UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F/A
(Amendment No. 1)
☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report ____________
For the transition period from ____________ to ____________
Commission file number: 000-30902
_________________________________________________
Compugen Ltd.
(Exact name of Registrant as specified in its charter)
____________________________________
(Translation of Registrant’s name into English)
___________________________________________________________
Israel
(Jurisdiction of incorporation or organization)
Azrieli Center, 26 Harokmim Street, Building D, Holon 5885849 Israel
(Address of principal executive offices)
________________________________________________
Ari Krashin, Chief Financial Officer
Phone: +972-3-765-8585, Fax: +972-3-765-8555
Azrieli Center, 26 Harokmim Street, Building D, Holon 5885849 Israel
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
________________________________________________
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Ordinary shares, par value NIS 0.01 per share | CGEN | The Nasdaq Stock Market LLC (The Nasdaq Global Market) |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 86,433,432 Ordinary Shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒ No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “accelerated filer” “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☒ | Non-accelerated filer ☐ | Emerging growth company ☐ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
EXPLANATORY NOTE
This Amendment No. 1 to the Annual Report on Form 20-F, or the Amendment, amends the Annual Report on Form 20-F of Compugen Ltd., or the Company, for the year ended December 31, 2021, which was originally filed with the Securities and Exchange Commission on February 28, 2022, or the Original Filing.
The Company is filing this Amendment solely for the purpose of updating disclosure in Item 7.A., “Major Shareholders and Related Party Transactions – Major Shareholders.” In addition, pursuant to Rule 12b-15 under the Exchange Act, the Company is filing the certifications required under the Sarbanes-Oxley Act of 2002.
Except as described above or as otherwise expressly provided by the terms of this Amendment, no other changes have been made to the Original Filing. Except as otherwise indicated herein, this Amendment continues to speak as of the date of the Original Filing, and the Company has not updated the disclosures contained therein to reflect any events that occurred subsequent to the date of the Original Filing.
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• | We have a history of losses and we expect to incur future losses and may never achieve or sustain profitability. |
• | We may need to raise additional funds in the future, and if we are unable to raise such additional funds, we may need to limit, curtail or cease operations. To the extent any such funding is based on the sale of equity, our existing shareholders would experience dilution of their shareholdings. |
• | We cannot provide assurance that our business model will succeed in generating substantial revenues. |
• | The widespread outbreak of an illness or any other communicable disease, or any other public health crisis, such as the COVID-19 pandemic, and the governmental and societal responses thereto, may negatively impact the global economy and may also adversely affect our business and results of operations. |
• | In the near term, we are highly dependent on the success of COM701 and of COM902. We may not be able to advance our internal clinical stage programs through clinical development or manufacturing or successfully partner or commercialize them, or obtain marketing approval, either alone or with a collaborator, or may experience significant delays in doing so. |
• | Clinical trials of any product candidates that we, or any current or future collaborators may conduct may fail to satisfactorily demonstrate safety and efficacy, and we, or any collaborator, may incur additional costs or experience delays in completing, or ultimately be unable to complete the development and commercialization of these product candidates. |
• | Clinical development involves a lengthy and expensive process, with an uncertain outcome. We may encounter substantial delays or even an inability to begin clinical trials for any specific product or may not be able to conduct or complete our trials on the timelines we expect. |
• | From time to time we publicly disclose preliminary data from our ongoing clinical trials. As more patient data become available the data and the interpretation of the data may change. |
• | We rely and expect to continue to rely on third parties to conduct our clinical trials. These third parties may not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, and we may experience significant delays in the conduct of our clinical trials as well as significant increased expenditures. |
• | Serious adverse events or undesirable side effects or lack of efficacy, may emerge in clinical trials conducted by other companies running clinical trials investigating the same target as us, which could adversely affect our development programs or our capability to enroll patients or partner the program for further development and commercialization. |
• | We are subject to certain manufacturing risks, any of which could either result in additional costs or delays in completing, or ultimately make us unable to complete, the development and commercialization of our product candidates. |
• | Our current and future relationships, and/or the relationships of our collaborators through which we may market, sell, and distribute our products, with healthcare professionals, physicians and other parties in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information and general privacy and security and other healthcare laws and regulations, which could expose us to adverse consequences. |
• | There are risks that are inherent in the development and commercialization of new therapeutic products. |
• | We have limited experience in the development of therapeutic product candidates, and we may be unable to implement our business strategy. |
• | Our approach to the discovery of therapeutic products is based on our predictive computational discovery capabilities that are not yet fully proven clinically, and we do not know whether we will be able to discover and develop additional potential product candidates or products of commercial value. |
• | We are focusing our discovery and therapeutic development activities on therapeutic product candidates for uses in immuno-oncology. Our current candidates may fail, and we may fail to continue to discover and develop therapeutic product candidates of industry interest in this field. |
• | We depend significantly on third parties to carry out the research, development and commercialization of our therapeutic product candidates. If we are unable to maintain our existing agreements or to enter into additional agreements with such third parties, including collaborators, in the future, our business will likely be materially harmed. |
• | We rely and expect to continue to rely completely on third parties to manufacture and supply our preclinical and clinical drug supplies. Our business could be harmed if those third parties fail to provide us with sufficient quantities of drug product or fail to do so at acceptable quality and quantity levels, prices or timelines. |
• | Our dependence on collaboration agreements with third parties presents number of risks. |
• | Our reliance on third parties for the performance of key activities heightens the risks faced by our business. |
• | Our business model is challenging to implement and to date has not yielded significant revenues. |
• | We operate in a highly competitive and rapidly changing industry which may result in others discovering, developing or commercializing competing products before us or more successfully than we do. |
• | Given our level of managerial, operational, financial and other resources, our current activities and future growth may be limited. |
• | We may be unable to hire or retain key personnel or sufficiently qualified management, clinical and scientific personnel. |
• | We may be unable to safeguard the integrity, security and confidentiality of our data or third parties’ data. |
• | Our internal computer systems, or those of our contract research organizations, or CROs, or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our pipeline and our business. |
• | Our business and operations would suffer if our information technology systems or infrastructure or data, or our vendors’ or partners’, are or were compromised. |
• | We are subject to stringent and changing obligations related to data privacy and security. Failure or perceived failure to comply with current or future obligations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business. |
• | If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely affected. |
• | In the future, we may need to obtain additional licenses of third-party technology that may not be available to us or are available only on commercially unreasonable terms, and which may cause us to operate our business in a more costly or otherwise adverse manner that was not anticipated. |
• | We, or potential collaborators and licensees, may infringe third-party rights and may become involved in litigation, which may materially harm our business. |
• | We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful. |
• | Conditions in the Middle East and in Israel may adversely affect our operations. |
• | Our results of operations may be adversely affected by the exchange rate fluctuations between the dollar and the New Israeli Shekel. |
• | Future sales of our ordinary shares or securities convertible or exchangeable for our ordinary shares may depress our share price. |
• | If we sell ordinary shares in future financings, shareholders may experience immediate dilution and, as a result, our share price may decline. |
• | Our share price and trading volume have been volatile and may be volatile in the future and that could limit investors’ ability to sell our shares at a profit and could limit our ability to successfully raise funds. |
• | If we are a passive foreign investment company, or PFIC, our U.S. shareholders may be subject to adverse U.S. federal income tax consequences. |
• | successful clinical trial results; |
• | ability to fund clinical trials designed to obtain regulatory approval and to become commercially successful; |
• | success of trials designed to allow for a path for registration/approval by regulatory authorities; |
• | our selected regulatory strategy; |
• | timely initiation, enrollment and completion of clinical trials; |
• | demographics, past therapy and other criteria of patients enrolled, even if they meet the inclusion/exclusion enrollment criteria; |
• | a safety, tolerability and efficacy profile, alone or in combination with other approved or investigational products, that is satisfactory to the FDA or comparable foreign regulatory authorities; |
• | selection of indications; |
• | selection of drug(s) for combinations; |
• | successful identification of biomarkers, including for patient selection; |
• | timely receipt of marketing approvals from applicable regulatory authorities; |
• | the performance of our current and future collaborators, if any; |
• | the extent of any required post-marketing approval commitments to applicable regulatory authorities; |
• | establishment and monitoring of manufacturing arrangements and processes with third-party service providers and clinical manufacturing organizations for manufacturing drug substance and drug product; |
• | establishment and monitoring of arrangements with third-party suppliers of raw materials and service for fill-finish, packaging and labeling; |
• | stability of our drug substance and drug products; |
• | supply of our drugs in sufficient quantities and quality for our clinical trials; |
• | establishment of arrangements with third-party manufacturers and processes monitoring to obtain commercial quality drug product that is appropriately packaged for sale; |
• | adequate ongoing availability of raw materials and drug product for clinical development and any commercial sales; |
• | protection of our rights in our intellectual property portfolio; |
• | successful launch of commercial sales following any marketing approval; |
• | a continued acceptable safety profile following any marketing approval; and |
• | commercial acceptance by patients, the medical community and third-party payors. |
• | inability to generate sufficient preclinical, toxicology, or other scientific data to support the initiation of clinical trials; |
• | lack of authorization from regulators or institutional review boards, or IRBs, or ethics committees to allow us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or continue such clinical trial; |
• | delays in sufficiently developing, characterizing, or controlling a manufacturing process suitable for clinical trials; |
• | inability to generate sufficient quantities or quality of our drug substance or drug product to support the initiation or continuation of clinical trials; |
• | delays in reaching a consensus with collaborators or regulatory agencies on trial design; |
• | delays in reaching agreement on acceptable terms with prospective CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; |
• | imposition of a temporary or permanent clinical hold by the FDA, or a similar delay imposed by foreign regulatory agencies for a number of reasons, including after review of an IND, other application or amendment; (i) as a result of a new safety finding that presents unreasonable risk to clinical trial participants; (ii) a negative finding from an inspection of our clinical trial operations or trial sites; (iii) developments on trials conducted by competitors for related technology that raises FDA concerns about risk to patients of the technology broadly; or (iv) if FDA finds that the investigational protocol or plan is clearly deficient to meet its stated objectives; |
• | clinical trials of any product candidates may fail to show safety or efficacy, produce negative or inconclusive results and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials or we may decide to abandon product development programs; |
• | difficulty collaborating with patient groups and investigators; |
• | failure by our CROs, other third parties, or us to adhere to clinical trial and related regulatory requirements; |
• | failure to perform in accordance with the FDA’s Good Clinical Practice, or GCP, requirements, or similar applicable regulatory guidelines in other countries; |
• | failure to perform in accordance with the FDA’s Good Manufacturing Practice, or GMP, requirements, or similar applicable regulatory guidelines in other countries; |
• | the number of patients required for clinical trials of any product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; |
• | delays in having patients complete their participation in a trial or return for post-treatment follow-up; |
• | occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits; |
• | changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; |
• | changes in the standard of care or in the regulatory landscape on which a clinical development plan was based, which may require new or additional trials; |
• | the cost of clinical trials of our product candidates being greater than we anticipate; |
• | clinical trials of our product candidates producing negative or inconclusive results, or early results that will not be repeated in larger or future cohorts, which may result in our deciding, or regulators requiring us, to conduct additional clinical trials or abandon product development programs; |
• | choosing the wrong dosing regimen and/or the wrong drug combination; |
• | delays or failure to secure supply agreements with suitable reagent suppliers, or any failures by suppliers to meet our quantity or quality requirements for necessary reagents; and |
• | delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing. |
• | warning letters; |
• | clinical trial holds; |
• | recalls, product seizures or medical product safety alerts; |
• | data lock or order to destroy or not use personal data; |
• | restrictions on, or prohibitions against, marketing such products; |
• | restrictions on importation of such products; |
• | suspension of review or refusal to accept or approve new or pending applications; |
• | withdrawal of product approvals; |
• | injunctions; |
• | civil and criminal penalties and fines; or |
• | debarment or other exclusions from government programs. |
• | our new target candidates will prove to be inappropriate for treatment of cancer; |
• | our new target candidates will prove to be inappropriate targets for therapeutic product candidates; |
• | our new target candidates will prove to be inappropriate targets for immunotherapy; |
• | we will not succeed in selecting the appropriate indication for the therapeutic product candidate; |
• | we will not succeed in choosing the appropriate mAb for these targets, or the appropriate mAb lead or the appropriate mAb isotype; |
• | we will not succeed in identifying or developing a biomarker or companion diagnostic for our therapeutic product candidates; |
• | we will not succeed in choosing the appropriate drug modality for these targets; |
• | our therapeutic product candidates will fail to progress to preclinical studies or clinical trials; |
• | our therapeutic product candidates will be found to be therapeutically ineffective; |
• | we will not choose the right combinations for our therapeutic product candidates; |
• | our therapeutic product candidates will be found to be toxic or to have other unacceptable side effects or negative consequences; |
• | our therapeutic product candidates will be inferior, or not show added value, compared to competing products or the standard of care; |
• | our early stage development efforts may provoke competition by others; |
• | our products covered by our collaborations may face internal competition from our partners’ internal pipeline; |
• | we or our collaborators will fail to receive required regulatory approvals; |
• | we or our collaborators will fail to manufacture our therapeutic product candidates in the quantity or quality needed for preclinical studies or clinical trials on a large or commercial scale, on time or in a cost-effective manner or with the drug stability required; |
• | the discovery of drug targets and the discovery, development or commercialization of our therapeutic product candidates will infringe third-party intellectual property rights; |
• | the development, marketing or sale of our therapeutic product candidates will fail because of our inability or failure to protect or maintain our own intellectual property rights; |
• | once a product is commercially available, there will be little or no demand for it for a number of possible reasons, including lack of acceptance by the medical community or by patients, lack of or insufficient coverage and payment by third-party payors, inefficient or insufficient marketing and sales activities or as a result of there being more attractive, less risky or less expensive, products available for the same use; and |
• | the product will be withdrawn from the market, or sales limited due to side effects observed in clinical practice. |
• | not being able to discover new drug targets in this field; |
• | our full scope of target discovery capabilities may not be adequate; |
• | not having chosen the right therapeutic area; |
• | having chosen a therapeutic area with a very high degree of competition; |
• | having chosen a therapeutic area of great biological complexity and with very high failure rates in product development; |
• | not choosing the appropriate drug modality; |
• | having insufficient knowledge, expertise, personnel or capabilities in our chosen therapeutic area to identify the right unmet medical needs, or drug targets, or to timely, properly and efficiently validate the targets and/or select the appropriate mAb for further development as therapeutic product candidates, or to timely, properly or efficiently further them in development; and |
• | the inherent risk of high program failure rate throughout therapeutic development. |
• | we may not be able to initiate or continue preclinical and clinical trials of products that are under development; |
• | we may experience significant disruption and delay to our clinical supply chain; |
• | we may experience significant adverse effect if we are unable to transfer the manufacturing process to a different third-party manufacturer in a timely and efficient manner; |
• | we may need to repeat clinical trials or stop our clinical trials; |
• | we may be delayed in submitting regulatory applications, or receiving regulatory approvals, for our product candidates; |
• | we may lose the cooperation of our collaborators; |
• | we may be required to cease distribution or recall some or all batches of our products; and |
• | ultimately, we may not be able to meet commercial demands for our products, if approved. |
• | we may be unable to reach mutually agreeable terms and conditions with respect to potential new collaborations; |
• | we or our collaborators may be unable to comply or fully comply with the obligations under collaboration agreements to which we are (or will become) a party, and as a result, we may not generate royalties or milestone payments from such agreements, and our ability to enter into additional agreements may be harmed; |
• | our obligations under existing or future collaboration agreements may harm our ability to enter into additional collaboration agreements; |
• | our collaborators have significant discretion in electing whether to pursue any of the planned activities and the manner in which it will be done, including the amount and nature of the resources to be devoted to the development and commercialization of our product candidates; |
• | our collaborators have significant discretion in terminating the collaborations for scientific, clinical, business or other reasons; |
• | if our collaborators breach or terminate an agreement with us, the development and commercialization of our therapeutic product candidates could be adversely affected because at such time we may not have sufficient financial or other resources or capabilities or access to the other partner’s data and drug(s) to successfully develop and commercialize these therapeutics on our own or find other partners or enforce our rights under breached or terminated agreement; |
• | our collaborators may fail to design and implement or analyze appropriate preclinical and/or clinical trials; |
• | our collaborators may not have an access to the drug combination treatment required for an effective treatment; |
• | our collaborators may not be able to identify biomarkers that may be required for further product development or approval; |
• | our collaborators may require us changing or adopting the trial design to fit their business priorities, standards and other objectives; |
• | our collaborators may fail to manufacture our therapeutic product candidates needed for either clinical trials or for commercial purposes on a sufficiently large scale, in the required quality and/or in a cost-effective manner; |
• | our collaborators may fail to develop and market products based on our discoveries due to various development hurdles or regulatory restrictions; |
• | our collaborators may fail to develop and market products based on our discoveries prior to the successful marketing of competing products by others or prior to expiry of the patents protecting such products; |
• | changes in a collaborator’s business strategy may negatively affect its willingness or ability to complete its obligations under its arrangement or to continue with its collaboration with us; |
• | our collaborators may terminate the program or the agreement and then compete against us in the development or commercialization of similar therapeutics; |
• | our collaborators may terminate the program or the agreement due to the competitive threat we may present to them with similar products; |
• | ownership of the intellectual property generated under or incorporated in our collaborations may be disputed; |
• | our ownership of rights in any intellectual property or products that may result from our collaborations may depend on additional investment of resources that we may not be able or willing to make; |
• | prospective collaborators may pursue alternative products or technologies, by internally developing them or by preferring those of our competitors; |
• | disagreements between us and our collaborators may lead to delays in, or termination of, the collaboration; |
• | our collaborators may fail to develop or commercialize successfully any products based on our novel drug targets or therapeutic product candidates to which they have obtained rights from us; |
• | we or our collaborators may not choose the right drug combinations for our therapeutic product; |
• | our collaborations may face internal competition by their internal pipelines; |
• | prospective collaborators may hesitate to pursue collaborations on novel target candidates that lack robust validation to serve as a basis for the development of therapeutics; and |
• | our collaboration partners may be acquired by, acquire, or merge with, another company, and the resulting entity may have different priorities or competitive products to the collaboration product being developed previously by our partner. |
• | much greater financial, technical and human resources than we have at every stage of the discovery, development, manufacture and commercialization process; |
• | more extensive experience in computational discovery, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and in manufacturing and marketing therapeutics; |
• | more extensive experience in oncology and immuno-oncology and in the fields of mAb therapeutics; |
• | accessibility to enhanced technologies that may result in better products; |
• | access to and experience in the development of therapeutic modalities that are competitive to mAb therapeutics; |
• | more extensive experience in oncology and immuno-oncology and in the field of target discovery; |
• | more extensive experience in the research and development of biological or genetic markers to determine response of or responders to therapeutic agents or for patient selection; |
• | greater accessibility to data and proprietary data from patients; |
• | access to internally developed, proprietary technologies for the discovery, research, development, or manufacturing of therapeutic agents; |
• | greater resources and means to compete with us on target discovery and as well as in acquiring or generating technologies complementary to, or necessary for, our programs as well as in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites; |
• | products that have been approved or are in late stages of development; |
• | reduced reliance on collaborations or partnerships with third parties in order to further develop and commercialize competitive therapeutic products; and |
• | collaborative arrangements in our target markets with leading companies and research institutions. |
• | the patenting of inventions involves complex legal issues relating to intellectual property laws, prosecution and enforcement of patent claims across a number or patent jurisdictions, many of which have not yet been settled; |
• | legislative and judicial changes, or changes in the examination guidelines of governmental patent offices may negatively affect our ability to obtain patent claims to certain biological molecules- and/or use of certain therapeutic targets; |
• | if we are not the first to file a patent application on one of our inventions, we may not be able to obtain a patent on our invention, and may not be able to protect one or more of our therapeutic product candidates; |
• | competition from other biotechnology and pharmaceutical companies who have already sought patent protection relating to proteins and protein based products, as well as therapeutic antibodies or other modulators specifically binding these proteins, and their utility based discoveries that we may intend to develop and commercialize; such prior patents may negatively affect our ability to obtain patent claims on antibodies or certain proteins or other biologic modulators, or may hinder our ability to obtain sufficiently broad patent claims for our inventions, and/or may limit our freedom to operate; |
• | publication of data on gene products or proteins by non-commercial and commercial entities may hinder our ability to obtain sufficiently broad patent claims for our inventions; |
• | even if we succeed in obtaining patent protection, such protection may not be sufficient to prevent third parties from circumventing our patent claims; |
• | even if we succeed in obtaining patent protection, we may face freedom to operate issues; |
• | even if we succeed in obtaining patent claims protecting our inventions and product candidates, our patents could be subject to challenge and litigation by our competitors, and may be partially or wholly invalidated as a result of such legal/judicial challenges and in connection with such challenges, in October 2020, two parties filed oppositions in the European Patent Office, or EPO, requesting revocation of our granted European patent relating to anti-PVRIG antibodies, that expires in 2036; |
• | significant costs that may need to be incurred in registering and filing patents; |
• | insufficient data to support our claims and/or may support others in strengthening their patents; |
• | seeking patent protection at an early stage may prevent us from providing comprehensive data supporting the patent claims and may prevent allowance of certain patent claims or limit the scope of patent claim coverage; |
• | we may not be able to supply sufficient data to support our claims, within the legally prescribed time following our initial filing in order to support our patent claims and this may harm our ability to get appropriate patent protection or protection at all; |
• | our claims may be too broad and not have sufficient enablement, in which case such claims might be rejected by patent offices or invalidated in court; and |
• | we might fail to demonstrate a unique technical feature for our antibodies as compared to existing prior art, in which case our claims might be rejected by the respective patent office, requiring superiority over prior art. |
• | forgo the research, development and commercialization of certain drug target candidates and product candidates that we discover, notwithstanding their promising scientific and commercial merits; or |
• | invest substantial management and financial resources to either challenge or in-license such third-party intellectual property, and we cannot be sure that we will succeed in doing so on commercially reasonable terms, if at all. |
• | issued patents that we may own or that we license may be held invalid or unenforceable, as a result of legal challenges; |
• | others may be able to make products that are similar to our products but that are not covered by the claims of our patent rights; |
• | we or our licensors or any future strategic partners might not have been the first to file patent applications on the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; |
• | others may independently develop similar or alternative technologies without infringing our intellectual property rights; |
• | it is possible that our pending patent applications will not lead to issued patents; |
• | issued patents that we may own or that we license may not provide us with any competitive advantage; |
• | our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; |
• | third parties performing manufacturing or testing for us using our product candidates or technologies could use the intellectual property of others without obtaining a proper license; |
• | we may not develop additional proprietary technologies that are patentable; and |
• | the patents of others may have an adverse effect on our business. |
• | hostilities involving Israel; |
• | the interruption or curtailment of trade between Israel and its present trading partners; |
• | a downturn in the economic or financial condition in Israel; and |
• | a full or partial mobilization of the reserve forces of the Israeli army. |
• | the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q and current reports on Form 8-K; |
• | the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, including extensive disclosure of compensation paid or payable to certain of our highly compensated executives as well as disclosure of the compensation determination process; |
• | the provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; and |
• | the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction (a purchase and sale, or sale and purchase, of the issuer’s equity securities within less than six months). |
• | global macroeconomic developments; |
• | clinical data disclosed by us or our competitors; |
• | massive sell of our shares by a large shareholder; |
• | our success (or lack thereof) in entering into collaboration agreements and achieving certain research and developmental milestones thereunder; |
• | our need to raise additional capital and our success or failure in doing so; |
• | our ability (or lack thereof) to disclose key discoveries or developments due to competitive concerns or need to secure our intellectual property position; |
• | achievement or denial of regulatory approvals by us or our competitors; |
• | announcements of technological innovations or new commercial products by our competitors; |
• | trends in share price of companies in our field or industry; |
• | announcement of corporate transactions, merger and acquisition activities or other similar events by companies in our field or industry; |
• | changes and developments effecting our field or industry; |
• | developments concerning material proprietary rights, including material patents; |
• | developments concerning our existing or new collaborations; |
• | regulatory developments in the United States, Israel and other countries; |
• | changes in the structure of healthcare payment systems; |
• | delay or failure by us or our partners in initiating, completing or analyzing preclinical or clinical trials or the unsatisfactory design or results of such trials; |
• | period to period fluctuations in our results of operations; |
• | changes in estimates by securities analysts; |
• | changes in senior management or the board of directors or changes in the size or structure of the company; |
• | our ability (or lack thereof) to disclose the commercial terms of, or progress under, our collaborations; |
• | our ability (or lack thereof) to show and accurately predict revenues; and |
• | transactions with respect to our ordinary shares by insiders or institutional investors. |
• | targeting novel pathways, identified internally, with potential to address the unmet need of patients non-responsive to cancer immunotherapies; |
• | applying a science-driven approach to identify drug combinations, through deep understanding of the biology of these novel pathways; and |
• | using the same scientific understanding of the new pathways to design a robust biomarker strategy for patient selection. |
• | COM701 is our lead immuno-oncology pipeline program. COM701 is a humanized antibody that binds with high affinity to PVRIG, a novel immune checkpoint target candidate discovered by us that blocks the interaction with its ligand, PVRL2. Our data suggests that the PVRIG pathway is parallel and complementary to TIGIT, an immune checkpoint discovered computationally by us in 2009. These two pathways intersect with DNAM-1, a costimulatory receptor on T cells and NK cells. The PD-1 pathway also intersects with DNAM-1. In certain tumors, the blockade of both TIGIT and PVRIG may be required to stimulate an antitumor immune response, with or without additional PD-1 pathway blockade. Phase 1 trials for COM701 were initiated in September 2018 and are currently conducted under the collaboration with Bristol Myers Squibb (except for the COM701 and COM902 combination trial). See below additional information regarding Bristol Myers Squibb Collaboration. |
• | COM902 is a high affinity, fully human antibody developed by us, targeting TIGIT, an immune checkpoint. COM902 blocks the interaction of TIGIT with PVR, its ligand. Our preclinical data suggests that in certain tumor indications the blockage of both TIGIT and PVRIG, two coinhibitory arms of the DNAM-1 axis, may be required to stimulate an anti-tumor immune response with or without the blockade of the PD-1 pathway. Phase 1 trials for COM902 were initiated in March 2020 to evaluate it as a monotherapy in patients with advanced malignancies who have exhausted all available standard therapies. |
• | Bapotulimab (formerly known as BAY1905254) is targeting ILDR2, a new immune checkpoint identified by us, that is being developed by Bayer pursuant to a research and discovery collaboration and license agreement signed in 2013. Bayer initiated its Phase 1 trial in patients with solid tumors in September 2018, which triggered a milestone payment of $7.8 million. |
• | AZD2936 is a novel TIGIT/PD-1 bispecific antibody with a TIGIT component that is derived from our COM902 and is developed pursuant to the exclusive license agreement with AstraZeneca. AstraZeneca initiated its Phase 1/2 trial in patients with advanced or metastatic non-small cell lung cancer in September 2021, which triggered a milestone payment of $6.0 million to us. |
• | COM701 - a therapeutic antibody targeting PVRIG |
• | In 15 patients with a median of five prior anticancer therapies (range of 2-10), COM701 in combination with Opdivo® was well-tolerated with no reported dose-limiting toxicities up to the fifth and final dose cohort of COM701 20 mg/kg and Opdivo® 480 mg, both IV Q4 weeks. |
• | The disease control rate (DCR) was 66.7% (N=10) with best responses of complete response (CR) 6.7% (N=1), partial response (PR) 6.7% (N=1) and stable disease (SD) 53.3% (N=8). |
• | A patient with anal squamous cell carcinoma with confirmed SD as reported at American Association for Cancer Research (AACR) 2020, had in the cutoff date confirmed CR and remains on treatment at 79 weeks. This patient progressed on Opdivo® prior to enrolling in our study. |
• | A patient with microsatellite stable (MSS)-colorectal cancer with durable confirmed partial response previously reported at AACR 2020 remained on study treatment at 44 weeks. |
• | Durable responses of confirmed SD of six months or more in three patients. One patient with renal cell carcinoma remains on treatment at 58 weeks, and one patient with non-small cell lung cancer (NSCLC) (squamous) who failed prior treatment with immune checkpoint inhibitors remained on treatment at 36 weeks, and one patient with endometrial cancer remained on treatment at 46 weeks. |
• | The patient with primary peritoneal cancer (platinum resistant, MSS) with durable confirmed partial response remains on study treatment at 62 weeks. |
• | The patient with pancreatic cancer, refractory to all three prior lines of standard of care (SOC) therapy with durable confirmed SD was on study treatment for 31 weeks. |
• | 20 patients enrolled in biomarker and data informed indications; four patients of each: endometrial cancer, NSCLC, ovarian cancer, breast cancer and colorectal cancer. |
• | Six of the 20 patients (30%) had best responses of SD, one patient with endometrial cancer, three patients with NSCLC and two patients with ovarian cancer. |
• | Two patients with SD remain on treatment as of the data cutoff date; one patient with NSCLC who had >3 prior lines of SOC therapy; including prior treatment with immune checkpoint inhibitors with treatment ongoing at 26 weeks, and one patient with ovarian cancer with treatment ongoing at 20 weeks. |
• | Two additional patients remain on treatment as of the data cutoff date. |
• | No new safety findings were observed. |
• | In 15 evaluable patients, COM701 in combination with Opdivo® was well-tolerated with no reported dose-limiting toxicities up to the fifth and final dose cohort of COM701 20 mg/kg and Opdivo® 480 mg, both IV Q4 weeks. |
• | The disease control rate (DCR) was 66.7% (N=10) with best responses of complete response (CR) 6.7% (N=1), partial response (PR) 6.7% (N=1) and stable disease (SD) 53.3% (N=8). |
• | Previously reported patient with anal squamous cell carcinoma with confirmed CR remains on treatment at 96 weeks (22 months). This patient had three prior lines of therapy and enrolled within one month after progression on Opdivo® monotherapy. |
• | Previously reported patient with renal cell carcinoma with best response of SD remains on treatment at 75 weeks. |
• | A patient with microsatellite stable (MSS)-colorectal cancer with durable confirmed partial response previously reported at AACR 2020 remained on study treatment for 44 weeks. |
• | Overall 36 patients enrolled. 16 patients, all comers in dose escalation and 20 patients in dose expansion; four patients of each: endometrial cancer, NSCLC, ovarian cancer, breast cancer and colorectal cancer (MSS). |
• | The disease control rate (DCR) was 47.2% (N=17) with best responses of partial response (PR) 2.7% (N=1) and stable disease (SD) 44.4% (N=16). |
• | Previously reported patient with primary peritoneal cancer (platinum resistant, MSS) with confirmed PR remains on study treatment at 79 weeks (18 months). Patient had three prior lines of standard-of-care treatment. - Archival pre-treatment biopsy data revealed the patient was PD-L1 negative, with PVRL2 expression on tumor and endothelial cells, with an immune desert phenotype (i.e, no immune cells detected prior to treatment). - Peripheral blood assessment showed immune activation as measured by immune cell proliferation and IFNγ induction prior to tumor shrinkage. |
• | Durable responses to treatment (CR, PR or SD ≥ 6 months) in 10/51 (19%) patients. |
• | Best responses of CR, PR, or SD were observed in 11/21 (52%) patients with prior treatment refractory disease. |
• | Best response of CR, PR or SD were observed in 13/18 (72%) patients with prior treatment with immune checkpoint inhibitors. |
• | Peripheral pharmacodynamic changes were measured via immune cell proliferation and cytokine levels in peripheral blood before and on treatment. |
• | After one treatment cycle, patients treated with COM701 monotherapy showed a trend of increased proliferation of effector memory CD8+ T cells (average change 87%), an immune cell population that expresses high level of PVRIG and are critical in driving anti-tumor immunity. Similar results were observed in the combination arm. |
• | Proliferation of NK-T cells, an immune cell population that expresses high level of PVRIG and plays a role in antitumor activity, increased significantly one day after COM701 monotherapy treatment, with a similar trend observed in the combination arm. |
• | Levels of IFNγ, a cytokine which plays a key role in antitumor immunity, were upregulated following combination treatment of COM701 with Opdivo®, with a dose response trend with increasing doses of COM701, suggesting the observed activity is derived from the combination treatment and not Opdivo® alone. |
• | Anti-tumor activity was observed in PD-L1 low, PVRL2 positive patients, suggesting COM701 treatment may drive anti-tumor immunity even in patients with less inflamed tumor microenvironment. |
• | The study enrolled 13 patients with a variety of advanced solid tumors cancers (all comers) who have exhausted all available standard treatments. All the patients received escalating doses of COM701 in combination with fixed doses of nivolumab and BMS-986207. |
• | The study population was heavily pretreated with a median of 10 prior therapies, with a minimum of 1 and maximum of 19. |
• | The combination was well tolerated with no dose limiting toxicity and a favorable safety and toxicity profile. |
• | COM701 20 mg/kg was selected as the recommended dose for expansion in combination with nivolumab and BMS-986207 (both at 480 mg) with all the study drugs administered IV Q4W. |
• | Translational assessment of peripheral blood from all patients showed a positive pharmacodynamic activation of the immune system following treatment, including increased T and NK cell activation, memory T cell proliferation and IFNγ induction, which is supportive of immune activation following triplet blockade. |
• | Best responses of stable disease were reported in 3 patients, one patient with prostate cancer remains on study beyond 100 days of treatment. |
• | COM902 - a therapeutic antibody targeting TIGIT |
• | The study enrolled 18 patients with advanced solid tumors who exhausted all available standard therapies. |
• | The study population was heavily pretreated with the median number of prior therapies was 7, with a minimum of 2 and maximum of 16. |
• | COM902 administered IV Q3W was well tolerated with a favorable safety profile. A maximum tolerated dose of COM902 was not reached. o One patient in the 0.01 mg/kg dose cohort reported a dose limiting toxicity (DLT) of Grade 2 vomiting, and one patient in the 1 mg/kg dose cohort had a DLT of Grade 3 atrial fibrillation; these were assessed by the investigator as possibly related to study treatment with COM902. o No DLTs were reported at any other COM902 doses including higher doses (3 mg/kg, 10 mg/kg). |
• | COM902 3 mg/kg IV Q3W has been selected as the recommended dose for expansion. |
• | Best response of stable disease (SD) was reported in 9 patients (50%), with 6 patients (67%) having confirmed SD and 3 patients (17%) with SD of at least 6 months. |
• | No depletion of major lymphocyte populations expressing TIGIT (NK, CD4 and CD8 T cells) in the peripheral blood analysis. |
• | Bapotulimab (formerly known as BAY1905254) – a therapeutic antibody targeting CGEN-15001T/ILDR2 |
• | AZD2936 - a therapeutic TIGIT/PD-1 bispecific antibody with a TIGIT component that is derived from our COM902 |
• | completion of preclinical laboratory tests and animal studies in compliance with the FDA’s GLP or other applicable regulations; |
• | submission to the FDA of an IND, which must become effective before human clinical trials may begin; |
• | performance of adequate and well-controlled human clinical trials in accordance with GCPs to establish the safety and efficacy of the product for its intended use; |
• | submission of annual reports to regulatory authorities; |
• | submission to the FDA of a biologics license application, or BLA; |
• | satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug or biologic is produced to assess compliance with current Good Manufacturing Practice, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; and |
• | FDA review and approval of the BLA. |
• | Phase 1: The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In the case of some products, usually for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients. |
• | Phase 2: Involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. |
• | Phase 3: Involves studies undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These studies are intended to establish the overall risk-benefit ratio of the product and provide an adequate basis for product labeling and approval. |
• | cash at hand; |
• | proceeds from Bristol Myers Squibb’s 2021 investment in us; and |
• | proceeds from AstraZeneca in connection with its 2021 milestone payment. |
Payments due by period (US$ in thousands) | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
Operating Lease Obligations(1) | 3,045 | 895 | 1,390 | 760 | - | |||||||||||||||
Accrued Severance Pay, net(2) | 552 | 552 | ||||||||||||||||||
Total | 3,597 | 895 | 1,390 | 760 | 552 |
Name | Age | Positions | ||
Paul Sekhri(3) | 63 | Chairman of the Board of Directors (Chairman of the Nomination and Corporate Governance Committee) | ||
Anat Cohen-Dayag, Ph.D. | 55 | President and Chief Executive Officer, Director | ||
Jean-Pierre Bizzari, M.D.(4) | 67 | Director | ||
Gilead Halevy(2) | 55 | Director (Chairman of the Audit Committee) | ||
Kinneret Livnat Savitzky, Ph.D.(1)(3) | 54 | Director | ||
Eran Perry(1)(2) | 51 | Director | ||
Sanford (Sandy) Zweifach(1)(2)(3) | 65 | Director (Chairman of the Compensation Committee) | ||
Ari Krashin | 49 | Chief Financial Officer and Chief Operating Officer | ||
Henry Adewoye, MD | 57 | Senior Vice President and Chief Medical Officer | ||
Oliver Froescheis, Ph.D. | 56 | Senior Vice President, Corporate and Business Development | ||
Zurit Levine, Ph.D. | 54 | Senior Vice President, Technology Innovation | ||
Yaron Turpaz, Ph.D. | 51 | Senior Vice President and Senior Advisor, Computational Discovery | ||
Eran Ophir, Ph.D. | 44 | Vice President, Research and Drug Discovery |
(1) | Member of our Compensation Committee |
(2) | Member of our Audit Committee |
(3) | Member of our Nomination and Corporate Governance Committee |
(4) | Dr. Jean-Pierre Bizzari is expected to retire form the board of directors of the Company effective March 1, 2022. |
Information Regarding the Covered Office Holders | Compensation for Services(2) | |||||||||||||||
Name and Principal Position(1) | Base Salary ($) | Benefits and Perquisites ($)(3) | Stock-Based Compensation ($)(4) | Total ($) | ||||||||||||
Dr. Anat Cohen-Dayag President & Chief Executive Officer | 498,266 | 333,362 | 469,679 | 1,301,307 | ||||||||||||
Dr. Henry Adewoye Senior Vice President and Chief Medical Officer | 400,000 | 160,690 | 276,178 | 836,868 | ||||||||||||
Ari Krashin Chief Financial and Operating Officer | 315,770 | 209,604 | 240,812 | 766,186 | ||||||||||||
Dr. Oliver Froescheis Senior Vice President, Corporate and Business Development | 370,000 | 77,238 | 219,111 | 666,349 | ||||||||||||
Dr. Zurit Levine Senior VP, Technology Innovations | 204,322 | 129,862 | 144,554 | 478,738 |
1) | All Covered Office Holders listed in the table were full-time officers of the Company in 2021. |
2) | Cash compensation amounts denominated in currencies other than the U.S. dollar were converted into U.S. dollars at an exchange rate of NIS 3.2302= $1.00, which reflects the average conversion rate for 2021, or the Representative Rate. |
3) | Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable to the respective Covered Office Holder, bonuses, payments, contributions and/or allocations for savings funds, pension, severance, vacation, car or car allowance, medical insurances and benefits, risk insurance (e.g., life, disability, accident), phone, convalescence pay, payments for social security, tax gross-up payments and other benefits and perquisites consistent with the Company’s policies. |
4) | Amounts reported in this column represent the expense recorded in our financial statements for the year ended December 31, 2021, with respect to options to purchase our ordinary shares granted to our Covered Office Holders. Assumptions and key variables used in the calculation of such amounts are discussed in Note 2m to our 2021 consolidated financial statements set forth elsewhere in this report. |
(a) | Audit Committee - $2,500 for a member, or $5,000 for the chairman; |
(b) | Compensation Committee - $2,000 for a member, or $4,000 for the chairman; and |
(c) | Nomination and Governance Committee - $1,000 for a member, or $3,000 for the chairman. |
• | a breach of duty of care to us or to another person; |
• | a breach of duty of loyalty to us, provided that the Office Holder acted in good faith and had reasonable grounds to assume that such act would not prejudice our interests; |
• | monetary liabilities or obligations imposed upon him or her in favor of another person; |
• | A payment which the Office Holder is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Israel Securities Law, 5728-1968, or the Securities Law, and expenses that the Office Holder incurred in connection with a proceeding under Chapters H’3, H’4 or I’1 of the Securities Law, including reasonable litigation expenses, including attorney’s fees, or in connection with Article D of Chapter Four of Part Nine of the Companies Law; and |
• | Expenses incurred by the Office Holder in connection with a proceeding under Chapter G’1, of the Israel Restrictive Trade Practices Law, 5748-1988, or Restrictive Trade Law, including reasonable litigation expenses, including attorney’s fees. |
• | For any monetary liabilities or obligations imposed on our Office Holder in favor of another person pursuant to a court judgment, including a compromise judgment or an arbitrator’s decision approved by a court; |
• | For any payments which our Office Holder is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Securities Law and expenses the Office Holder incurred in connection with a proceeding under Chapters H’3, H’4 or I’1 of the Securities Law, including reasonable litigation expenses, including attorney’s fees, or in connection with Article D of Chapter Four of Part Nine of the Companies Law; |
• | For reasonable litigation expenses, including attorney’s fees, incurred by the Office Holder in consequence of an investigation or proceeding instituted against the Office Holder by an authority that is authorized to conduct such investigation or proceeding, and which was concluded without filing of an indictment against the Office Holder and without imposing on the Office Holder a financial obligation in lieu of criminal proceedings, or which was concluded without filing of an indictment against the Office Holder but with imposing on such Office Holder a financial obligation in lieu of criminal proceedings in respect of an offense that does not require proof of criminal intent or in connection with a financial sanction; For the purposes hereof: (i) “a proceeding that concluded without filing an indictment in a matter in respect of which an investigation was conducted”; and (ii) “financial obligation in lieu of a criminal proceeding”, shall have the meanings specified in Section 260(a)(1A) of the Companies Law; |
• | For reasonable litigation expenses, including attorney’s fees, incurred by the Office Holder or which the Office Holder is ordered to pay by a court, in a proceeding filed against the Office Holder by the Company or on its behalf or by another person, or in a criminal action of which the Office Holder is acquitted, or in a criminal action in which the Office Holder is convicted of an offense that does not require proof of criminal intent; |
• | For expenses incurred by our Office Holder in connection with a proceeding under Chapter G’1, of the Restrictive Trade Law, including reasonable litigation expenses, including attorney’s fees; and |
• | For any other liability, obligation or expense indemnifiable or which our Officer Holders may from time to time be indemnifiable by law. |
• | a breach by the Office Holder of his or her duty of loyalty, except that the company may enter into an insurance contract or indemnify an Office Holder if the Office Holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; |
• | a breach by the Office Holder of his or her duty of care if such breach was intentional or reckless, but unless such breach was solely negligent; |
• | any act or omission done with the intent to derive an illegal personal benefit; or |
• | any fine, civil fine, financial sanction or monetary settlement in lieu of criminal proceedings imposed on such Office Holder. |
Board Diversity Matrix as of February 15, 2022 | ||||
Total Number of Directors | 7 | |||
Female | Male | Non-Binary | Did Not Disclose Gender | |
Part I: Gender Identity | ||||
Directors | 2 | 4 | 1 | |
Part II: Demographic Background | ||||
African American or Black | ||||
Alaskan Native or Native American | ||||
Asian | ||||
Hispanic or Latinx | ||||
Native Hawaiian or Pacific Islander | ||||
White | 2 | 3 | ||
Two or More Races or Ethnicities | 1 | |||
LGBTQ+ | 1 | |||
Did Not Disclose Demographic Background | 1 |
• | information regarding the business advisability of a given action brought for the Office Holder’s approval or performed by the Office Holder by virtue of his or her position; and |
• | all other information of importance pertaining to the aforesaid actions. |
• | refrain from any act involving a conflict of interest between the fulfillment of his or her position in the company and the fulfillment of any other position or his or her personal affairs; |
• | refrain from any act that is competitive with the business of the company; |
• | refrain from exploiting any business opportunity of the company with the aim of obtaining a personal gain for himself or herself or for others; and |
• | disclose to the company all relevant information and provide it with all documents relating to the company’s affairs which the Office Holder obtained due to his or her position in the company. |
December 31, 2021 | December 31, 2020 | December 31, 2019 | |
Research & Development | 51 | 45 | 37 |
Administration, Accounting and Operations | 21 | 21 | 23 |
Marketing and Business Development | 1 | 2 | 1 |
Total | 73 | 68 | 61 |
Beneficial Owner | Amount Owned | Percent of Class | ||||||
Anat Cohen-Dayag(1) | 966,122 | 1.1 | % | |||||
All directors and executive officers as a group (13 persons)(2) | 2,984,881 | 3.3 | % |
(1) | Includes (i) 56,122 shares held by Dr. Cohen-Dayag, and (ii) 910,000 shares subject to options that are exercisable within 60 days after February 15, 2022, with a weighted average exercise price of $5.74 per share, and which expire between August 2022 and July 2030. |
(2) | Includes (i) a total of 78,894 ordinary shares held by directors and executive officers, and (ii) a total of 2,905,987 shares subject to options that are beneficially owned by directors and executive officers that are exercisable within 60 days after February 15, 2022, with a weighted average exercise price of $5.16 per share and which expire between August 2022 and September 2030. |
Reporting Beneficial Owner | Number of Ordinary Shares Beneficially Owned | Percent of Ordinary Shares Beneficially Owned(1) | ||||||
ARK Investment Management LLC(2) | 9,222,415 | 10.7 | % | |||||
Nikko Asset Management Americas, Inc.(3) | 6,998,382 | 8.1 | % | |||||
Sumitomo Mitsui Trust Holdings, Inc.(4) | 6,998,382 | 8.1 | % | |||||
Bristol-Myers Squibb Company(5) | 4,757,058 | 5.5 | % |
• | ARK Investment Management LLC’s percentage of ownership has decreased from 20.42% as of December 31, 2020 to 10.7% as stated above. |
• | Nikko Asset Management Americas, Inc.’s percentage of ownership has decreased from 8.40% as of December 31, 2020 to 8.1% as stated above. |
• | Sumitomo Mitsui Trust Holdings, Inc.’s percentage of ownership has decreased from 8.40% as of December 31, 2020 to 8.1% as stated above. |
(1) | Based upon 86,459,252 ordinary shares issued and outstanding as of February 15, 2022. |
(2) | Based upon information provided by the shareholder in its Form 13G/A filed with the SEC on February 9, 2022. With respect to the ordinary shares reported in its Schedule 13G/A, ARK Investment Management LLC, or ARK, indicated as having (i) sole voting power with respect to 8,879,327 ordinary shares, (ii) shared voting power with respect to 210,870 ordinary shares, (iii) sole dispositive power with respect to 9,222,415 ordinary shares, and (iv) no shared dispositive power with respect to ordinary shares. Furthermore, in such filing ARK indicated aggregate beneficial ownership of 9,222,415 ordinary shares. The address of the principal business office of ARK is 3 East 28th Street, 7th Floor, New York, NY 10016. |
(3) | Based upon information provided by the shareholder in its Schedule 13G/A filed with the SEC on February 14, 2022. With respect to the ordinary shares reported in the Schedule 13G/A, Nikko Asset Management Americas, Inc., or Nikko, indicated as having (i) no sole voting or dispositive power with respect to ordinary shares, (ii) shared voting power with respect to 5,851,942 ordinary shares, and (iii) shared dispositive power with respect to 6,998,382 ordinary shares. Furthermore, in such filing Nikko indicated aggregate beneficial ownership of 6,998,382 ordinary shares. The address of the principal business office of Nikko is 605 Third Avenue, 38th Floor, New York, NY 10158. |
(4) | Based upon information provided by the shareholder in its Schedule 13G/A filed with the SEC on February 4, 2022. With respect to the ordinary shares reported in the Schedule 13G/A, Sumitomo Mitsui Trust Holdings, Inc., or Sumitomo, indicated as having (i) no sole voting or dispositive power with respect to ordinary shares and (ii) shared voting power and dispositive power with respect to 6,998,382 ordinary shares. Furthermore, in such filing Sumitomo indicated aggregate beneficial ownership of 6,998,382 ordinary shares. The address of the principal business office of Sumitomo is 1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233, Japan. |
(5) | Based upon information provided by the shareholder in its Form 13G filed with the SEC on November 19, 2021, and confirmation by the shareholder that such information is true and correct as of the date of this Annual Report. With respect to the ordinary shares reported in its Schedule 13G, Bristol-Myers Squibb Company, or BMS, indicated as having (i) sole voting power and dispositive power with respect to 4,757,058 ordinary shares, and (ii) no shared voting power nor shared dispositive power with respect to ordinary shares. Furthermore, in such filing BMS indicated aggregate beneficial ownership of 4,757,058 ordinary shares. The address of the principal business office of BMS is 430 East 29th Street, New York, NY 10016. |
• | at least 75% of our gross income is passive income, or |
• | at least 50% of the value (determined on the basis of a quarterly weighted average) of our total assets for the taxable year produce or are held for the production of passive income. |
2021 | 2020 | |||||||
Audit Fees | $ | 133,000 | $ | 133,000 | ||||
Audit Related Fees | $ | 25,000 | $ | 75,000 | ||||
Tax Fees | $ | 4,500 | $ | 4,500 | ||||
All Other Fees | $ | 2,500 | $ | 2,500 | ||||
Total | $ | 165,000 | $ | 215,000 |
Exhibit Number | Description |
101* | The following financial information from Compugen Ltd.’s Annual Report on Form 20-F for the year ended December 31, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019; (ii) Consolidated Balance Sheets as of December 31, 2021 and 2020; (iii) Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2021, 2020 and 2019; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019; and (v) Notes to Consolidated Financial Statements. |
101.INS | Inline XBRL Instance Document |
101.SCH | Inline XBRL Taxonomy Extension Schema Document |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document |
101.LAB | Inline XBRL Taxonomy Label Linkbase Document |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
104 | Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101). |
* | Filed herewith. |
@ | Confidential treatment has been granted by the Securities and Exchange Commission as to certain portions. |
# | Portions of this exhibit (indicated by asterisks therein) have been omitted as these portions are both not material and confidential. |
COMPUGEN LTD. Signature: /s/ Dr. Anat Cohen-Dayag Name: Dr. Anat Cohen-Dayag Title: President and Chief Executive Officer, Director Date: February 28, 2022 |
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
U.S. DOLLARS IN THOUSANDS
INDEX
Page | |
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F-2 – F-4 |
(PCAOB ID: 1281)
F-5 – F-6 | |
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F-7 | |
| |
F-8 | |
| |
F-9 – F-10 | |
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F-11 – F-38 | |
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| Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel | Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
COMPUGEN LTD.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Compugen Ltd. and its subsidiary (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and 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 December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’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 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. 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.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F - 2
|
Accrued pre-clinical and clinical trial expenses | ||
Description of the matter | As discussed in Note 2(k) to the consolidated financial statements, the Company records costs for pre-clinical and clinical trial activities based upon estimates of costs incurred through the balance sheet date that have yet to be invoiced by the contract research organizations and other vendors.
Auditing the Company’s accruals for pre-clinical and clinical trial activities is challenging due to the fact that information necessary to estimate the accruals for the services that have been received during the reporting period is accumulated from multiple sources such as Company’s operations personnel that oversee the pre-clinical and clinical trial activities, information from service providers and terms and conditions included in the contracts with the service providers. In addition, in certain circumstances, the determination of the nature and level of services that have been received during the reporting period requires judgment because the timing and pattern of vendor invoicing does not correspond to the level of services provided and there may be delays in invoicing from pre-clinical and clinical study sites and other vendors. | |
How we addressed the matter in our audit | We obtained an understanding of, evaluated the design and tested the operating effectiveness of internal controls that addressed the identified risks related to the Company’s process for recording accrued pre-clinical and clinical trial expenses.
To test the pre-clinical and clinical trial accruals, our audit procedures included, among others, reviewing a sample of agreements with the service providers to corroborate key terms and conditions and testing the accuracy and completeness of the underlying data used in the accrual computations. We also evaluated management’s estimates of the progress of a sample of pre-clinical and clinical trial activities by making direct inquiries of the Company’s operations personnel that oversee the pre-clinical and clinical trial activities and obtaining information directly from certain service providers which indicated the progress of pre-clinical and clinical trial completed through the balance sheet date and compared that to the Company’s accrual computations. To evaluate the completeness of the accruals, we also examined subsequent invoices from the service providers and cash disbursements to the service providers, to the extent such invoices were received, or payments were made prior to the date that the consolidated financial statements were issued. |
/s/KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
We have served as the Company’s auditor since 2002
Tel-Aviv, Israel
February 28, 2022
F - 3
| Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel | Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
COMPUGEN LTD.
Opinion on Internal Control over Financial Reporting
We have audited Compugen Ltd. and its subsidiary’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Compugen Ltd. and its subsidiary (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020 and the related consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 28, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures, as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
Tel-Aviv, Israel
February 28, 2022
F - 4
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
|
|
| December 31, | ||||||||
Note |
|
| 2021 |
|
| 2020 | |||||
ASSETS | |||||||||||
| |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ | 7,801 | $ | 7,143 | |||||||
Restricted cash | 713 | 667 | |||||||||
Short-term bank deposits | 109,248 | 116,622 | |||||||||
Trade receivables | 0- | 2,000 | |||||||||
Other accounts receivable and prepaid expenses | 3 | 5,460 | 2,658 | ||||||||
| |||||||||||
Total current assets | 123,222 | 129,090 | |||||||||
| |||||||||||
NON-CURRENT ASSETS: | |||||||||||
Long-term prepaid expenses | 1,911 | 1,880 | |||||||||
Severance pay fund | 3,125 | 2,863 | |||||||||
Operating lease right of use asset | 4 | 2,247 | 2,772 | ||||||||
Property and equipment, net | 5 | 1,658 | 1,711 | ||||||||
| |||||||||||
Total non- current assets | 8,941 | 9,226 | |||||||||
| |||||||||||
Total assets | $ | 132,163 | $ | 138,316 |
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share and per share data)
|
|
| December 31, | ||||||||
Note |
|
| 2021 |
|
| 2020 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| |||||||||||
CURRENT LIABILITIES: | |||||||||||
Trade payables | $ | 4,621 | $ | 1,413 | |||||||
Short-term deferred participation in R&D expenses | 3,629 | 668 | |||||||||
Current maturity of operating lease liability | 4 | 768 | 639 | ||||||||
Other accounts payable and accrued expenses | 6 | 8,078 | 7,803 | ||||||||
| |||||||||||
Total current liabilities | 17,096 | 10,523 | |||||||||
| |||||||||||
NON- CURRENT LIABILITIES: | |||||||||||
Long-term deferred participation in R&D expenses | 2,715 | 1,968 | |||||||||
Long-term operating lease liability | 1,982 | 2,527 | |||||||||
Accrued severance pay | 3,677 | 3,516 | |||||||||
| |||||||||||
Total non-current liabilities | 8,374 | 8,011 | |||||||||
| |||||||||||
COMMITMENTS AND CONTINGENT LIABILITIES | 7 | ||||||||||
| |||||||||||
SHAREHOLDERS’ EQUITY: | 8 | ||||||||||
Share capital: | |||||||||||
Ordinary shares of NIS 0.01 par value: 200,000,000 shares authorized at December 31, 2021 and 2020; 86,433,432 and 83,675,856 shares issued and outstanding at December 31, 2021 and 2020, respectively | 239 | 231 | |||||||||
Additional paid-in capital | 528,533 | 507,427 | |||||||||
Accumulated deficit | (422,079 | ) | (387,876 | ) | |||||||
| |||||||||||
Total shareholders’ equity | 106,693 | 119,782 | |||||||||
| |||||||||||
Total liabilities and shareholders’ equity | $ | 132,163 | $ | 138,316 |
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
U.S. dollars in thousands (except share and per share data)
Year ended December 31, | |||||||||||||||
Note | 2021 | 2020 | 2019 | ||||||||||||
| |||||||||||||||
Revenue | $ | 6,000 | $ | 2,000 | $ | 0- | |||||||||
Cost of revenue | 680 | 60 | 0- | ||||||||||||
| |||||||||||||||
Gross profit | 5,320 | 1,940 | 0- | ||||||||||||
| |||||||||||||||
Operating expenses: | |||||||||||||||
| |||||||||||||||
Research and development expenses, net | 28,694 | 22,760 | 19,816 | ||||||||||||
Marketing and business development expenses | 842 | 871 | 651 | ||||||||||||
General and administrative expenses | 10,858 | 9,805 | 8,412 | ||||||||||||
| |||||||||||||||
Total operating expenses | 40,394 | 33,436 | 28,879 | ||||||||||||
| |||||||||||||||
Operating loss | (35,074 | ) | (31,496 | ) | (28,879 | ) | |||||||||
| |||||||||||||||
Financial and other income, net | 11 | 871 | 1,798 | 820 | |||||||||||
| |||||||||||||||
Loss before taxes on income | (34,203 | ) | (29,698 | ) | (28,059 | ) | |||||||||
Taxes on income | 9 | 0- | 0- | 722 | |||||||||||
| |||||||||||||||
Net loss | (34,203 | ) | (29,698 | ) | (27,337 | ) | |||||||||
| |||||||||||||||
Basic net loss per share | $ | (0.41 | ) | $ | (0.37 | ) | $ | (0.43 | ) | ||||||
| |||||||||||||||
Diluted net loss per share | $ | (0.41 | ) | $ | (0.37 | ) | $ | (0.43 | ) | ||||||
| |||||||||||||||
Total comprehensive loss | $ | (34,203 | ) | $ | (29,698 | ) | $ | (27,337 | ) | ||||||
| |||||||||||||||
Weighted average number of ordinary shares used in computing basic net loss per share | 84,203,971 | 79,591,187 | 63,636,673 | ||||||||||||
| |||||||||||||||
Weighted average number of ordinary shares used in computing diluted net loss per share | 84,203,971 | 79,591,187 | 63,636,673 |
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
COMPUGEN LTD. AND ITS SUBSIDIARY
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
U.S. dollars in thousands (except share data)
Ordinary shares | Additional paid-in | Accumulated | Total shareholders’ | |||||||||||||||||
Number | Amount | capital | deficit | equity | ||||||||||||||||
| ||||||||||||||||||||
Balance as of January 1, 2019 | 59,849,784 | $ | 164 | $ | 367,920 | $ | (330,841 | ) | $ | 37,243 | ||||||||||
| ||||||||||||||||||||
Options exercised | 878,378 | 3 | 3,246 | - | 3,249 | |||||||||||||||
Issuance of shares and warrants, net | 7,194,674 | 20 | 22,738 | - | 22,758 | |||||||||||||||
Stock-based compensation relating to options issued to employees, directors and non-employees | - | - | 2,408 | - | 2,408 | |||||||||||||||
Net loss | - | - | - | (27,337 | ) | (27,337 | ) | |||||||||||||
| ||||||||||||||||||||
Balance as of December 31, 2019 | 67,922,836 | 187 | 396,312 | (358,178 | ) | 38,321 | ||||||||||||||
| ||||||||||||||||||||
Options exercised | 3,070,542 | 9 | 15,906 | - | 15,915 | |||||||||||||||
Warrants exercised | 3,866,139 | 11 | 18,314 | - | 18,325 | |||||||||||||||
Issuance of shares, net | 8,816,339 | 24 | 74,123 | - | 74,147 | |||||||||||||||
Stock-based compensation relating to options issued to employees, directors and non-employees | - | - | 2,772 | - | 2,772 | |||||||||||||||
Net loss | - | - | - | (29,698 | ) | (29,698 | ) | |||||||||||||
| ||||||||||||||||||||
Balance as of December 31, 2020 | 83,675,856 | 231 | 507,427 | (387,876 | ) | 119,782 | ||||||||||||||
| ||||||||||||||||||||
Exercise of options and ESPP shares | 335,204 | 1 | 1,454 | - | 1,455 | |||||||||||||||
Warrants exercised | 89,557 | (0* | ) | 425 | - | 425 | ||||||||||||||
Issuance of shares, net | 2,332,815 | 7 | 14,951 | - | 14,958 | |||||||||||||||
Stock-based compensation issued to employees, directors and non-employees | - | - | 4,276 | - | 4,276 | |||||||||||||||
Net loss | - | - | - | (34,203 | ) | (34,203 | ) | |||||||||||||
| ||||||||||||||||||||
Balance as of December 31, 2021 | 86,433,432 | $ | 239 | $ | 528,533 | $ | (422,079 | ) | $ | 106,693 |
(*) Representing amount lower than $1.
The accompanying notes are an integral part of the consolidated financial statements.
F - 8
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Cash flows from operating activities: | ||||||||||||
| ||||||||||||
Net loss | $ | (34,203 | ) | $ | (29,698 | ) | $ | (27,337 | ) | |||
Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||||||
Stock-based compensation | 4,276 | 2,772 | 2,408 | |||||||||
Depreciation | 461 | 715 | 989 | |||||||||
Increase (decrease) in severance pay, net | (101 | ) | 184 | (22 | ) | |||||||
Gain from property and equipment sales and disposals | (3 | ) | (12 | ) | (135 | ) | ||||||
Decrease (increase) in interest receivables from short-term bank deposits | 469 | (532 | ) | 66 | ||||||||
Decrease (increase) in trade receivables | 2,000 | (2,000 | ) | 0- | ||||||||
Increase in other accounts receivable and prepaid expenses | (2,802 | ) | (1,613 | ) | (142 | ) | ||||||
Decrease (increase) in long-term prepaid expenses | (31 | ) | (1,187 | ) | 83 | |||||||
Decrease in operating lease right of use asset | 525 | 475 | 2,165 | |||||||||
Increase (decrease) in trade payables and other accounts payable and accrued expenses | 3,367 | 3,817 | (3,502 | ) | ||||||||
Increase (decrease) in deferred participation in R&D expenses | 3,708 | (829 | ) | (627 | ) | |||||||
Decrease in operating lease liability | (416 | ) | (412 | ) | (1,834 | ) | ||||||
| ||||||||||||
Net cash used in operating activities | (22,750 | ) | (28,320 | ) | (27,888 | ) | ||||||
| ||||||||||||
Cash flows from investing activities: | ||||||||||||
| ||||||||||||
Proceeds from maturity of short-term bank deposits | 136,850 | 70,300 | 59,403 | |||||||||
Investment in short-term bank deposits | (129,945 | ) | (152,350 | ) | (54,300 | ) | ||||||
Purchase of property and equipment | (292 | ) | (166 | ) | (155 | ) | ||||||
Proceeds from sale of property and equipment | 3 | 44 | 382 | |||||||||
| ||||||||||||
Net cash provided by (used in) investing activities | 6,616 | (82,172 | ) | 5,330 |
The accompanying notes are an integral part of the consolidated financial statements.
F - 9
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended December 31, | ||||||||||||
2021 |
|
| 2020 |
|
| 2019 | ||||||
Cash flows from financing activities: | ||||||||||||
| ||||||||||||
Proceeds from issuance of ordinary shares, net | 14,958 | 74,147 | 22,758 | |||||||||
Proceeds from exercise of warrants | 425 | 18,325 | 0- | |||||||||
Proceeds from exercise of stock-based awards | 1,455 | 15,991 | 3,173 | |||||||||
| ||||||||||||
Net cash provided by financing activities | 16,838 | 108,463 | 25,931 | |||||||||
| ||||||||||||
Increase (decrease) in cash, cash equivalents and restricted cash | 704 | (2,029 | ) | 3,373 | ||||||||
Cash, cash equivalents and restricted cash at the beginning of the year | 7,810 | 9,839 | 6,466 | |||||||||
| ||||||||||||
Cash and cash equivalents and restricted cash at the end of the year | $ | 8,514 | $ | 7,810 | $ | 9,839 | ||||||
| ||||||||||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||||||
| ||||||||||||
Purchase of property and equipment | $ | 116 | $ | 16 | $ | 47 | ||||||
Receivables on account of shares | $ | 0- | $ | 0- | $ | 76 | ||||||
Right-of-use asset obtained in exchange for operating lease liability | $ | 0- | $ | (194 | ) | $ | 363 | |||||
| ||||||||||||
Cash paid (received) during the year for: | ||||||||||||
| ||||||||||||
Interest payments received from short-term bank deposits and cash equivalents | $ | 1,364 | $ | 1,232 | $ | 1,002 | ||||||
| ||||||||||||
Reconciliation of cash, cash equivalents and restricted cash: | ||||||||||||
| ||||||||||||
Cash and cash equivalents | $ | 7,801 | $ | 7,143 | $ | 9,187 | ||||||
Restricted cash | 713 | 667 | 652 | |||||||||
| ||||||||||||
Total cash, cash equivalents and restricted cash | $ | 8,514 | $ | 7,810 | $ | 9,839 |
The accompanying notes are an integral part of the consolidated financial statements.
F - 10
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 1: -GENERAL
a.Compugen Ltd. (the “Company”) is a clinical-stage therapeutic discovery and development company utilizing its broadly applicable predictive computational discovery capabilities to identify novel drug targets and new biological pathways to develop therapeutics in the field of cancer immunotherapy. Compugen’s innovative immuno-oncology pipeline consists of four clinical stage programs, targeting immune checkpoints Compugen discovered computationally, COM701, COM902, bapotulimab (formerly known as BAY1905254) and AZD2936. The Company’s lead product candidate, COM701, a potential first-in-class anti-PVRIG antibody, for the treatment of solid tumors, is undergoing Phase 1 clinical trials in dual, and triple combinations under clinical collaboration with Bristol Myers Squibb. COM902, a potential best-in-class, is a therapeutic antibody targeting TIGIT, developed internally and is undergoing a Phase 1 trial to evaluate it in patients with advanced malignancies as a monotherapy and in combination with COM701. Bapotulimab, an antibody targeting ILDR2, licensed to Bayer under a research and discovery collaboration and license agreement, is also in Phase 1 trials in patients with advanced solid tumors. AZD2936 is a novel anti-TIGIT/PD-1 bispecific antibody with a TIGIT component that is derived from Compugen’s COM902 program and is developed by AstraZeneca pursuant to an exclusive license agreement between Compugen and AstraZeneca and is in Phase 1/2 trial in patients with advanced or metastatic non-small cell lung cancer. Compugen’s therapeutic pipeline of early-stage immuno-oncology programs consists of programs aiming to address various mechanisms of immune resistance, including myeloid targets. The innovative immuno-oncology pipeline, the strategic collaborations and the Company’s computational discovery engine serve as the corporate three key building blocks. Compugen’s business model is to selectively enter into collaborations for its novel targets and related drug product candidates at various stages of research and development under various revenue-sharing arrangements.
b.The Company is headquartered in Holon, Israel. Its clinical development activities are headed from its United States subsidiary, Compugen USA, Inc, located in South San Francisco, CA.
c.The Company has incurred losses in the amount of $34,203 during the year ended December 31, 2021, has an accumulated deficit of $422,079 as of December 31, 2021 and has an accumulated negative cash flow from operating activities in the amount of $22,750 for the year ended December 31, 2021. On February 26, 2019, the Company announced a corporate restructuring to reduce costs by consolidating and streamlining R&D operations. The restructuring included reducing its workforce by 35%, consolidating R&D activities in one location in Israel and outsourcing certain preclinical activities to third-party service providers. The Company believes that its existing capital resources will be adequate to satisfy its expected liquidity requirements at the current level of yearly expenditures into 2024.
d.On August 5, 2013, the Company entered into a Research and Development Collaboration and License Agreement (“Bayer Agreement”) with Bayer Pharma AG (“Bayer”) for the research, development, and commercialization of antibody-based therapeutics against two novel, Compugen-discovered immune checkpoint regulators.
Under the terms of the Bayer Agreement, the Company received an upfront payment of $10,000, and, following the return of the CGEN 15022 program in 2017, the Company is eligible to receive an aggregate of over $250,000 in potential milestone payments for Bapotulimab (formerly known as BAY1905254), not including aggregate milestone payments of approximately $23,000 received to date. Additionally, the Company is eligible to receive mid to high single digit royalties on global net sales of any approved products under the collaboration.
Pursuant to the terms of Bayer Agreement, Bapotulimab program was transferred to Bayer’s full control for further preclinical and clinical development activities, and worldwide commercialization under milestone and royalty bearing license from Compugen.
F - 11
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 1: -GENERAL (Cont.)
e.Effective March 30, 2018, the Company entered into an exclusive license agreement with MedImmune Limited. the global biologics research and development arm of AstraZeneca (“AstraZeneca”) to enable the development of bi-specific and multi-specific immuno-oncology antibody products. Under the terms of the agreement, Compugen provided an exclusive license to AstraZeneca for the development of bi-specific and multi-specific antibody products derived from COM902. AstraZeneca has the right to create multiple products under this license and will be solely responsible for all research, development, and commercial activities under the agreement. Compugen received a $10,000 upfront payment, and received $8,000 milestone payments out of up to $200,000 the Company is eligible to receive in development, regulatory and commercial milestones for the first product in addition to tiered royalties on future product sales. If additional products are developed, additional milestones and royalties would be due to Compugen for each product.
f.On October 10, 2018, the Company entered into a Master Clinical Trial Collaboration Agreement (the “Agreement”) with Bristol-Myers Squibb Company (“Bristol-Myers Squibb”) to evaluate the safety and tolerability of Compugen’s COM701 in combination with Bristol-Myers Squibbs’ PD-1 immune checkpoint inhibitor Opdivo® (nivolumab), in patients with advanced solid tumors.
Pursuant to the Agreement, Compugen is responsible for and will continue sponsoring the ongoing two-part Phase 1 trial, which includes the evaluation of the combination of COM701 and Opdivo®. The collaboration was also designed to address potential future combinations, including trials sponsored by Bristol-Myers Squibb to investigate combined inhibition of checkpoint mechanisms, such as PVRIG and TIGIT. Bristol-Myers Squibb and Compugen each supplies the other company with its own compound for the other party’s study, and otherwise each party is responsible for all costs associated with the study that it is conducting.
In conjunction with the signing of the Agreement in October 2018, Bristol-Myers Squibb made a $12,000 investment in Compugen, see Note 8b.
On February 14, 2020, the Agreement was amended to include a triple combination clinical trial to evaluate the safety, tolerability and antitumor activity of COM701 in combination with Opdivo® (nivolumab), and Bristol-Myers Squibb’s investigational antibody targeting TIGIT known as BMS-986207, in patients with advanced solid tumors, instead of the planned expansion of the combined therapy study designed to evaluate the dual combination of COM701 and Opdivo®.
Pursuant to the Agreement, as amended, the Company sponsors the two-part Phase 1/2 trial, which evaluates the triple combination of COM701, Opdivo® and BMS-986207, in patients with advanced solid tumors where Bristol-Myers Squibb provides Opdivo® and BMS-986207 at no cost to the Company.
F - 12
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 1: -GENERAL (Cont.)
As part of the amended Agreement, it was agreed that the Company will complete the dose escalation arm of the dual combination of COM701 with Opdivo® under the ongoing Phase 1 study and will not continue the expansion cohorts of the dual combination. However, on February 19, 2021, the Agreement was further amended to include an expansion of the Phase 1 combination study designed to evaluate the dual combination of COM701 and Opdivo® in patients with advanced solid tumors, where the Company is responsible for and sponsors the expansion cohort and Bristol Myers Squibb provides Opdivo® at no cost to the Company for this study.
On November 10, 2021, the Agreement was further amended to establish a joint steering committee (alongside the existing joint development committee which acts at an operational level) to facilitate strategic oversight and guidance for the programs run under the collaboration.
In conjunction with the signing of the amendment to the Agreement in November 2021, Bristol-Myers Squibb made a $20,000 investment in Compugen, see Note 8b.
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”).
a.Use of estimates:
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
The Company considered the impact of COVID-19 on the estimates and assumptions and determined that there were no material adverse impacts on the consolidated financial statements for the year ended December 31, 2021. As events continue to evolve and additional information becomes available, the Company’s estimates and assumptions may change materially in future periods. Such changes could result in future impairments of long-lived assets.
b.Financial statements in U.S. dollars:
The reporting and functional currency of the Company is the U.S. dollar, as the Company’s management believes that the U.S. dollar is the primary currency of the economic environment in which the Company and Compugen USA, Inc. have operated and expect to continue to operate in the foreseeable future.
Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts denominated in currencies other than the dollar are re-measured into dollars in accordance with ASC No. 830, “Foreign Currency Matters”. All transaction gains and losses from the re-measurement of monetary balance sheet items are reflected in the consolidated statement of comprehensive loss as financial income or expenses, as appropriate.
F - 13
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES (Cont.)
c.Basis of consolidation:
The consolidated financial statements include the accounts of the Company and Compugen USA, Inc. Intercompany transactions and balances have been eliminated upon consolidation.
d.Cash equivalents:
Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at acquisition.
e.Restricted cash:
Restricted cash is held in interest bearing saving accounts which are used as a security for the Company’s Israeli facility leasehold bank guarantee and credit card security for Compugen USA, Inc.
f.Short-term bank deposits:
Bank deposits with maturities of more than three months but less than one year are included in short-term bank deposits. Such short-term bank deposits are stated at cost which approximates market values.
The short-term bank deposits as of December 31, 2021 and 2020 are in U.S. dollars and bear an annual weighted average interest rate of 0.77% and 1.01%, respectively.
g.Property and equipment, net:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:
% | |
| |
Computers, software and related equipment | 33 |
Laboratory equipment and office furniture | 6 - 20 (mainly 20) |
Leasehold improvements | Shorter of the term of the lease or useful life |
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COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES (Cont.)
h.Impairment of long-lived assets:
The long-lived assets of the Company and Compugen USA, Inc. are reviewed for impairment in accordance with ASC 360, “Property, Plant, and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset with the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the years 2021, 2020 and 2019, no impairment losses have been identified.
i.Revenue recognition:
The Company generates revenues mainly from its collaborative and license agreements. The revenues are derived mainly from upfront license payments, research and development services and contingent payments related to milestone achievements.
The Company recognizes revenue in accordance with ASC 606 – “Revenue from Contracts with Customers”.
As such, the Company analyzes its contracts to assess whether they are within the scope of ASC 606. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps:
•
Identification of the contract, or contracts, with a customer
•
Identification of the performance obligations in the contract - At contract inception, the Company assesses the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not distinct from other promises in the contract (either because it is not capable of being distinct or because it is not distinct within the context of the contract), or if an option to acquire good or service does not provide the customer with a material right.
•
Determination of the transaction price - The Company considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
F - 15
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES (Cont.)
i.Revenue recognition (Cont.):
•
Allocation of the transaction price to the performance obligations in the contract - If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling prices. The relative selling price for each deliverable is estimated using observable objective evidence if it is available. If observable objective evidence is not available, the Company uses its best estimate of the selling price for the deliverable.
•
Recognition of revenue when, or as, the Company satisfies a performance obligation - Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service is considered to be as the services are received and used.
After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception.
The Company entered into an exclusive license agreement with AstraZeneca. Under the terms of the agreement, Compugen provided AstraZeneca with an exclusive license to intellectual property (“IP”) rights of the Company for the development of bi-specific and multi-specific antibody products derived from COM902. Compugen received a $10,000 upfront nonrefundable payment and is eligible to receive up to $200,000 for development, regulatory and commercial milestones for the first product, including $8,000 received to date as well as tiered royalties on future product sales.
Under ASC 606, the Company determined the license to the IP to be a functional IP that has significant standalone functionality. The Company is not required to continue to support, develop or maintain the intellectual property transferred and will not undertake any activities to change the standalone functionality of the IP. Therefore, the license to the IP is a distinct performance obligation and as such revenue is recognized at the point in time that control of the license is transferred to the customer.
Future milestone payments are considered variable consideration and are subject to the variable consideration constraint (i.e. will be recognized once concluded that it is “probable” that a significant reversal of the cumulative revenues recognized under the contract will not occur in future periods when the uncertainty related to the variable consideration is resolved). Therefore, as the milestone payments are not probable, revenue was not recognized in respect to such milestone payments prior to achievement of such milestone.
F - 16
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES (Cont.)
i.Revenue recognition (Cont.):
Sales- or usage-based royalties to be received in exchange for licenses of IP are recognized at the later of when (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all of the sales- or usage-based royalty has been allocated is satisfied (in whole or in part). As royalties are payable based on future Commercial Sales, as defined in the agreement, which did not occur as of the financial statements date, the Company did not recognize any revenues from royalties.
On December 18, 2020 the first milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $2,000 in accordance with the criteria prescribed under ASC 606.
On September 29, 2021 the second milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $6,000 in accordance with the criteria prescribed under ASC 606.
For information regarding revenues, please refer to Note 10 below.
j.Cost of revenues:
Cost of revenues consist of certain royalties and milestones paid or accrued.
k.Research and development expenses, net:
Research and development costs are charged to the statement of comprehensive loss as incurred and are presented net of the amount of any grants the Company receives for research and development in the period in which the grant was received.
As part of the process of preparing the consolidated financial statements, the Company accrues costs for pre-clinical and clinical trial activities based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the contract research organizations or other pre-clinical or clinical trial vendors that perform the activities. In certain circumstances, the Company is required to make nonrefundable advance payments to vendors for goods or services that will be received in the future for use in research and development activities. In such circumstances, the nonrefundable advance payments are deferred and capitalized, and amortized as the related goods or services are provided. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense.
F - 17
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES (Cont.)
k.Research and development expenses, net (Cont.):
The portion of the Bristol-Myers Squibb $12,000 investment over the fair market value of the shares issued in the amount of $4,121 and the portion of the $20,000 investment over the fair market value of the shares issued in the amount of $5,000 were considered as deferred participation of Bristol-Myers Squibb in R&D expenses which is amortized over the period of the clinical trial based on the progress in the R&D, in accordance with ASC 808 “Collaborative Arrangements”, see Note 1f and Note 8b.
Amortization of participation in R&D expenses for the years ended December 31, 2021, 2020 and 2019 were $1,291, $829 and $627, respectively.
l.Severance pay:
The Company’s liability for severance pay for its Israeli employees is calculated pursuant to Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date, and is in large part covered by regular deposits with recognized pension funds, deposits with severance pay funds and purchases of insurance policies. The value of these deposits and policies is recorded as an asset in the Company’s balance sheet. Pursuant to Section 14 of the Israeli Severance Pay Law, for Israeli employees under this section, the Company’s contributions for severance pay have replaced its severance obligation. Upon contribution of the full amount of the employee’s monthly salary for each year of service, no additional calculations are conducted between the parties regarding the matter of severance pay and no additional payments are made by the Company to the employee.
Further, the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid.
Severance expenses for the years ended December 31, 2021, 2020 and 2019 amounted to approximately $383, $572 and $366, respectively.
m.Stock-based compensation:
The Company accounts for stock-based compensation to employees and non-employees in accordance with ASC 718, “Compensation - Stock Compensation”, (“ASC 718”), which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The Company accounts for forfeitures as they occur.
The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards.
F - 18
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES (Cont.)
m.Stock-based compensation (Cont.):
The Company selected the Black-Scholes-Merton (“Black-Scholes”) option-pricing model as the most appropriate fair value method for its share-options awards and Employee Stock Purchase Plan (“ESPP”). The option-pricing model requires a number of assumptions, of which the most significant are the expected share price volatility and the expected option term. Expected volatility was calculated based on actual historical share price movements over a term that is equivalent to the expected term of granted options. The expected term of options granted is based on historical experience and represents the period of time that options granted are expected to be outstanding.
The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The Company used the following weighted-average assumptions for options granted to employees, directors and non-employees and ESPP:
Year ended December 31, | |||||||||
2021 | 2020 | 2019 | |||||||
| |||||||||
Employee stock Options | |||||||||
Volatility | 67.68% | 63.17% | 54.59% | ||||||
Risk-free interest rate | 0.77% | 0.45% | 1.92% | ||||||
Dividend yield | 0% | 0% | 0% | ||||||
Expected life (years) | 5.17 | 5.16 | 5.15 | ||||||
| |||||||||
ESPP | |||||||||
Volatility | 64.68%-69.68% | 0- | 0- | ||||||
Risk-free interest rate | 0.04%-0.10% | 0- | 0- | ||||||
Dividend yield | 0% | 0- | 0- | ||||||
Expected life (years) | 0.42-0.50 | - | - |
n.Concentration of credit risks:
Financial instruments that potentially subject the Company and Compugen USA, Inc. to concentration of credit risk consist principally of cash and cash equivalents, restricted cash and short-term bank deposits.
Cash, cash equivalents, restricted cash and short-term bank deposits are invested in major banks in Israel and in the U.S. Generally, these deposits may be redeemed upon demand and bear minimal risk.
The trade receivables of the Company derive from milestone payments under collaboration agreements between the company and its collaborators, located primarily in Europe.
F - 19
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES (Cont.)
n.Concentration of credit risks (Cont.):
The Company’s collaborators are major pharma companies. The amounts due to the Company by such collaborators are paid pursuant to the terms of the agreements after a short period of time and bear low risk.
The Company had one collaborator that accounted for 100% of the Company’s consolidated revenues, for the years ended December 31, 2021 and 2020. The Company had no revenues in 2019.
o.Basic and diluted loss per share:
Basic loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year. Diluted net loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential in accordance with ASC 260, “Earnings per Shareˮ.
All outstanding share options and warrants for the years ended December 31, 2021, 2020 and 2019 have been excluded from the calculation of the diluted net loss per share, because all such securities are anti-dilutive for all periods presented. As of December 31, 2021, 2020 and 2019 the average number of shares related to outstanding options and warrants excluded from the calculations of diluted net loss per share were 6,758,300, 7,150,648 and 12,754,803, respectively.
p.Income taxes:
The Company accounts for income taxes in accordance with ASC No. 740, “Income Taxes”, (“ASC 740”) which prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. As of December 31, 2021 and 2020, a full valuation allowance was provided by the Company.
ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740-10.
F - 20
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES (Cont.)
q.Fair value of financial instruments:
The Company applies ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), pursuant to which fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputting that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.
Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The hierarchy is broken down into three levels based on the inputs as follows:
Level 1 -Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.
Level 2 -Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 -Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The carrying amounts of cash and cash equivalents, restricted cash, short-term bank deposits, other accounts receivable and prepaid expenses, trade payable and other accounts payable and accrued expenses approximate their fair values due to the short-term maturities of such instruments.
r.Derivative instruments:
The Company accounts for derivatives and hedging based on ASC 815, “Derivatives and Hedging”. ASC 815 requires the Company to recognize all derivatives on the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.
F - 21
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES (Cont.)
r.Derivative instruments (Cont.):
If the derivatives meet the definition of a hedge and are so designated, depending on the nature of the hedge, changes in the fair value of such derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is recognized in earnings.
In the past the Company entered into forward contracts to hedge against the risk of overall changes in future cash flow from payments of payroll and related expenses as well as other expenses denominated in NIS. As of December 31, 2021 and 2020, the Company had no outstanding forward contracts. The Company measured the fair value of the contracts in accordance with ASC 820 (classified as level 2).
These contracts met the requirement for cash flow hedge accounting and during each of the years ended December 31, 2021, 2020 and 2019, no amount of total gains were recognized and were classified to operating expenses as effective hedge and no unrealized gains were recognized under other comprehensive income (loss).
s.Comprehensive income (loss):
The Company accounts for comprehensive income (loss) in accordance with ASC 220, “Comprehensive Income”. This statement establishes standards for the reporting and display of comprehensive income (loss) and its components in a full set of general-purpose financial statements. Comprehensive income (loss) generally represents all changes in shareholders’ equity during the period except those resulting from investments by, or distributions to, shareholders. The Company elected to present the comprehensive income (loss) in a single continuous statement.
In the years 2021, 2020 and 2019 the Company has no components of other comprehensive income (loss), other than net loss.
F - 22
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: -SIGNIFICANT ACCOUNTING POLICIES (Cont.)
t.Recently issued and recently adopted Accounting Standards:
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature and a beneficial conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS). ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020 and can be adopted on either a fully retrospective or modified retrospective basis. The Company adopted ASU 2020-06 as of January 1, 2021. The adoption of this standard did not have an impact to the Company’s financial statements.
In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832). This ASU requires business entities to disclose information about government assistance they receive if the transactions were accounted for by analogy to either a grant or a contribution accounting model. The disclosure requirements include the nature of the transaction and the related accounting policy used, the line items on the balance sheets and statements of operations that are affected and the amounts applicable to each financial statement line item and the significant terms and conditions of the transactions. The ASU is effective for annual periods beginning after December 15, 2021. The disclosure requirements can be applied either retrospectively or prospectively to all transactions in the scope of the amendments that are reflected in the financial statements at the date of initial application and new transactions that are entered into after the date of initial application. The ASU is currently not expected to have a material impact on our consolidated financial statements.
NOTE 3: -OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
December 31, | ||||||||
2021 | 2020 | |||||||
| ||||||||
Prepaid expenses | $ | 5,272 | $ | 2,482 | ||||
Government authorities | 57 | 54 | ||||||
Other | 131 | 122 | ||||||
| ||||||||
$ | 5,460 | $ | 2,658 |
F - 23
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 4: -LEASES
The Company leases all its real estate, storage area and cars under various operating lease agreements that expire on various dates.
The Company’s operating leases have original lease periods expiring between 2022 and 2024. The offices in Israel lease include two options to renew, one of which was exercised in 2020. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably certain.
In October 2020 the Company’s lease of its offices in Israel was amended in connection with the exercise of the option. The amendment was not accounted for as a new lease. As a result of the amendment the operating lease right of use asset increased by $43, the operating lease liability decreased by $194 and the Company recorded foreign currency exchange rate of $237.
Lease payments included in the measurement of the lease liability comprise the following: the fixed non-cancelable lease payments and payments for optional renewal periods where it is reasonably certain the renewal period will be exercised.
Under ASC 842, all leases, including non-cancelable operating leases, are now recognized on the balance sheet. The aggregated present value of lease payments is recorded as a long-term asset titled Operating lease right of use asset. The corresponding lease liabilities are split between current maturity of operating lease liability within current liabilities and long-term operating lease liability within long-term liabilities. The Company’s leases do not provide an implicit rate, therefore the Company uses its incremental borrowing rate based on information available on the commencement date in determining the present value of lease payments.
The Company subleased small part of its leased premises until March 14, 2021. Sublease income in the year ended December 31, 2021 and 2020, amounted to $3 and $56, respectively.
The following table represents the weighted-average remaining lease term and discount rate:
Twelve months ended | ||
December 31, 2021 | ||
| ||
Weighted average remaining lease term | 3.87 | |
Weighted average discount (annual) rate | 5.49% |
Operating lease expenses were approximately $956, $944 and $1,586 in the years ended December 31, 2021, 2020 and 2019, respectively.
Cash paid for amounts included in the measurement of lease liabilities was approximately $914, $927 and $1,577 in the years ended December 31, 2021, 2020 and 2019, respectively.
F - 24
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 4: -LEASES (Cont.)
Maturities of operating lease liabilities were as follows:
December 31, 2021 | ||||
| ||||
2022 | $ | 895 | ||
2023 | 726 | |||
2024 | 664 | |||
2025 | 631 | |||
2026 and after | 129 | |||
| ||||
Total operating lease payments | 3,045 | |||
Less: imputed interest | 295 | |||
Present value of lease liabilities | 2,750 | |||
| ||||
Lease liabilities, current | 768 | |||
Lease liabilities, non- current | 1,982 | |||
| ||||
Present value of lease liabilities | $ | 2,750 |
The above annual minimum future rental commitments include the period covered by the first exercised option with respect to the leased facility of Compugen Ltd. through March 2026 and exclude the second option to extend the lease of the Company facility for additional five-year period following expiration of the current lease period.
NOTE 5: -PROPERTY AND EQUIPMENT, NET
December 31, | ||||||||
2021 | 2020 | |||||||
Cost: | ||||||||
| ||||||||
Computers, software and related equipment | $ | 1,506 | $ | 1,431 | ||||
Laboratory equipment and office furniture | 3,674 | 3,367 | ||||||
Leasehold improvements | 2,321 | 2,321 | ||||||
| ||||||||
7,501 | 7,119 | |||||||
Accumulated depreciation: | ||||||||
| ||||||||
Computers, software and related equipment | 1,351 | 1,264 | ||||||
Laboratory equipment and office furniture | 3,114 | 3,001 | ||||||
Leasehold improvements | 1,378 | 1,143 | ||||||
| ||||||||
5,843 | 5,408 | |||||||
| ||||||||
Depreciated cost | $ | 1,658 | $ | 1,711 |
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COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 5: -PROPERTY AND EQUIPMENT, NET (Cont.)
During 2021 and 2020 total cost of $26 and $220, respectively and total accumulated depreciation of $26 and $188, respectively were disposed from the consolidated balance sheets.
For the years ended December 31, 2021, 2020 and 2019, depreciation expenses were approximately $461, $715 and $989, respectively.
NOTE 6: -OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 31, | ||||||||
2021 | 2020 | |||||||
| ||||||||
Employees and related accruals | $ | 3,299 | $ | 2,881 | ||||
Accrued expenses | 4,779 | 4,922 | ||||||
| ||||||||
$ | 8,078 | $ | 7,803 |
NOTE 7: - COMMITMENTS AND CONTINGENCIES
a.The Company provided bank guarantees in the amount of $703 related to its offices in Israel, car leases in Israel and credit card security for its U.S. subsidiary.
b.Under the Office of the Israel Innovation Authority of the Israeli Ministry of Industry, Trade and Labor, formerly known as the Office of the Chief Scientist, (the “IIA”), the Company is not obligated to repay any amounts received from the IIA if it does not generate any income from the results of the funded research program(s). If income is generated from a funded research program, the Company is committed to pay royalties at a rate of between 3% to 5% of future revenue arising from such research program(s), and up to a maximum of 100% of the amount received, linked to the U.S. dollar (for grants received under programs approved subsequent to January 1, 1999, the maximum to be repaid is 100% plus interest at LIBOR). For the years ended December 31, 2021, 2020 and 2019, the Company had an aggregate of paid or accrued royalties to the IIA, recorded as cost of revenue in the consolidated statements of comprehensive loss in the amount of $180, $60 and $0, respectively.
As of December 31, 2021, the Company’s aggregate contingent obligations for payments to IIA, based on royalty-bearing participation received or accrued, net of royalties paid or accrued, totaled approximately to $9,522.
F - 26
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 7: - COMMITMENTS AND CONTINGENCIES (Cont.)
c.On June 25, 2012 the Company entered into an Antibodies Discovery Collaboration Agreement (the “Antibodies Discovery Agreement”) with a U.S. antibody technology company (“mAb Technology Company”), providing an established source for fully human mAbs. Under the Antibodies Discovery Agreement, the mAb Technology Company will be entitled to certain royalties that could be eliminated, upon payment of certain one-time fees (all payments referred together as “Contingent Fees”). For the years ended December 31, 2021, 2020 and 2019, the Company incurred such Contingent Fees in the amounts of $500, $500 and $0.
d.On May 9, 2012, the Company entered into agreement (the “May 2012 Agreement”) with a U.S. Business Development Strategic Advisor (“Advisor”) for the purpose of entering into transactions with Pharma companies related to selected Pipeline Program Candidates.
Under the agreement the Advisor was entitled to 4% of the cash considerations that may be received under such transactions. In 2014, the May 2012 Agreement was terminated except for certain payments arising from the Bayer Agreement which survive termination until August 5, 2025.
For the years ended December 31, 2021, 2020 and 2019, the Company has not paid and did not accrue payments under this agreement.
e.Effective as of January 5, 2018, the Company entered into a Commercial License Agreement (CLA) with a European cell line development company. Under the agreement the Company is required to pay an annual maintenance fee, certain amounts upon the occurrence of specified milestones events, and 1% royalties on annual net sales with respect to each commercialized product manufactured using the company’s cell line. Royalties due under the CLA are creditable against the annual maintenance fee. In addition, the Company may at any time prior to the occurrence of a specific milestone event buy-out the royalty payment obligations in a single fixed amount. For the years ended December 31, 2021, 2020 and 2019, the Company incurred in the research and development expenses in connection with such milestone payment in the amounts of $0, $52 and $0.
f.Effective as of October 28, 2020, the Company entered into a collaboration agreement with a U.S. antibody discovery and optimization company for generation and optimization of therapeutic antibodies for the Company. Under the agreement the Company is required to pay service fees per services performed and certain amounts upon the occurrence of specified milestones events, and single-digit percent royalties on annual net sales with respect to each product sold that comprises or contains one or more antibodies so generated or optimized. The royalty rate is dependent upon the product type and any third-party contribution. For the years ended December 31, 2021, 2020 and 2019, the Company incurred in the research and development expenses such milestone payment in the amounts of $250, $0 and $0.
F - 27
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8: - SHAREHOLDERS’ EQUITY
a.Ordinary shares:
The ordinary shares confer upon their holders the right to attend and vote at general meetings of the shareholders. Subject to the rights of holders of shares with limited or preferred rights which may be issued in the future, the ordinary shares of the Company confer upon the holders thereof equal rights to receive dividends, and to participate in the distribution of the assets of the Company upon its winding-up, in proportion to the amount paid up or credited as paid up on account of the nominal value of the shares held by them respectively and in respect of which such dividends are being paid or such distribution is being made, without regard to any premium paid in excess of the nominal value, if any.
b.Issuance of shares:
On May 25, 2018, the Company entered into a Controlled Equity OfferingSM sales agreement with Cantor Fitzgerald & Co. (“Cantor”), as sales agent, pursuant to which the Company may offer and sell, from time to time through Cantor, ordinary shares, par value NIS 0.01 per share, of the Company, under an “at-the-market” (“ATM”) offering, having an aggregate offering price of up to $25,000 (the “ATM Shares”). As of December 31, 2019, 7,245,268 shares were issued and sold under the ATM, with proceeds of approximately $22,914 (net of $781 issuance expenses). The program was terminated in 2019.
On June 14, 2018, the Company entered into securities purchase agreement with certain institutional investors and a placement agency agreement with JMP Securities LLC in connection with a registered direct offering (the “Offering”) of an aggregate of 5,316,457 ordinary shares (the “RD Shares”) of the Company at a purchase price of $3.95 per RD Share. In connection with the issuance of the RD Shares, the Company also issued warrants to purchase an aggregate of up to 4,253,165 additional ordinary shares. The Warrants are exercisable at a price of $4.74 per ordinary share and have a term of five years from the date of issuance. The Offering was made pursuant to the Company’s Registration Statement. Proceeds from the Offering were $19,767 (net of $1,233 issuance expenses).
During the years ended December 31, 2021, and 2020, warrants to purchase an aggregate of 3,955,696 ordinary shares were exercised with proceeds of approximately $18,750 and as of December 31, 2021, warrants to purchase up to 297,469 ordinary shares remain outstanding.
On October 10, 2018, the Company entered into a Master Clinical Trial Collaboration Agreement (the “Master Clinical Agreement”) with Bristol-Myers Squibb to evaluate the safety and tolerability of the Company’s COM701 in combination with Bristol-Myers Squibb’s PD-1 immune checkpoint inhibitor Opdivo® (nivolumab), in patients with advanced solid tumors. In conjunction with the Master Clinical Agreement, Bristol-Myers Squibb made a $12,000 equity investment in the Company.
F - 28
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8: - SHAREHOLDERS’ EQUITY (Cont.)
Under the terms of the securities purchase agreement, Bristol-Myers Squibb purchased 2,424,243 ordinary shares of the Company at a purchase price of $4.95 per share. The share price represented a 33% premium over the average closing price of Compugen’s ordinary shares for twenty (20) Nasdaq trading days prior to the execution of the securities purchase agreement. The investment closed on October 12, 2018.
The premium over the fair market value in the amount of $4,121 represents the relative fair value of deferred participation of Bristol-Myers Squibb in R&D expenses (which are amortized over the period of the clinical trial, based on the progress in the R&D, in accordance with ASC 808 “Collaborative Arrangements”) and $7,788 (net of $91 issuance expenses) were considered equity investment.
In conjunction with the signing of the amendment to the Master Clinical Agreement in November 2021, Bristol Myers Squibb made a $20,000 investment in the Company, purchasing 2,332,815 ordinary shares of the Company at a purchase price of $8.57333 per share. The share price represented a 33% premium over the closing price of Company’s ordinary shares on the last Nasdaq trading day immediately prior to the execution of the securities purchase agreement.
The premium over the fair market value in the amount of $5,000 represents the relative fair value of deferred participation of Bristol-Myers Squibb in R&D expenses (which are amortized over the period of the clinical trial, based on the progress in the R&D, in accordance with ASC 808 “Collaborative Arrangements”) and $14,958 (net of $42 issuance expenses) were considered equity investment.
In March 2020, the Company entered into an underwriting agreement with SVB Leerink LLC and Stifel, Nicolaus & Company, Incorporated, as representatives of several underwriters relating to the issuance and sale in a public offering of 8,333,334 of the Company’s ordinary shares at a price to the public of $9.00 per share (and a price of $8.46 per share to the underwriters). Such shares were issued on March 16, 2020. In addition, the Company granted the underwriters a 30-day option to purchase additional ordinary shares at the price set forth above. On April 14, 2020, the Company issued and sold, pursuant to that underwriting agreement additional 483,005 ordinary shares pursuant to the underwriters’ option specified above. The Company sold a total of 8,816,339 ordinary shares in the offering with proceeds of $74,147 (net of $5,200 issuance expenses).
c.Share option plan:
Under the Company’s 2010 Share Option Plan as amended (the “Plan”), options may be granted to employees, directors and non-employees of the Company and Compugen USA Inc.
Under the 2010 Share Option Plan the Company reserved for issuance up to an aggregate of 12,395,152 ordinary shares. The Company’s Board of Directors last amended the Plan in May 2020, to increase the number of shares available under the 2010 Plan and extend the plan term by additional 10 years. As of December 31, 2021, an aggregate of 1,133,128 options under the 2010 Share Option Plan of the Company are still available for future grants.
F - 29
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8: - SHAREHOLDERS’ EQUITY (Cont.)
c.Share option plan (Cont.):
In general, options granted under the Plan vest over a four-year period and expire 10 years from the date of grant and are granted at an exercise price of not less than the fair market value of the Company’s ordinary shares on the date of grant, unless otherwise determined by the Company’s board of directors. The exercise price of the options granted under the Plan may not be less than the nominal value of the shares into which such options are exercised and the expiration date may not be later than 10 years from the date of grant. If a grantee leaves his or her employment or other relationship with the Company, or if his or her relationship with the Company is terminated without cause (and other than by reason of death or disability, as defined in the Plan), the term of his or her unexercised options will generally expire in 90 days, unless determined otherwise by the Company.
Any options that are cancelled, forfeited or expired become available for future grants.
Transactions related to the grant of options to employees, directors and non-employees under the above Plan during the year ended December 31, 2021, were as follows:
Number of options | Weighted average exercise price | Weighted average remaining contractual life | Aggregate intrinsic value | |||||||||||||
$ | Years | $ | ||||||||||||||
| ||||||||||||||||
Options outstanding at beginning of year | 5,960,256 | 6.26 | 6.94 | 37,587 | ||||||||||||
Options granted | 1,397,500 | 6.72 | ||||||||||||||
Options exercised | (217,375 | ) | 4.19 | |||||||||||||
Options forfeited | (154,277 | ) | 7.45 | |||||||||||||
Options expired | (10,000 | ) | 6.14 | |||||||||||||
| ||||||||||||||||
Options outstanding at end of year | 6,976,104 | 6.39 | 6.69 | 3,323 | ||||||||||||
| ||||||||||||||||
Exercisable at end of year | 3,693,761 | 5.23 | 5.21 | 2,496 |
Weighted average fair value of options granted to employees, directors and non-employees during the years 2021, 2020 and 2019 was $3.81, $7.15 and $1.73 per share, respectively.
Aggregate intrinsic value of exercised options by employees, directors and non-employees during the years 2021, 2020 and 2019 was $759, $21,610, and $979, respectively. The aggregate intrinsic value of the exercised options represents the total intrinsic value (the difference between the sale price of the Company’s share at the date of exercise, and the exercise price) multiplied by the number of options exercised.
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing share price on the last trading day of calendar 2020 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2021. This amount is impacted by the changes in the fair market value of the Company’s shares.
F - 30
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8: - SHAREHOLDERS’ EQUITY (Cont.)
c.Share option plan (Cont.):
As of December 31, 2021, the total unrecognized estimated compensation cost related to non-vested share options granted prior to that date was $11,926 which is expected to be recognized over a weighted average period of approximately 3.02 years.
d.Employee Stock Purchase Plan:
The Company adopted an ESPP in November 2020, with the first offering period starting at January 1, 2021. In connection with its adoption, a total of 600,000 ordinary shares were reserved for issuance under this plan.
The ESPP is implemented through six-month offering periods (except for the first offering period that was five months). According to the ESPP, eligible employees and non-employees may use up to 15% of their base salaries to purchase ordinary shares up to an aggregate limit of $40 per participant for every calendar year. The price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the ordinary share on the first day of each offering period or on the last day of such period.
Since its adoption and through December 31, 2021, 117,829 ordinary shares had been purchased under the ESPP and as of December 31, 2021, 482,171 ordinary shares were available for issuance under the ESPP.
In accordance with ASC No. 718, the ESPP is compensatory and, as such, results in recognition of compensation cost.
e.The stock-based compensation expenses related to stock options and ESPP are included as follows in the expense categories:
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| ||||||||||||
Research and development expenses | $ | 1,971 | $ | 1,123 | $ | 1,151 | ||||||
Marketing and business development expenses | 215 | 172 | 46 | |||||||||
General and administrative expenses | 2,090 | 1,477 | 1,211 | |||||||||
| ||||||||||||
$ | 4,276 | $ | 2,772 | $ | 2,408 |
F - 31
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9: - INCOME TAXES
a. Israeli taxation:
1.Tax rates applicable to the income of the Company.
Taxable income of the Company is subject to a corporate tax rate of 23% in 2019, 2020 and 2021.
2.Measurement of taxable income in US dollars:
The Company has elected to measure its taxable income and file its tax return under the Israeli Income Tax Regulations (Principles Regarding the Management of Books of Account of Foreign Invested Companies and Certain Partnerships and the Determination of Their Taxable Income), 1986. Accordingly, results for tax purposes are measured in terms of earnings in dollars.
3.Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”):
On April 1, 2005, an amendment to the Investment Law came into effect (the “Amendment 60”) that significantly changed the provisions of the Investment Law. The Amendment 60 limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as a “Beneficiary Enterprise” including a provision generally requiring that at least 25% of the Beneficiary Enterprise’s income will be derived from export.
Another condition for receiving the benefits under the alternative track in respect of expansion programs pursuant to Amendment 60 is a minimum qualifying investment. The Company was eligible under the terms of minimum qualifying investment and elected 2012 as its “year of election”.
Additionally, the Amendment 60 enacted major changes in the manner in which tax benefits are awarded under the Investment Law so that companies no longer require Investment Center approval in order to qualify for tax benefits. However, the Investment Law provides that terms and benefits included in any certificate of approval already granted will remain subject to the provisions of the Investment Law as they were on the date of such approval.
As of December 31, 2021, there was no taxable income attributable to the Beneficiary Enterprise.
F - 32
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9: - INCOME TAXES (Cont.)
a. Israeli taxation (Cont.):
In January 2011, another amendment to the Investment Law came into effect (“the 2011 Amendment”). According to the 2011 Amendment, the benefit tracks in the Investment Law were modified and a flat tax rate applies to the Company’s entire income subject to this amendment (the “Preferred Income”).
Once an election is made, the Company’s income will be subject to the amended tax rate of 16% from 2015 and thereafter (or 9% for a preferred enterprise located in development area A).
Commencing 2011 tax year, the Company can elect (without possibility of reversal) to apply the Amendment in a certain tax year and from that year and thereafter, it will be subject to the amended tax rates.
The Company does not currently intend to adopt the 2011 Amendment and intends to continue to comply with the Investment Law as in effect prior to enactment of the 2011 Amendment. Accordingly, the Company did not adjust its deferred tax balances as of December 31, 2021. The Company’s position may change in the future.
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2016 and 2017 Budget Years), 2016, which includes Amendment 73 to the Law (the “Amendment 73”) was published. According to Amendment 73, a preferred enterprise located in development area A will be subject to a tax rate of 7.5% instead of 9% effective from January 1, 2016 and thereafter (the tax rate applicable to preferred enterprises located in other areas remains at 16%).
Amendment 73 also prescribes special tax tracks for technological enterprises, which are subject to rules that were issued by the Minister of Finance in May 2017. The new tax tracks under the Amendment are as follows:
Preferred Technological Enterprise (“PTE”) - an enterprise for which total consolidated revenues of its parent company and all subsidiaries are less than NIS 10 billion in a tax year. A PTE, as defined in the Law, which is located in the center of Israel will be subject to tax at a rate of 12% on profits deriving from intellectual property (in development area A - a tax rate of 7.5%).
The above changes in the tax rates relating to PTE tax track were not taken into account in the computation of deferred taxes as of December 31, 2021 and 2020, since the Company estimates that it will not implement the PTE tax track.
F - 33
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9: - INCOME TAXES (Cont.)
a. Israeli taxation (Cont.):
4.Tax benefits under the law for the Encouragement of Industry (Taxes), 1969 (the “Encouragement Law”):
The Encouragement Law provides several tax benefits for industrial companies. An industrial company is defined as a company resident in Israel, at least 90% of the income of which in a given tax year exclusive of income from specified Government loans, capital gains, interest and dividends, is derived from an industrial enterprise owned by it. An industrial enterprise is defined as an enterprise whose major activity in a given tax year is industrial production activity.
Management believes that the Company is currently qualified as an “industrial company” under the Encouragement Law and, as such, is entitled to tax benefits, including: (1) deduction of purchase of know-how and patents and/or right to use a patent over an eight-year period; (2) the right to elect, under specified conditions, to file a consolidated tax return with additional related Israeli industrial companies and an industrial holding company; (3) accelerated depreciation rates on equipment and buildings; and (4) expenses related to a public offering on the Tel-Aviv Stock exchange and on recognized stock markets outside of Israel, are deductible in equal amounts over three years.
Eligibility for benefits under the Encouragement Law is not subject to receipt of prior approval from any Governmental authority. No assurance can be given that the Israeli tax authorities will agree that the Company qualifies, or, that the Company will continue to qualify as an industrial company or that the benefits described above will be available to the Company in the future.
5.Net operating losses carryforward and capital loss:
As of December 31, 2021, Compugen Ltd.’s net operating losses carryforward for tax purposes in Israel amounted to approximately $369,800. These net operating losses may be carried forward indefinitely and may be offset against future taxable income.
F - 34
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9: - INCOME TAXES (Cont.)
b.Non-Israeli subsidiary, Compugen USA, Inc.:
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “U.S. Tax Reform” or “TCJA”); a comprehensive tax legislation that includes significant changes to the taxation of business entities. These changes include several key tax provisions that might impact the Company, among others: (i) a permanent reduction to the statutory federal corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017; (ii) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system (along with certain new rules designed to prevent erosion of the U.S. income tax base - “BEAT”); (iii) establishing immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits; and (iv) providing a permanent deduction to corporations generating revenues from non-US markets (known as a deduction for foreign derived intangible income - “FDII”).
As of December 31, 2021, Compugen USA, Inc. has net operating loss carryforwards for federal income tax purposes of approximately $4,850, approximately $3,750 of which expires in the years 2023 to 2032. Utilization of the U.S. net operating losses may be subject to substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.
Neither Israeli income taxes, foreign withholding taxes nor deferred income taxes were provided in relation to undistributed earnings of the Company’s foreign subsidiary. This is because the Company has the intent and ability to reinvest these earnings indefinitely in the foreign subsidiary and therefore those earnings are continually redeployed in those jurisdictions.
c.Loss (income) before taxes is comprised as follows:
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| ||||||||||||
Domestic (Israel) | $ | 34,619 | $ | 30,010 | $ | 28,799 | ||||||
Foreign | (416 | ) | (312 | ) | (740 | ) | ||||||
| ||||||||||||
$ | 34,203 | $ | 29,698 | $ | 28,059 |
d.Taxes on income (tax benefit) for the year ended December 31, 2019 is comprised from refund of withholding tax payments, which were deducted from milestone payments by the German tax authorities. There were no withholding tax payments for the years ended December 31, 2021, 2020 and 2019.
F - 35
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9: - INCOME TAXES (Cont.)
e.Deferred taxes:
Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company and Compugen USA, Inc.’s deferred tax assets are comprised of operating loss carryforward and other temporary differences. Significant components of the Company and Compugen USA, Inc. deferred tax assets are as follows:
December 31, | ||||||||
2021 | 2020 | |||||||
| ||||||||
Operating loss carryforward | $ | 86,068 | $ | 80,134 | ||||
Research and development | 9,773 | 9,001 | ||||||
Accrued social benefits and other | 2,801 | 2,389 | ||||||
Right of use assets | (520 | ) | (651 | ) | ||||
Lease liabilities | 636 | 742 | ||||||
Property and equipment | 2 | 2 | ||||||
Deferred tax asset before valuation allowance | 98,760 | 91,617 | ||||||
Valuation allowance | (98,760 | ) | (91,617 | ) | ||||
| ||||||||
Net deferred tax asset | $ | 0- | $ | 0- |
The Company and Compugen USA, Inc. have provided full valuation allowances in respect of deferred tax assets resulting from operating loss carryforward and other temporary differences. Management currently believes that since the Company has a history of losses, it is more likely than not that the deferred tax regarding the operating loss carryforward and other temporary differences will not be realized in the foreseeable future.
f.Reconciliation of the theoretical tax expense (benefit) to the actual tax expense (benefit):
The main reconciling items between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating loss carryforward among the Company and Compugen USA, Inc. due to the uncertainty of the realization of such tax benefits.
g.Tax assessments:
The Company has tax assessments through 2016 that are deemed to be final.
F - 36
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 10: - GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS
The Company’s business is currently comprised of 1 operating segment, the research, development and commercialization of therapeutic and product candidates. The nature of the products and services provided by the Company and the type of customers for these products and services are similar. Operations in Israel and the United States include research and development, clinical operations, marketing and business development. The Company follows ASC 280, “Segment Reportingˮ. Total revenues are attributed to geographic areas based on the location of the end customer.
The following represents the total revenue for the years ended December 31, 2021, 2020 and 2019 and long-lived assets as of December 31, 2021 and 2020:
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Revenue from sales to customers: | ||||||||||||
| ||||||||||||
Europe | $ | 6,000 | $ | 2,000 | $ | 0- | ||||||
| ||||||||||||
Total revenue | $ | 6,000 | $ | 2,000 | $ | 0- |
December 31, | ||||||||
2021 | 2020 | |||||||
Long-lived assets: | ||||||||
| ||||||||
Israel | $ | 3,787 | $ | 4,240 | ||||
United States | 118 | 243 | ||||||
| ||||||||
Total long-lived assets | $ | 3,905 | $ | 4,483 |
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Sales to a single customer exceeding 10%: | ||||||||||||
| ||||||||||||
Customer A | 100 | % | 100 | % | 0- |
NOTE 11: -FINANCIAL AND OTHER INCOME, NET
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| ||||||||||||
Interest income | $ | 894 | $ | 1,765 | $ | 935 | ||||||
Bank fees and other finance expenses | (25 | ) | (42 | ) | (32 | ) | ||||||
Foreign currency translation adjustments | (1 | ) | 63 | (218 | ) | |||||||
Gain (loss) from sales and disposals of fixed assets | 3 | 12 | 135 | |||||||||
| ||||||||||||
Financial and other income, net | $ | 871 | $ | 1,798 | $ | 820 |
F - 37
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 12: -RELATED PARTY BALANCES AND TRANSACTIONS
December 31, | ||||||||
2021 |
|
| 2020 | |||||
| ||||||||
Trade payables and accrued expenses | $ | 94 | $ | 83 |
Year ended December 31, | ||||||||||||
2021 |
|
| 2020 |
|
| 2019 | ||||||
Amounts charged to: | ||||||||||||
| ||||||||||||
Research and development expenses | $ | 240 | $ | 294 | $ | 241 |
For the years ended December 31, 2021, 2020 and 2019 the Company received research and development services related with cancer studies in animal models, and breeding and maintenance of animals (mice) to support such studies. The transaction was at arm’s length.
NOTE 13: -LOSSES PER SHARE
The following table sets forth the computation of basic and diluted losses per share:
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Numerator: | ||||||||||||
| ||||||||||||
Net loss for basic and diluted loss per share | $ | (34,203 | ) | $ | (29,698 | ) | $ | (27,337 | ) | |||
| ||||||||||||
Denominator: | ||||||||||||
| ||||||||||||
Weighted average number of ordinary shares used in computing basic and diluted net loss per share | 84,203,971 | 79,591,187 | 63,636,673 | |||||||||
| ||||||||||||
Basic and diluted earnings per ordinary share | $ | (0.41 | ) | $ | (0.37 | ) | $ | (0.43 | ) |
F - 38