufacturing, clinical development, and quality control.
Chart Industries
In November 2018, we entered into a license agreement with a subsidiary of Chart Industries, Inc., or Chart, regarding our thawing device for cell-based therapies. Pursuant to the terms of the agreement, Chart obtained the exclusive rights to manufacture and market the thawing device in all territories worldwide, excluding Greater China, and we are to receive royalties from sales of the product and supply of an agreed upon number of thawing devices. Royalties shall commence on the date of Chart’s first commercial sale of the thawing device.
NASA
In February 2019, we entered a collaboration with NASA’s Ames Research Center to evaluate the potential of our PLX cell therapies in preventing and treating medical conditions caused during space missions.
U.S. Department of Defense
In August 2017, we announced that a pilot study of our PLX-R18 cell therapy was initiated by the DoD. The study examined the effectiveness of PLX-R18 as a treatment for ARS prior to, and within the first 24 hours of exposure to radiation. In July 2019, we presented positive results from a series of studies of our PLX-R18 cell therapy product conducted by the DoD.
RESTORE
We are members of a large-scale research initiative, the RESTORE project which has received funding of €1,000,000 (approximately $1,100,000) from the European Union’s Horizon 2020 research and innovation program, to submit a full grant application for the development and advancement of transformative therapeutics. Currently, due to COVID-19, there is no open call for full proposal. The members of the RESTORE project continue to collaborate in attempt to collectively submit the grant application once such call is available.
CRISPR-IL
In June 2020, we announced that we were selected as a member of the CRISPR-IL consortium, a group funded by the IIA. CRISPR-IL brings together the leading experts in life science and computer science from academia, medicine, and industry, to develop Artificial Intelligence, or AI, based end-to-end genome-editing solutions. These next-generation, multi-species genome editing products for human, plant, and animal DNA, have applications in the pharma, agriculture, and aquaculture industries. CRISPR-IL is funded by the IIA with a total budget of approximately $10,000,000 of which, an amount of approximately $480,000 is a direct grant allocated to us, for an initial period of 18 months, with a potential for extension of an additional 18 months, or the Second Period, with additional budget from the IIA.
In August 2021, we submitted an additional budget for the Second Period. The CRISPR-IL consortium program does not require us to pay royalties to the IIA.
United Arab Emirates-based Abu Dhabi Stem Cells Center
In August 2020, we signed a non-binding MOU with the United Arab Emirates-based Abu Dhabi Stem Cells Center, a specialist healthcare center focused on cell therapy and regenerative medicine. The aim of the collaboration is to capitalize on each party’s respective areas of expertise in cell therapies. The parties have agreed to exchange research results, share samples, join usage of equipment and testing, and other essential activities related to advancing the treatment and research of cell therapies for a broad range of medical conditions, including COVID-19.
We plan to continue to collaborate with universities, and academic institutions, and corporate partners worldwide to fully leverage our expertise and explore the use of our cells in other indications.
In-House Clinical Manufacturing
We have the in-house capability to perform clinical cell manufacturing. Our state-of-the-art Good Manufacturing Practice, or GMP, grade manufacturing facility in Haifa has been in use since February 2013 for the main purpose of clinical grade, large-scale manufacturing. The facility’s new automated manufacturing process and products were approved for production of PLX-PAD for clinical use by the FDA, EMA, Korean MFDS, PMDA and the Israeli MOH. Our second product, PLX R18,PLX-R18, was cleared by the FDA and the Israeli Ministry of HealthMOH for clinical use. Furthermore, the site was inspected and approved by an EUEuropean Union qualified person (European accreditation body), approving that the site and production processes meet the current GMP for the purpose of manufacturing clinical grade products.
The site was also inspected and approved by Israel’s Ministry of Healththe MOH and we received a GMP certificationcGMP Certification and manufacturer-importer authorization. Following the clinical approval of the facility, we are moving forward with our planned clinical trials based on cells manufactured in the new, efficient and improved manufacturing processes.
We obtain the human placentas used for our research and manufacturing activities from various hospitals in Israel after receiving a written informed consent by the mother and pathogen clearance. Any medical waste related to the use of placentas is treated in compliance with local environmental laws and standards.
In June 2019, we announced that we developed a serum-free formulation to support the manufacturing of cell therapy products. This serum-free formulation was developed using our deep understanding in cell therapy industrial scale production standards, and the quality methods designed to support implementation in Phase III development and marketing. Achieving this significant technological challenge is expected to provide us with large-scale, highly consistent production capacity with operational independency from third party suppliers for standard serum, an expensive and quantity limited product. PLX-R18 is the first product candidate manufactured using the serum-free media.
Government Regulation
The development, manufacturing, and future marketing of our cell therapy product candidates are subject to the laws and regulations of governmental authorities in the United States, Europe and the European UnionIsrael, as well as other countries in which our products willmay be marketed in the future like Japan, Israel and South Korea. In addition, the manufacturing conditions are specifically inspected by the Israeli Ministry of Health.MOH.
The FDA in the United States and the EMA in Europe must approve the product forproducts prior to marketing. Furthermore, various governmental statutes and regulations also govern or influence testing, manufacturing, safety, labeling, storage and record keeping related to such products and their marketing. Governments in other countries have similar requirements for testing and marketing.
The process of obtaining these approvals and the subsequent compliance with appropriate statutes and regulations require the expenditure of substantial time, resources and money. There can be no assurance that our product candidates will ultimately receive marketing approval, or, if approved, will be reimbursed by public and private health insurance.
There are several stages every drug has to go throughundergoes during its development process. Among these are:
| Performance of nonclinical laboratory and animal studies to assess a |
| The manufacture of the product according to GMP regulations and standards; |
| ● | Conducting adequate and well-controlled human clinical |
Potential post-marketing clinical testing and surveillance of the product after marketing approval, which can result in additional conditions on the approvals or suspension of clinical use. |
Approval of a drug for clinical studies in humans and approval of marketing are sovereign decisions of states, made by national, or, in case of the European Union, international regulatory competent authorities.
The Regulatory Process in the United States
In the United States, our product candidates are subject to regulation as a biological product under the Public Health Service Act and the Federal Food, Drug and Cosmetic Act. The FDA, regulating the approval of clinical trialsstudies and marketing applications in the United States, generally requires the following steps prior to approving a new biological product for use either for clinical studies or for commercial sale:
| ● | Submission of an IND Application, which must become effective before clinical testing in humans can begin; |
| ● | Obtaining approval of Institutional Review Boards, or IRBs, of research institutions or other clinical sites to introduce the drug candidate into humans in clinical studies; |
| ● | FDA may grant approval for EAP prior to the completion of clinical studies, in order to allow access for the investigational drug, for patients that are excluded from the study; |
| ● | FDA may grant priority review status to expedite the BLA review process. Obtaining a Fast Track designation allows access for the request of priority review; |
| ● | Submission of a BLA for marketing authorization of the product, which must include adequate results of pre-clinical testing and clinical studies; |
| ● | Submission of BLA with a proof of efficacy that is based only on animal studies is feasible in instances where human efficacy studies cannot be conducted because the conduct of such studies is unethical and field studies after an accidental or deliberate exposure are not feasible; |
| ● | FDA review of the BLA in order to determine, among other things, whether the product is safe and effective for its intended uses; and |
| ● | FDA inspection and approval of the product manufacturing facility at which the product will be manufactured. |
The Regulatory Process in Europe
In the European Union, our investigational cellular products are regulated under the Advanced Therapy Medicinal Product regulation, a regulation specific to cell and tissue products.
This European Union regulation requires:| ● | Filing a Clinical Trial Application for each European country involved in the clinical study. The application may be filed via a centralized procedure, which makes it possible to obtain a coordinated assessment of an application for a clinical study that is to take place in several European countries; |
| ● | Obtaining approval of affiliated ethics committees to test the investigational product into humans in clinical studies; |
| ● | Adequate and well-controlled clinical studies to establish the safety and efficacy of the investigational product for its intended use; and |
| ● | Since our investigational cellular products are regulated under the Advanced Therapy Medicinal Product regulation, the application for marketing authorization to the EMA is mandatory within the 28 member states of the European Union. The EMA is expected to review and approve the MAA. |
In May 2015, we were selected by the EMA for development of PLX-PAD cells via the EMA Adaptive Pathways approach, with the potential to reach the market several years faster than the traditional regulatory approval pathway. The Adaptive Pathways group at the EMA is advising us with respect to the clinical development of PLX-PAD in CLI and in recovery following surgery for hip fracture.Project.
Other Regulations
In general, the approval procedure varies among countries, and may involve additional preclinical testing and clinical trials.studies. The requirements and time required may differ from those required for FDA or EMA approval. Each country may impose certain procedures and requirements of its own. Most countries other than the United States, the European Union and Japan are willing to consider requests for marketing approval only after the product had been approved for marketing by either the FDA, the EMA or the PMDA. The decision regarding marketing approval is made following the submission of a dossier that is thoroughly assessed and critically addressed.
In Japan, we have completed the required regulatory interactions with the PMDA, prior to the submission of clinical study notification, in the framework of the new regulations for regenerative therapy effective in November 2014, which promote expedited approval for regenerative therapies that are being developed for seriously debilitating/life-threatening indications.
Clinical trialsStudies
Typically, in the United States, the European Union as well as in Japan,the European Union, clinical testingdevelopment involves a three-phase process, although the phases may overlap. In Phase I, clinical trialsstudies are conducted within a small number of healthy volunteers, or patients in cases of ethical issues with using healthy volunteers and are designed to provide information about product safety and to evaluate the pattern of drug distribution and metabolism within the body. In
Phase II clinical trialsstudies are conducted with a homogenous group of patients afflicted with the specific target disease, in order to determineexplore preliminary efficacy, optimal dosages and expanded evidence of safety.confirm the safety profile. In some cases, an initial trialstudy is conducted in diseased patients to assess both preliminary efficacy and preliminary safety and patterns of drug metabolism and distribution, in which case it is referred to as a Phase I/II trial.study. Phase III clinical trialsstudies are generally large-scale, multi-center, controlled trialsstudies conducted with a heterogeneous group of patients afflicted with the target disease, in orderaiming to provide statistically valid proofsignificant support of efficacy, as well as safety and potency. The Phase III trials represent the trials thatstudies are considered confirmatory for confirmation ofestablishing the efficacy and safety profile of the drug and are the most important onescritical for the approval. In some circumstances, a regulatory agency may require Phase IV, or post-marketing trials if it feels thatstudies in case additional information needs to be collected aboutafter the drug after it is on the market.
During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data and clinical trialstudy sites investigators to minimize risks.risks and ensure high quality and integrity of the collected data. The sponsor of a clinical trialstudy is required to submit an annual safety report to the relevant regulatory agencies, in which serious adverse events must beare reported, and also to submit in an expedited manner any individual serious adverse events that are suspected to be related to the tested drug.drug and are unexpected with its use. An agency may, at its discretion, re-evaluate, alter, suspend, or terminate the clinical study based upon the data that have been accumulated to that point and its assessment of the risk/benefit ratio to the patient.
Employees
As of June 30, 2021, we employed a total of 172153 full-time employees and 8nine part-time employees, of whom, 147129 full-time employees and 8nine part-time employees are engaged in research and development, manufacturing and clinical trials.development.
Competition
The regenerative medicine field is characterized by intense competition, as global and local pharma players are becoming more engaged in the cell therapy field based on the advancements made in clinical trialsstudies and due to the new favorable regenerative medicine legislation in certain regions. We face competition from both allogeneic and autologous cell therapy companies, academic, commercial and research institutions, pharmaceutical companies, biopharmaceutical companies, and governmental agencies. Some of the clinical indications we currently have under development are also being investigated in preclinical and clinical programs by others.
While there are hundreds of companies in the regenerative medicine space globally, there are multiple participants in the cell therapy field based in the United States, Europe, Japan, Korea, and Australia such as Athersys Inc., Capricor Therapeutics, Inc., Celularity – a spin-off of Celgene Corporation,Inc., Tigenix NV (acquired by Takeda), SanBio Inc., Healios K.K., Cytori Therapeutics, Cesca. and Mesoblast LTD.Ltd. Among other things, we expect to compete based upon our intellectual property portfolio, our in-house manufacturing efficiencies and capabilities, and the efficacy of our products.
Impact of COVID-19
In managing our ongoing global clinical studies, as well as our daily operations, in the ongoing COVID-19 global pandemic, we are taking all necessary precautions for the safety and well-being of patients, healthcare providers involved in our studies, and our employees. We are continuing our operational and manufacturing activities, subject to the directives of the MOH, with a dedicated team on site at our facilities. In addition, the majority of our employees have been vaccinated and we are using remote work technologies that enable the mitigation of office staff while allowing other activities to be conducted without the need for a physical presence in our facilities. The COVID-19 global pandemic caused delays in enrollment of some of our clinical studies. Despite these impacts, we currently hold supplies of PLX cells in inventory in Israel, and in secure storage facilities in Europe and the U.S. In addition, we are following the FDA and EMA guidelines regarding the management of clinical studies during COVID-19. However, the impact of the COVID-19 global pandemic is constantly evolving, and we may experience further impacts on our daily operations, including the need for employees to potentially self-isolate based on potential exposure to the virus, difficulties for our employees in travelling abroad, and delays in our clinical trials and our ongoing research work with various hospitals and academic institutions.
Available Information
Additional information about us is contained on our Internet website at www.pluristem.com. Information on our website is not incorporated by reference into this report. Under the "SEC Filings"“SEC Filings” and “Financial Information” sections, under the "Investors “Investors& Media"Media” section of our website, we make available free of charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, (Exchange Act),or the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our reports filed with the SEC are also made available to read and copy aton the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. You may obtain information about the Public Reference Room by calling the SEC at 1-800-SEC-0330. Reports filed with the SEC are also made available on itsSEC’s website at www.sec.gov. The following Corporate Governance documents are also posted on our website: Code of Business Conduct and Ethics, Trading Policy and the Charters for each of the Committees of our Board of Directors.Directors, or the Board.
Item 1A. Risk Factors.
An investment in our actual resultssecurities involves a high degree of operations and could cause our actual results to differ materially from those expressed in forward-looking statements made by us. These forward-looking statements are based on current expectations and except as required by law we assume no obligation to update this information.risk. You should consider carefully consider the following information about these risks, described below and elsewheretogether with the other information contained in this Annual Report on Form 10-K before making an investment decision. Our business, prospects, financial condition orand results of operations couldmay be materially and adversely affected byas a result of any of the following risks. The value of our securities could decline as a result of any of these risks. Our common stock is considered speculative and the trading price of our common stockYou could decline due to any of these risks, and you may lose all or part of your investment.investment in our securities. Some of the statements in “Item 1A. Risk Factors” are forward-looking statements. The following risk factors are not the only risk factors facing our Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business.business, prospects, financial condition and results of operations.
Summary of Risk Factors
Our business is subject to a number of risks, including risks that may adversely affect our business, financial condition and results of operations. These risks are discussed more fully below and include, but are not limited to, risks related to:
| ● | the COVID-19 pandemic has caused interruptions and delays of our business plan and may have a significant adverse effect on our business; |
| ● | we have a history of losses and have not generated significant revenues to date. We expect to experience future losses and do not foresee generating significant or steady revenues in the immediate future; |
| ● | we may need to raise additional capital to meet our business requirements in the future, and such capital raising may be costly or difficult to obtain and could dilute our shareholders’ ownership interests, and such offers or availability for sale of a substantial number of our common shares may cause the price of our publicly traded shares to decline; |
| ● | we may become subject to claims by much larger and better funded competitors enforcing their intellectual property rights against us or seeking to invalidate our intellectual property or our rights thereto; |
| ● | clinical studies necessary to support the approval of our applications are often lengthy and expensive and require the enrollment of a large number of patients. Suitable patients may be difficult to identify and enroll. Any delay or failure of clinical trials could delay us from commercializing our product candidates, which would materially and adversely affect our results of operations and the value of our business; |
| ● | we may not be able to successfully license our product candidates; |
| ● | there are inherent risks in the manufacturing of our product candidates, including meeting relevant high regulatory standards, the failure of which could materially and adversely affect our results of operations and the value of our business; |
| ● | we may be subject, directly or indirectly, to applicable U.S. federal and state anti-kickback, false claims laws, healthcare and security laws and regulations, which could expose us to criminal sanctions civil penalties, contractual damages, reputational harm and diminished profits and future earnings; |
| ● | we may be exposed to product liability and corporate claims and insurance may not be sufficient to cover these claims; |
| ● | in the United States and Europe, our business could be significantly and adversely affected by healthcare reform initiatives and/or other legislation or judicial interpretations of existing or future healthcare laws and/or regulations; |
| ● | if we are unable to obtain and maintain intellectual property protection covering our products and technology, others may be able to utilize our intellectual property, which would adversely affect our business; |
| ● | we are an international business, and we are exposed to various global and local risks that could have a material adverse effect on our financial condition and results of operations; |
| ● | the market prices of our common shares are subject to fluctuation and have been and may continue to be volatile, which could result in substantial losses for investors; |
| ● | we anticipate being subject to fluctuations in currency exchange rates because a significant portion of our business is conducted outside the United States and we are exposed to currency exchange fluctuations in other currencies such as the New Israeli Shekel, or NIS, and the Euro, because a significant portion of our expenses in Israel are paid in NIS, and we anticipate receipt of additional funds in Euros from the EIB Finance Agreement; |
| ● | restrictions and covenants contained in the EIB Finance Agreement may restrict our ability to conduct certain strategic initiatives; |
| ● | limitations we may face relating to the grants we have received from the IIA may impact our plans and future decisions; |
| ● | if there are significant shifts in the political, economic and military conditions in Israel and its neighboring countries, it could have a material adverse effect on our business relationships and profitability; and |
| ● | it may be difficult for investors in the United States to enforce any judgments obtained against us or some of our directors or officers. |
Risk Related to Our independent registered public accounting firm’s report states that there is a substantial doubt that we will be able to continue as a going concern.Business
We may need to raise additional financing to support the research, development and manufacturing of our cell therapy products and our products in the future, but we cannot be sure we will be able to obtain additional financing on terms favorable to us when needed. If we are unable to obtain additional financing to meet our needs, our operations may be adversely affected or terminated.
It is highly likely that we will need to raise significant additional capital in the future. Although we were successful in raising capital in the past, our current financial resources are limited, and are dependent, to a certain extent, on our achieving certain milestones, and may not be sufficient to finance our operations until we become profitable, if that ever happens.
It is likely that we will need to raise additional funds in the near future in order to satisfy our working capital and capital expenditure requirements. Therefore, we are dependent on our ability to sell our common stockshares for funds, receive grants, potentially receive milestone payments pursuant to the EIB Finance Agreement, enter into collaborations and licensing deals or to otherwise raise capital. There can be no assurance that we will be able to obtain financing.financing, including any funding under the EIB Finance Agreement. Any sale of our common stockshares in the future will result in dilution to existing stockholdersshareholders and could adversely affect the market price of our common stock.shares.
Also, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to conduct the development and commercialization of our potential cell therapy products, which could result in the loss of some or all of one'sone’s investment in our common stock.shares.
Our likelihood of profitability depends on our ability to license and/or develop and commercialize our products based on our cell production technology, which is currently in the development stage. If we are unable to complete the development and commercialization of our cell therapy products successfully, our likelihood of profitability will be limited severely
.We are engaged in the business of developing cell therapy products. We have not realized a profit from our operations to date and there is little likelihood that we will realize any profits in the short or medium term. Any profitability in the future from our business will be dependent upon successful commercialization of our potential cell therapy products and/or licensing of our products, which will require significant additional research and development.
The clinical manufacturing process for cell therapy products is complex and requires meeting high regulatory standards. Any delay or problem in the clinical manufacturing of PLX may result in a material adverse effect on our business.
Our manufacturing process, controls, equipment and quality system for PLX-PAD have received approval from the FDA, EMA, Germany’s PEI, the MFDS and the PMDA. However, the clinical manufacturing process is complex, and we have no experience in manufacturing our product candidates at a commercial level.
There can be no guarantee that we will be able to successfully develop and manufacture our product candidates in a manner that is cost-effective or commercially viable, or that our development as well as substantial clinical trials.and manufacturing capabilities might not take much longer than currently anticipated to be ready for the market. In addition, if we fail to maintain regulatory approvals for our manufacturing facilities, we may suffer delays in our ability to manufacture our product candidates. This may result in a material adverse effect on our business.
If we are not able to successfully license and/or develop and commercialize our cell therapy product candidates and obtain the necessary regulatory approvals, we may not generate sufficient revenues to continue our business operations.
So far, the productsproduct candidates we are developing have completed one Phase I/II clinical trial of Gluteal Musculature rehabilitation after total hip arthroplasty (efficacy, ongoing for safety), two Phase I clinical trials for CLI, and one Phase II clinical trial in IC.IC and a multinational Phase III study in CLI. In addition, we currently have two ongoing Phase II FDA studies of PLX cells for the treatment of COVID-19 complicated by ARDS and one Phase III multinational clinical trial with our PLX-PAD product candidate in muscle recovery following surgery for hip fracture. In addition, our second product candidate, PLX-R18, is currently in a Phase I study for recovery following HCT. Our early stage cell therapy product candidates may fail to perform as we expect. Moreover, even if our cell therapy product candidates successfully perform as expected, in later stages of development they may fail to show the desired safety and efficacy traits despite having progressed successfully through pre-clinical or initial clinical testing. We will need to devote significant additional research and development, financial resources and personnel to develop commercially viable products and obtain the necessary regulatory approvals.
If our cell therapy product candidates do not prove to be safe and effective in clinical trials, we will not obtain the required regulatory approvals. If we fail to obtain such approvals, we may not generate sufficient revenues to continue our business operations.
Even if we obtain regulatory approval of a product, that approval may be subject to limitations on the indicated uses for which it may be marketed. Even after granting regulatory approval, the FDA, the EMA, the PMDA and regulatory agencies in other countries continue to regulate marketed products, manufacturers and manufacturing facilities, which may create additional regulatory barriers and burdens. Later discovery of previously unknown problems with a product, manufacturer or facility, may result in restrictions on the product or manufacturer, including a withdrawal of the product from the market.
Further, regulatory agencies may establish additional regulations that could prevent or delay regulatory approval of our products.product candidates.
We have not generated significant or consistent revenues to date, which raises doubts with respect to our ability to generate revenues in the future.
We have a limited operating history in our business of commercializing cell production technology. Until we entered into the prior license agreement with United Therapeutics Corporation which was terminated in December 2015, we did not generate any material revenues and we have not generated any material revenues since that date. It is not clear when we will generate revenues or whether we will experience further delays in recognizing revenues such as if we experienced a clinical hold. Our primary source of funds has been the sale of our common shares, government grants and funds distributed pursuant to our EIB Finance Agreement. We cannot market and sell our cell therapy product candidates in the United States, Europe, Japan, or in other countries if we fail to obtain the necessary regulatory approvals or licensure.
If we encounter problems or delays in the research and development of our potential cell therapy products, we may not be able to raise sufficient capital to finance our operations during the period required to resolve such problems or delays.
Our cell therapy products are currently in the development stage and we anticipate that we will continue to incur substantial operating expenses and incur net losses until we have successfully completed all necessary research and clinical trials. We, and any of our potential collaborators, may encounter problems and delays relating to research and development, regulatory approval and intellectual property rights of our technology. Our research and development programs may not be successful, and our cell culture technology may not facilitate the production of cells outside the human body with the expected result. Our cell therapy products may not prove to be safe and efficacious in clinical trials. If any of these events occur, we may not have adequate resources to continue operations for the period required to resolve the issue delaying commercialization and we may not be able to raise capital to finance our continued operation during the period required for resolution of that issue. Accordingly, we may be forced to discontinue or suspend our operations.
Because most of our officers and directors are located in non-U.S. jurisdictions, you may have no effective recourse against the management for misconduct and may not be able to enforce judgment and civil liabilities against our officers, directors, experts and agents.
Most of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of their assets are located outside the United States.
As a result, it may be difficult to enforce within the United States any judgments obtained against our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any U.S. state.
Risks Related to Development, Clinical studies, and Regulatory Approval of Our Product Candidates
We cannot market and sell our cell therapy product candidates in the United States, Europe, or in other countries if we fail to obtain the necessary regulatory approvals or licensure.
We cannot sell our cell therapy product candidates until regulatory agencies grant marketing approval, or licensure. The process of obtaining regulatory approval is lengthy, expensive and uncertain. It is likely to take at least several years to obtain the required regulatory approvals for our cell therapy product candidates, or we may never gain the necessary approvals.
Any difficulties that we encounter in obtaining regulatory approval may have a substantial adverse impact on our operations and cause our share price to decline significantly.
To obtain marketing approvals in the United States and Europe for cell therapy product candidates we must, among other requirements, complete carefully controlled and well-designed clinical trials sufficient to demonstrate to the FDA, the EMA and the PMDA that the cell therapy product candidates is safe and effective for each disease for which we seek approval. So far, we have successfully conducted Phase I/II and Phase I clinical trials for our PLX-PAD product candidate. Several factors could prevent completion or cause significant delay of these trials, including an inability to enroll the required number of patients or failure to demonstrate adequately that cell therapy product candidates are safe and effective for use in humans. Negative or inconclusive results from or adverse medical events during a clinical trial could cause the clinical trial to be repeated or a program to be terminated, even if other studies or trials relating to the program are successful. The FDA or EMA (or, if we seek to conduct development efforts in Japan, the PMDA) can place a clinical trial on hold if, among other reasons, it finds that patients enrolled in the trial are or would be exposed to an unreasonable and significant risk of illness or injury. If safety concerns develop, we, the FDA, the EMA or other regulatory bodies could stop our trials before completion.
If we are not able to conduct our clinical trials properly and on schedule, marketing approval by FDA, EMA, MOH and other regulatory authorities may be delayed or denied.
The completion of our clinical trials may be delayed or terminated for many reasons, such as:
| ● | The FDA, the EMA or the MOH does not grant permission to proceed or places additional trials on clinical hold; |
| ● | Subjects do not enroll in our trials at the rate we expect, including as a result of COVID-19 pandemic; |
| ● | Government actions, such as those enacted during the ongoing COVID-19 pandemic, that limit the general populations movement; |
| ● | The regulators may ask to increase subject’s population in the clinical trials; |
| ● | Subjects experience an unacceptable rate or severity of adverse side effects; |
| ● | Third party clinical investigators and other related vendors do not perform our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, GCP and regulatory requirements, or other third parties do not perform data collection and analysis in a timely or accurate manner; |
| ● | Third party clinical investigators and other related vendors may declare bankruptcy or terminate their business unexpectedly, which most likely will result in further delays in our clinical trials’ anticipated schedule and cause additional expenditures; |
| ● | Inspections of clinical trial sites by the FDA, EMA, MOH and other regulatory authorities find regulatory violations that require us to undertake corrective action, suspend or terminate one or more sites, or prohibit us from using some or all of the data in support of our marketing applications; or |
| ● | One or more IRBs suspends or terminates the trial at an investigational site, precludes enrollment of additional subjects, or withdraws its approval of the trial. |
Our development costs will increase if we have material delays in our clinical trials, or if we are required to modify, suspend, terminate or repeat a clinical trial. If we are unable to conduct our clinical trials properly and on schedule, marketing approval may be delayed or denied by the FDA, EMA, MOH and other regulatory authorities.
The results of our clinical trials may not support our product candidates’ claims or any additional claims we may seek for our product candidates and our clinical trials may result in the discovery of adverse side effects.
Even if any clinical trial that we need to undertake is completed as planned, or if interim results from existing clinical trials are released, we cannot be certain that such results will support our product candidates claims or any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials. The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause us to stop seeking additional clearances or approvals for our product candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize a product candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.
If our processing and storage facilities or our clinical manufacturing facilities are damaged or destroyed, our business and prospects would be adversely affected.
If our processing and storage facilities, our clinical manufacturing facility or the equipment in such facilities were to be damaged or destroyed, the loss of some or all of the stored units of our cell therapy drug candidates would force us to delay or halt our clinical trial processes. We have one clinical manufacturing facility located in Haifa, Israel. If these facilities or the equipment in them are significantly damaged or destroyed, we may not be able to quickly or inexpensively replace our manufacturing capacity.
Favorable results from compassionate use treatment or initial interim results from a clinical trial do not ensure that later clinical trials will be successful and success in early stage clinical trials does not ensure success in later-stage clinical trials.
PLX cells have been administered as part of compassionate use treatments, which permit the administration of the PLX cells outside of clinical trials. No assurance can be given that any positive results are attributable to the PLX cells, or that administration of PLX cells to other patients will have positive results. Compassionate use is a term that is used to refer to the use of an investigational drug outside of a clinical trial to treat a patient with a serious or immediately life-threatening disease or condition who has no comparable or satisfactory alternative treatment options. Regulators often allow compassionate use on a case-by-case basis for an individual patient or for defined groups of patients with similar treatment needs.
There is no assurance that we will obtain regulatory approval for PLX cells. We will only obtain regulatory approval to commercialize a product candidate if we can demonstrate to the satisfaction of the FDA, the EMA or other applicable regulatory authorities, in well-designed and conducted clinical trials, that the product candidate is safe and effective and that the product candidate, including the cell production methodology, otherwise meets the appropriate standards required for approval. Clinical trials can be lengthy, complex and extremely expensive processes with uncertain results. A failure of one or more clinical trials may occur at any stage of testing.
Success in early clinical trials does not ensure that later clinical trials will be successful, and initial results from a clinical trial do not necessarily predict final results. While results from treating patients through compassionate use have in certain cases been successful, we cannot be assured that further trials will ultimately be successful. Results of further clinical trials may be disappointing.
Even if early stage clinical trials are successful, we may need to conduct additional clinical trials for product candidates with patients receiving the drug for longer periods before we are able to seek approvals to market and sell these product candidates from the FDA and regulatory authorities outside the United States. Even if we are able to obtain approval for our product candidates through an accelerated approval review program, we may still be required to conduct clinical trials after such an approval. If we are not successful in commercializing any of our lead product candidates, or are significantly delayed in doing so, our business will be materially harmed.
We may not be able to secure and maintain research institutions to conduct our clinical trials.
We rely on research institutions to conduct our clinical trials. Specifically, the limited number of centers experienced with cell therapy product candidates heightens our dependence on such research institutions. Our reliance upon research institutions, including hospitals and clinics, provides us with less control over the timing and cost of clinical trials and the ability to recruit subjects. If we are unable to reach agreements with suitable research institutions on acceptable terms, or if any resulting agreement is terminated, we may be unable to quickly replace the research institution with another qualified institution on acceptable terms. We may not be able to secure and maintain suitable research institutions to conduct our clinical trials.
Our product development programs are based on novel technologies and are inherently risky.
We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our therapeutics creates significant challenges in regardsregard to product development and optimization, manufacturing, government regulation, third-partythird party reimbursement and market acceptance. For example, the FDA, the EMA the PMDA and other countries’ regulatory authorities have relatively limited experience with cell therapies. Very few cell therapy products have been approved by regulatory authorities to date for commercial sale, and the pathway to regulatory approval for our cell therapy product candidates may accordingly be more complex and lengthy.lengthier. As a result, the development and commercialization pathway for our therapies may be subject to increased uncertainty, as compared to the pathway for new conventional drugs.
There are very few drugs and limited therapies that the FDA or EMA and other regulatory authorities have approved as treatments for some of the disease indications we are pursuing. This could complicate and delay FDA, EMA or other countries’ regulatory authoritiesauthorities’ approval of our biologic drug candidates.
There are very few drugs and limited therapies currently approved for the treatment of CLI,COVID-19, IC, ARS, muscle recovery following surgery for hip fracture or HCT.
Our cell therapy drug candidates represent new classes of therapy that the marketplace may not understand or accept.
Even if we successfully develop and obtain regulatory approval for our cell therapy candidates, the market may not understand or accept them. We are developing cell therapy product candidates that represent novel treatments and will compete with a number of more conventional products and therapies manufactured and marketed by others, including major pharmaceutical companies. The degree of market acceptance of any of our developed and potential products will depend on a number of factors, including:
| ● | the clinical safety and effectiveness of our cell therapy drug candidates and their perceived advantage over alternative treatment methods, if any; |
| ● | adverse events involving our cell therapy product candidates or the products or product candidates of others that are cell-based; and |
| ● | the cost of our products and the reimbursement policies of government and private third party payers. |
If the health care community does not accept our potential products for any of the foregoing reasons, or for any other reason, it could affect our sales, having a material adverse effect on our business, financial condition and results of operations.
We have limited experience in conducting Phase III trials. If we fail in the conduct of such trials, our business will be materially harmed.
Even though we have conducted Phase I, Phase II and Phase III trials, and we are currently conducting one Phase III trial for our PLX-PAD product candidate, two Phase II studies of PLX cells for the treatment of severe COVID-19 complicated by ARDS, and a Phase I study for our PLX-R18 product, and have recruited employees who are experienced in managing and conducting clinical manufacturing process for cell therapy products is complex and requires meeting high regulatory standards;trials, we have limited manufacturingexperience in this area.
We will need to expand our experience and know-how. Any delay or problemrely on consultants in the clinical manufacturing of PLX may result in a material adverse effect on our business.
Interim, “top-line,” and preliminary data from our clinical trials that we announce or publish from time to time may result in a material adverse effect on our business.
From time to time, we may publish interim, “top-line,” or preliminary data from our clinical studies. Interim data from clinical trials that we may complete are subject to the IIA, for research and development programsrisk that meet specified criteria. The terms of the IIA’s grants limit our ability to transfer know-how developed under an approved research and development program outside of Israel, regardless of whether the royalties are fully paid. Any non-Israeli citizen, resident or entity that, among other things, becomes a holder of 5% or more of our share capital or voting rights, is entitled to appoint one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Material adverse changes between preliminary, “top-line,” or interim data and final data could significantly harm our directorsbusiness prospects.
Risk Related to Commercialization of Our Product Candidates
We may not successfully maintain our existing exclusive out-licensing agreement with CHA, or our Chief Executive Officer, or CEO, serves as a director of our Company or as our CEO is generally required to notify the same to the IIAestablish new collaborative and to undertake to observe the law governing the grant programs of the IIA, the principal restrictions oflicensing arrangements, which are the transferability limits described above. For more information, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources”.
One of the future.
Even if we are able to maintain or establish licensing or collaboration arrangements, these arrangements may not be on favorable terms and may contain provisions that we will ever be profitable.
Our success dependsagreements with our collaborators and licensees may have provisions that give rise to a significant extent ondisputes regarding the continued servicesrights and obligations of the parties. These and other possible disagreements could lead to termination of the agreement or delays in collaborative research, development, supply, or commercialization of certain highly qualified scientific and management personnel,product candidates, or could require or result in particular, Zami Aberman,litigation or arbitration. Moreover, disagreements could arise with our Co-CEO and Chairman, and Yaky Yanay,collaborators over rights to intellectual property or our Co-CEO and President. We face competition for qualified personnel from numerous industry sources, and there can be no assurance that we will be ablerights to attract and retain qualified personnel on acceptable terms. The loss of service ofshare in any of the future revenues of products developed by our key personnelcollaborators. These kinds of disagreements could result in costly and time-consuming litigation. Any such conflicts with our collaborators could reduce our ability to obtain future collaboration agreements and could have a material adverse effectnegative impact on our operations or financial condition. In the event of the loss of services of such personnel, no assurance can be given that we will be able to obtain the services of adequate replacement personnel. We do not maintain key person insurance on the lives of any of our officers or employees.relationship with existing collaborators.
The market for our products will be heavily dependent on third party reimbursement policies.
Our ability to successfully commercialize our product candidates will depend on the extent to which government healthcare programs, as well as private health insurers, health maintenance organizations and other third party payers will pay for our products and related treatments.
Reimbursement by third party payers depends on a number of factors, including the payer’s determination that use of the product is safe and effective, not experimental or investigational, medically necessary, appropriate for the specific patient and cost-effective. Reimbursement in the United States or foreign countries may not be available or maintained for any of our product candidates. If we do not obtain approvals for adequate third party reimbursements, we may not be able to establish or maintain price levels sufficient to realize an appropriate return on our investment in product development. Any limits on reimbursement from third party payers may reduce the demand for, or negatively affect the price of, our products. The lack of reimbursement for these procedures by insurance payers has negatively affected the market for our products in this indication in the past.
Managing and reducing health care costs has been a general concern of federal and state governments in the United States and of foreign governments. In addition, third party payers are increasingly challenging the price and cost-effectiveness of medical products and services, and many limit reimbursement for newly approved health care products. In particular, third party payers may limit the indications for which they will reimburse patients who use any products that we may develop. Cost control initiatives could decrease the price for products that we may develop, which would result in lower product revenues to us.
Risk Related to Intellectual Property
Our success depends in large part on our ability to develop and protect our technology and our cell therapy products. If our patents and proprietary rights agreements do not provide sufficient protection for our technology and our cell therapy products, our business and competitive position will suffer.
Our success will also depend in part on our ability to develop our technology and commercialize cell therapy products without infringing the proprietary rights of others. We have not conducted full freedom of use patent searches and no assurance can be given that patents do not exist or could not be filed which would have an adverse effect on our ability to develop our technology or maintain our competitive position with respect to our potential cell therapy products. If our technology components, devices, designs, products, processes or other subject matter are claimed under other existing United States or foreign patents or are otherwise protected by third party proprietary rights, we may be subject to infringement actions. In such event, we may challenge the validity of such patents or other proprietary rights or we may be required to obtain licenses from such companies in order to develop, manufacture or market our technology or products. There can be no assurances that we would be able to obtain such licenses or that such licenses, if available, could be obtained on commercially reasonable terms. Furthermore, the failure to either develop a commercially viable alternative or obtain such licenses could result in delays in marketing our proposed products or the inability to proceed with the development, manufacture or sale of products requiring such licenses, which could have a material adverse effect on our business, financial condition and results of operations. If we are required to defend ourselves against charges of patent infringement or to protect our proprietary rights against third parties, substantial costs will be incurred regardless of whether we are successful. Such proceedings are typically protracted with no certainty of success. An adverse outcome could subject us to significant liabilities to third parties and force us to curtail or cease our development of our technology and the commercialization our potential cell therapy products.
We have built the ability to manufacture clinical grade ASCsadherent stromal cells in-house. Through our experience with ASC-basedadherent stromal cell-based product development, we have developed expertise and know-how in this field. To protect these expertise and know-how, our policies require confidentiality agreements with our employees, consultants, contractors, manufacturers and advisors. These agreements generally provide for protection of confidential information, restrictions on the use of materials and assignment of inventions conceived during the course of performance for us. These agreements might not effectively prevent disclosure of our confidential information.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on our business.
Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. We have yet to conduct comprehensive freedom-to-operate searches to determine whether our proposed business activities or use of certain of the patent rights owned by us would infringe patents issued to third parties. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference proceedings before the U.S. Patent and Trademark Office. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all.
Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. For example, we are aware of issued third party patents directed to placental stem cells and their use for therapy and in treating various diseases. We may need to seek a license for one or more of these patents. No assurances can be given that such a license will be available on commercially reasonable terms, if at all. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common shares. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors are able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
We must further protect and develop our technology and products in order to become a profitable company.
If we do not complete the development of our technology and products by the time our patents expire and create additional sufficient layers of patents or other intellectual property rights, other companies may use the technology to develop competing products. If this happens, we may lose our competitive position and our business would likely suffer.
Furthermore, the scope of our patents may not be sufficiently broad to offer meaningful protection. In addition, our patents could be successfully challenged, invalidated or circumvented so that our patent rights would not create an effective competitive barrier. We also intend to seek patent protection for any of our potential cell therapy products once we have completed their development. We also rely on trade secrets and un-patentable know-how that we seek to protect, in part, by confidentiality agreements with our employees, consultants, suppliers and licensees. These agreements may be breached, and we might not have adequate remedies for any breach. If this were to occur, our business and competitive position would likely suffer.
The patent approval process is complex, and we cannot be sure that our pending patent applications or future patent applications will be approved.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and any future licensors’ patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or products or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States and we may not be able to obtain meaningful patent protection for any of our commercial products either in or outside the United States.
No assurance can be given that the scope of any patent protection granted will exclude competitors or provide us with competitive advantages, that any of the patents that have been or may be issued to us will be held valid if subsequently challenged, or that other parties will not claim rights to or ownership of our patents or other proprietary rights that we hold. Furthermore, there can be no assurance that others have not developed or will not develop similar products, duplicate any of our technology or products or design around any patents that have been or may be issued to us or any future licensors. Since patent applications in the United States and in Europe are not publicly disclosed until patents are issued, there can be no assurance that others did not first file applications for products covered by our pending patent applications, nor can we be certain that we will not infringe any patents that may be issued to others.
Risk Related to Our Common Shares
The price of our common stockshares may fluctuate significantly.
The market for our shares of common stockshares may fluctuate significantly. A number of events and factors may have an adverse impact on the market price of our common stock,shares, such as:
| ● | results of our clinical trials or adverse events associated with our products; |
| ● | the amount of our cash resources and our ability to obtain additional funding; |
| ● | changes in our revenues, expense levels or operating results; |
| ● | entering into or terminating strategic relationships; |
| ● | announcements of technical or product developments by us or our competitors; |
| ● | market conditions for pharmaceutical and biotechnology shares in particular; |
| ● | changes in laws and governmental regulations, including changes in tax, healthcare, competition and patent laws; |
| ● | disputes concerning patents or proprietary rights; |
| ● | new accounting pronouncements or regulatory rulings; |
| ● | public announcements regarding medical advances in the treatment of the disease states that we are targeting; |
| ● | patent or proprietary rights developments; |
| ● | regulatory actions that may impact our products; |
| ● | future sales of our common shares, or the perception of such sales; |
| ● | disruptions in our manufacturing processes; and |
| ● | competition. |
In addition, a global pandemic, such as the COVID-19 pandemic and a market downturn in general and/or in the biopharmaceutical sector in particular, may adversely affect the market price of our securities, which may not necessarily reflect the actual or perceived value of our Company.
Future sales of our common stock,shares may cause dilution.
Future sales of our common shares, or the perception that such sales may occur, could cause immediate dilution and adversely affect the market price of our common stock.shares. If we raise additional capital by issuing equity securities, the percentage ownership of our existing shareholders may be reduced, and accordingly these shareholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of our common shares. Given our need for cash and that equity raising is the most common type of fundraising for companies like ours, the risk of dilution is particularly significant for shareholders of our company.
Risks Related to Foreign Exchange Rates
We are exposed to fluctuations in currency exchange rates.
A significant portion of our business is conducted outside the United States. Therefore, we are exposed to currency exchange fluctuations in other currencies such as the New Israeli Shekel, or NIS and the Euro, because a significant portion of our expenses in Israel and Europe are paid in NIS, and Euros, respectively,we have also received €20 million pursuant to the EIB Finance Agreement, all of which subjects us to the risks of foreign currency fluctuations. Our primary expenses paid in NIS are employee salaries, fees for consultants and subcontractors and lease payments on our Israeli facilities. During the fiscal year ended June 30, 2018,2021, or fiscal year 2018,Fiscal Year 2021, we entered into options contracts to hedge against some of the risk of changes in future cash flows from payments of payroll and related expenses and costs of operations denominated in NIS.
The dollar cost of our operations in Israel will increase to the extent increases in the rate of inflation in Israel are not offset by a devaluation of the NIS in relation to the dollar, which would harm our results of operations.
Since a considerable portion of our expenses such as employees'employees’ salaries are linked to an extent to the rate of inflation in Israel, the dollar cost of our operations is influenced by the extent to which any increase in the rate of inflation in Israel is or is not offset by the devaluation of the NIS in relation to the dollar. As a result, we are exposed to the risk that the NIS, after adjustment for inflation in Israel, will appreciate in relation to the dollar. In that event, the dollar cost of our operations in Israel will increase and our dollar-measured results of operations will be adversely affected. We cannot predict whether the NIS will appreciate against the dollar or vice versa in the future. Any increase in the rate of inflation in Israel, unless the increase is offset on a timely basis by a devaluation of the NIS in relation to the dollar, will increase labor and other costs, which will increase the dollar cost of our operations in Israel and harm our results of operations.
The dollar cost of our loan from the EIB will be subject to currency valuations of the U.S. dollar and the Euro
Following the receipt of the first tranche of the loan from the EIB, which was provided in Euros pursuant to the EIB Finance Agreement, we have established both a cash asset and a liability in our financial statements. If the Euro increases in value in relation to the U.S. dollar, both the asset and the liability of our loan from the EIB will increase, and if the Euro decreases in relation to the U.S. dollar, both the asset and liability will conversely decrease.
Since the tranche of the loan received from the EIB and the accumulated interest are payable together in a single installment within five years from disbursement of the tranche, and we are likely to use the cash received from the EIB to finance our operations, as time progress the cost basis of the liability is expected to increase and the cash asset is expected to decrease.
Therefore, the effect of currency fluctuations of the Euro in relation to the U.S. dollar on the liability resulting from the loan from the EIB is expected to be greater than the effect on the cash asset.
As part of our hedging strategy, we may use currency transactions of options and forward contracts to minimize the risk of financial exposure from fluctuations in the exchange rate of the U.S. dollar against the Euro, but there are no guaranties that we will be able to offset some or all the losses if the Euro inclines in value in relation to the U.S. dollar.
Our cash may be subject to a risk of loss and we may be exposed to fluctuations in interest rates.
Our assets include a significant component of cash and cash equivalents and bank deposits. We adhere to an investment policy set by our investment committee which aims to preserve our financial assets, maintain adequate liquidity and maximize returns. We believe that our cash is held in institutions whose credit risk is minimal and that the value and liquidity of our deposits are accurately reflected in our consolidated financial statements as of June 30, 2021. Currently, we hold part of our cash assets in bank deposits. However, nearly all of our cash and bank deposits are not insured by the Federal Deposit Insurance Corporation, or the FDIC, or similar governmental deposit insurance outside the United States. Therefore, our cash and any bank deposits that we now hold or may acquire in the future may be subject to risks, including the risk of loss or of reduced value or liquidity, particularly in light of the increased volatility and worldwide pressures in the financial and banking sectors.
Other Risks
The COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease, may materially and adversely affect our future earningsbusiness and financial condition.operations.
While COVID-19 is still spreading globally, and the final implications of the pandemic are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population. At this time, the pandemic has caused states of emergency to be declared in various countries, travel restrictions imposed globally, quarantines established in certain jurisdictions and various institutions and companies being closed. We face an inherentare actively monitoring any developments regarding the pandemic and we are taking any necessary measures to respond to the situation in cooperation with the various stakeholders.
COVID-19 infection of our workforce could result in a temporary disruption in our business riskactivities, including manufacturing and other functions. Based on guidelines provided by the Israeli Government, we have increased as much as possible the capacity and arrangement for employees to work remotely, and although the vast majority of our employees have been vaccinated and we have adopted hybrid working models to minimize exposure, we cannot guaranty that there will be no infection and spread of the virus among our employees and staff.
The COVID-19 pandemic is also affecting the United States, Israel and global economies and has affected, and may continue to product liability claimsaffect, the conduct of our clinical trials and may in the eventfuture affect our operations and those of third parties on which we rely, including by causing disruptions in our raw material supply. In that regard, to date we have experienced delays in enrolling patients in our various studies due to the useCOVID-19 pandemic.
In addition, the COVID-19 pandemic may affect the operations of the FDA and other health authorities, which could result in delays of reviews and approvals, including with respect to our products resultsPhase III clinical trial related to muscle recovery following surgery for hip fracture. The evolving COVID-19 pandemic has already impacted, and may continue to, directly or indirectly impact the pace of enrollment in adverse effects. Weour clinical trials as patients may avoid or may not be able to maintain adequate levelstravel to healthcare facilities and physicians’ offices unless due to a health emergency and clinical trial staff may not be able to physically arrive to the clinical sites. Additionally, such facilities and offices have been and may continue to be required to focus limited resources on non-clinical trial matters, including treatment of insuranceCOVID-19 patients, thereby decreasing availability, in whole or in part, for clinical trial services. Additionally, the stock market has been unusually volatile during the COVID-19 outbreak and such volatility may continue. To date, during certain periods of the COVID-19 pandemic, our share price fluctuated significantly, and such fluctuation may continue to occur.
The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, financing or clinical trial activities, or on healthcare systems or the global economy as a whole if the pandemic continues for an extended period of time or significantly worsens. However, these liabilities at reasonable cost and/effects could have a material impact on our liquidity, capital resources, operations and business and those of the third parties on which we rely.
Since we received grants from the IIA, we are subject to on-going restrictions.
We have received royalty-bearing grants from the IIA, for research and development programs that meet specified criteria. The terms of the IIA’s grants limit our ability to transfer know-how developed under an approved research and development program outside of Israel, regardless of whether the royalties are fully paid. Any non-Israeli citizen, resident or reasonable terms. Excessive insurance costsentity that, among other things, becomes a holder of 5% or uninsured claims would addmore of our share capital or voting rights, is entitled to appoint one or more of our directors or our Chief Executive Officer, or CEO, serves as a director of our Company or as our CEO is generally required to notify the same to the IIA and to undertake to observe the law governing the grant programs of the IIA, the principal restrictions of which are the transferability limits described above. For more information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”
Since we have signed the EIB Finance Agreement, we have agreed to guaranty the loan and have also agreed to other limitations that require us to notify the EIB, and in some cases obtain their approval, before we engage with other banks for additional sources of funding or with potential partners for certain strategic activities.
The EIB Finance Agreement contains certain limitations that we must adhere to such as the use of proceeds received from the EIB, the disposal of assets, substantive changes in the nature of our business, our potential execution of mergers and acquisitions, changes in our holding structure, distributions of future operating expensespotential dividends and adversely affect our financial condition.engaging with other banks and financing entities for other loans.
Our principal research and development and manufacturing facilities are located in Israel and the unstable military and political conditions of Israel may cause interruption or suspension of our business operations without warning.
Our principal research and development and manufacturing facilities are located in Israel. As a result, we are directly influenced by the political, economic and military conditions affecting Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. During June 2021, July and August 2014 and November 2012, Israel was engaged in an armed conflict with a militia group and political party which controls the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel. We cannot predict if or when armed conflict will take place and the duration of each conflict.
Furthermore, certain of our employees may be obligated to perform annual reserve duty in the Israel Defense Forces and are subject to being called up for active military duty at any time. All Israeli male citizens who have served in the army are required to perform reserve duty until they are between 40 and 49 years old, depending upon the nature of their military service.
In addition, Israeli-based companies and companies doing business with Israel, have been the subject of an economic boycott by members of the Arab League and certain other predominantly Muslim countries since Israel'sIsrael’s establishment. Although Israel has entered into various agreements with certain Arab countries and the Palestinian Authority, and various declarations have been signed in connection with efforts to resolve some of the economic and political problems in the Middle East, we cannot predict whether or in what manner these problems will be resolved. Wars and acts of terrorism have resulted in significant damage to the Israeli economy, including reducing the level of foreign and local investment.
Risk Related to perform annual reserve duty in the Israel Defense Forces and are subject to being called up for active military duty at any time. All Israeli male citizens who have served in the army are subject to an obligation to perform reserve duty until they are between 40 and 49 years old, depending upon the nature of their military service.Our Industry
The trend towards consolidation in the pharmaceutical and biotechnology industries may adversely affect us.
There is a trend towards consolidation in the pharmaceutical and biotechnology industries. This consolidation trend may result in the remaining companies having greater financial resources and technical discovery capabilities, thus intensifying competition in these industries. This trend may also result in fewer potential collaborators or licensees for our therapeutic product candidates. Also, if a consolidating company is already doing business with our competitors, we may lose existing licensees or collaborators as a result of such consolidation.
If we do not keep pace with our competitors and with technological and market changes, our technology and products may bebecome obsolete and our business may suffer.
The cellular therapeutics industry, of which we are a part, is very competitive and is subject to a risk of losstechnological changes that can be rapid and we may be exposedintense. We have faced, and will continue to fluctuationsface, intense competition from biotechnology, pharmaceutical and biopharmaceutical companies, academic and research institutions and governmental agencies engaged in cellular therapeutic and drug discovery activities or funding, both in the market valuesUnited States and internationally. Some of these competitors are pursuing the development of cellular therapeutics, drugs and other therapies that target the same diseases and conditions that we target in our clinical and pre-clinical programs.
Some of our portfolio investmentscompetitors have greater resources, more product candidates and in interest rates.
Potential product liability claims could adversely affect our future earnings and financial condition.
We face an inherent business risk of loss or of reduced value or liquidity, particularly in light of the increased volatility and worldwide pressuresexposure to product liability claims in the financial and banking sectors.
Risk Related to pay any dividendsOur Dependence on our common stock, investors seeking dividend income should not purchase shares of our common stock.Third Parties
We are dependent upon third-partythird party suppliers for raw materials needed to manufacture PLX; if any of these third parties fails or is unable to perform in a timely manner, our ability to manufacture and deliver will be compromised.
In addition to the placenta used in the clinical manufacturing process of PLX, we require certain raw materials. These items must be manufactured and supplied to us in sufficient quantities and in compliance with current GMP. To meet these requirements, we have entered into supply agreements with firms that manufacture these raw materials to current GMP standards. Our requirements for these items are expected to increase if and when we transition to the manufacture of commercial quantities of our cell-based drug candidates.
In addition, as we proceed with our clinical trial efforts, we must be able to continuously demonstrate to the FDA, EMA and other regulatory authorities that we can manufacture our cell therapy product candidates with consistent characteristics. Accordingly, we are materially dependent on these suppliers for supply of current GMP-grade materials of consistent quality. Our ability to complete ongoing clinical trials may be negatively affected in the event that we are forced to seek and validate a replacement source for any of these critical materials.
We may not be ableintend to take advantagedecrease our dependency in third party suppliers for raw materials. To that effect we have developed a serum-free formulation which is expected to support the manufacturing of cell therapy products. This serum-free formulation was developed using our deep understanding in cell therapy industrial scale production standards, and the new regulatory pathways in the United States, Europe and Japan to shorten our time to market our products.
We rely and will be made availablecontinue to a limited number of CLI patients in the United States who are unsuitable for revascularization and cannot take part in therely on third parties to conduct our ongoing Phase III clinical study.
We depend and will depend upon independent investigators and collaborators, such as universities, medical institutions, CROs, vendors and strategic partners to conduct our pre-clinical and clinical trials under agreements with us. We negotiate budgets and contracts with CROs, vendors and study sites which may result in delays to our development timelines and increased costs. We rely heavily on these third parties over the course of our clinical trials, and we control only certain aspects of their activities. Nevertheless, we are responsible for PLX cells.ensuring that each of our studies is conducted in accordance with applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. We will only obtain regulatory approvaland these third parties are required to commercialize a product candidate if we can demonstrate to the satisfaction ofcomply with current good clinical practices, or cGCPs, which are regulations and guidelines enforced by the FDA the EMA, the PMDA or other applicableand comparable foreign regulatory authorities for product candidates in well-designedclinical development.
Regulatory authorities enforce these cGCPs through periodic inspections of trial sponsors, principal investigators and conductedtrial sites. If we or any of these third parties fail to comply with applicable cGCP regulations, the clinical trials, that the product candidate is safe and effective and that the product candidate, including the cell production methodology, otherwise meets the appropriate standards required for approval. Clinical trials can be lengthy, complex and extremely expensive processes with uncertain results. A failure of one or more clinical trials may occur at any stage of testing.
Any third parties conducting our clinical trials are successful,not and will not be our employees and, except for remedies available to us under our agreements with such third parties, which in some instances may be limited, we cannot control whether or not they devote sufficient time and resources to our ongoing pre-clinical, clinical and nonclinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities, which could affect their performance on our behalf. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they declare bankruptcy or if they need to conduct additionalbe replaced for whatever reason or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials for product candidates with patients receiving the drug for longer periods before we are able to seek approvals to marketmay be extended, delayed or terminated and sell these product candidates from the FDA and regulatory authorities outside the United States. Even if we are able to obtain approval for our product candidates through an accelerated approval review program, we may still be required to conduct clinical trials after such an approval. If we are not successful in commercializing any of our lead product candidates, or are significantly delayed in doing so, our business will be materially harmed.
Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches.
We rely on and could have a negative impact onutilize services provided by third parties in connection with our relationshipclinical trials, which services involve the collection, use, storage and analysis of personal health information. While we receive assurances from these vendors that their services are compliant with existing collaborators.
Despite the implementation of security measures, our internal computer systems and those of our current and future CROs and other contractors and consultants are vulnerable to damage from computer viruses, cyber security incidents and unauthorized access. While, to our knowledge, we have not experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that such proposed joint venture will be formed.
Unsuccessful compliance with certain European privacy regulations could have an adverse effect on our business and reputation.
The collection and use of personal health data in the European Union is governed by the provisions of the Data Protection Directive, and as of May 2018 the General Data Protection Regulation, or GDPR. These directives imposeThis directive imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent national data protection authorities and the security and confidentiality of the personal data. The GPDR also extends the geographical scope of European Union data protection law to non-European Union entities under certain conditions, tightens existing European Union data protection principles and creates new obligations for companies and new rights for individuals. Failure to comply with the requirements of the Data Protection Directive, the GDPR and the related national data protection laws of the European Union Member States may result in fines and other administrative penalties. TheThere may be circumstances under which a failure to comply with GDPR, introduces newor the exercise of individual rights under the GDPR, would limit our ability to utilize clinical trial data protection requirements in the European Union and substantial fines for breaches of the data protection rules.collected on certain subjects. The GDPR regulations impose additional responsibility and liability in relation to personal data that we process and we intend to put in place additional mechanisms ensuring compliance with these and/or new data protection rules.
Changes to these European privacy regulations and unsuccessful compliance may be onerous and adversely affect our business, financial condition, prospects, results of operations and reputation.
Existing government programs and tax benefits may be terminated.
We have received certain Israeli government approvals under certain programs and may in the future utilize certain tax benefits in Israel by virtue of these programs. To remain eligible for such tax benefits, we must continue to meet certain conditions. If we fail to comply with these conditions in the future, the benefits we receive could be canceled and have to pay additional taxes. We cannot guarantee that these programs and tax benefits will be continued in the future, at their current levels or at all. If these programs and tax benefits are ended, our business, financial condition and results of operations could be materially adversely affected.
If we fail to obtain or maintain orphan drug exclusivity for our products, our competitors may sell products to treat the same conditions and our potential future revenue will be reduced.
Our business strategy focuses on the development of drugs that are eligible for FDA and European Union orphan drug designation. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, the EMA’s Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union Community. Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product.
In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity. In the European Union, orphan drug designation also entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity is granted following drug or biological product approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition.
Even with orphan drug exclusivity, if a third party were to prepare or market a product which infringes upon our intellectual property, we may need to initiate litigation, which may be costly, to enforce our rights against such party. After an orphan drug is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Orphan drug designation on its own neither shortens the development time or regulatory review time for a drug.
While orphan drug products are typically sold at a high price relative to other medications, the market may not be receptive to high pricing of our products.
We develop our product candidates to treat rare and ultra-rare diseases, a space where medications are usually sold at high prices compared with other medications.
Accordingly, even if regulatory authorities approve our product candidates, the market may not be receptive to, and it may be difficult for us to achieve, a per-patient per-year price high enough to allow us to realize a return on our investment.
We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit U.S. companies or their agents and employees from providing anything of value to a foreign official or political party for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain any unfair advantage. We have operations and agreements with third parties. Our international activities create the risk of unauthorized and illegal payments or offers of payments by our employees or consultants, even though they may not always be subject to our control. We discourage these practices by our employees and consultants. However, our existing safeguards and any future improvements may prove to be less than effective, and our employees or consultants, may engage in conduct for which we might be held responsible for.for Any failure by us to adopt appropriate compliance procedures and ensure that our employees and consultants comply with the FCPA and applicable laws and regulations in foreign jurisdictions could result in substantial penalties or restrictions on our ability to conduct business in certain foreign jurisdictions.
Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.
Item 1B. Unresolved Staff Comments.
Not Applicable.
Item 2.
Properties.Our principal executive, manufacturing and research and development offices are located at MATAM Advanced Technology Park, Building No. 5, Haifa, Israel, where we occupy approximately 4,389 square meters. Our gross monthly rent payment for these leased facilities as of July 20182021 was 258,000263,000 NIS (approximately $73,000), excluding MTM - Scientific Industries Center Haifa, Ltd., or MTM, participation as described at Item 7.$80,000). For the fiscal year ended June 30, 2018,Fiscal Year 2021, we recognized ana net expense (rent expenses after deducting deferred participation payments from MATAM) in the amount of $878,000, net, for rent$702,000, according to the implementation of BuildingAccounting Standards Update No. 5, which was offset by MATAM participation of $239,000 due to renovations made in Building No. 5.2016-02, “Leases.”
We believe that the current space we have is adequate to meet our current and nearforeseeable future needs.
Item 3. Legal Proceedings.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant'sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common shares trade on the Nasdaq CapitalGlobal Market under the symbol PSTI and in the Tel Aviv Stock Exchange under the ticker symbol PLTR.PSTI.
| Quarter Ended | High | Low | ||||||
| Fiscal Year Ended June 30, 2017 | ||||||||
| September 30, 2016 | $ | 1.85 | $ | 1.30 | ||||
| December 31, 2016 | $ | 1.65 | $ | 1.38 | ||||
| March 31, 2017 | $ | 1.64 | $ | 1.04 | ||||
| June 30, 2017 | $ | 1.59 | $ | 1.20 | ||||
| Fiscal Year Ended June 30, 2018 | ||||||||
| September 30, 2017 | $ | 1.62 | $ | 1.06 | ||||
| December 31, 2017 | $ | 2.12 | $ | 1.30 | ||||
| March 31, 2018 | $ | 1.65 | $ | 1.29 | ||||
| June 30, 2018 | $ | 1.52 | $ | 1.14 | ||||
As of August 31, 2018,September 3, 2021, there were 10889 holders of record, and 113,595,48332,004,785 of our common shares were issued and outstanding.
American Stock Transfer and Trust Company, LLC is the registrar and transfer agent for our common shares. Their address is 6201 15th Avenue, 2nd Floor, Brooklyn, NY 11219, telephone: (718) 921-8300, (800) 937-5449.
Item 6. Selected Financial Data.[Reserved]
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Statements of Operations Data: | ||||||||||||||||||||
| Revenues | $ | 50 | $ | - | $ | 2,847 | $ | 379 | $ | 379 | ||||||||||
| Cost of revenues | 2 | - | 100 | 13 | 11 | |||||||||||||||
| Gross profit | 48 | - | 2,747 | 366 | 368 | |||||||||||||||
| Research and development expenses | 26,371 | 24,001 | 22,856 | 23,416 | 24,938 | |||||||||||||||
| Research and development participation grants | 3,742 | 2,909 | 3,276 | 4,243 | 5,396 | |||||||||||||||
| Research and development expenses, net | 22,629 | 21,092 | 19,580 | 19,173 | 19,542 | |||||||||||||||
| General and administrative expenses | 11,193 | 6,927 | 6,486 | 6,460 | 8,676 | |||||||||||||||
| Other income | 43 | - | - | - | - | |||||||||||||||
| Operating loss | 33,731 | 28,019 | 23,319 | 25,267 | 27,850 | |||||||||||||||
| Financial income, net | 7,605 | 205 | 73 | 590 | 918 | |||||||||||||||
| Net loss for the period | $ | 26,126 | $ | 27,814 | $ | 23,246 | $ | 24,677 | $ | 26,932 | ||||||||||
| Basic and diluted net loss per share | $ | 0.25 | $ | 0.32 | $ | 0.29 | $ | 0.35 | $ | 0.42 | ||||||||||
| Weighted average number of shares used in computing basic and diluted net loss per share | 105,876,763 | 87,426,208 | 79,547,989 | 70,284,337 | 63,514,405 | |||||||||||||||
| Statements of Cash Flows Data: | ||||||||||||||||||||
| Net cash used in operating activities | $ | 21,380 | $ | 21,611 | $ | 18,522 | $ | 20,605 | $ | 19,121 | ||||||||||
| Net cash provided by investing activities | 5,573 | 4,298 | 1,312 | 21,537 | 1,983 | |||||||||||||||
| Net cash provided by financing activities | 19,921 | 15,797 | 807 | 17,201 | 12,624 | |||||||||||||||
| Net increase (decrease) in cash | 4,114 | (1,516 | ) | (16,403 | ) | 18,133 | (4,514 | ) | ||||||||||||
| Cash and cash equivalents at beginning of year | 4,707 | 6,223 | 22,626 | 4,493 | 9,007 | |||||||||||||||
| Cash and cash equivalents at end of year | $ | 8,821 | $ | 4,707 | $ | 6,223 | $ | 22,626 | $ | 4,493 | ||||||||||
| Balance Sheet Data: | ||||||||||||||||||||
| Cash, cash equivalents, short-term bank deposits, restricted cash and short-term deposits, and marketable securities | $ | 30,587 | $ | 26,665 | $ | 32,750 | $ | 53,119 | $ | 58,819 | ||||||||||
| Current assets | 32,036 | 29,016 | 35,596 | 56,868 | 61,987 | |||||||||||||||
| Long-term assets | 6,924 | 8,518 | 10,345 | 11,287 | 12,036 | |||||||||||||||
| Total assets | 38,960 | 37,534 | 45,941 | 68,155 | 74,023 | |||||||||||||||
| Current liabilities | 8,548 | 5,414 | 5,775 | 6,183 | 7,397 | |||||||||||||||
| Long-term liabilities | 1,905 | 1,869 | 2,010 | 3,829 | 4,503 | |||||||||||||||
| Stockholders’ equity | 28,507 | 30,251 | 38,156 | 58,143 | 62,123 | |||||||||||||||
Item 7.
We are a biotechnology company focused in the field of regenerative medicine, and a leading developer of placenta-based cell therapy product candidates for the treatment of multiple ischemic, inflammatory, muscle injuries and hematologic conditions. Our lead indicationsoperations are CLI, recovery following surgery for hip fracturefocused on the research, development, manufacturing, conducting clinical trials and ARS. Eachbusiness development of these indications is a severe unmet medical need.cell therapeutics and related technologies.
PLX cells are derived from a class of placental cells that are harvested from donated placenta at the time of full term healthy delivery of a baby. PLX cell products require noThe cells are grown using our proprietary three-dimensional expansion technology and can be administered to patients off the-shelf, without blood or tissue matching prior to administration. TheyPLX cells are produced using our proprietary three-dimensional expansion technology. believed to release a range of therapeutic proteins in response to the patient’s condition, such as inflammation, muscle trauma, hematological disorders and radiation damage.
We are conducting several multinational clinical studies which consist of a Phase III clinical study in muscle recovery following surgery for hip fracture and two Phase II clinical studies in ARDS associated with COVID-19 in the United States, Europe and Israel. In addition, we are focusing on other clinical programs in the hematological field such as a Phase I clinical study for incomplete recovery following bone marrow transplantation in the United States and Israel, an investigator-led Phase I/II cGVHD study in Israel, and ARS under the FDA animal rule. We believe that each of these indications is a severe unmet medical need.
Our manufacturing facility complies with the European, Japanese, Israeli, South Korean and the FDA’s current Good Manufacturing PracticecGMP requirements and has been inspected and approved by the European and Israeli regulators for production of PLX-PAD for late stage trials and marketing. In December 2017, after an audit of our facilities, we weretrials. We have also been granted manufacturer/importer authorization and Good Manufacturing PracticecGMP Certification by Israel’s Ministry of Health.the MOH. If we obtain FDA and other regulatory approvals to market PLX cells, we expect to have in-house production capacity to grow clinical-grade PLX cells in commercial quantities.
Our goal is to make significant progress with our robust clinical pipeline and our anticipated pivotal trialsclinical studies in order to ultimately bring innovative, potent therapies to patients who need new treatment options. We expect to demonstrate a real-world impact and value from our clinical pipeline, technology platform and commercial-scale manufacturing capacity. Our business model for commercialization and revenue generation includes, but is not limited to, licensing deals, joint ventures with pharmaceutical companies, direct sale of our products, partnerships, licensing deals, and joint ventures with pharmaceutical companies.partnerships.
RESULTS OF OPERATIONS – YEAR ENDED JUNE 30, 20182021 COMPARED TO YEAR ENDED JUNE 30, 2017 AND YEAR ENDED JUNE 30, 2017 COMPARED TO YEAR ENDED JUNE 30, 2016.2020.
Revenues
Revenues for the year ended June 30, 20182020 were $50,000, versus$23,000 compared to no revenues generated infor the year ended June 30, 2017. All2021. The revenues in the year ended June 30, 20182020 were related to the sale of our PLX cells for research use.
Research and Development, netNet
Research and development net costs (costs less participation and grants by the IIA, Horizon 2020 and other parties) increased by 39% from $21,577,000 for the year ended June 30, 2018 increased by 7%2020 to $22,629,000 from $21,092,000$30,066,000 for the year ended June 30, 2017.2021. The increase is mainly attributed to (1) an increase in clinical study subcontractor expenses which mostly relates to ARDS associated with COVID-19 Phase II clinical studies, (2) an increase in payroll expenses related to payroll adjustments and exchange rate adjustment that relates to the strength of the NIS against the U.S. dollar, (3) increased share-based compensation expenses due to increased amount of restricted stock units, or RSUs, granted during the year ended June 30, 2021 compared to the amount of RSUs granted during the year ended June 30, 2020, and (4) a decrease in the participation of Horizon 2020 in our clinical programs. The increased research and development net costs were partially offset by a decrease in travel abroad expenses due to the COVID–19 pandemic.
General and Administrative
General and administrative expenses increased by 159% from $7,922,000 for the year ended June 30, 2020 to $20,557,000 for the year ended June 30, 2021. The increase is mainly attributed to: (1) an increase in payroll expenses related to differences in exchange rates, an increase in the average number of employees and increases in average salaries, (2) an increase in materials consumption, and (3) a decrease in IIA participation ($3,300,000 was approved in calendar year 2016 compared to $1,500,000 that was approved in calendar year 2017 and compared to $900,000 approved in calendar year 2018). The increase was partially offset due to: (1) a higher participation of the European Union with respect to the Horizon 2020 grants which commenced in calendar year 2017, (2) a decrease in stock-based compensation expenses due to the amount of granted restricted stock units and their vesting schedules, (3) a decrease in rent and maintenance expenses, (4) a decrease in depreciation expenses, and (5) a decrease in other research and development expenses and subcontractors’ expenses related to some of our clinical studies.
Financial Income, Net
Financial income increased by 7% from $6,486,000$324,000 for the year ended June 30, 20162020 to $6,927,000$758,000 for the year ended June 30, 2017.2021. This increase is attributedmainly attributable to (1) increased income from exchange rate differences related to the strength of the NIS against the U.S. dollar on deposits linked to NIS, and (2) increased interest income from bank deposits due to an increase in corporate activities expenses andour deposits. The increase in financial income was partially offset by an increase in payrollinterest expenses duerelating to differences in exchange rates as well as an increase in the number of employees.EIB loan.
Loss For The Year
Loss for the year ended June 30, 20172021 amounted to $7,605,000$49,865,000 as compared to a loss of $29,152,000 for the year ended June 30, 2018. This increase is2020. The changes were mainly due to increases in general and administrative expenses and research and development expenses, net, for the sale of our investments in marketable securities, specifically the sale of the investment in CHA shares which resulted in a net gain of $6,200,000. The increase was partially offset due to an expense of $850,000 resulting from an other-than-temporary impairment loss recognized and resulting from changes in the fair value of our hedging instruments related to the strength of the U.S. dollar against the NIS.
The increase in weighted average common shares outstanding reflects the issuances of shares pursuant to a securities purchase agreement with certain institutional investors in February 2021, issuances of shares pursuant to our Open Market Sale AgreementSM, or the ATM Agreement, that we entered into with Jefferies LLC, or Jefferies, on July 16, 2020, and issuances of additional shares upon settlement of RSUs issued to directors, employees and consultants, and shares issued as a result of the exercise of outstanding warrants and options.
Liquidity and Capital Resources
As of June 30, 2018,2021, our total current assets were $32,036,000$67,371,000 and our total current liabilities were $8,548,000.$11,517,000. On June 30, 2018,2021, we had a working capital surplus of $23,488,000$55,854,000 and an accumulated deficit of $215,697,000.$330,021,000.
As of June 30, 2017,2020, our total current assets were $29,016,000$48,461,000 and our total current liabilities were $5,414,000.$7,987,000. On June 30, 2017,2020, we had a working capital surplus of $23,602,000$40,474,000 and an accumulated deficit of $189,571,000.$280,156,000.
Our cash and cash equivalents and restricted cash as of June 30, 20182021 amounted to $8,821,000. This is$31,838,000 which reflects an increase of $4,114,000$22,609,000 from the $4,707,000$9,229,000 reported as of June 30, 2017.2020. Cash balances increased in the year ended June 30, 20182021 for the reasons presented below:below.
Our cash used by operating activities used cash of $21,380,000 inwas $30,910,000 during the year ended June 30, 2018.2021 and $26,369,000 during the year ended June 30, 2020. Cash used by operating activities in the year ended June 30, 20182021 primarily consisted of payments to subcontractors, suppliers, and professional services providers related to our ongoing clinical studies and payments of salaries to our employees, and payments of fees to our consultants, suppliers, subcontractors, and professional services providers including the costs of clinical studies, offset by participation of the IIA, and Horizon 2020 grants.
Cash used for investing activities provided cash of $4,298,000was $7,265,000 during the year ended June 30, 2021 and $30,458,000 during the year ended June 30, 2020. The investing activities in the year ended June 30, 2017.2021 consisted primarily of cash used for investment in long-term deposits of $10,953,000 and payments of $373,000 related to investments in property and equipment, partially offset by the withdrawal of $4,061,000 of short-term deposits. The investing activities in the year ended June 30, 2020 consisted primarily of proceeds of $5,937,000 from the sale and redemption of marketable securities and redemption of short termcash used for investment in short-term deposits of $2,316,000, offset by investing $3,607,000$17,949,000, investment in marketable securitieslong-term deposits of $12,239,000 and the purchasepayments of $270,000 related to investments in property and equipment for $378,000.equipment.
Financing activities generated cash in the amount of $15,797,000$61,402,000 during the year ended June 30, 2017.2021 and $60,870,000 during the year ended June 30, 2020. The cash generated in the year ended June 30, 2021 from financing activities are primarily attributableis related to: (1) net proceeds of $36,589,000 comprised of funds received from our registered direct offering which closed in February 2021 and common shares issuances made under the ATM Agreement, (2) proceeds of $24,449,000 received from the EIB pursuant to the EIB Finance Agreement, and (3) net proceeds of $364,000 from the exercise of outstanding warrants. The cash generated in the year ended June 30, 2020 from financing activities is related to net proceeds of $15,718,000$43,262,000 from issuing our common shares under our prior Open Market Sales AgreementSM we executed with Jefferies LLC on February 6, 2019, net proceeds of $14,901,000 from issuing our common shares in a registered direct offering in May 2020 and net proceeds of $2,707,000 from issuing our common shares from the exercise of warrants.
On July 16, 2020, we entered into the ATM Agreement with Jefferies, pursuant to which we may issue and sell shares of our common stock in the underwritten public offering we closed in January 2017, proceeds related to grant received from the Israel-United States Binational Industrial Research and Development Foundation and exercises of options by employees.
In the year ended June 30, 2021, warrants to purchase up to 51,999 shares from our April 2019 firm commitment public offering were exercised by investors at an exercise price of $7.00 per share, resulting in the issuance of 51,999 common shares for net proceeds of approximately $364,000.
On February 2, 2021, we entered into a securities purchase agreement with several institutional investors, or the Investors, pursuant to which we sold, in a registered direct offering, directly to the Investors, 4,761,905 common shares, for gross proceeds of $30,000,000. The aggregate net proceeds were approximately $28,077,000, net of issuance expenses of approximately $1,923,000.
In April 2020, we and our subsidiaries, Pluristem Ltd. and Pluristem GmbH, executed the EIB Finance Agreement for funding of up to €50 million in the aggregate, payable in three tranches. The proceeds from the EIB Finance Agreement are intended to support our research and development in the European Union to further advance our regenerative cell therapy platform, and to bring the products in our pipeline to market. The proceeds from the EIB Finance Agreement are expected to be deployed in three tranches, subject to the achievement of certain clinical, regulatory and scaling up milestones.
During June 2021, we received the first tranche in the amount of $24,449,000 (€20 million) pursuant to the EIB Finance Agreement. The amount received is due to be repaid on June 1, 2026 and bears annual interest of 4% to be paid together with the principal of the loan. As of June 30, 2021, the interest accrued was in the amount of $78,000 (€65,000).
Non-dilutive grants
During the years ended June 30, 2018, 20172021 and 2016,2020, we received total cash grants of approximately $2,328,000, $3,258,000$239,000 and $2,526,000,$1,227,000, respectively, in cash from the IIA towards ourEuropean Union research and development expenses.consortiums relating to the Horizon 2020 program.
The IIA has supported our research activity. Our last program was approved by the IIA in 2019 and relates to a grant of approximately $500,000. The grant was used to cover research and development expenses for the period January 1, 2019 to December 31, 2019.
According to the IIA grant terms, we are required to pay royalties at a rate of 3% on sales of products and services derived from technology developed using this and other IIA grants until 100% of the dollar-linked grants amount plus interest are repaid. In the absence of such sales, no payment is required. During the year ended June 30, 2018, we2021, no royalties were paid $2,000 of royalties to the IIA. The IIA may impose certain conditions on any arrangement under which the IIA permits the Company to transfer technology or development out of Israel or outsource manufacturing out of Israel. While the grant is given to the Company over a certain period of time (usually a year), the requirements and restrictions under the Israeli Law for the Encouragement of Industrial Research and Development, 1984 continue and do not have a set expiration period, except for the royalties, which requirement to pay them expires after payment in full.
In May 2020, we were selected as a member of the years ended June 30, 2018CRISPR-IL consortium, a group funded by the IIA. CRISPR-IL brings together the leading experts in life science and 2017, we receivedcomputer science from academia, medicine, and industry, to develop AI based end-to-end genome-editing solutions. CRISPR-IL is funded by the IIA with a total cash grantsbudget of approximately $2,265,000$10,000,000 of which, an amount of approximately $480,000 is a direct grant allocated to us, for a period of 18 months, with a potential for extension of an additional 18 months and $965,000, respectively,additional budget from the European Union researchIIA. CRISPR-IL participants include leading companies, and development consortiums relating to the Horizon 2020 program.
In July 2018, will be sufficient to maintain our operations into the first quarter of fiscal year 2020. Our inability to raise funds to carry out our business plan will have a severe negative impact on its ability to remain a viable company. These conditions raise substantial doubt about our ability to continue as a going concern.
In July 2017, we were awarded an additional “Smart Money”Smart Money grant of approximately $229,000 from Israel’s Ministry of Economy. The Israeli government granted us budget resources that we intend to use to advance our product candidate towards marketing in China-Hong Kong markets. We will also receive close support from Israel’s trade representatives stationed in China, including Hong Kong, along with experts appointed by the Smart Money program.
In August 2016, our CLI program in the European Union was awarded a Euro 7,600,000€7,600,000 (approximately $8,900,000)$8,500,000) non-royalty bearing grant. The grant is part of the European Union’s Horizon 2020 program. The Phase III study of PLX-PAD in CLI will be a collaborative project carried out by an international consortium led by the Berlin-Brandenburg Center for Regenerative Therapies together with the Company and with participation of additional third parties. The grant will covercovered a significant portion of the CLI program costs. An amount of Euro 1,900,000€1,900,000 (approximately $2,200,000)$2,100,000) is a direct grant allocated to us, and the Company also expects to benefit fromhad cost savings resulting from grant amounts allocated to the other consortium members. In July 2017, the consortium amended the consortium agreement, pursuant to which the original grant allocation was amended such that we will receive an additional direct grant of Euro 1,000,000€1,177,000 (approximately $1,200,000)$1,295,000). The additional direct grant was allocated to us from the total amount of the original grant. As of June 30, 2021, we received €2,615,000 (approximately $2,946,000) and we expect to receive an additional €461,000 (approximately $548,000).
In September 2017, our Phase III study of PLX-PAD cell therapy in the treatment of muscle injury following surgery for hip fracture was awarded a Euro 7,400,000€7,400,000 (approximately $8,600,000)$8,300,000) grant, as part of the European Union’s Horizon 2020 program. This Phase III study will be a collaborative project carried out by an international consortium led by Charite Universitätsmedizin Berlin,Charité, together with us, and with participation of additional third parties. The grant will cover a significant portion of the project costs. An amount of Euro€ 2,550,000 (approximately $3,000,000)$2,900,000) is a direct grant allocated to us for manufacturing and other costs, and we also expect to have a direct benefit from cost savings resulting from grant amounts allocated to the other consortium members. As of June 30, 2021, we received €2,166,000 (approximately $2,540,000) and we expect to receive an additional €382,000 (approximately $454,000).
In October 2017, the nTRACK, a collaborative project carried out by an international consortium led by Leitat was awarded a Euro 6,800,000€6,800,000 (approximately $7,900,000)$7,600,000) non-royalty bearing grant. An amount of Euro 500,000€500,000 (approximately $580,000)$560,000) is a direct grant allocated to us. We also expect to benefit from cost savings resulting from grant amounts allocated to the other consortium members. As of June 30, 2021, we received €414,000 (approximately $473,000) and we expect to receive an additional €73,000 (approximately $87,000).
Outlook
We have accumulated a deficit of $330,021,000 since our inception in May 2001. We do not expect to generate any significant revenues from sales of products in the next twelve months. Our cash needs may increase in the foreseeable future. We expect to generate revenues, from the sale of licenses to use our technology or products, but in the short and medium terms will unlikely exceed our costs of operations.
We may be required to obtain additional liquidity resources in order to support the commercialization of our products and maintain our research and development and clinical trials activities.
We are continually looking for sources of funding, including non-diluting sources such as collaboration with other companies via licensing agreements, the EIB Finance Agreement, the IIA grants, the European Union grant and other research grants, and sales of our common shares.
We believe that we have sufficient cash to fund our operations for at least the next 12 months.
Application of Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in Note 2 to our consolidated financial statements appearing in this Annual Report. We believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations.
The discussion and analysis of our financial condition and results of operations is based on our financial statements, which we prepared in accordance with U.S. generally accepted accounting principles.GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Share-Based Compensation
Share-based compensation is considered to be satisfied at a point in time where the customer obtains control over the product.
In accordance with ASC 718, "Compensation-Stock Compensation"“Compensation-Stock Compensation”, or ASC 718, restricted share unitsRSUs granted to employees and directors are measured at their fair value on the grant date. All restricted shares unitsRSUs granted in 2018fiscal years 2021 and 20172020 were granted for no consideration; therefore their fair value was equal to the share price at the date of grant basedunless the RSUs include a market-based condition in which case the fair value RSUs at the date of grant was calculated using the Monte Carlo model. The RSUs granted in Fiscal Year 2021 to non-employee consultants were measured at their fair value on the close trading price of our shares known at the grant date. The restricted shares units to non-employees consultants are remeasureddate in any future vesting period for the unvested portion of the grants.accordance with ASU No. 2018-07 - “Compensation—Share Compensation”.
The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in our consolidated statements of operations. We have graded vesting based on the accelerated method over the requisite service period of each of the awards. The expected pre-vesting forfeiture rate affects the number of the shares. Based on our historical experience, the pre-vesting forfeiture rate per grant is 7%13% for the shares granted to employees and 0% for the shares granted to our directors Co-CEOs and non-employeesofficers and non-employee consultants.
Research and Development Expenses, Net
We expect our research and development expenses to remain our primary expense in the near future as we continue to develop our product candidates. Our research and development expenses consist primarily of clinical trials expenses, consultant and subcontractor expenses, payroll and related expenses, lab material expenses, stock basedshare-based compensation expenses, rent and maintenance expenses and patent expenses. The following table provides a breakdown of the related costs for fiscal years 2016 through 20182020 and 2021 (in thousands of dollars):
| Year ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Payroll and related expenses | $ | 10,563 | $ | 8,478 | ||||
| Materials expenses | 2,843 | 2,821 | ||||||
| Clinical trials expenses | 10,024 | 6,021 | ||||||
| Depreciation expenses | 1,252 | 1,453 | ||||||
| Consultants and subcontractor expenses | 2,411 | 1,351 | ||||||
| Rent and maintenance expenses | 1,369 | 1,227 | ||||||
| Share-based compensation expenses | 1,538 | 556 | ||||||
| Other Research and development expenses | 533 | 1,189 | ||||||
| Total expenses | 30,533 | 23,096 | ||||||
| Less: Research and development participation grants | (467 | ) | (1,519 | ) | ||||
| Research and development expenses, net | $ | 30,066 | $ | 21,577 | ||||
| Year ended June 30, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| Payroll and related expenses | $ | 9,915 | $ | 8,341 | $ | 7,945 | ||||||
| Materials expenses | 4,521 | 3,145 | 3,799 | |||||||||
| Clinical trials expenses | 4,370 | 4,461 | 3,048 | |||||||||
| Depreciation expenses | 1,893 | 2,029 | 2,006 | |||||||||
| Consultants and subcontractor expenses | 1,469 | 1,485 | 1,734 | |||||||||
| Rent and maintenance expenses | 1,429 | 1,567 | 1,515 | |||||||||
| Stock-based compensation expenses | 1,423 | 1,584 | 1,021 | |||||||||
| Patent expenses | 426 | 461 | 640 | |||||||||
| Other Research and Development expenses | 925 | 928 | 1,148 | |||||||||
| Total expenses | 26,371 | 24,001 | 22,856 | |||||||||
| Less: Research and Development participation grants | (3,742 | ) | (2,909 | ) | (3,276 | ) | ||||||
| Research and Development Expenses, Net | $ | 22,629 | $ | 21,092 | $ | 19,580 | ||||||
We invest heavily in research and development. Research and development expenses, net, were our major operating expenses, representing 67%, 75%59% and 75%73% of the total operating expenses for each of our fiscal years 2018, 20172021 and 2016,2020, respectively. We expect that in the upcoming years our research and development expenses, net, will continue to be our major operating expense.
| Payments due by period | ||||||||||||||||||||
| Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
| Operating lease obligations | $ | 3,418,000 | $ | 1,049,000 | $ | 1,936,000 | $ | 433,000 | ||||||||||||
| Minimum purchase requirements | $ | 1,605,000 | $ | 1,605,000 | ||||||||||||||||
| Accrued severance pay, net | $ | 281,000 | $ | 281,000 | ||||||||||||||||
| Total | $ | 5,304,000 | $ | 2,654,000 | $ | 1,936,000 | $ | 433,000 | $ | 281,000 | ||||||||||
Item 7A. Quantitative and Qualitative Disclosures Aboutabout Market Risk.
We are exposed to a variety of risks, including changes in interest rates, foreign currency exchange rates changes in the value of our marketable securities and inflation.
As of June 30, 2018,2021, we had $8.8$31.25 million in cash and cash equivalents, and $22.1$34.31 million in short-term bank deposits and restricted deposits and $23.27 million in long-term bank deposits and restricted deposits.
We adhere to an investment policy set by our investment committee, which aims to preserve our financial assets, maintain adequate liquidity and maximize return while minimizing exposure to the NIS. Such policy further provides that we should hold most of our current assets in bank depositsNIS and the remainder of our current assets should be invested in low risk instruments.Euro. As of today,June 30, 2021, the currency of our financial portfolio is mainly in U.S. dollars and we use options contracts in order to hedge our exposures to currencies other than the U.S. dollar.
Interest Rate Risk
We invest a major portion of our cash surplus in bank deposits in banks in Israel. Since the bank deposits typically carry fixed interest rates, financial income over the holding period is not sensitive to changes in interest rates. However, our interest gains from future deposits may decline in the future as a result of changes in the financial markets. In any event, given the historic low levels of the interest rate, we estimate that a further decline in the interest rate we are receiving will not result in a material adverse effect to our business.
Foreign Currency Exchange Risk and Inflation
Foreign Currency Exchange Risk - NIS
A significant portion of our expenditures, including salaries, lab materials, consultants’ fees and officefacility expenses relate to our operations in Israel. The cost of those Israeli operations, as expressed in U.S. dollars, is influenced by the extent to which any increase in the rate of inflation in Israel is not offset (or is offset on a lagging basis) by a devaluation of the NIS in relation to the U.S. dollar. If the U.S. dollar declines in value in relation to the NIS, it will become more expensive for us to fund our operations in Israel. In addition, as of June 30, 2018,2021, we own net financial balances in NIS of approximately ($2,875,000)1,614,000).
Assuming a 10% appreciation of the NIS against the U.S. dollar, we would experience exchange rate loss of approximately $261,000,$179,000, while assuming a 10% devaluation of the NIS against the U.S. dollars, we would experience an exchange rate gain of approximately $319,000,$147,000, in both cases excluding the effect of our hedging transactions (as described below).
The exchange rate of the U.S. dollar to the NIS, based on exchange rates published by the Bank of Israel, was as follows:
Year Ended June 30, | ||||||||
| 2020 | 2021 | |||||||
| Average rate for period | 3.507 | 3.322 | ||||||
| Rate at period-end | 3.466 | 3.260 | ||||||
| Year Ended June 30, | ||||||||||||
| 2016 | 2017 | 2018 | ||||||||||
| Average rate for period | 3.862 | 3.741 | 3.529 | |||||||||
| Rate at period-end | 3.846 | 3.496 | 3.650 | |||||||||
We use currency transactions of options and forward contracts to decrease the risk of financial exposure from fluctuations in the exchange rate of the U.S. dollar against the NIS.
Foreign Currency Exchange Risk - Euro (€)
Following the year ended June 30, 2018,receipt of the first tranche in amount of €20 million (approximately $24 million) of the loan from the EIB pursuant to the EIB Finance Agreement, we have established both a cash asset and a liability in our net gainfinancial statements. If the Euro increases in value in relation to the U.S. dollar, both the asset and liability of our loan from the EIB will increase, and if the Euro decreases in relation to the U.S. dollar, both the asset and liability will conversely decrease.
Since the tranche and the accumulated interest are payable together in a single installment within five years from disbursement of the tranche, and we are likely to use the cash received to finance our operations, as time progress the cost basis of the liability of our loan is expected to increase and the cash asset is expected to decrease.
As part of our hedging strategy, we may use currency transactions that are non-designated and consist primarily of options strategiesand forward contracts to minimize the risk associated withof financial exposure from fluctuations in the foreign exchange effectsrate of monetary assets and liabilities denominated in NIS was $270,000.the U.S. dollar against the Euro
Item 8.
Financial Statements and Supplementary Data.Our financial statements are stated in thousands United States dollars (US$) and are prepared in accordance with U.S. GAAP.
The following audited consolidated financial statements are filed as part of this Annual Report:
| Reports of Independent Registered Public Accounting Firm, dated September 13, 2021 | F-2 - F-3 |
| Consolidated Balance Sheets | F-4 - F-5 |
| Consolidated Statements of Operations | F-6 |
| Consolidated Statements of Comprehensive Loss | |
| Statements of Changes in Equity | F-7 - F-8 |
| Consolidated Statements of Cash Flows | F-9 |
| Notes to the Consolidated Financial Statements | F-10 - F-31 |
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARYSUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 20182021
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARYSUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 20182021
U.S. DOLLARS IN THOUSANDS
INDEX
Page | |
Report of Independent Registered Public Accounting Firm
To the board of directors and shareholders of Pluristem Therapeutics Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Pluristem Therapeutics Inc. and its subsidiaries (the “Company”) as of June 30, 2021, and the related consolidated statements of operations, of changes in shareholders’ equity and of cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. We determined there are no critical audit matters.
/s/ Kesselman & Kesselman
Certified Public Accountants (lsr.)
A member firm of PricewaterhouseCoopers International Limited
Haifa, Israel
September 13, 2021
We have served as the Company’s auditor since 2021.
  | Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel | |
Tel: +972-3-6232525 Fax: ey.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Thethe Stockholders and Board of Directors and Stockholders Of
PLURISTEM THERAPEUTICS INC.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Pluristem Therapeutics Inc. and its subsidiary (the "Company"subsidiaries (the “Company”) as of June 30, 2018 and 2017,2020, the related consolidated statements of operations, comprehensive loss, changes in stockholders'stockholders’ equity and cash flows for each of the three years in the periodyear ended June 30, 20182020 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2018 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the periodyear ended June 30, 2018,2020, in conformity with U.SU.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOBPublic Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
| ||
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
We have served as the Company‘sCompany’s auditor since 2003.from 2003 to 2020.
Tel Aviv, Israel
September 12, 201810, 2020
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PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARYSUBSIDIARIES
| U.S. Dollars in thousands (except share and per share data) |
| June 30, | ||||||||||||
| Note | 2018 | 2017 | ||||||||||
| ASSETS | ||||||||||||
| CURRENT ASSETS: | ||||||||||||
| Cash and cash equivalents | $ | 8,821 | $ | 4,707 | ||||||||
| Short-term bank deposits | 21,079 | 6,235 | ||||||||||
| Restricted cash and short-term bank deposits | 2f | 687 | 559 | |||||||||
| Marketable securities | 3 | - | 15,164 | |||||||||
| Accounts receivable from the Israeli Innovation Authority (“IIA”) | 58 | 1,036 | ||||||||||
| Other current assets | 5 | 1,391 | 1,315 | |||||||||
Total current assets | 32,036 | 29,016 | ||||||||||
| LONG-TERM ASSETS: | ||||||||||||
| Long-term deposits and restricted bank deposits | 2g | 383 | 403 | |||||||||
| Severance pay fund | 846 | 804 | ||||||||||
| Property and equipment, net | 6 | 5,678 | 7,277 | |||||||||
| Other long-term assets | 17 | 34 | ||||||||||
Total long-term assets | 6,924 | 8,518 | ||||||||||
Total assets | $ | 38,960 | $ | 37,534 | ||||||||
| June 30, | ||||||||||||
| Note | 2021 | 2020 | ||||||||||
| ASSETS | ||||||||||||
| CURRENT ASSETS: | ||||||||||||
| Cash and cash equivalents | $ | 31,241 | $ | 8,270 | ||||||||
| Short-term bank deposits | 2f | 33,709 | 37,514 | |||||||||
| Restricted cash | 2f | 597 | 555 | |||||||||
| Prepaid expenses and other current assets | 3 | 1,824 | 2,122 | |||||||||
| Total current assets | 67,371 | 48,461 | ||||||||||
| LONG-TERM ASSETS: | ||||||||||||
| Long-term deposits | 23,269 | 12,249 | ||||||||||
| Restricted bank deposits | 2g | - | 404 | |||||||||
| Severance pay fund | 664 | 631 | ||||||||||
| Property and equipment, net | 4 | 1,499 | 2,516 | |||||||||
| Operating lease right-of-use asset | 6 | 728 | 1,259 | |||||||||
| Other long-term assets | 7 | 12 | ||||||||||
| Total long-term assets | 26,167 | 17,071 | ||||||||||
| Total assets | $ | 93,538 | $ | 65,532 | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARYSUBSIDIARIES
CONSOLIDATED BALANCE SHEETS |
| U.S. Dollars in thousands (except share and per share data) |
| June 30, | ||||||||||||
| Note | 2018 | 2017 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| CURRENT LIABILITIES | ||||||||||||
| Trade payables | $ | 3,261 | $ | 1,966 | ||||||||
| Accrued expenses | 2,266 | 1,465 | ||||||||||
| Other accounts payable | 7,2n | 3,021 | 1,983 | |||||||||
Total current liabilities | 8,548 | 5,414 | ||||||||||
| LONG-TERM LIABILITIES | ||||||||||||
| Accrued severance pay | 1,127 | 940 | ||||||||||
| Other long-term liabilities | 8g | 778 | 929 | |||||||||
Total long-term liabilities | 1,905 | 1,869 | ||||||||||
| COMMITMENTS AND CONTINGENCIES | 8 | |||||||||||
| STOCKHOLDERS’ EQUITY | ||||||||||||
| Share capital: | 9 | |||||||||||
Common stock $0.00001 par value per share: Authorized: 200,000,000 shares Issued and outstanding: 113,565,780 shares as of June 30, 2018; 96,938,789 shares as of June 30, 2017 | 1 | 1 | ||||||||||
| Additional paid-in capital | 244,203 | 217,822 | ||||||||||
| Accumulated deficit | (215,697 | ) | (189,571 | ) | ||||||||
| Other comprehensive income | - | 1,999 | ||||||||||
Total stockholders' equity | 28,507 | 30,251 | ||||||||||
Total liabilities and stockholders' equity | $ | 38,960 | $ | 37,534 | ||||||||
| June 30, | ||||||||||||
| Note | 2021 | 2020 | ||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| CURRENT LIABILITIES | ||||||||||||
| Trade payables | $ | 2,526 | $ | 1,968 | ||||||||
| Accrued expenses | 5,941 | 3,018 | ||||||||||
| Operating lease liability | 6 | 634 | 1,020 | |||||||||
| Other accounts payable | 5 | 2,416 | 1,981 | |||||||||
| Total current liabilities | 11,517 | 7,987 | ||||||||||
| LONG-TERM LIABILITIES | ||||||||||||
| Accrued severance pay | 920 | 879 | ||||||||||
| Operating lease liability | 6 | 100 | 565 | |||||||||
| Loan from the European Investment Bank (EIB) | 7 | 23,850 | - | |||||||||
| Total long-term liabilities | 24,870 | 1,444 | ||||||||||
| COMMITMENTS AND CONTINGENCIES | 8 | |||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Share capital: | 9 | |||||||||||
| Common shares, $0.00001 par value per share: Authorized: 60,000,000 shares Issued and outstanding: 31,957,782 shares as of June 30, 2021; 25,492,713 shares as of June 30, 2020 | * | * | ||||||||||
| Additional paid-in capital | 387,172 | 336,257 | ||||||||||
| Accumulated deficit | (330,021 | ) | (280,156 | ) | ||||||||
| Total shareholders’ equity | 57,151 | 56,101 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 93,538 | $ | 65,532 | ||||||||
| (*) | Less than $1 |
The accompanying notes are an integral part of the consolidated financial statements.
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
| Year ended June 30, | ||||||||||||||||
| Note | 2018 | 2017 | 2016 | |||||||||||||
| Revenues | 1c, 2i | 50 | - | $ | 2,847 | |||||||||||
| Cost of revenues | (2 | ) | - | (100 | ) | |||||||||||
| Gross profit | 48 | - | 2,747 | |||||||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development expenses | (26,371 | ) | (24,001 | ) | (22,856 | ) | ||||||||||
| Less: participation grants by the IIA, Horizon 2020 and other parties | 3,742 | 2,909 | 3,276 | |||||||||||||
| Research and development expenses, net | (22,629 | ) | (21,092 | ) | (19,580 | ) | ||||||||||
| General and administrative expenses, net | (11,193 | ) | (6,927 | ) | (6,486 | ) | ||||||||||
| Other income | 10 | 43 | - | - | ||||||||||||
| Total operating loss | (33,731 | ) | (28,019 | ) | (23,319 | ) | ||||||||||
| Financial income, net | 11 | 7,605 | 205 | 73 | ||||||||||||
| Net loss for the period | $ | (26,126 | ) | $ | (27,814 | ) | $ | (23,246 | ) | |||||||
| Loss per share: | ||||||||||||||||
| Basic and diluted net loss per share | $ | (0.25 | ) | $ | (0.32 | ) | $ | (0.29 | ) | |||||||
| Weighted average number of shares used in computing basic and diluted net loss per share | 105,876,763 | 87,426,208 | 79,547,989 | |||||||||||||
| Year ended June 30, | ||||||||||||
| Note | 2021 | 2020 | ||||||||||
| Revenues | 2h | - | 23 | |||||||||
| Cost of revenues | - | - | ||||||||||
| Gross profit | - | 23 | ||||||||||
| Operating Expenses: | ||||||||||||
| Research and development expenses | (30,533 | ) | (23,096 | ) | ||||||||
| Less: participation grants by the Israel Innovation Authority, Horizon 2020 and other parties | 467 | 1,519 | ||||||||||
| Research and development expenses, net | 2l | (30,066 | ) | (21,577 | ) | |||||||
| General and administrative expenses | (20,557 | ) | (7,922 | ) | ||||||||
| Total operating loss | (50,623 | ) | (29,476 | ) | ||||||||
| Financial income, net | 10 | 758 | 324 | |||||||||
| Loss for the year | $ | (49,865 | ) | $ | (29,152 | ) | ||||||
| Loss per share: | ||||||||||||
| Basic and diluted loss per share | $ | (1.77 | ) | $ | (1.60 | ) | ||||||
| Weighted average number of shares used in computing basic and diluted loss per share | 28,113,636 | 18,197,303 | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARYSUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY |
| U.S. Dollars in thousands (except share and per share data) |
| Year ended June 30, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| Net loss | $ | (26,126 | ) | $ | (27,814 | ) | $ | (23,246 | ) | |||
| Other comprehensive income (loss), net: | ||||||||||||
| Unrealized gain (loss) on available-for-sale marketable securities, net | 6,441 | 924 | (1,071 | ) | ||||||||
Reclassification adjustment of derivative instruments losses realized in net loss, net | - | - | (46 | ) | ||||||||
| Reclassification adjustment of available-for-sale marketable securities losses (gains) realized in net loss, net | (8,440 | ) | (405 | ) | 457 | |||||||
| Other comprehensive income (loss) | (1,999 | ) | 519 | (660 | ) | |||||||
| Total comprehensive loss | $ | (28,125 | ) | $ | (27,295 | ) | $ | (23,906 | ) | |||
| Common Share | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of July 1, 2019 | 15,082,852 | $ | (* | ) | $ | 272,825 | $ | (251,004 | ) | $ | 21,821 | |||||||||
| Share-based compensation to employees, directors and non-employee consultants | 357,755 | (* | ) | 2,562 | - | 2,562 | ||||||||||||||
| Issuance of common shares under Open Market Sales Agreement, net of aggregate issuance costs of $3,573 (Note 9b) | 8,060,950 | (* | ) | 43,262 | - | 43,262 | ||||||||||||||
| Issuance of common shares related to May 2020 registered direct offering, net of issuance costs of $99 (Note 9d) | 1,587,302 | (* | ) | 14,901 | - | 14,901 | ||||||||||||||
| Exercise of options by employees and non-employee consultants | 15,884 | (* | ) | - | - | - | ||||||||||||||
| Exercise of warrants by investors (Note 9c) | 386,678 | (* | ) | 2,707 | - | 2,707 | ||||||||||||||
| Round up of shares due to reverse share split effectuated on July 25, 2019 (Note 9a) | 1,292 | (* | ) | - | - | - | ||||||||||||||
| Loss for the year | - | - | - | (29,152 | ) | (29,152 | ) | |||||||||||||
| Balance as of June 30, 2020 | 25,492,713 | $ | (* | ) | $ | 336,257 | $ | (280,156 | ) | $ | 56,101 | |||||||||
| (*) | Less than $1 |
The accompanying notes are an integral part of the consolidated financial statements.
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
SUBSIDIARIES
| U.S. Dollars in thousands (except share and per share data) |
| Common Stock | Additional Paid-in | Receivables on account | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | of shares | Income (Loss) | Deficit | Equity | ||||||||||||||||||||||
| Balance as of July 1, 2015 | 78,771,905 | $ | 1 | $ | 195,303 | $ | (790 | ) | $ | 2,140 | $ | (138,511 | ) | $ | 58,143 | |||||||||||||
| Exercise of options by employees and non-employee consultants | 28,000 | (* | ) | 17 | - | - | - | 17 | ||||||||||||||||||||
| Stock-based compensation to employees, directors and non-employee consultants | 1,379,094 | (* | ) | 3,073 | - | - | - | 3,073 | ||||||||||||||||||||
| Proceeds related to issuance of common stock in a private placement (Note 9a) | - | - | - | 790 | - | - | 790 | |||||||||||||||||||||
| Stock-based compensation to contractor (Note 9b) | 90,000 | (* | ) | 39 | - | - | - | 39 | ||||||||||||||||||||
| Other comprehensive loss, net | - | - | - | - | (660 | ) | - | (660 | ) | |||||||||||||||||||
| Net loss | - | - | - | - | - | (23,246 | ) | (23,246 | ) | |||||||||||||||||||
| Balance as of June 30, 2016 | 80,268,999 | $ | 1 | $ | 198,432 | $ | - | $ | 1,480 | $ | (161,757 | ) | $ | 38,156 | ||||||||||||||
| (*) Less than $1 | ||||||||||||||||||||||||||||
| Common Share | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of July 1, 2020 | 25,492,713 | $ | (* | ) | $ | 336,257 | $ | (280,156 | ) | $ | 56,101 | |||||||||
| Share-based compensation to employees, directors and non-employee consultants | 591,033 | (* | ) | 13,968 | - | 13,968 | ||||||||||||||
| Issuance of common shares under ATM Agreement, net of issuance costs of $380 (Note 9e) | 1,045,097 | (* | ) | 8,506 | - | 8,506 | ||||||||||||||
| Issuance of common shares related to February 2021 registered direct offering net of issuance costs of $1,923 (Note 9g) | 4,761,905 | (* | ) | 28,077 | - | 28,077 | ||||||||||||||
| Exercise of options by employees and non-employee consultants | 15,035 | (* | ) | - | - | - | ||||||||||||||
| Exercise of warrants by investors (Note 9f) | 51,999 | (* | ) | 364 | - | 364 | ||||||||||||||
| Loss for the year | - | - | - | (49,865 | ) | (49,865 | ) | |||||||||||||
| Balance as of June 30, 2021 | 31,957,782 | $ | (* | ) | $ | 387,172 | $ | (330,021 | ) | $ | 57,151 | |||||||||
| (*) | Less than $1 |
The accompanying notes are an integral part of the consolidated financial statements.
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARYSUBSIDIARIES
CONSOLIDATED STATEMENTS OF |
| U.S. Dollars in thousands |
| Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Income (Loss) | Deficit | Equity | |||||||||||||||||||
| Balance as of July 1, 2016 | 80,268,999 | $ | 1 | $ | 198,432 | $ | 1,480 | $ | (161,757 | ) | $ | 38,156 | ||||||||||||
| Exercise of options by employees and non-employee consultants | 17,900 | (* | ) | 10 | - | - | 10 | |||||||||||||||||
| Stock-based compensation to employees, directors and non-employee consultants | 2,570,257 | (* | ) | 3,662 | - | - | 3,662 | |||||||||||||||||
| Issuance of common stock and warrants related to January 2017 offering, net of issuance costs of $1,532 (Note 9c) | 14,081,633 | (* | ) | 15,718 | - | - | 15,718 | |||||||||||||||||
| Other comprehensive income, net | - | - | - | 519 | - | 519 | ||||||||||||||||||
| Net loss | - | - | - | - | (27,814 | ) | (27,814 | ) | ||||||||||||||||
| Balance as of June 30, 2017 | 96,938,789 | $ | 1 | $ | 217,822 | $ | 1,999 | $ | (189,571 | ) | $ | 30,251 | ||||||||||||
| (*) Less than $1 | ||||||||||||||||||||||||
| Year ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Loss for the year | $ | (49,865 | ) | $ | (29,152 | ) | ||
| Adjustments to reconcile loss to net cash used in operating activities: | ||||||||
| Depreciation | 1,370 | 1,570 | ||||||
| Share-based compensation to employees, directors and non-employee consultants | 13,968 | 2,562 | ||||||
| Decrease (increase) in prepaid expenses and other current assets and other long-term assets | 303 | (150 | ) | |||||
| Increase (decrease) in trade payables | 578 | (291 | ) | |||||
| Decrease in operating lease right-of-use asset and liability, net | (321 | ) | (295 | ) | ||||
| Increase (decrease) in other accounts payable, accrued expenses, other long-term liabilities and other current liabilities | 3,353 | (638 | ) | |||||
| Decrease (increase) in interest receivable on short-term deposits | (256 | ) | 45 | |||||
| Long term interest payable pursuant to EIB loan | 78 | - | ||||||
| Linkage differences and interest on long-term deposits and restricted bank deposits | (126 | ) | (11 | ) | ||||
| Accrued severance pay, net | 8 | (9 | ) | |||||
| Net cash used for operating activities | $ | (30,910 | ) | $ | (26,369 | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | $ | (373 | ) | $ | (270 | ) | ||
| Proceeds from withdrawal of (investment in) short-term deposits | 4,061 | (17,949 | ) | |||||
| Investment in long-term deposits and restricted bank deposits | (10,953 | ) | (12,239 | ) | ||||
| Net cash used for investing activities | $ | (7,265 | ) | $ | (30,458 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds related to issuance of common shares, net of issuance costs | $ | 36,589 | $ | 58,163 | ||||
| Proceeds related to exercise of warrants | 364 | 2,707 | ||||||
| Proceeds from EIB loan | 24,449 | - | ||||||
| Net cash provided by financing activities | $ | 61,402 | $ | 60,870 | ||||
| EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS | (618 | ) | - | |||||
| Increase in cash, cash equivalents and restricted cash | 22,609 | 4,043 | ||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | 9,229 | 5,186 | ||||||
| Cash, cash equivalents and restricted cash at the end of the period | $ | 31,838 | $ | 9,229 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARYSUBSIDIARIES
| Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Income (Loss) | Deficit | Equity | |||||||||||||||||||
| Balance as of July 1, 2017 | 96,938,789 | $ | 1 | $ | 217,822 | $ | 1,999 | $ | (189,571 | ) | $ | 30,251 | ||||||||||||
| Exercise of options by employees | 50,500 | (* | ) | 42 | - | - | 42 | |||||||||||||||||
| Stock-based compensation to employees, directors and non-employee consultants | 3,148,380 | (* | ) | 6,548 | - | - | 6,548 | |||||||||||||||||
| Issuance of common stock under At-The Market (“ATM”) Agreement, net of issuance costs of $174 (Note 9e) | 3,599,408 | (* | ) | 4,985 | - | - | 4,985 | |||||||||||||||||
| Issuance of common stock, net of issuance costs of $1,405 (Note 9f) | 9,000,000 | (* | ) | 13,646 | - | - | 13,646 | |||||||||||||||||
| Exercise of warrants by investors (Note 9d) | 828,703 | (* | ) | 1,160 | - | - | 1,160 | |||||||||||||||||
| Other comprehensive income, net | - | - | - | (1,999 | ) | - | (1,999 | ) | ||||||||||||||||
| Net loss | - | - | - | - | (26,126 | ) | (26,126 | ) | ||||||||||||||||
| Balance as of June 30, 2018 | 113,565,780 | $ | 1 | $ | 244,203 | $ | - | $ | (215,697 | ) | $ | 28,507 | ||||||||||||
| (*) Less than $1 | ||||||||||||||||||||||||
| Year ended June 30, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net loss | $ | (26,126 | ) | $ | (27,814 | ) | $ | (23,246 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation | 2,018 | 2,177 | 2,150 | |||||||||
| Loss from sale of property and equipment, net | 6 | 72 | 82 | |||||||||
| Accretion of discount, amortization of premium and changes in accrued interest of marketable securities | 11 | 35 | (114 | ) | ||||||||
| Loss (gain) from sale of investments of available-for-sale marketable securities | (8,440 | ) | (362 | ) | 419 | |||||||
| Other-than-temporary loss of available-for-sale marketable securities | 850 | 767 | 38 | |||||||||
| Stock-based compensation to employees, directors and non-employees consultants | 6,548 | 3,662 | 3,073 | |||||||||
| Decrease (increase) in accounts receivable from the IIA | 978 | 1,192 | (537 | ) | ||||||||
| Decrease (increase) in other current and other long-term assets | (59 | ) | (731 | ) | 1,395 | |||||||
| Decrease (increase) in trade payables | 1,212 | (701 | ) | (77 | ) | |||||||
| Increase in other accounts payable, accrued expenses, other long-term liabilities and other current liabilities | 1,600 | 138 | 1,225 | |||||||||
| Decrease in deferred revenues | - | - | (2,847 | ) | ||||||||
| Decrease in advance payment from United Therapeutics Corporation | - | - | (93 | ) | ||||||||
| Increase in interest receivable on short-term deposits | (128 | ) | (24 | ) | (25 | ) | ||||||
| Linkage differences and interest on short and long-term deposits and restricted bank deposits | 5 | (14 | ) | (3 | ) | |||||||
| Accrued severance pay, net | 145 | (8 | ) | 38 | ||||||||
| Net cash used in operating activities | $ | (21,380 | ) | $ | (21,611 | ) | $ | (18,522 | ) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
| Purchase of property and equipment | $ | (342 | ) | $ | (378 | ) | $ | (1,750 | ) | |||
| Proceeds from sale of property and equipment | - | 30 | 28 | |||||||||
| Repayment of (investment in) short-term deposits | (14,829 | ) | 2,316 | (849 | ) | |||||||
| Repayment of long-term deposits and restricted bank deposits | - | - | 5 | |||||||||
| Proceeds from sale of available-for-sale marketable securities | 21,881 | 5,527 | 6,999 | |||||||||
| Proceeds from redemption of available-for-sale marketable securities | 9 | 410 | 1,094 | |||||||||
| Investment in available-for-sale marketable securities | (1,146 | ) | (3,607 | ) | (4,215 | ) | ||||||
| Net cash provided by investing activities | $ | 5,573 | $ | 4,298 | $ | 1,312 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Proceeds related to issuance of common stock and warrants, net of issuance costs | $ | 18,631 | $ | 15,718 | $ | 790 | ||||||
| Proceeds with respect to Israel-United States Binational Industrial Research and Development Foundation liability | 88 | 69 | - | |||||||||
| Exercise of warrants and options | 1,202 | 10 | 17 | |||||||||
| Net cash provided by financing activities | $ | 19,921 | $ | 15,797 | $ | 807 | ||||||
| Increase (decrease) in cash and cash equivalents | 4,114 | (1,516 | ) | (16,403 | ) | |||||||
| Cash and cash equivalents at the beginning of the period | 4,707 | 6,223 | 22,626 | |||||||||
| Cash and cash equivalents at the end of the period | $ | 8,821 | $ | 4,707 | $ | 6,223 | ||||||
| (a) Supplemental disclosure of cash flow activities: | ||||||||||||
| Cash paid during the period for: | ||||||||||||
| Taxes paid due to non-deductible expenses | $ | 27 | $ | 28 | $ | 66 | ||||||
| (b) Supplemental disclosure of non-cash activities: | ||||||||||||
| Purchase of property and equipment on credit | $ | 171 | $ | 88 | $ | 126 | ||||||
| Share consideration to contractor | $ | - | $ | - | $ | 39 | ||||||
| U.S. Dollars in thousands (except share and per share amounts) |
NOTE 1:-GENERAL - GENERAL
a. | Pluristem Therapeutics Inc., a Nevada corporation (“Pluristem Therapeutics”), was incorporated on May 11, 2001. Pluristem Therapeutics The |
The Company’s common shares are traded on the Nasdaq Global Market and on the Tel-Aviv Stock Exchange under the symbol “PSTI”.
| b. | The Company is a |
The Company has incurred an accumulated deficit of approximately $330,021 and incurred recurring operating losses and negative cash flows from operating activities since inception. As of June 30, 2021, the Company’s total shareholders’ equity amounted to $57,151. During the year ended June 30, 2018,2021, the Company incurred operating losses of $33,731$49,865 and its negative cash flow from operating activities was $21,380. The Company will be required to identify additional liquidity resources in the near term in order to support the commercialization of its products and maintain its research and development and clinical trials activities.$30,910.
As of June 30, 2018,2021, the Company'sCompany’s cash position (cash and cash equivalents, short-term bank deposits and short-termlong-term bank deposits) totaled approximately $29,900.$88,219. The Company is addressingplans to continue to finance its liquidity issues operations from its current resources, by implementing initiativesentering into licensing or other commercial agreements, from grants to allow the continuationsupport its research and development activities from sales of its activities. The Company'sequity securities and from the proceeds from the loan previously provided by the European Investment Bank (the “EIB”, see also note 7), as well as the potential additional draw down of funds from the Finance Contract (as defined herein) executed with the EIB, assuming applicable milestones will be achieved. Management believes that its current resources, together with its existing operating plan, includes various assumptions concerningare sufficient for the level and timingCompany to meet its obligations as they come due at least for a period of cash outflows for operating activities and capital expenditures. The Company's ability to successfully carry out its business plan, which includes a cost-reduction plan should it be unable to raise sufficient additional capital, is primarily dependent upon its ability to (1) obtain sufficient additional capital, (2) enter into license agreements to use or commercializetwelve months from the Company’s products and (3) receive other sourcesdate of funding, including non-diluting sources such as the IIA grants, the European Union's Horizon 2020 program (“Horizon 2020”) grants and other grants.issuance of these consolidated financial statements. There are no assurances, however, that the Company will be successful in obtainingable to obtain an adequate level of financing neededfinancial resources that are required for the long-term development and commercialization of its products.
NOTE 2:-SIGNIFICANT - SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("(“U.S. GAAP"GAAP”) applied on consistent basis.
| a. | Use of estimates |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, judgments, and assumptions that are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
| b. | Functional currency |
The Company'sCompany’s management believes that the dollar is the primary currency of the economic environment in which Pluristem Therapeutics Inc.the Company and its Subsidiarythe Subsidiaries operate. Thus, the dollar is the Company’s functional and reporting currency. Accordingly, non-dollar denominated transactions and balances have been re-measured into the functional currency in accordance with Accounting Standards Codification (“ASC”) 830, “Foreign Currency Matters”. All transaction gains and losses from the re-measured monetary balance sheet items are reflected in the statements of income as financial income or expenses, as appropriate.
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| U.S. Dollars in thousands (except share and per share amounts) |
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
| c. | Principles of consolidation |
The consolidated financial statements include the accounts of Pluristem Therapeutics Inc. and it’s Subsidiary.the Subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.
| d. | Cash and cash equivalents |
Cash equivalents are short-term highly liquid investments that are readily convertible to cash with maturities of three months or less at the date acquired.
| e. | Short-term bank deposit |
Bank deposits with original maturities of more than three months but less than one year are presented as part of short-term investments. Deposits are presented at their cost which approximates market values including accrued interest. Interest on deposits is recorded as financial income.
| f. | Restricted cash and short-term bank deposits |
Short-term restricted bank deposits and restricted cash used to secure derivative and hedging transactions and the Company’s credit line. The restricted cash and short-term bank deposits are presented at cost which approximates market values including accrued interest.