UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2021
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number 001-38556
Entera Bio Ltd.
(Exact Name of Registrant as Specified in Its Charter)
Israel |
| 00-0000000 |
(State or Other Jurisdiction of |
| (I.R.S. Employer |
Kiryat Hadassah
Minrav Building – Fifth Floor
Jerusalem, Israel 9112002
(Address of Principal Executive Offices) (Zip Code) |
972-2-532-7151 |
(Registrant’s Telephone Number, Including Area Code) |
Securities registered pursuant to Section 12(b) of the Act: | ||||
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Title of Each Class |
| Trading Symbol |
| Name of Each Exchange on Which Registered |
Ordinary shares, par value NIS 0.0000769 per share |
| ENTX |
| Nasdaq Capital Market |
Warrants to purchase ordinary shares |
| ENTXW |
| Nasdaq Capital Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
| Accelerated filer | ☐ |
Non-accelerated filer | ☒ |
| Smaller reporting company | ☒ |
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| Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has fi led 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 fi rm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $142.1 million as of June 30, 2021.
As of March 1, 2022, the registrant had 28,804,411 ordinary shares, par value NIS 0.0000769 per share (“Ordinary Shares”) outstanding.
• | the scope, progress and costs of developing our product candidates such as EB613 for Osteoporosis and EB612 for Hypoparathyroidism, including without limitation any changes to the design of the Phase 3 clinical trial of EB613; |
• | the accuracy of our estimates regarding expenses, capital requirements, the sufficiency of our cash resources and the need for additional financing; |
• | our ability to raise additional funds on commercially reasonable terms, including via our ATM Program (as defined in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources” of this Annual Report); |
• | our ability to develop, advance product candidates into, and successfully complete, clinical studies such as our Phase 2 clinical trial of EB613 in osteoporosis; |
• | our reliance on third parties to conduct our clinical trials and on third-party suppliers to supply or produce our product candidates; |
• | our interpretation of U.S. Food and Drug Administration (the “FDA”) feedback and guidance and how such guidance may impact our clinical development plans, specifically our ability to utilize the 505(b)(2) pathway for the development and potential approval of EB613 and any other product candidates we may develop; |
• | our expectations regarding licensing, business transactions and strategic collaborations, including our ongoing collaboration with Amgen; |
• | our ability to use and expand our drug delivery technology to additional product candidates; |
• | our operation as a development stage company with limited operating history and a history of operating losses and our ability to fund our operations going forward; |
• | our ability to continue as a going concern absent access to sources of liquidity; |
• | our ability to obtain and maintain regulatory approval for any of our product candidates; |
• | our competitive position, especially with respect to Forteo® and other products on the market or in development for the treatment of osteoporosis; |
• | our ability to establish and maintain development and commercialization collaborations; |
• | any potential commercial launch of current or future product candidates, and the timing, cost or other aspects of such commercialization; |
• | our ability to manufacture and supply sufficient amounts of material to support our clinical trials and any potential future commercial requirements; |
• | the safety and efficacy of therapeutics marketed by competitors that are targeted toward indications for which we are developing product candidates; |
• | the size of any market we may target and the adoption of our product candidates, if approved, by physicians and patients; |
• | our ability to obtain, maintain and protect our intellectual property and operate our business without infringing misappropriating or otherwise violating any intellectual property rights of others; |
• | our ability to retain key personnel and recruit additional qualified personnel; |
• | the possibility that competing products or technologies may make any product candidates we may develop and commercialize or our oral delivery technology obsolete; |
• | the pricing and reimbursement of our product candidates, if approved; |
• | our ability to develop a sales, marketing and distribution infrastructure, if any; |
• | our ability to manage growth; and |
• | the duration and severity of the coronavirus (COVID-19) pandemic, the actions that may be required to contain the coronavirus or treat its impact, and its impact on our operations and workforce, including our research and development and clinical trials. |
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ITEM 1. | BUSINESS |
• | Advance EB613, potentially the first oral anabolic drug into Phase 3 for the treatment of osteoporosis: We successfully completed and reported the results of the randomized, double-blind, placebo controlled dose ranging Phase 2 clinical trial of EB613 for the treatment of osteoporosis. The results of the Phase 2 study support the selection of the 2.5 mg dose for a pivotal Phase 3 study. We are planning to initiate a Phase 3 (potentially pivotal) trial in 2022. |
• | Advance EB612 through clinical development for the treatment of hypoparathyroidism: To date we have completed two Phase 2 clinical trials of EB612 for the treatment of hypoparathyroidism. We reported positive results from the first trial in the third quarter of 2015, and then conducted a Phase 2 PK/PD trial in 2019 to evaluate the profile of various EB612 dose regimens. After the completion of additional formulation and development activities to determine our final formulations, and subject to available funds, we expect to initiate a Phase 2b/3 clinical trial of EB612 for the treatment of hypoparathyroidism. The FDA and the European Medicines Agency, or EMA, have granted EB612 orphan drug designation for the treatment of hypoparathyroidism. |
• | Establish global and regional commercial partnerships, or selectively develop commercial capabilities for our lead oral PTH product candidates: For our oral PTH product candidates that target orphan indications (EB612 for hypoparathyroidism and GLP-2 for short bowel syndrome), we may determine to retain commercialization rights within key territories, including the United States, because of the ability to commercialize efficiently with a small sales and marketing organization. For product candidates that target indications with larger patient populations, such as osteoporosis, we may choose to partner with larger biopharmaceutical companies ahead of late stage development and commercialization, license our technology to third parties for additional indications or seek other potential collaborations. We are currently building a corporate and business development capability to determine the appropriate development and commercial strategies for our current and future product candidates. |
• | Leverage our technology to develop more effective novel large molecule therapeutics through collaborations with other biotechnology or pharmaceutical companies: Oral drug delivery lowers the treatment burden on patients relative to injectable drugs, leading to higher patient and physician acceptance and compliance, and at a lower cost to patients. However, certain peptides, proteins and other large molecule therapeutics can currently be delivered only via injections and other non-oral pathways because oral administration leads to negligible absorption into the blood stream as well as enzymatic degradation within the gastrointestinal tract. In December 2018, we entered into a research collaboration and license agreement with Amgen, and we intend to explore additional collaborations to further validate our technology and potentially generate value through funding from such collaborations. COVID-19 may impact our ability to conduct research and development activities or to develop data that may lead to potential future collaborations (see “Item 1A. Risk Factors—Risks Related to Our Business and the Development of Our Product Candidates—The COVID-19 pandemic could adversely affect our business, financial condition, and results of operations.”). |
• | Identify and develop additional products based on FDA-approved injectable large molecule therapeutics: We intend to leverage our technology platform by applying it to the development of known large molecule therapeutics, and we believe we can reduce the development and regulatory risks by working on FDA-approved large molecule therapeutic agents with known mechanisms of action. We believe this will allow us to advance our product candidates efficiently and predictably through the development cycle thereby offering us the option either to develop these products on our own or to collaborate with the companies that originally developed the injectable form of the drug. For example, in February 2021, we announced that we initiated a new research program for an oral glucagon-like peptide-2 (GLP-2) analog based on the Company’s platform technology. |
• | having the appropriate size, as measured by molecular weight, and other chemical/physical characteristics; |
• | having a mechanism of action that favors delivery through the gastrointestinal tract rather than through injections; and |
• | having a dosing schedule that requires dosing one or more times per day for at least three months. |
Stage of | ||||||||
Program | Indication | Description | Development | Status | ||||
EB613 | Osteoporosis | Oral PTH (1-34) | Phase 3 | Phase 2 dose ranging clinical trial completed and final BMD results reported in Q2 2021 End-of-Phase 2 Meeting with FDA Dec 2021 Phase 3 initiation expected in 2022 | ||||
EB612 | Hypoparathyroidism | Oral PTH (1-34) | Phase 2 | Phase 2a successfully completed (results reported 2015) | ||||
Phase 2b PK/PD clinical trial head to head with Natpara in hypoparathyroid patients results reported in Q3 2019 | ||||||||
Improved formulation selected in Q4 2021 |
Class of Drug | Name (Producer) | Method of Action | Known Side Effects | 2020 Branded Sales (in millions) | ||||||
Injectable PTH | Forteo (Eli Lilly) | Increases bone mineral density by, increasing bone formation. | Decrease in blood pressure, increase in serum, calcium in the blood; nausea, joint aches, pain, leg cramps, injection site reactions | $1,046 | ||||||
Monoclonal antibody | Prolia (Amgen) | Blocks bone resorption by osteoclasts by binding RANK-L a protein that is essential to activate osteoclasts | Hypocalcemia, serious infections, dermatologic adverse reactions, osteonecrosis of the jaw, atypical femoral fractures, back pain, pain in extremity, musculoskeletal pain, hypercholesterolemia, and cystitis | $2,763 | ||||||
EVENITY® (Amgen) | Increases bone formation and, to a lesser extent, decreases bone resorption by inhibiting the action of sclerostin, a regulatory factor in bone metabolism. Note: limited duration of use to 12 monthly doses. | Heart attack, stroke, Hypersensitivity reactions, including angioedema, erythema multiforme, dermatitis, rash, and urticaria; hypocalcemia; osteonecrosis of the jaw; atypical femoral fracture; | $350 | |||||||
Injectable abaloparatide | Tymlos (Radius Health) | Similar to PTH, binds to PTH receptors and results in bone formation and increased bone mineral density | Osteosarcoma, Orthostatic hypotension, hypercalcemia, hypercalciuria, dizziness, nausea, headache, palpitations, fatigue, upper abdominal pain and vertigo | $219 | ||||||
Bisphosphonate | Fosamax (Merck) | Prevent bone loss by inhibiting osteoclasts. Effects reversible at low doses but high intravenous causes apoptosis. | Irritation of the gastrointestinal mucosa, hypocalcemia, severe musculoskeletal pain, osteonecrosis of the jaw, atypical femoral fractures | N/A | ||||||
Actonel, Boniva | (Generic) | |||||||||
Zometa (IV) | ||||||||||
(Novartis) |
Company/Technology | | Molecule | | API MW (g/mole) | | Bioavailability (F) |
Entera Bio | | PTH (1-34) | | 4118 | | 1.5% |
Novartis/Emisphere (Eligen - CNAC) (1) | | PTH (1-34) | | 4118 | | 0.2 - 0.5% |
Enteris Biopharma - Unigen (Peptelligence) (2) | | PTH (1-31) | | 3719 | | 0.52% |
Multiple manufacturers(3) | | Desmopressin | | 1069 | | 0.16% |
Chiasma (TPE)(4) | | Octreotide | | 1019 (Cyclic peptide) | | 0.67% |
Proxima Concepts (AXCESS)(5) | | Insulin | | 5733 | | 0.7% |
(1) | Source: The single dose pharmacokinetic profile of a novel oral human parathyroid hormone formulation in healthy postmenopausal women Sibylle P. Hämmerle, et al. Bone. 2012 Apr;50(4):965-73. doi: 10.1016/j.bone.2012.01.009. Epub 2012 Jan 25. |
(2) | Source: Pharmacokinetics of oral recombinant human parathyroid hormone rhPTH (1-31)NH2 in postmenopausal women with osteoporosis. Sturmer A1 et el. Clin Pharmacokinet. 2013 Nov;52(11):995-1004. doi: 10.1007/s40262-013-0083-4. |
(3) | Source: Public Assessment Report, Desmopressin Acetate 100 Microgram Tablet PL 24668/0177 and Desmopressin Acetate 200 Microgram Tablet PL 24668/0178. Medicines and Healthcare Products Regulatory Agency. |
(4) | Source: Pharmacokinetic Modeling of Oral Octreotide (Octreolin™) in Healthy Volunteers and Dosing Regimen Optimization for Acromegaly Patients. Shmuel Tuvia et al. Endocrine Society’s 94th Annual Meeting June 2012, OR29-6-OR29-6. Source: The glucose lowering effect of an oral insulin (Capsulin) during an isoglycaemic clamp study in persons with type 2 diabetes S. D. Luzio et al. Diabetes Obes Metab. 2010 Jan;12(1):82-7. doi: 10.1111/ j.1463-1326.2009.01146.x. Epub 2009 Sep 25. |
N | Mean | Median | |||
Age | 161 | 61 | 61 | ||
Weight (Kg) | 161 | 67 | 66 | ||
BMI | 161 | 26 | 26 |
• | A significant increase in P1NP from baseline versus placebo at month 3 (P <0.04) as well as significant increases at months 1 (P <0.0001) and 2 (P <0.003); |
• | A significant increase in Osteocalcin from baseline versus placebo at month 3 (P<0.006) as well as significant increases at months 1 (P<0.0001) and 2 (P<0.0001); |
• | A significant decrease in CTX from baseline versus placebo at month 3 and month 6 )both timepoints, P <0.015 versus placebo) as well as a significant decrease at month 1 (P <0.001) |
• | Increased lumbar spine, femoral neck and total hip BMD compared to placebo, and compared to start of treatment; |
• | The increase in spine BMD was similar in magnitude to that previously reported with ForteoÒ; |
• | Increases in total hip and femoral neck were greater than those previously reported with ForteoÒ; |
• | Reduced serum CTX compared to placebo; |
• | Adverse event profile similar to that observed with ForteoÒ, and typical of orthostatic hypotension; |
• | Was not associated with serum calcium increases or Hypercalcemia adverse events; and |
• | Greater than 90% of subjects tolerated the 2.5 mg dose well, after titration starting with the 1.5 mg, and progressing through 2.0 mg doses, |
• | EB612 is designed to be dosed multiple times a day. Studies performed by the NIH have shown that dosing PTH multiple times per day significantly increases the efficacy of therapy and would be more effective for treating hypoparathyroidism than a once-per-day regimen. These studies found that the total daily PTH dose required to maintain serum calcium in the normal or near-normal range was reduced by 50% with twice-daily PTH (1-34) and also demonstrated that twice-daily dosing achieved better control over serum calcium and urinary calcium excretion as compared to once-daily dosing. |
• | EB612 is designed to be dosed according to patient needs. The hypoparathyroid population is heterogeneous, and patients have highly variable responsiveness to PTH. Therefore, the ability to customize PTH dosing throughout the day with an oral tablet is an advantage over a once-daily preset injection pen. |
• | EB612 is expected to have fewer adverse events of hypercalcemia. Our planned treatment regimen would be increased gradually and in parallel to increases in serum calcium. As a result, calcium supplements and active vitamin D metabolites (e.g., calcitriol) would be reduced gradually, while maintaining a relatively stable level of serum calcium. This is in contrast with Natpara’s initially high dose, which requires an immediate reduction in supplements in anticipation of a rapid increase in serum calcium levels. Furthermore, this immediate and prolonged increase in serum calcium increases the risk of prolonged hypercalcemia compared to EB612. Moreover, the target serum calcium level would be the lower end of the normal range. If serum calcium were at, or greater than, the middle of the normal range, calcium supplements, active vitamin D metabolites and oral PTH dose would be reduced. |
• | EB612 can be administered in a more convenient manner. Natpara is administered by subcutaneous injection, must be stored under restrictive conditions (refrigeration required with no freezing or shaking) and has a multi-step preparation that must be performed every two weeks. EB612 will not require such additional preparations and will have no significant storage restrictions. |
• | A significant reduction of 42% (p=0.001) from baseline in median calcium supplement use; |
• | Maintenance of median ACa levels above the lower target level for HypoPT patients (>7.5 mg/dL) throughout the study; |
• | A rapid decline of 23% (p=0.0003) in median serum phosphate levels 2 hours following the first dose that was maintained within the normal range for the duration of the study; |
• | A notable median decrease of 21% (p=0.07) in 24-hour urine calcium excretion between the first and last treatment days; and |
• | An increase in quality of life score of 5% (p=0.03) from baseline by the end of the treatment period. |
• | preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the FDA’s Good Laboratory Practice regulations; |
• | submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may begin; |
• | approval by an independent IRB, representing each clinical site before each clinical trial may be initiated; |
• | performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product candidate for each proposed indication for use and conducted in accordance with Good Clinical Practice, or GCP, requirements; |
• | submission of data supporting safety and efficacy as well as detailed information on the manufacture and composition of the product in clinical development and proposed labeling; |
• | preparation and submission to the FDA of a New Drug Application, or an NDA, or Biologics License Application, or BLA; |
• | review of the product by an FDA advisory committee, where appropriate or if applicable; |
• | satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities, including those of third parties, at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practice, or cGMP, standards and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; |
• | satisfactory completion of any FDA audits of the non-clinical and clinical trial sites to assure compliance with GCP requirements and the integrity of clinical data in support of the NDA or BLA; |
• | payment of user fees and securing FDA approval of the NDA or BLA for the proposed indication; and |
• | compliance with any post-approval requirements, including risk evaluation and mitigation strategies, or REMS, and any post-approval studies required by the FDA. |
• | Phase 1 clinical trials are initially conducted in a limited population to test the product candidate for safety, including adverse effects, dose tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics in healthy humans. For some products for severe or life-threatening diseases, especially if the product may be too toxic to administer to healthy humans, the initial clinical trials may be conducted in individuals having a specific disease for which use the tested product is indicated. |
• | Phase 2 clinical trials are generally conducted in a limited patient population to identify possible adverse effects and safety risks, evaluate the efficacy of the product candidate for specific targeted indications and determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more costly Phase 3 clinical trials. |
• | Phase 3 clinical trials proceed if the Phase 2 clinical trials demonstrate that a dose range of the product candidate is potentially effective and has an acceptable safety profile. Phase 3 clinical trials are undertaken to further evaluate, in a larger number of patients, dosage, provide substantial evidence of clinical efficacy and further test for safety in an expanded and diverse patient population at multiple, geographically dispersed clinical trial sites. A well-controlled, statistically robust Phase 3 trial may be designed to deliver the data that regulatory authorities will use to decide whether or not to approve, and, if approved, how to appropriately label a drug: such Phase 3 studies are referred to as “pivotal.” |
• | restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; |
• | fines, warning letters or holds on post-approval clinical trials; |
• | refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals; |
• | product seizure or detention, or refusal to permit the import or export of products; or |
• | injunctions or the imposition of civil or criminal penalties. |
• | preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the applicable EU Good Laboratory Practice regulations; |
• | submission to the relevant regulatory agencies in EU member states, or national authorities, of a clinical trial application, or CTA, for each clinical trial, which must be approved before human clinical trials may begin; |
• | performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed indication; |
• | submission to the relevant national authorities of a Marketing Authorisation Application, or MAA, which includes the data supporting safety and efficacy as well as detailed information on the manufacture and composition of the product in clinical development and proposed labeling; |
• | satisfactory completion of an inspection by the relevant national authorities of the manufacturing facility or facilities, including those of third parties, at which the product is produced to assess compliance with cGMP; |
• | potential audits of the non-clinical and clinical trial sites that generated the data in support of the MAA; and |
• | review and approval by the relevant national authority of the MAA before any commercial marketing, sale or shipment of the product. |
• | A streamlined application procedure via a single entry point, known as the Clinical Trials Information System; |
• | A single set of documents to be prepared and submitted for the application as well as simplified reporting procedures which will spare sponsors from submitting broadly identical information separately to various and different national authorities; |
• | A harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts; |
• | Strictly defined deadlines for the assessment of clinical trial application; and |
• | The involvement of the ethics committees in the assessment procedure in accordance with the national law of the member state concerned but within the overall timelines defined by the Regulation (EU) No 536/2014. |
Clinical Testing in Israel
• | the federal Anti-Kickback Statute prohibits, among other things, the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (i) the referral of a person, (ii) the furnishing or arranging for the furnishing of items or services reimbursable under the Medicare, Medicaid or other governmental programs, or (iii) the purchase, lease or order or arranging or recommending purchasing, leasing or ordering of any item or service reimbursable under the Medicare, Medicaid or other governmental programs. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation; in addition, items or services resulting from a violation of the federal Anti-Kickback Statute may constitute a false or fraudulent claim for purposes of the False Claims Act; |
• | the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; |
• | the Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any health care benefit program or making false statements relating to health care matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; |
• | the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for health care benefits, items or services; |
• | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information that is stored or transmitted electronically; |
• | the Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which requires specified manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other “transfers of value” made to physicians. All such reported information is publicly available; |
• | analogous state and non-U.S. laws and regulations, such as state anti-kickback and false claims laws which may apply to items or services reimbursed by any payer, including commercial insurers; state laws that require pharmaceutical companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require pharmaceutical manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and |
• | regulation by the Centers for Medicare and Medicaid Services and enforcement by the U.S. Department of Health and Human Services Office of Inspector General or the U.S. Department of Justice. |
Employees | ||||
Area of Activity: | ||||
Research and development | 16 | |||
General and administrative | 3 | |||
Total | 19 |
ITEM 1A. | RISK FACTORS |
• | We have incurred significant losses since our inception and anticipate that we will continue to incur substantial losses for the next several years; |
• | Management has performed an analysis of our ability to continue as a going concern and our independent registered public accounting firm has raised substantial doubt as to our ability to continue as a going concern; |
• | All of our product candidates, including EB613 and EB612, are in preclinical or clinical development and we have not yet successfully completed the development of any product candidates; |
• | If serious adverse, undesirable or unacceptable side effects are identified during the development of our product candidates, marketing approval may be delayed or we may need to abandon our development of such product candidates, and if such side effects are identified following regulatory approval, any approved product label may be limited or we may be subject to other significant negative consequences; |
• | The COVID-19 pandemic could adversely affect our business, financial condition, and results of operations; |
• | The commencement and completion of clinical trials can be delayed or prevented for a number of reasons; |
• | The results of previous clinical trials may not be predictive of future results, our progress in trials for one product candidate may not be indicative of progress in trials for other product candidates, and our trials may not be designed so as to support regulatory approval; |
• | Even if regulatory approvals are obtained for our product candidates, we will be subject to ongoing government regulation. If we fail to comply with applicable current and future laws and government regulations, it could delay or prevent the promotion, marketing or sale of our products; |
• | Healthcare legislative changes may harm our business and future prospects; |
• | We are subject to manufacturing risks that could substantially increase our costs and limit supply of our products; |
• | We are highly dependent upon our ability to enter into agreements with collaborators to develop, commercialize and market our products; |
• | We may fail to establish, maintain, defend and enforce intellectual property rights with respect to our technology; |
• | The price of our Ordinary Shares and IPO Warrants may be volatile, and holders of our Ordinary Shares and IPO Warrants could lose all or part of their investment; and |
• | Security, political and economic instability in the Middle East may harm our business. |
• | the number and characteristics of product candidates that we pursue; |
• | the scope, progress, timing, cost and results of research, preclinical development, and clinical trials; |
• | the costs, timing and outcome of seeking and obtaining approvals from the FDA, EMA or other regulatory agencies; |
• | the costs associated with manufacturing our product candidates and establishing sales, marketing, and distribution capabilities; |
• | the costs associated with obtaining, maintaining, expanding, defending and enforcing the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make in connection with the licensing, filing, defense and enforcement of any patents or other intellectual property rights; |
• | the extent to which we acquire or in-license other products or technologies; |
• | the economic and other terms, timing of and success of any collaboration, licensing, or other arrangements into which we entered or may enter in the future, including the timing of achievement of milestones and receipt of any milestone or royalty payments under these agreements; |
• | our need and ability to hire additional management, scientific, and medical personnel; |
• | the effect of competing products that may limit market penetration of our product candidates; |
• | the amount and timing of revenues, if any, we receive from commercial sales of any product candidates for which we receive marketing approval in the future; |
• | our need to implement additional internal systems and infrastructure, including financial and reporting systems to support our current operations as a public company; and |
• | the impact of COVID-19 on our clinical trials, regulatory timelines, business operations and financial stability. |
• | the completion of future development efforts for EB613, EB612 or other product candidates; |
• | securing additional funding as may be needed to continue the development of EB613 or any other product candidates; |
• | obtaining required regulatory and marketing approvals for the manufacturing and commercialization of EB613 and any other product candidates we may develop, including a new Oral GLP-2 analog research program; |
• | obtaining adequate reimbursement from third-party payors for any product that may be commercialized, if approved; |
• | managing our spending as costs and expenses increase due to the preparation of regulatory filings, potential regulatory approvals, manufacturing scale-up and potential commercialization; |
• | continuing to build and maintain our intellectual property portfolio; |
• | recruiting and retaining qualified executive management and other personnel; |
• | building and maintaining appropriate research and development, clinical, sales, manufacturing, financial reporting, distribution and marketing capabilities on our own or through third parties; |
• | gaining market acceptance for our product candidates; |
• | developing and maintaining successful strategic relationships and collaborations; |
• | developing a sustainable and scalable manufacturing process for any approved product candidates and maintaining supply and manufacturing relationships with third parties that can support clinical development and market demand for our product candidates, if approved; |
• | establishing sales, marketing, and distribution capabilities in the United States and the EU; |
• | obtaining market acceptance for any of our product candidates that receive marketing approval, if any, as viable treatment options; |
• | addressing any competing technological and market developments; |
• | negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter; and |
• | attracting, hiring and retaining qualified personnel. |
• | regulatory authorities may require us to take these products off the market; |
• | regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies; |
• | we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product; |
• | we may be subject to limitations on how we may promote the product; |
• | sales of the product may decrease significantly; |
• | we may be subject to litigation or product liability claims; and |
• | our reputation may suffer. |
• | such authorities may disagree with the number, design, size, conduct or implementation of our clinical trials or any of our collaborators’ clinical trials; |
• | we or any of our development partners may be unable to demonstrate to the satisfaction of the FDA or other regulatory authorities that a product candidate is safe and effective for any indication; |
• | the results of clinical trials may not meet the level of statistical significance or clinical significance required by the FDA, EMA or other regulatory agencies for approval; |
• | such authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that authority’s jurisdiction; |
• | the data collected from non-clinical studies and clinical trials of our product candidates may not be sufficient to support the submission of an application for regulatory approval; |
• | the results of clinical trials may not demonstrate the safety or efficacy required by such authorities for approval; |
• | we or any of our future development partners may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; |
• | such authorities may disagree with our interpretation of data from preclinical studies or clinical trials or the use of results from studies that served as precursors to our current or future product candidates; |
• | such authorities may find deficiencies in our manufacturing processes or facilities or those of third-party manufacturers with which we or any of our future development partners contract for clinical and commercial supplies; |
• | the FDA may require development of a Risk Evaluation and Mitigation Strategy, or REMS, as a condition of approval; and |
• | the approval policies or regulations of such authorities may significantly change in a manner rendering our or any of our future development partners’ clinical data insufficient for approval. |
• | future clinical trial results may show that our oral PTH is not effective, including if our drug delivery technology is not effective, our product candidates are not effective, our clinical trial designs are flawed, or clinical trial investigators or subjects do not comply with trial protocols; |
• | our product candidates may not be well tolerated or may cause negative side effects; |
• | our ability to complete the development and commercialization of our oral PTH for our intended uses may be significantly dependent upon our ability to obtain and maintain experienced and committed collaborators to assist us with obtaining clinical and regulatory approvals for, and the manufacturing, marketing and distribution of, our oral PTH; |
• | even if our oral PTH is shown to be safe and effective for its intended purposes, we may face significant or unforeseen difficulties in obtaining or manufacturing sufficient quantities at reasonable prices, or at all; |
• | even if our oral PTH is successfully developed, commercially produced and receives all necessary regulatory approvals, there is no guarantee that there will be market acceptance; |
• | even if our oral PTH is successfully developed, commercially produced and receives all necessary regulatory approvals for the treatment of Osteoporosis, there is no guarantee that we will successfully develop and commercialize it for other indications, including hypoparathyroidism and delayed union fractures; and |
• | our competitors may develop therapeutics or other treatments that are superior to or less costly than our own with the result that our products, even if they are successfully developed, manufactured and approved, may not generate significant revenues. |
• | difficulties obtaining regulatory approval to commence a clinical trial or complying with conditions imposed by a regulatory authority regarding the scope or term of a clinical trial; |
• | delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations, or CROs, contract manufacturing organizations, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly; |
• | failure of our third-party contractors, such as CROs and contract manufacturing organizations, or our investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner; |
• | insufficient or inadequate supply or quality of a product candidate or other materials necessary to conduct our clinical trials; |
• | difficulties obtaining institutional review board, or IRB, or ethics committee approval to conduct a clinical trial at a prospective site; |
• | the FDA, EMA or other regulatory authority may require changes to any of our trial designs, our pre-clinical strategy or our manufacturing plans; |
• | various challenges recruiting and enrolling subjects to participate in clinical trials, including size and nature of subject population, proximity of subjects to clinical sites, eligibility criteria for the trial, budgetary limitations, nature of trial protocol, the patient referral practices of physicians, changes in the readiness of subjects to volunteer for a trial, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications; |
• | difficulties in maintaining contact with subjects who withdraw from the trial, resulting in incomplete data; |
• | governmental or regulatory delays and changes in regulatory requirements, policy and guidelines; |
• | the FDA or other regulatory authorities may impose a clinical hold, or we or our investigators, IRBs, or ethics committees may elect to suspend or terminate clinical research or trials; |
• | varying interpretations of data by the FDA and foreign regulatory agencies; and |
• | inaccurate interpretations by us of the FDA’s guidance for the clinical and regulatory path for our product candidates. |
• | failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols; |
• | failing to establish clinical endpoints acceptable to the FDA and other regulatory authorities; |
• | findings of an inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities; |
• | unforeseen issues, including serious adverse events associated with a product candidate, or lack of effectiveness or any determination that a clinical trial presents unacceptable health risks; |
• | lack of adequate funding to continue the clinical trial due to unforeseen costs or other business decisions; and |
• | upon a breach or pursuant to the terms of any agreement with, or for any other reason by, current or future collaborators that have responsibility for the clinical development of any of our product candidates. |
• | issue warning letters or untitled letters or take similar enforcement actions; |
• | seek an injunction or impose civil or criminal penalties or monetary fines; |
• | suspend or withdraw marketing approval; |
• | suspend any ongoing clinical trials; |
• | refuse to approve pending applications or supplements to applications; |
• | suspend or impose restrictions on operations, including costly new manufacturing requirements; |
• | seize or detain products, refuse to permit the import or export of products, exclude products from federal healthcare programs, or request that we initiate a product recall; or |
• | refuse to allow us to enter into supply contracts, including government contracts. |
• | the federal Anti-Kickback Statute prohibits, among other things, the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (i) the referral of a person, (ii) the furnishing or arranging for the furnishing of items or services reimbursable under the Medicare, Medicaid or other governmental programs, or (iii) the purchase, lease or order or arranging or recommending purchasing, leasing or ordering of any item or service reimbursable under the Medicare, Medicaid or other governmental programs. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act; |
• | the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; |
• | HIPAA imposes criminal and civil liability for executing a scheme to defraud any health care benefit program or making false statements relating to health care matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; |
• | the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for health care benefits, items or services; |
• | the Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which requires specified manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS information related to payments or other “transfers of value” made to physicians. All such reported information is publicly available; |
• | analogous state and non-U.S. laws and regulations, such as certain state anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and |
• | regulation by the CMS and enforcement by the HHS Office of Inspector General or the U.S. Department of Justice. |
• | We do not have experience in manufacturing our product candidates at commercial scale. We may not succeed in the scaling up of our final manufacturing process. We may need a larger-scale manufacturing process for our oral PTH than what we have planned, depending on the dose and regimen that will be determined in future studies. Any changes in our manufacturing processes as a result of scaling up may result in the need to obtain additional regulatory approvals. Difficulties in achieving commercial-scale production or the need for additional regulatory approvals as a result of scaling up could delay the development and regulatory approval of our product candidates and ultimately affect our success. Contract manufacturers may not have sufficient expertise to manufacture a dry oral formulation with a large molecule API, in which case we may have to establish our own commercial manufacturing capabilities, which could be expensive and delay launch of product candidates. |
• | The manufacturing process for large molecules is more complex and subject to greater regulation than that of other drugs. The process of manufacturing large molecules, such as our product candidates, is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. |
• | The manufacturing facilities in which our product candidates are made could be adversely affected by equipment failures, labor shortages, natural disasters, power failures, outbreaks of an infectious disease such as COVID-19 and numerous other factors. |
• | We and our contract manufacturing organizations, or CMOs, must comply with applicable current cGMP regulations and guidelines. We and our CMOs may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. We and our CMOs are subject to inspections by the FDA and comparable agencies in other jurisdictions to confirm compliance with applicable regulatory requirements. Any failure to follow cGMP or other regulatory requirements or delay, interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our product candidates as a result of a failure of our facilities or the facilities or operations of third parties to comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability to develop and commercialize our product candidates, including leading to significant delays in the availability of drug product for our clinical trials or the termination or hold on a clinical trial, or the delay or prevention of a filing or approval of marketing applications for our product candidates. Significant noncompliance could also result in the imposition of sanctions, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approvals for our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could damage our reputation. If we are not able to maintain regulatory compliance, we may not be permitted to market our product candidates and/or may be subject to product recalls, seizures, injunctions, or criminal prosecution. |
• | Any adverse developments affecting manufacturing operations for our product candidates, if any are approved, may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our products. We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives. |
• | Our product candidates that have been produced and are stored for later use may degrade, become contaminated or suffer other quality defects, which may cause the affected product candidates to no longer be suitable for their intended use in clinical trials or other development activities. If the defective product candidates cannot be replaced in a timely fashion, we may incur significant delays in our development programs that could adversely affect the value of such product candidates. |
• | limitations or warnings contained in the approved labeling for a product candidate; |
• | changes in the standard of care for the targeted indications for any of our product candidates; |
• | limitations in the approved clinical indications for our product candidates; |
• | demonstrated clinical safety and efficacy compared to other products; |
• | lack of significant adverse side effects; |
• | sales, marketing and distribution support; |
• | availability and extent of coverage and reimbursement from managed care plans and other third-party payors; |
• | timing of market introduction and perceived effectiveness of competitive products; |
• | the degree of cost-effectiveness of our product candidates; |
• | availability of alternative therapies at similar or lower cost, including generic and over-the-counter products; |
• | the extent to which the product candidate is approved for inclusion on formularies of hospitals and third-party payors, including managed care organizations; |
• | whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular diseases; |
• | adverse publicity about our product candidates or favorable publicity about competitive products; |
• | convenience and ease of administration of our products; and |
• | potential product liability claims. |
• | a covered benefit under its health plan; |
• | safe, effective and medically necessary; |
• | appropriate for the specific patient; |
• | cost-effective; and |
• | neither experimental nor investigational. |
• | decreased demand for any of our product candidates or products we develop; |
• | injury to our reputation and significant negative media attention; |
• | withdrawal of clinical trial participants or cancellation of clinical trials; |
• | costs to defend the related litigation, which may be only partially recoverable even in the event of successful defense; |
• | a diversion of management’s time and our resources; |
• | substantial monetary awards to trial participants or patients; |
• | regulatory investigations, product recalls, withdrawals or labeling, marketing or promotional restrictions; |
• | loss of revenues; and |
• | the inability to commercialize any products we develop. |
• | Collaborators may have significant discretion in determining the efforts and resources that they will apply to these collaborations; |
• | Collaborators may not perform their obligations as expected; |
• | Collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; |
• | Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; |
• | Collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; |
• | Product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; |
• | A collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products; |
• | Disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; |
• | Collaborators may not properly obtain, maintain, defend or enforce our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation or other intellectual property-related proceedings, including proceedings challenging the scope, ownership, validity and enforceability of our intellectual property. For example, Amgen has the first right to enforce or defend certain of our intellectual property rights under our research collaboration and license agreement, and although we may have the right to assume the enforcement and defense of such intellectual property rights if Amgen does not, our ability to do so may be compromised by Amgen’s actions; |
• | Collaborators may own or co-own intellectual property covering our product candidates or research programs that results from our collaboration with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property or such product candidates or research programs; |
• | Collaborators may infringe, misappropriate or otherwise violate the intellectual property rights of third parties, which may expose us to litigation and potential liability; |
• | Collaborators may fail to comply with applicable laws, rules or regulations when performing services for us, which may expose us to legal proceedings and potential liability; |
• | Collaborations may be terminated for convenience by the collaborator and, if terminated, we may suffer from negative publicity and we may find it more difficult to attract new collaborators. For example, at any point in the research and development process, subject to certain conditions, Amgen can terminate our research collaboration and license agreement in its entirety or with respect to a specific development program; and |
• | The outbreak of COVID-19 may cause us to fail to meet contractually obligated deadlines with our collaboration partners or otherwise strain our relationships with current collaborators or other business partners. |
• | the possibility of a breach of the manufacturing agreements by the third parties because of factors beyond our control; |
• | the possibility that the supply is inadequate or delayed; |
• | the risk that the third party may enter the field and seek to compete and may no longer be willing to continue supplying; |
• | the possibility of termination or nonrenewal of the agreements by the third parties before we are able to arrange for a qualified replacement third-party manufacturer; and |
• | the possibility that we may not be able to secure a manufacturer or manufacturing capacity in a timely manner and on satisfactory terms in order to meet our manufacturing needs. |
• | our clinical trial results and the timing of the release of such results; |
• | the amount of our cash resources and our ability to obtain additional funding; |
• | the announcement of research activities, business developments, technological innovations or new products, or acquisitions or expansion plans by us or our competitors; |
• | the success or failure of our research and development projects or those of our competitors; |
• | our entering into or terminating strategic relationships; |
• | changes in laws or government regulation; |
• | actual or anticipated fluctuations in our and our competitors’ results of operations and financial condition; |
• | regulatory developments and the decisions of regulatory authorities as to the approval or rejection of new or modified products; |
• | the departure of our key personnel; |
• | disputes related to intellectual property and proprietary rights, including patents, litigation matters and our ability to obtain intellectual property protection for our technologies; |
• | our sale, or the sale by our significant shareholders, of Ordinary Shares, IPO Warrants or other securities in the future; |
• | public concern regarding the safety, efficacy or other aspects of the products or methodologies we are developing; |
• | market conditions in our industry and changes in estimates of the future size and growth rate of our markets; |
• | market acceptance of our products; |
• | the mix of products that we sell and related services that we provide; |
• | the success or failure of our licensees to develop, obtain approval for and commercialize our licensed products, for which we are entitled to contingent payments and royalties; |
• | the publication of the results of preclinical or clinical trials for EB613, EB612 or any other product candidates we may develop, including a new Oral GLP-2 analog research program; |
• | the failure by us to achieve a publicly announced milestone; |
• | delays between our expenditures to develop and market new or enhanced products and the generation of sales from those products; |
• | changes in the amounts that we spend to develop, acquire or license new products, technologies or businesses; |
• | changes in our expenditures to promote our products; |
• | variances in our financial performance from the expectations of market analysts; |
• | the limited trading volume of our Ordinary Shares and IPO Warrants; and |
• | general economic and market conditions, including factors unrelated to our industry or operating performance. |
• | we are required to report on forms that are applicable to U.S. companies, such as Forms 10-K, 10-Q and 8-K, rather than the forms formerly used us, such as Forms 20-F and 6-K; |
• | we are required to include substantially more information in proxy statements than previously provided; |
• | we can no longer make use of the shelf registration statement on Form F-3 that was declared effective on July 22, 2020, and will need to file a new registration statement on the relevant form applicable to domestic issuers should we wish to engage in public capital raising activities, including capital raising under our ATM Program; |
• | if we engage in capital raising activities, there is a higher likelihood that investors may require us to file resale registration statements with the SEC as a condition to any such financing; and |
• | we may be required to modify certain of our policies to comply with accepted governance practices associated with U.S. domestic issuers. |
ITEM 2. | PROPERTIES. |
ITEM 3. | LEGAL PROCEEDINGS. |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
ITEM 6. | [Reserved] |
• | The subsequent sale or usage occurs; and |
• | The performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially satisfied). |
• | employee-related expenses, including salaries, bonuses and share-based compensation expenses for employees and service providers in the research and development function; |
• | expenses incurred in operating our laboratories including our small-scale manufacturing facility; |
• | expenses incurred under agreements with CROs, and investigative sites that conduct our clinical trials; |
• | expenses related to outsourced and contracted services, such as external laboratories, consulting and advisory services; |
• | supply, development and manufacturing costs relating to clinical trial materials; and |
• | other costs associated with pre-clinical and clinical activities. |
• | the uncertainty of the scope, rate of progress, results and cost of our clinical trials, nonclinical testing and other related activities; |
• | the cost of manufacturing clinical supplies and establishing commercial supplies of our product candidates and any products that we may develop; |
• | the number and characteristics of product candidates that we pursue; |
• | the cost, timing and outcomes of regulatory approvals; |
• | the cost and timing of establishing any sales, marketing, and distribution capabilities; and |
• | the terms and timing of any collaborative, licensing and other arrangements that we may establish, including any milestone and royalty payments thereunder. |
| Year Ended December 31, | Increase (Decrease) | ||||||||||||||
| 2021 | 2020 | $ | % | ||||||||||||
| (In thousands, except for percentage information) | |||||||||||||||
Revenues | $ | 571 | $ | 365 | $ | 206 | 56 | % | ||||||||
Cost of revenues | $ | 373 | $ | 300 | 73 | 24 | % | |||||||||
Operating expenses: | | |||||||||||||||
Research and development expenses, net | $ | 6,771 | $ | 6,382 | $ | 398 | 6 | % | ||||||||
General and administrative expenses | $ | 5,690 | $ | 4,851 | $ | 839 | 17 | % | ||||||||
Other income | $ | (46 | ) | $ | - | $ | (46 | ) | 100 | % | ||||||
Operating loss | $ | 12,217 | $ | 11,168 | $ | 1,049 | 9 | % | ||||||||
Financial expenses, net | $ | 29 | $ | 28 | $ | 1 | 4 | % | ||||||||
Income tax (benefit) expenses | $ | (59 | ) | $ | 20 | $ | (79 | ) | (395 | )% | ||||||
Net loss | $ | 12,187 | $ | 11,216 | $ | 1,190 | 9 | % |
• | the costs, timing and outcome of clinical trials for, and regulatory review of, EB613, EB612 and any other product candidates we may develop; |
• | the costs of development activities for any other product candidates we may pursue; |
• | the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; |
• | the impact of COVID-19 on our clinical trials, regulatory timelines, business operations and financial stability; and |
• | our ability to establish collaborations on favorable terms, if at all. |
| (audited) Year ended December 31, | |||||||
| 2021 | 2020 | ||||||
| (in thousands) | |||||||
Net Cash used in operating activities | $ | (9,063 | ) | $ | (10,557 | ) | ||
Net Cash used in investing activities | (17 | ) | (53 | ) | ||||
Net Cash provided by financing activities | 25,381 | 4,051 | ||||||
Net (decrease) increase in cash and cash equivalents | $ | 16,301 | $ | (6,559 | ) |
| Payments due by period | |||||||||||||||||||
Contractual Obligations | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than 5 years | |||||||||||||||
| (In thousands) | |||||||||||||||||||
Operating leases for facility and vehicles | $ | 341 | $ | 224 | $ | 117 | $ | - | $ | - | ||||||||||
Total | $ | 341 | $ | 224 | $ | 117 | $ | - | $ | - |
| Year ended December 31, | |||||||
| 2021 | 2020 (1) | ||||||
| (in thousands) | |||||||
Cost of revenues | $ | 102 | $ | 51 | ||||
Research and development | 661 | 514 | ||||||
General and administrative | 1,098 | 336 | ||||||
Total | $ | 1,861 | $ | 901 |
(1) | The resignation of Mr. Gridley, our Former CEO, took effect on September 7, 2020. According to the terms of Mr. Gridley’s options, of which had yet to fully vest expired, 553,942 options expired and were recognized in the consolidated statement of comprehensive loss as a reverse of expense under the general and administrative line item in the amount of $0.3 million. |
Page | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID No. 1309) | 93 |
CONSOLIDATED FINANCIAL STATEMENTS: | |
94 | |
95 | |
96 | |
97 | |
99 |
Tel-Aviv, Israel |
March 8, 2022 |
ENTERA BIO LTD.
(U.S. dollars in thousands, except share data)
| December 31 | |||||||
2021 | 2020 | |||||||
A s s e t s | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | 24,892 | 8,593 | ||||||
Accounts receivable | 183 | 255 | ||||||
Other current assets | 254 | 261 | ||||||
TOTAL CURRENT ASSETS | 25,329 | 9,109 | ||||||
NON-CURRENT ASSETS: | ||||||||
Property and equipment, net | 156 | 192 | ||||||
Operating lease right-of-use assets | 239 | 374 | ||||||
Deferred income taxes | 217 | 0 | ||||||
Funds in respect of employee rights upon retirement | 46 | 47 | ||||||
TOTAL NON-CURRENT ASSETS | 658 | 613 | ||||||
TOTAL ASSETS | 25,987 | 9,722 | ||||||
L i a b i l i t i e s and shareholders' equity | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | 166 | 164 | ||||||
Accrued expenses and other payables | 2,801 | 1,330 | ||||||
Current maturities of operating lease | 179 | 189 | ||||||
Contract liabilities | 15 | 158 | ||||||
TOTAL CURRENT LIABILITIES | 3,161 | 1,841 | ||||||
NON-CURRENT LIABILITIES: | ||||||||
Operating lease liabilities | 123 | 243 | ||||||
Liability for employee rights upon retirement | 138 | 128 | ||||||
TOTAL NON-CURRENT LIABILITIES | 261 | 371 | ||||||
TOTAL LIABILITIES | 3,422 | 2,212 | ||||||
COMMITMENTS AND CONTINGENCIES | 0 | 0 | ||||||
SHAREHOLDERS' EQUITY: | ||||||||
Ordinary Shares, NIS 0.0000769 par value: Authorized - as of December 31, 2021 and December 31, 2020, 140,010,000 shares; issued and outstanding:- as of December 31, 2021, and December 31, 2020 28,804,411 and 21,057,922 shares, respectively | * | * | ||||||
Additional paid-in capital | 104,950 | 77,708 | ||||||
Accumulated other comprehensive income | 41 | 41 | ||||||
Accumulated deficit | (82,426 | ) | (70,239 | ) | ||||
TOTAL SHAREHOLDERS' EQUITY | 22,565 | 7,510 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 25,987 | 9,722 |
* Represents an amount less than one thousand US dollars
The accompanying notes are an integral part of the consolidated financial statements.
ENTERA BIO LTD.
(U.S. dollars in thousands, except share and per share data)
| Year ended December 31 | |||||||
2021 | 2020 | |||||||
| ||||||||
REVENUES | 571 | 365 | ||||||
COST OF REVENUES | 373 | 300 | ||||||
GROSS PROFIT | 198 | 65 | ||||||
OPERATING EXPENSES: | ||||||||
Research and development | 6,771 | 6,382 | ||||||
General and administrative | 5,690 | 4,851 | ||||||
Other income | (46 | ) | 0 | |||||
TOTAL OPERATING EXPENSES | 12,415 | 11,233 | ||||||
OPERATING LOSS | 12,217 | 11,168 | ||||||
| ||||||||
FINANCIAL EXPENSES , net | 29 | 28 | ||||||
LOSS BEFORE INCOME TAX | 12,246 | 11,196 | ||||||
INCOME TAX (BENEFIT) EXPENSE | (59 | ) | 20 | |||||
NET LOSS | 12,187 | 11,216 | ||||||
| ||||||||
LOSS PER SHARE BASIC AND DILUTED | 0.47 | 0.67 | ||||||
| ||||||||
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE | 26,133,770 | 18,417,093 | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. dollars in thousands, except share and per share data)
Ordinary shares | ||||||||||||||||||||||||
Number of shares | Amounts | Additional paid-in | Accumulated other | Accumulated | Total | |||||||||||||||||||
BALANCE AT JANUARY 1, 2020 | 17,864,684 | * | 72,756 | 41 | (59,023 | ) | 13,774 | |||||||||||||||||
Net loss | - | 0 | 0 | 0 | (11,216 | ) | (11,216 | ) | ||||||||||||||||
Issuance of ordinary shares and warrants due to a private placement net of issuance costs | 337,553 | 0 | 796 | 0 | 0 | 796 | ||||||||||||||||||
Issuance of shares due to the ATM program, net of issuance costs | 2,802,731 | 0 | 3,187 | 0 | 0 | 3,187 | ||||||||||||||||||
Exercise of options to ordinary shares | 31,954 | 0 | 68 | 0 | 0 | 68 | ||||||||||||||||||
Share-based compensation | - | 0 | 901 | 0 | 0 | 901 | ||||||||||||||||||
Vested restricted share units | 21,000 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
BALANCE AT DECEMBER 31, 2020 | 21,057,922 | * | 77,708 | 41 | (70,239 | ) | 7,510 | |||||||||||||||||
Net loss | - | 0 | 0 | 0 | (12,187 | ) | (12,187 | ) | ||||||||||||||||
Exercise of warrants to ordinary shares | 3,175,050 | 0 | 3,158 | 0 | 0 | 3,158 | ||||||||||||||||||
Issuance of shares due to the ATM program, net of issuance costs | 4,386,728 | * | 21,805 | 0 | 0 | 21,805 | ||||||||||||||||||
Exercise of options to ordinary shares | 177,711 | 0 | 418 | 0 | 0 | 418 | ||||||||||||||||||
Share-based compensation | - | 0 | 1,861 | 0 | 0 | 1,861 | ||||||||||||||||||
Vested restricted share units | 7,000 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
BALANCE AT DECEMBER 31, 2021 | 28,804,411 | * | 104,950 | 41 | (82,426 | ) | 22,565 |
* Represents an amount less than one thousand US dollars.
The accompanying notes are an integral part of these consolidated financial statements
| Year ended December 31 | |||||||
| 2021 | 2020 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | (12,187 | ) | (11,216 | ) | ||||
Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| ||||||||
Depreciation | 53 | 63 | ||||||
Deferred income taxes | (217 | ) | 0 | |||||
Share-based compensation | 1,861 | 901 | ||||||
Finance expenses (income), net | 18 | 46 | ||||||
Changes in operating asset and liabilities: | ||||||||
Decrease in accounts receivable | 72 | 23 | ||||||
Decrease (increase) in other current assets | 7 | (55 | ) | |||||
Increase (decrease) in accounts payable | 2 | (170 | ) | |||||
Increase (decrease) in accrued expenses and other payables | 1,471 | (40 | ) | |||||
Increase (decrease) in contract liabilities | (143 | ) | (109 | ) | ||||
Net cash used in operating activities | (9,063 | ) | (10,557 | ) | ||||
| ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | (17 | ) | (53 | ) | ||||
Net cash used in investing activities | (17 | ) | (53 | ) | ||||
| ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| ||||||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of shares and warrants, net of issuance costs | 0 | 796 | ||||||
Proceeds from issuance of shares through ATM programs, net of issuance costs | 21,805 | 3,187 | ||||||
Exercise of options and warrants into shares | 3,576 | 68 | ||||||
Net cash provided by financing activities | 25,381 | 4,051 | ||||||
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 16,301 | (6,559 | ) | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT BEGINNING OF THE YEAR | 8,663 | 15,222 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT END OF THE YEAR | 24,964 | 8,663 |
ENTERA BIO LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
Reconciliation in amounts on consolidated balance sheets:
Cash and cash equivalents | 24,892 | 8,593 | ||||||
Restricted deposits included in other current assets | 72 | 70 | ||||||
Total cash and cash equivalents and restricted cash | 24,964 | 8,663 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW TRANSACTIONS: | ||||||||
Income taxes paid in cash during the year | 2 | 89 | ||||||
SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS: | ||||||||
| ||||||||
Cashless exercise of warrants | * | - | ||||||
Vested restricted shares units | * | * | ||||||
Operating lease right of use assets obtained in exchange for new operating lease liabilities | 31 | 258 |
ENTERA BIO LTD.
(U.S. dollars in thousands, except share and per share amounts)
a. | Entera Bio Ltd. (collectively with its subsidiary, the "Company") was incorporated on September 30, 2009 and commenced operation on June 1, 2010. On January 8, 2018 the Company incorporated Entera Bio Inc., a wholly owned subsidiary incorporated in Delaware USA. The Company is a leader in the development and commercialization of orally delivered large molecule therapeutics for use in areas with significant unmet medical need where adoption of injectable therapies is limited due to cost, convenience and compliance challenges for patients. The Company’s most advanced product candidates, EB613 for the treatment of osteoporosis and EB612 for the treatment of hypoparathyroidism, are based on its proprietary technology platform and are both in Phase 2 clinical development. The Company also licenses its technology to biopharmaceutical companies for use with their proprietary compounds and, to date, has completed one such agreement with Amgen Inc. |
b. | The Company's securities have been listed for trading on the Nasdaq Capital Market since the Company’s initial public offering in July 2018, where a total of 1,400,000 ordinary shares and 1,400,000 warrants (the “IPO warrants”) to purchase up to 700,000 ordinary shares were issued in consideration of net proceeds of $9.6 million, after deducting offering expenses. The public offering price was $8.00 per unit, each of which consisted of one ordinary share and one warrant to purchase 0.5 of an ordinary share. |
c. | On December 10, 2018, the Company entered into agreement (the “Amgen Agreement”) with Amgen Inc. (“Amgen”) in inflammatory disease and other serious illnesses. Pursuant to the Amgen Agreement, the Company and Amgen have agreed to use the Company’s proprietary drug delivery platform to develop oral formulations for one preclinical large molecule program that Amgen has selected. Amgen also has options to select up to two additional programs to include in the agreement. Amgen is responsible for the clinical development, regulatory approval, manufacturing and worldwide commercialization of the programs.
The Company granted Amgen an exclusive, worldwide, sublicensable license under certain of its intellectual property relating to its drug delivery technology to develop, manufacture and commercialize the applicable products. The Company will retain all intellectual property rights to its drug delivery technology, and Amgen will retain all rights to its large molecules and any subsequent improvements, and ownership of certain intellectual property developed through the performance of the agreement is to be determined by U.S. patent law. See also note 10. |
d. | Since the Company is engaged in research and development activities, it has not derived significant income from its activities and has incurred accumulated losses in the amount of $82.4 million through December 31, 2021 and negative cash flows from operating activities. The Company's management is of the opinion that its available funds as of December 31, 2021 will allow the Company to operate under its current plans into the fourth quarter of 2022. These factors raise substantial doubt as to the Company's ability to continue as a going concern. Management is in the process of evaluating various financing alternatives in the public or private equity markets, government grants or through license of the company's technology to additional external parties through partnerships or research collaborations as the Company will need to finance future research and development activities, general and administrative expenses and working capital through fund raising. However, there is no certainty about the Company's ability to obtain such funding. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
a. | Basis of presentation of the financial statements |
b. | Use of estimates in the preparation of financial statements |
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
c. | Functional currency |
1) | Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The U.S. dollar is the currency of the primary economic environment in which the operations of the Company is conducted. The consolidated financial statements are presented in U.S. dollars. |
2) | Transactions and balances Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Balances in non- U.S. dollar currencies are translated into U.S. dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-U.S. dollar transactions and other items in the statements of income (indicated below), the following exchange rates are used: (i) for transactions – exchange rates at transaction dates or average exchange rates; and (ii) for other items (derived from non-monetary balance sheet items such as depreciation and amortization) – historical exchange rates. Currency transaction gains and losses are presented in financial income (expenses), as appropriate. The functional currency of the subsidiary is the U.S. dollar. |
d. | Principles of consolidation The consolidated financial statements include the accounts of the Company and Entera Bio Inc. All inter-company transactions and balances have been eliminated in consolidation. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
e. | Cash and cash equivalents The Company considers as cash equivalents all short-term, highly liquid investments, which include short-term bank deposits with original maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash. |
f. | Restricted Restricted cash deposited in an interest-bearing saving account which is used as a security for the Company's office rent, and credit card. |
g. | Fair value measurement |
The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable inputs that are based on inputs not quoted on active markets but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
h. | Employee severance benefits |
Under the Israeli Severance Pay Law, 1963, the Company is required to make severance payments upon dismissal of an Israeli employee or upon termination of employment in certain other circumstances. The severance payment liability to the employees located in Israel (based upon length of service and the latest monthly salary - one month’s salary for each year employed) is recorded on the Company’s balance sheet under “Liability for employee rights upon retirement.” The liability is recorded as if it was payable at each balance sheet date on an undiscounted basis.
In accordance with Section 14 of the Israeli Severance Pay Law, 1963, the Company makes regular deposits with certain insurance companies for accounts controlled by each applicable employee in order to secure the employee’s retirement benefit obligation. The Company is fully relieved from any severance pay liability with respect to each such employee after it makes the payments on behalf of the employee. The liability accrued in respect of these employees and the amounts funded, as of the respective agreement dates, are not reflected in the Company balance sheet, as the amounts funded are not under the control and management of the Company and the pension or severance pay risks have been irrevocably transferred to the applicable insurance companies (the “Contribution Plan”).
With regard to the period before December 2013, the liability is funded in part from the purchase of insurance policies or by the establishment of pension funds with dedicated deposits in the funds. The amounts used to fund these liabilities are included in the balance sheets under “Funds in respect of employee rights upon retirement.” These policies are the Company’s assets.
The amounts of severance payment expenses were $137 and $125 for the years ended December 31, 2021 and 2020, respectively.
The Company expects to contribute approximately $142 in the year ending December 31, 2022 to insurance companies in connection with its expected severance liabilities for that year.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
i. | Leases |
On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842). The Company determines if an arrangement is a lease at inception. Balances related to operating leases are included in operating lease right-of-use (“ROU”) assets and current and non-current operating lease liabilities in the consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized as of the commencement date based on the present value of lease payments over the lease term. Lease terms will include options to extend or terminate the lease when it is reasonably certain that the Company will either exercise or not exercise the option to renew or terminate the lease.
The discount rate for the lease is the rate implicit in the lease unless that rate cannot be readily determined. As the Company’s leases do not provide an implicit rate, the Company’s uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term (see also Note 4).
Sublease income is recognized on a straight-line basis over the expected lease term and is included in other income in our consolidated statements of operations.
j. | Property and equipment |
1) | Property and equipment are stated at cost, net of accumulated depreciation and amortization. |
2) | The Company’s property and equipment are depreciated using the straight-line method, which approximates the pattern of usage, over the term of the estimated useful life, as follows: |
Years | ||||
Computer equipment | 3-5 | |||
Office furniture | 10 | |||
Laboratory equipment | 7-10 |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
k. | Impairment of long-lived assets |
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the long-lived asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the sum of the expected undiscounted cash flow is less than the carrying amount of the asset, the Company recognizes an impairment loss, which is the excess of the carrying amount over the fair value of the asset, using the expected future discounted cash flows As of December 31, 2021 and 2020, the Company did not recognize an impairment loss on its long-lived assets.
l. | Share-based compensation |
The Company grants share options and restricted share units (“RSU”) (together “Share-Based Compensation”) to its employees, directors and non-employees in consideration for services rendered.
The Company accounts for Share-Based Compensation awards classified as equity awards, including share-based option awards and restricted share units, using the grant-date fair value. The Company recognize the value of the award as an expense over the requisite service period.
The Company applies ASU 2018-07 (Topic 718) that expands the scope of Topic 718 to include Share-Based Compensation transactions for acquiring goods and services from non-employees. Under the provision of the amendment, the Company measures share-based compensation to non-employees in the same manner as share-based compensation to employees.
The Company measures compensation expenses for option awards based on estimated fair value on the date of grant using the Black-Scholes option-pricing model. This option pricing model requires estimates as to the option’s expected term and the price volatility of the underlying stock. The Company measures compensation expense for the restricted share units based on the market value of the underlying share at the date of grant.
The Company elected to recognize compensation costs for awards granted to employees and directors conditioned only on continued service that have a graded vesting schedule using the accelerated method based on the multiple-option award approach. The Company elects to account for forfeitures as they occur.
m. | Research and development expenses |
Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, share-based compensation expenses, payroll taxes and other employee benefits, lab expenses, consumable equipment and consulting fees. All costs associated with research and developments are expensed as incurred.
Grants received from Israel Innovation Authority (hereafter - “IIA”) are recognized when the grant becomes receivable, provided there is reasonable assurance that the Company will comply with the conditions attached to the grant and there is reasonable assurance the grant will be received. Since at the time the grants were received, successful development of the related projects was not assured, the grant was deducted from the research and development expenses as the applicable costs are incurred, and presented in R&D expenses, net.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
n. | Revenue recognition |
The Company recognized revenue from the Amgen Agreement which was signed in December 2018 according to ASC 606, "Revenues from Contracts with Customers”. Prior to the signing of the Amgen Agreement in 2018, the Company did not have revenue transactions.
ASC 606 Revenue from Contracts with Customer introduces a five-step model for recognizing revenue from contracts with customers, as follows:
1. Identify the contract with a customer.
2. Identify the performance obligations in the contract.
3. Determine the transaction price.
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognize revenue when (or as) the entity satisfies a performance obligation.
According to ASC 606, a performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. Goods and services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. A good or service promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.
Options granted to the customer that do not provide a material right to the customer that it would not receive without entering into the contract do not give rise to performance obligations.
On December 10, 2018, the Company entered into the Amgen Agreement in inflammatory disease and other serious illnesses. As part of the agreement, the Company received non-refundable and non-creditable initial access payment of $725 from Amgen in January 2019.
The Company identified two performance obligations in the agreement: 1) License to use the Company's proprietary drug delivery platform and 2) pre-clinical research and development services (“pre-clinical R&D services”). The preclinical R&D services include discovery, research and design preclinical activities relating to the programs selected by Amgen.
The Company determined the license to the intellectual property to be a right to use that has significant standalone functionality separately from the pre-clinical R&D services since 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 intellectual property. Therefore, the license to the intellectual property is a distinct performance obligation and as such revenue is recognized at the point in time that control of the license was transferred to Amgen on December 10, 2018.
Revenues attributed to the preclinical R&Ds services are recognized during the period of the pre-clinical R&D services, over time according to the input model method on a cost-to-cost basis, since the customer benefits from the research and development services as the entity performs the service.
The Company evaluated the standalone selling price of the pre-clinical R&D services at $225 and the right to use the intellectual property at $500.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
n. | Revenue recognition (continued) |
The transaction price was comprised of fixed consideration and variable consideration (capped research and development reimbursements). Under ASC 606, the consideration that the Company would be entitled to upon the achievement of contractual milestones, which are contingent upon the occurrence of future events of development and commercial progress, are a form of variable consideration. When assessing the portion, if any, of such milestones-related consideration to be included in the transaction price, the Company first assesses the most likely outcome for each milestone and excludes the consideration related to milestones of which the occurrence is not considered the most likely outcome. The Company then evaluates if any of the variable consideration determined in the first step is constrained. Variable consideration is included in the transaction price if, in the Company’s judgment, it is highly probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available. As of December 31, 2021, the Company did not recognize any revenues from any potential milestone payments.
An entity should recognize revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual property only when (or as) the later of the following events occurs:
a) | The subsequent sale or usage occurs; and |
b) | The performance obligation to which some or all of the sales based or usage-based royalty has been allocated has been satisfied (or partially satisfied). |
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. See also note 10.
o. | Income taxes |
1) | Deferred taxes |
2) | Uncertainty in income taxes |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
p. | Loss per share |
Basic loss per share is computed on the basis of the net loss, adjusted to recognize the effect of a down-round feature when it is triggered, for the period divided by the weighted average number of outstanding ordinary shares during the period.
Diluted loss per share is based upon the weighted average number of ordinary shares and of ordinary shares equivalents outstanding when dilutive. Ordinary share equivalents include outstanding stock options and warrants, which are included under the treasury stock method when dilutive. The calculation of diluted loss per share does not include options, restricted shares units and warrants, exercisable into 6,517,102 shares and 7,218,966 shares for the years ended December 31, 2021 and 2020, respectively, because the effect would be anti-dilutive.
q. | Legal and other contingencies |
Certain conditions may exist as of the date of the consolidated financial statements, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, if any, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
Management applies the guidance in ASC 450-20, “Loss Contingencies” when assessing losses resulting from contingencies. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is recorded as accrued expenses in the Company’s consolidated financial statements.
Legal costs incurred in connection with loss contingencies are expensed as incurred.
r. | Derivatives |
Freestanding instruments are first analyzed under the provisions of ASC 480 in order to determine whether the instrument should be classified as a liability, with subsequent changes in fair value recognized in the Statements of Operations in each period.
If the instrument is not within the scope of ASC 480, it is further analyzed under the provisions of ASC 815-10 in order to determine whether the instrument is considered indexed to the entity's own stock, and can be classified within equity, or rather be classified as a liability with subsequent changes in fair value recognized in the Statements of Operations in each period.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
s. | Newly issued and recently adopted accounting pronouncements: |
Recently issued accounting pronouncements, not yet adopted
1) | In November 2021, the FASB issued ASU 2021-10 “Government Assistance (Topic 832)”, which requires annual disclosures that increase the transparency of transactions involving government grants, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2021. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements. |
2) | In August 2020, the FASB issued ASU 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The amendments to this guidance are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements. |
3) | In June 2016, the FASB issued ASU 2016-13 “Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance will be effective for Smaller Reporting Companies (SRCs, as defined by the SEC) for the fiscal year beginning on January 1, 2023, including interim periods within that year. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
1) | The Company leases office and research and development space under several agreements. The annual lease consideration is a total of $192 and is linked to the Israeli CPI. The lease agreement will expire on June 30, 2023. |
2) | The Company has entered into operating lease agreements for vehicles used by its employees. The lease periods are generally for three years and the payments are linked to the Israeli CPI. To secure the terms of the lease agreements, the Company has made certain prepayments to the leasing company, representing approximately three months of lease payments. The annual lease consideration is a total of $36 . |
Year ended December 31, 2021 | Year ended December 31, 2020 | |||||||
Operating lease cost | 216 | 180 |
Supplemental cash flow information related to leases was as follows:
Year ended December 31, 2021 | Year ended December 31, 2020 | |||||||
Operating cash flows from operating leases | 216 | 180 |
Supplemental balance sheet information related to operating leases was as follows:
December 31, 2021 | December 31, 2020 | |||||||
Operating Leases | ||||||||
Operating lease right-of-use assets | 239 | 374 | ||||||
Current lease liabilities | 179 | 189 | ||||||
Non-current lease liabilities | 123 | 243 | ||||||
Total lease liabilities | 302 | 432 | ||||||
Weighted-average remaining lease term (in years) | 1.53 | 2.53 | ||||||
Weighted-average discount rate | 16 | % | 16 | % |
As of December 31, 2021, the maturity of lease liabilities under our non-cancelable operating leases were as follows:
2022 | 224 | |||
2023 | 117 | |||
Total future minimum lease payments | 341 | |||
Less: interest | (39 | ) | ||
Present value of operating lease liabilities | 302 |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
a. | Commitment to pay royalties to the government of Israel |
The Company is committed to pay royalties to the IIA on proceeds from sales of products in the research and development of which the Government participates by way of grants. At the time the grants were received, successful development of the related project was not assumed. In the case of failure of the project that was partly financed by the IIA, the Company is not obligated to pay any such royalties.
Under the terms of the Company’s funding from the IIA, royalties are payable on sales of products developed from projects so funded of 3% during the first three years, from commencement of revenues, 4% during the subsequent three years and 5% commencing the seventh year up to 100% of the amount of the grant received by the Company (dollar linked) with the addition of annual interest based on LIBOR. The amount that must be repaid may be increased to three times the amount of the grant received, and the rate of royalties may be accelerated, if manufacturing of the products developed with the grant money is transferred outside of the State of Israel. As to the replacement of the LIBOR benchmark rate - even though the IIA has not declared the alternative benchmark rate to replace the LIBOR, the Company does not believe it will have significant impact.
As of December 31, 2021, the total royalty amount that would be payable by the Company to the IIA, before the additional LIBOR interest and payments as described above, is approximately $460.
Following the signing of the Amgen Agreement (see note 10), the IIA determined that the Company should pay 5.38% of each payment that will be received by the Company from Amgen on the license of IP up to six times the grant received. As of December 31, 2021, the Company had paid a total amount of $79 to the IIA.
b. | On June 1, 2010 D.N.A. Biomedical Solutions Ltd. ("D.N.A.") and Oramed Ltd., ("Oramed") entered into a joint venture agreement, (the "Joint Venture Agreement") for the establishment of Entera Bio Ltd. According to the Joint Venture Agreement each of D.N.A. and Oramed acquired 50% of the Company's ordinary shares. D.N.A invested $600 in the Company, and Oramed and the Company entered into a Patent License Agreement pursuant to which Oramed licensed to the Company certain of Oramed's patent (the “IPR&D”). |
On February 22, 2011, Oramed and the Company entered into a patent transfer agreement, (the "Patent Transfer Agreement"), that superseded the Patent License Agreement, whereby Oramed assigned to the Company all of its rights, title and interest to its patent that Oramed licensed to the Company in 2010, under certain conditions. Under this agreement, the Company is obligated to pay Oramed royalties equal to 3% of its net revenues (as defined in the Patent Transfer Agreement). |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
1) | Rights of the Company’s ordinary shares Each ordinary share is entitled to one vote. The holder of the ordinary shares is also entitled to receive dividends whenever funds are legally available, when and if declared by the Board of Directors. The right to receive upon liquidation of the Company a sum equal to the nominal value of the share, and if a surplus remains, to receive such surplus, subject to the rights conferred on any class of shares which may be issued in the future. Since its inception, the Company has not declared any dividends. | |
2) | Changes in share capital: |
a. | IPO warrants |
As described in note 1b, in July 2018 the Company issued 1,400,000 IPO warrants to purchase 700,000 ordinary shares of the Company, these warrants have been listed for trading on the Nasdaq Capital Market and trading began on August 12, 2018. The IPO warrants are exercisable immediately at an initial exercise price of $8.40 per ordinary share for a period of five years, unless earlier repurchased by the Company under "Fundamental Transactions” as described in the warrant agreement or early expired as described in the warrant agreement.
The exercise price and number of ordinary shares issuable upon exercise of each warrant are subject to standard adjustments. In addition, the exercise price is subject to reduction if, within two years of the date of original issuance of the warrants which ended in July 2020, the Company sells or grants any warrant or option (except in certain circumstances as described in the warrant agreement) at an effective price per share less than $8.00 per share (as adjusted in proportion with any adjustments made from time to time), which reduction will be based on a weighted average, as described in the agreement. As described in note 6(2)b below, the Company completed financing round in a price per share lower than the $8.00, therefore, the adjusted exercise price is $5.85. At the IPO completion date, both of the instruments (warrants and shares) were classified as equity instruments as the warrants are considered indexed to the entity's own stock based on the provision of ASC 815. In March 2021, 4,500 IPO warrants were exercised into 2,250 ordinary shares of the Company for a total consideration of $13 at an exercise price of $5.85 per ordinary share. As of the December 31, 2021 there are 1,395,500 traded warrants to purchase 697,750 ordinary shares of the Company with an exercise price of $5.85. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
b. | On December 11, 2019 and December 18, 2019 (“the first and second closing”), the Company entered into subscription agreements with a selected group of accredited investors, including certain board members and their affiliates for the private placement of 5,710,153 ordinary shares for aggregate subscription proceeds to the Company of $13.5 million at a price of $2.37 per share. In addition, the Company granted 2,855,095 warrants, exercisable over a three-years period from the date of issuance, to purchase 2,855,095 ordinary shares at a per share exercise price of $2.96. In addition, the exercise price is subject to reduction if, within one years of the date of original issuance of the warrants which ended in December 2020 the Company will issue ordinary shares at an effective price per share less than $2.96. |
In addition, on December 13, 2019, D.N.A Biomedical Solutions Ltd. (“DNA”), an existing shareholder of the Company, subscribed to the Private Placement (the “DNA Private Placement”) to purchase 337,553 ordinary shares for aggregate consideration of $800. In connection with the transaction, the Company granted DNA warrants, exercisable over a three-year period from the date of issuance, to purchase 168,776 ordinary shares at a per share exercise price of $2.96. This investment was approved by the shareholders of the Company on February 18, 2020. The 168,776 warrants issued in connection with the DNA Private Placement together with the 2,855,095 warrants issued in connection with the Private Placement are the “Investors Warrants” In connection therewith, the Company entered into Placement Agency agreement with GP Numenkari Inc., a broker-dealer (“the Broker”). Based on the agreement, the Broker was entitled to the following consideration:
|
1. | A cash fee equal to 10% of the total proceeds paid by subscribers invested through the Broker. | |
2. | Three-years warrants to purchase ordinary shares in the amount equal to 10% of the number of shares issued to subscribers invested through the Broker at a per share exercise price of $2.37 (“Broker Warrants Type 1”). | |
3. | Three-years warrants to purchase ordinary share in the amount equal to 5% of number of shares issued to subscribers invested through the Broker at a per share exercise price of $2.96 (“Broker Warrants Type 2”), together with the Broker Warrants Type 1 (the “Broker Warrants”). |
Following the first and second closing of the offering, the Company issued 184,515 Broker Warrants type 1 and 92,257 Broker Warrants type 2 at per share exercise price of $2.37 to $2.96, respectively The Company had transaction costs of approximately $1.2 million, out of which $205 are Stock-Based Compensation due to issuance of the Broker Warrants. At the transaction date, both of the instruments (shares and warrants) were classified as equity instruments as the warrants are considered indexed to the entity's own stock based on the provision of ASC 815. During 2020, upon issuance of shares through the Company’s At-the-market equity program at a price per share lower than the exercise price, the exercise price adjusted to $1.05. See note 6(2)e. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 6 - SHARE CAPITAL (continued)
On April 21, 2021, upon satisfaction of the sale price condition pursuant to the subscription agreement signed in December 2019, the Company’s Board of Directors decided to accelerate the termination date of the Investors and Broker warrants issued in December 2019 and February 2020. In accordance with the terms of the agreement, as of the notice date and until June 23, 2021 (the “Early Termination Exercise Period”), the holders may exercise their warrants and following such Early Termination Exercise Period, these warrants shall be deemed terminated. Through June 23, 2021, all warrants holders, including the company's Chairman of the board and DNA, exercised 3,300,645 warrants into 3,172,800 ordinary shares through cash or cashless mechanism. The total consideration from the exercise of these warrants was $3,145 at an exercise price of $1.05. As of December 31, 2021, all Investors and Broker warrants were exercised. | ||
c. | On June 13, 2020, 687,960 warrants to purchase 687,960 ordinary shares for a purchase price of $6.99 per share in accordance with the Series B preferred share purchase agreement signed in 2016 and its following amendments expired. | |
d. | In July 2020, 340,210 warrants to purchase 340,210 ordinary shares for a purchase price of $3.69 per share in accordance with the Series A preferred share purchase agreement expired. | |
e. | On July 4, 2020, the Company established a primary registration statement under form F-3 and at-the-market equity program (the " 2020 ATM Program") that allows the Company to issue up to $13.9 million of ordinary shares, at the Company's discretion. Distributions of the ordinary shares through 2020 ATM Program were made pursuant to the terms of an equity distribution agreement dated July 13, 2020 among the Company and Canaccord Genuity LLC (the "Agent"). As of December 31, 2020, the Company issued 2,802,731 ordinary shares for gross proceeds of $3.5 million at a weighted average price of $1.27 per ordinary share through 2020 ATM Program. The net consideration from 2020 ATM Program was $3.2 million. These transactions triggered adjustment to the exercise price of the Investors and Broker warrants issued in the Private Placement held in 2019. See note 6(2)b. The Company adjusted its net loss of 2020 for the purpose of loss per share computation in order to include the effect of the down-round trigger in a total amount of $1,042. In February and March 2021, the Company issued additional 2,546,265 ordinary shares for net proceeds of $9.9 million at a weighted average price of $3.99 per ordinary share through 2020 ATM Program. |
f. | On May 7, 2021, the Company entered into a new At-the-market equity program (the "2021 ATM Program") that allows the Company to issue up to additional 5 million ordinary shares, at the Company's discretion. Distributions of the ordinary shares through the 2021 ATM Program were made pursuant to the terms of an equity distribution agreement dated May 7, 2021 among the Company and B. Riley Securities, Inc. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 6 - SHARE CAPITAL (continued)
In June and July 2021, the Company issued 1,840,463 ordinary shares for net proceeds of $12.1 million at a weighted average price of $6.74 per ordinary share through the Company’s 2021 ATM Program. |
g. | During the twelve months ended December 31, 2021, several employees and service providers exercised 177,711 options into 177,711 ordinary shares of the Company for a total consideration of $418 at a weighted average price of $2.54 per ordinary share. |
1) | Share-based compensation plan On March 17, 2013, the Company's Board of Directors approved a Share Incentive Plan (the “2013 Plan”). Under the 2013 Plan, the Company shall reserve sufficient number of ordinary shares, NIS 0.000769 par value, of the Company for allocation of stock options, restricted share units, restricted share awards and performance-based awards (the "Option"), to employees and non-employees. Each Option is exercisable for one ordinary share. Any option granted under the 2013 Plan that is not exercised within six years from the date upon which it becomes exercisable will expire. On July 2, 2018, the Company's board of directors and shareholders of the Company approved a new Share Incentive Plan (the “2018 Plan”) and reserved 1,371,398 ordinary shares of the Company for allocation of stock options, restricted share units, restricted share awards and performance-based awards (the "Option"), to employees and non-employees for issuance under the 2018 Plan. Each Option is exercisable for one ordinary share NIS 0.0000769 par value. Any option granted under 2018 Plan that is not exercised within 10 years from the date upon which it becomes exercisable will expire.
The options granted to employees are subject to the terms stipulated by section 102(b)(2) of the Israeli Income Tax Ordinance (the “Ordinance”). According to these provisions, the Company will not be allowed to claim as an expense for tax purposes the amounts credited to the employees as a capital gain benefit in respect of the options granted. Options granted to related parties or non-employees of the Company are governed by Section 3(i) of the Ordinance or Non-Qualified Share Options ("NSO"). The Company will be allowed to claim as an expense for tax purposes in the year in which the related parties or non-employees exercised the options into shares. As of December 31, 2021, 289,638 ordinary shares remain available for future grants under the Plan. On January 1, 2022 the Company’s Board of Directors approved an increase of 1,440,220 ordinary shares that may be issued under the Company’s Plan. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
2) | share-based compensation grants to employees and directors: | |
a) | On March 16, 2020, the Company’s Board of Directors approved the following option grants, with an exercise price of $2.14 per share: |
1. | 250,000 options to purchase ordinary shares were granted to certain executive officers. |
2. | 201,600 options to purchase ordinary shares were granted to certain employees. |
3. | 7,500 options to purchase ordinary shares was granted to a service provider. |
The options vest over 4 years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% vest in twelve equal quarterly installments following the first anniversary of the applicable grant date. The fair value of the options at the date of grant was $590. |
b) | On April 20, 2020 options to purchase 31,502 ordinary shares granted to the former CEO with an exercise price of $1.98 per share. The options vest over 4 years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% vest in twelve equal quarterly installments following the first anniversary of the applicable grant date. The fair value of the options at the date of grant was $37. Effective September 7, 2020, due to termination of the employment agreement with the former CEO, these options are forfeited and recognized as a reverse of expense under the General and Administrative line. | |
c) | In April 2020, the Company entered into an investor relations services agreement. Under the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue the consultant 28,000 Restricted Share Units (“RSU”), of which the first 7,000 shares vested on the signing date and the remaining 21,000 shares will vest in three equal installments until January 8, 2021. As of December 31, 2020, 21,000 shares were fully vested. The fair value of the RSU was $53 using the fair value of the shares at the grant date. | |
d) | In November 2020, the Company entered into an amendment to business development services agreement with the business development consultant. Under the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue the consultant 79,760 options with an exercise price of $1.06 per share. The options vests over 6 months in six equal installments from October 1, 2020. The fair value of the options at the date of grant was $35. |
e) | On January 4, 2021 options to purchase 1,314,218 ordinary shares were granted to the Chief Executive Officer of the Company, with an exercise price of $1.24. The options vest over 4 years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option will vest in twelve equal quarterly installments following the first anniversary of the grant date. The grant was subject to the approval by the shareholders of the Company, which approved the grant in March 2021. The fair value of the options at the date of grant was $1,320. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 7 - SHARE-BASED COMPENSATION (continued)
f) | On April 7, 2021, the Company’s Board of Directors approved the following option grants: |
i. | Options grants to purchase 213,000 ordinary shares to certain employees and 70,000 options granted to service providers, with an exercise price of $3.61 per share. The options vest over 4 years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option will vest in twelve equal quarterly installments following the first anniversary of the grant date. The fair value of the options at the date of grant was $646. | |
ii. | Options grant to purchase 33,368 ordinary shares to a non-executive director of the Company, with an exercise price of $3.61. The options will vest over 3 years in twelve equal quarterly instalments starting on the vesting commencement date. These options were subject to the approval of the shareholders of the Company, which was approved on October 4, 2021. The fair value of the options at the shareholders' approval date was $104. | |
g) | On April 21, 2021, options to purchase 345,000 ordinary shares were granted to several executive officers of the Company, with an exercise price of $3.15. The options vest over 4 years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option will vest in twelve equal quarterly installments following the first anniversary of the grant date. These options were subject to the approval of the shareholders of the Company, which was approved on October 4, 2021. The fair value of the options at the shareholders' approval date was $1,140. |
h) | On August 23. 2021, the Company’s Board of Directors approved the following option grants which were approved by the shareholders of the Company on October 4, 2021. |
i. | Grants of options to purchase ordinary shares with a total fair value 0f $195 for each of the seven non-executive board member on January 1, 2022. The options will vest over 3 years in twelve equal quarterly instalments starting on January 1, 2022 the vesting commencement date. On January 1, 2022, which is considered the awards grant date, the Company granted 752,899 ordinary shares to non-executive directors with an exercise price of $2.815 per share. |
ii. | Grants of options to purchase ordinary shares with a total fair value 0f $65 for each of the seven non-executive board member on January 1, 2022. The options will vest over 1 year in four equal quarterly instalments starting on January 1, 2022 the vesting commencement date. On January 1, 2022, which is considered the awards grant date, the Company granted 250,964 ordinary shares to non-executive directors with an exercise price of $2.815 per share. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
2021 | 2020 | |||||||
Exercise price | $ | 1.240$3.61 | $ | 1.06-$2.14 | ||||
Dividend yield | 0 | 0 | ||||||
Expected volatility | 68%-71 | % | 66.35%-71 | % | ||||
Risk-free interest rate | 1.11%-0.94 | % | 0.16%-0.58 | % | ||||
Expected life - in years | 6.1-5.8 | 2.75-6.1 |
2021 | 2020 | |||||||||||||||
Number of options | Weighted average exercise price | Number of options | Weighted average exercise price | |||||||||||||
Outstanding at beginning of year | 2,570,109 | $ | 4.85 | 2,847,600 | $ | 4.74 | ||||||||||
Granted | 1,975,586 | 1.95 | 570,362 | $ | 1.98 | |||||||||||
Exercised | (177,710 | ) | 2.37 | (31,954 | ) | 2.11 | ||||||||||
Forfeited | (16,660 | ) | 2.37 | (589,793 | ) | 2.7 | ||||||||||
Expired | (34,466 | ) | 4.00 | (226,106 | ) | 2.68 | ||||||||||
Outstanding at end of year | 4,316,859 | $ | 3.63 | 2,570,109 | $ | 4.85 | ||||||||||
Exercisable at end of year | 2,068,067 | $ | 5.39 | 1,791,687 | $ | 5.49 |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
The following tables summarizes information concerning outstanding and exercisable options as of December 31, 2021, in terms of ordinary shares:
December 31, 2021 | ||||||||||||||||||
Options outstanding | Options exercisable | |||||||||||||||||
Number of | Weighted | Number of | Weighted | |||||||||||||||
options | Average | options | Average | |||||||||||||||
Exercise | outstanding | Remaining | exercisable | Remaining | ||||||||||||||
prices per | at end of | Contractual | at end of | contractual | ||||||||||||||
share (USD) | year | Life | year | Life | ||||||||||||||
0 | 4,680 | 0.78 | 4,680 | 0.78 | ||||||||||||||
1.06 | 14,760 | 3.85 | 14,760 | 3.85 | ||||||||||||||
1.24 | 1,314,218 | 9.02 | 0 | - | ||||||||||||||
2.14 | 422,300 | 8.26 | 184,756 | 8.26 | ||||||||||||||
2.53 | 33,638 | 7.89 | 28,031 | 7.89 | ||||||||||||||
3.15 | 345,000 | 9.30 | 0 | - | ||||||||||||||
3.61 | 316,368 | 9.27 | 5,561 | 9.27 | ||||||||||||||
3.68 | 185,640 | 0.32 | 185,640 | 0.32 | ||||||||||||||
3.97 | 287,565 | 7.05 | 251,949 | 7.05 | ||||||||||||||
6.31 | 1,245,400 | 4.08 | 1,245,400 | 4.08 | ||||||||||||||
7.54 | 147,290 | 1.26 | 147,290 | 1.26 | ||||||||||||||
4,316,859 | 2,068,067 |
The aggregate intrinsic value of the total of the outstanding and exercisable options as of December 31, 2021, is $2,378 and $146, respectively.
The following table illustrates the effect of share-based compensation on the statements of operations:
2021 | �� | 2020 | ||||||
Cost of revenues | 102 | 51 | ||||||
Research and development expenses | 661 | 514 | ||||||
General and administrative | 1,098 | 336 | ||||||
1,861 | 901 |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
A. | Corporate tax rate |
1) Ordinary taxable income in Israel is subject to a corporate tax rate of 23%. | |
2) The Company’s subsidiary Entera Bio, Inc. taxed separately under the U.S. tax laws at a tax rate of 29%. | |
B. | Losses for tax purposes carried forward to future years |
The balance of carryforward losses as of December 31, 2021 and 2020 are approximately $56.1 million and $44.2 million, respectively. | |
Under Israeli tax law, tax loss carry forward have no expiration date. | |
C. | Tax assessments |
The Company and its subsidiary have tax assessments that are considered to be final through tax year 2016. | |
D. | Loss (income) before income taxes is composed of the following |
Year ended December 31 | ||||||||
2021 | 2020 | |||||||
Entera Bio Ltd | 12,362 | 11,283 | ||||||
Entera Bio Inc | (116 | ) | (87 | ) | ||||
Total loss before taxes | 12,246 | 11,196 |
E. | Tax expenses: |
Year ended December 31 | ||||||||
2021 | 2020 | |||||||
Current: | ||||||||
Subsidiary | 158 | 20 | ||||||
Total current income tax | 158 | 20 | ||||||
Deferred: | ||||||||
Subsidiary | (217 | ) | 0 | |||||
Total tax on income | (59 | ) | 20 |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 8 - INCOME TAX (continued)
F. | Deferred income taxes |
December 31, | ||||||||
2021 | 2020 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carry forward | 12,895 | 10,176 | ||||||
Research and development | 1,319 | 1,316 | ||||||
Share-based compensation | 876 | 688 | ||||||
Other | 152 | 240 | ||||||
Net deferred tax assets before valuation allowance | 15,242 | 12,420 | ||||||
valuation allowance | (15,025 | ) | (12,420 | ) | ||||
Net deferred tax assets | 217 | 0 |
Realization of deferred tax assets is contingent upon sufficient future taxable income during the period that deductible temporary differences and carry forward losses are expected to be available to reduce taxable income. |
G. | Rollforward of valuation allowance: |
Balance at January 1, 2020 | 9,718 | |||
Additions | 2,702 | |||
Balance at January 1, 2021 | 12,420 | |||
Additions | 2,605 | |||
Balance at December 31, 2021 | 15,025 |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 8 - INCOME TAX (continued)
H. | Reconciliation of theoretical tax expenses to actual expenses |
The primary difference between the statutory tax rate of the Company and the effective rate results virtually from the changes in valuation allowance in respect of carry forward tax losses and research and development expenses due to the uncertainty of the realization of such tax benefits.
I. | Uncertain tax positions |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
Balance sheets:
December 31, | ||||||||
2021 | 2020 | |||||||
U.S. dollars in thousands | ||||||||
b. Accounts payable - other: | ||||||||
Employees and employees related | 147 | 144 | ||||||
Income tax | 134 | 0 | ||||||
Provision for vacation | 308 | 263 | ||||||
Accrued expenses | 2,212 | 923 | ||||||
2,801 | 1,330 |
On December 10, 2018, the Company entered into a research collaboration and license agreement (the “Amgen Agreement”) with Amgen Inc. (“Amgen”) in inflammatory disease and other serious illnesses. Pursuant to the Amgen Agreement, the Company and Amgen will use the Company’s proprietary drug delivery platform to develop oral formulations for one preclinical large molecule program that Amgen has selected. Amgen also has options to select up to two additional programs to include in the collaboration. Amgen is responsible for the clinical development, regulatory approval, manufacturing and worldwide commercialization of the programs. The Company granted Amgen an exclusive, worldwide, sublicensable license under certain of its intellectual property relating to its drug delivery technology to develop, manufacture and commercialize the applicable products. The Company will retain all intellectual property rights to its drug delivery technology, and Amgen will retain all rights to its large molecules and any subsequent improvements, and ownership of certain intellectual property developed through the performance of the collaboration is to be determined by U.S. patent law. Pursuant to the terms of the Amgen Agreement, Amgen is required to make aggregate payments of up to $270 million upon achievement of various clinical and commercial milestones or its exercise of options to select additional two programs to include in the collaboration, as well as tiered royalty payments ranging from the low to mid-single digits based on the level of Amgen’s net sales of the applicable products. Amgen is required to pay for the initial program $450 for the second year of preclinical R&D services to be provided by the Company and must reimburse the Company for further expenses as shall be agreed between the parties. Preclinical R&D services includes time spent by the Company's employees performing the Company's activities under the work plan of collaboration program. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share amounts)
NOTE 10 - REVENUE FROM COLLABORATION AND LICENSE AGREEMENT (continued)
Amgen’s obligation to pay royalties with respect to a product in a particular country commences upon the first commercial sale of such product in such country and expires on a country-by-country and product-by-product basis on the later of (a) the date on which the sale of the product is no longer covered by a valid claim of a patent licensed to Amgen under the Amgen Agreement, and (b) the tenth anniversary of the first commercial sale of such product in such country.
The term of the Amgen Agreement commenced on December 10, 2018, and unless earlier terminated, shall continue in full force and effect, on a product-by-product basis, until expiration of the last-to-expire royalty term with respect to such product.
In January 2019, as required by the Amgen Agreement, Amgen paid the Company a non-refundable and non-creditable initial technology access fee of $725. The Company evaluated the selling price of the preclinical R&D services at $225 and the right to use the intellectual property (“License fees”) at $500. In December 2018, the Company recognized $500 in revenues for the right to use the intellectual property.
During the second quarter of 2021, the Company extended the agreement, pursuant to the terms, Amgen is required to pay for the third year of preclinical R&D services to be provided by the Company for a total consideration of $450.
Revenues attributed to the preclinical R&D services are recognized during the period of the pre-clinical R&D services according to the input model method on a cost-to-cost basis. During 2021 the Company received the second installment for the second year and the first installment for the third year for the pre-clinical R&D services in the amount of $450.
In 2021 and 2020, the Company recorded revenues of $502 and $365 related to services provided under the Amgen Agreement.
In addition, as of December 31, 2021 and 2020 the Company recorded a contract liability of $15 and $158, respectively. |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
• | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions; |
• | provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance with generally accepted accounting principles; |
• | provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board of directors (as appropriate); and |
• | provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements. |
ITEM 9B. | OTHER INFORMATION |
ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. |
Item 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
(a) | Documents filed as part of this report: |
(1) | Financial statements |
(2) | Financial Statement Schedules |
Exhibit No. | Description | |
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set. |
ITEM 16. | FORM 10-K SUMMARY |
Date: March 8, 2022 | ENTERA BIO LTD. | |
By: | /s/ Spiros Jamas | |
Spiros Jamas | ||
Chief Executive Officer |
Name | Title | Date | ||
/s/ Spiros Jamas | Chief Executive Officer | March 8, 2022 | ||
Spiros Jamas | (Principal Executive Officer) | |||
/s/ Dana Yaacov-Garbeli | Israel-based Chief Financial Officer | March 8, 2022 | ||
Dana Yaacov-Garbeli | (Principal Financial and Accounting Officer) | |||
/s/ Phillip Schwartz | Director | March 8, 2022 | ||
Phillip Schwartz | ||||
/s/ Gerald Lieberman | Director | March 8, 2022 | ||
Gerald Lieberman | ||||
/s/ Roger J. Garceau | Director | March 8, 2022 | ||
Roger J. Garceau | ||||
/s/ Ron Mayron | Director | March 8, 2022 | ||
Ron Mayron | ||||
/s/ Yonatan Malca | Director | March 8, 2022 | ||
Yonatan Malca | ||||
/s/ Miranda J. Toledano | Director | March 8, 2022 | ||
Miranda J. Toledano |
/s/ Gerald M. Ostrov | Director | March 8, 2022 | ||
Gerald M. Ostrov |
/s/ Sean Ellis | Director | March 8, 2022 | ||
Sean Ellis |