☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Israel | 00-0000000 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(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: | ||||
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 |
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☒ |
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• | Clinical development involves a lengthy and expensive process with uncertain outcomes. We may incur additional costs and experience delays in developing and commercializing or be unable to develop or commercialize our current and future product candidates; |
• | The regulatory approval processes of the U.S. Food and Drug Administration (“FDA”) and comparable foreign authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be materially harmed; |
• | Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all; |
• | Positive results from preclinical studies and early-stage clinical trials may not be predictive of future results. Initial positive results in any of our clinical trials may not be indicative of results obtained when the trial is completed or in later stage trials; |
• | The scope, progress and costs of developing our product candidates such as EB613 for Osteoporosis and EB612 for Hypoparathyroidism may alter over time based on various factors such as regulatory requirements, the competitive environment and new data from pre-clinical and clinical studies; |
• | The accuracy of our estimates regarding expenses, capital requirements, the sufficiency of our cash resources and the need for additional financing; |
• | our ability to continue as a going concern absent access to sources of liquidity; |
• | Our ability to raise additional funds or consummate strategic partnerships to offset additional required capital to pursue our business objectives, which may not be available on acceptable terms or at all. A failure to obtain this additional capital when needed, or failure to consummate strategic partnerships, could delay, limit or reduce our product development, and other operations; |
• | Even if a current or future product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success; |
• | The successful commercialization of our product candidates, if approved, will depend in part on the extent to which governmental authorities and third-party payors establish adequate coverage and reimbursement levels and pricing policies; |
• | Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue; |
• | If we are unable to obtain and maintain patent protection for our product candidates, or if the scope of the patent protection obtained is not sufficiently broad or robust, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our product candidates may be adversely affected; |
• | We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors; |
• | Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain; |
• | 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 FDA feedback and guidance and how such guidance may impact our clinical development plan; |
• | 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 competitive position with respect to other products on the market or in development for the treatment of osteoporosis and hypoparathyroidism and other disease categories we pursue; |
• | our ability to establish and maintain development and commercialization collaborations; |
• | our ability to manufacture and supply enough material to support our clinical trials and any potential future commercial requirements; |
• | 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; |
• | our ability to comply with laws and regulations that currently apply or become applicable to our business in Israel, the United States and internationally; and |
• | our ability to manage growth. |
Program | Indication | Stage | Status | |||
EB613 Oral PTH Tablets | Osteoporosis | Phase 3 | Phase 2 Trial Completed (Q2 2021) End-of-Phase 2 Meeting with FDA (December 2021) Type C Meeting with FDA (October 2022) Type D Meeting with FDA (March 2023E) Phase 3 Registrational Study Initiation (H2’2023E) | |||
EB612 Oral PTH Tablets | Hypoparathyroidism | Phase 1 | Phase 2A Old Formulation (2015) Phase 2b Old Formulation PK/PD vs. Natpara (2019) Phase 1 PK Study of New Formulation Initiation H1’2023E |
• | Advancing EB613, Potentially the First Daily Anabolic PTH Mini Tablet into Phase 3 for the Treatment of Post-Menopausal Women with Low Bone Mass and Osteoporosis: Our six-month placebo-controlled Phase 2 double-blind, dose-ranging trial of EB613 in 118 patients with low bone mass and osteoporosis met both primary and secondary endpoints and was selected for oral presentation at the American Society of Bone Mineral Research (ASBMR) annual conference in 2021. Based on the outcome of our October 2022 Type C meeting with the FDA, we believe that EB613 may be the first osteoporosis program to be permitted by FDA to pursue a placebo controlled, bone mineral density (“BMD”) endpoint registrational Phase 3 study to support a potential new drug application (“NDA”) pursuant to the FDA’s pathway under section 505(b)2 of the U.S. Federal Food, Drug, and Cosmetic Act. We view this outcome as testament to the treatment gap and unmet need for a viable alternative to treat the millions of osteoporosis patients who, despite current guidelines and availability of highly efficacious anabolic agents, are unwilling to take daily or monthly injections. We are planning to enable Phase 3 study initiation in the second half of 2023. |
• | Advancing the New Formulation of EB612 Through Clinical Development as the First Daily PTH Mini Tablet for the Treatment of Hypoparathyroidism: In 2015, we successfully completed a Phase 2a four-month trial in 19 patients with hypoparathyroidism which demonstrated clinical benefit, including a statistically significant reduction in calcium supplementation, maintenance of calcium levels above the lower target level for Hypoparathyroidism patients (>7.5 mg/dL) throughout the study and statistically significant rapid decline of in median serum phosphate levels two hours following the first dose, which was maintained for the duration of the study. We expect to carry out a PK Phase 1 study for the new formulation of EB612 in the first half of 2023. The FDA and the European Medicines Agency, or EMA, have granted EB612 orphan drug designation for the treatment of hypoparathyroidism. |
• | Establishing Select Global and Regional Development and Commercial Partnerships: Our technology platform and intellectual property are designed to generate a pipeline of product candidates across various therapeutic indications. We intend to explore opportunities to diversify and shorten the preclinical and clinical development of these candidates in a capital-efficient manner, including selectively pursuing research and clinical development partnerships with biopharmaceutical companies with specific domain expertise as well as with biopharmaceutical companies with proven commercial footprints to de-risk our late-stage programs. |
• | Identifying and Developing Additional Products Internally based on FDA-Approved Injectable Protein Therapeutics: We intend to leverage our technology platform by applying it to the development of additional approved injectable peptides and therapeutic proteins with known mechanisms of action and established safety profiles. We believe this will allow us to advance our product candidates more efficiently and predictably through the research and clinical development cycle. |
• | 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 initial new drug, or IND, application for human clinical testing, which must become effective before human clinical trials may begin; |
• | approval by an independent review board, or 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. |
• | 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 | 15 | |||
General and administrative | 2 | |||
Total | 17 |
• | 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 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 raise additional capital or 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; |
• | Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations; and |
• | Security, political and economic instability in the Middle East may harm our business. |
• | 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 in relation to registrational strategies and potential NDA or BLA approvals for our product candidates; |
• | the costs associated with manufacturing our product candidates and potentially establishing sales, marketing, and distribution capabilities in the absence of commercial partnerships; |
• | 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 residual 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 clinical development, manufacturing and commercialization of EB613, EB612 and any other product candidates we may develop; |
• | 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, regulatory, 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 independently or in collaboration with strategic partners; |
• | 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, geopolitical tensions such as the ongoing conflict between Russia and Ukraine 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 patent; |
• | 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 revenue; 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. |
• | 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; and |
• | 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. |
• | 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 and plans for clinical development; |
• | 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, such as geopolitical tensions. |
ITEM 1B. | UNRESOLVED STAFF COMMENTS. |
ITEM 2. | PROPERTIES. |
ITEM 3. | LEGAL PROCEEDINGS. |
ITEM 4. | MINE SAFETY DISCLOSURES. |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
ITEM 6. | [Reserved] |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | 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. |
The Company’s subsidiary, Entera Bio, Inc., is taxed separately under the U.S. tax laws. As of December 31, 2022, Entera Bio Inc. has tax loss carry-forwards of $98 thousand.
| Year Ended December 31, | Increase (Decrease) | ||||||||||||||
| 2022 | 2021 | $ | % | ||||||||||||
| (In thousands, except for percentage information) | |||||||||||||||
Revenues | $ | 134 | $ | 571 | $ | (437 | ) | (77 | )% | |||||||
Cost of revenues | $ | 101 | $ | 373 | (272 | ) | (73 | )% | ||||||||
Operating expenses: | | |||||||||||||||
Research and development expenses | $ | 5,848 | $ | 6,771 | $ | (923 | ) | (14 | )% | |||||||
General and administrative expenses | $ | 7,253 | $ | 5,690 | $ | 1,563 | 27 | % | ||||||||
Other income | $ | (51 | ) | $ | (46 | ) | $ | (5 | ) | 11 | % | |||||
Operating loss | $ | 13,017 | $ | 12,217 | $ | 800 | 7 | % | ||||||||
Financial expenses (income), net | $ | (83 | ) | $ | 29 | $ | (112 | ) | (386 | )% | ||||||
Income tax expenses (benefit) | $ | 137 | $ | (59 | ) | $ | 196 | (332 | )% | |||||||
Net loss | $ | 13,071 | $ | 12,187 | $ | 884 | 7 | % |
• | 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; and |
• | our ability to establish collaborations on favorable terms, if at all. |
| (audited) Year ended December 31, | |||||||
| 2022 | 2021 | ||||||
| (in thousands) | |||||||
Net Cash used in operating activities | $ | (12,499 | ) | $ | (9,063 | ) | ||
Net Cash used in investing activities | (102 | ) | (17 | ) | ||||
Net Cash provided by financing activities | 13 | 25,381 | ||||||
Net increase (decrease) in cash and cash equivalents | $ | (12,588 | ) | $ | 16,301 |
| 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 | $ | 96 | $ | 96 | $ | - | $ | - | $ | - | ||||||||||
Total | $ | 96 | $ | 96 | $ | - | $ | - | $ | - |
| Year ended December 31, | |||||||
| 2022 | 2021 | ||||||
| (in thousands) | |||||||
Cost of revenues | $ | 14 | $ | 102 | ||||
Research and development | 708 | 661 | ||||||
General and administrative | 1,525 | 1,098 | ||||||
Total | $ | 2,247 | $ | 1,861 |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Page | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID No. 1309) | 90 |
CONSOLIDATED FINANCIAL STATEMENTS: | |
91 | |
92 | |
93 | |
94 | |
95 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Entera Bio Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Entera Bio Ltd. and its subsidiary (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 1d to the consolidated financial statements, the Company has suffered recurring losses from operations and has cash outflows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in note 1d. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Kesselman & Kesselman |
Certified Public Accountants (lsr.) |
A member firm of PricewaterhouseCoopers International Limited |
Tel-Aviv, Israel |
March 31, 2023 |
|
We have served as the Company’s auditor since 2010. |
90
December 31 | ||||||||
2022 | 2021 | |||||||
A s s e t s | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | 12,309 | 24,892 | ||||||
Accounts receivable | 246 | 183 | ||||||
Other current assets | 294 | 254 | ||||||
TOTAL CURRENT ASSETS | 12,849 | 25,329 | ||||||
NON-CURRENT ASSETS: | ||||||||
Property and equipment, net | 139 | 156 | ||||||
Operating lease right-of-use assets | 90 | 239 | ||||||
Deferred income taxes | 43 | 217 | ||||||
Funds in respect of employee rights upon retirement | 6 | 46 | ||||||
TOTAL NON-CURRENT ASSETS | 278 | 658 | ||||||
TOTAL ASSETS | 13,127 | 25,987 | ||||||
L i a b i l i t i e s and shareholders' equity | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | 17 | 166 | ||||||
Accrued expenses and other payables | 1,233 | 2,801 | ||||||
Current maturities of operating lease | 91 | 179 | ||||||
Contract liabilities | - | 15 | ||||||
TOTAL CURRENT LIABILITIES | 1,341 | 3,161 | ||||||
NON-CURRENT LIABILITIES: | ||||||||
Operating lease liabilities | - | 123 | ||||||
Liability for employee rights upon retirement | 32 | 138 | ||||||
TOTAL NON-CURRENT LIABILITIES | 32 | 261 | ||||||
TOTAL LIABILITIES | 1,373 | 3,422 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS' EQUITY: | ||||||||
Ordinary Shares, NIS 0.0000769 par value: Authorized - as of December 31, 2022 and December 31, 2021, 140,010,000 shares; issued and outstanding as of December 31, 2022, and December 31, 2021 28,809,922 and 28,804,411 shares, respectively | * | * | ||||||
Additional paid-in capital | 107,210 | 104,950 | ||||||
Accumulated other comprehensive income | 41 | 41 | ||||||
Accumulated deficit | (95,497 | ) | (82,426 | ) | ||||
TOTAL SHAREHOLDERS' EQUITY | 11,754 | 22,565 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 13,127 | 25,987 |
* Represents an amount less than one thousand US dollars
Year ended December 31 | ||||||||
2022 | 2021 | |||||||
REVENUES | 134 | 571 | ||||||
COST OF REVENUES | 101 | 373 | ||||||
GROSS PROFIT | 33 | 198 | ||||||
OPERATING EXPENSES: | ||||||||
Research and development | 5,848 | 6,771 | ||||||
General and administrative | 7,253 | 5,690 | ||||||
Other income | (51 | ) | (46 | ) | ||||
TOTAL OPERATING EXPENSES | 13,050 | 12,415 | ||||||
OPERATING LOSS | 13,017 | 12,217 | ||||||
FINANCIAL EXPENSES (INCOME), net | (83 | ) | 29 | |||||
LOSS BEFORE INCOME TAX | 12,934 | 12,246 | ||||||
INCOME TAX EXPENSE (BENEFIT) | 137 | (59 | ) | |||||
NET LOSS | 13,071 | 12,187 | ||||||
LOSS PER SHARE BASIC AND DILUTED | 0.45 | 0.47 | ||||||
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE | 28,808,090 | 26,133,770 |
ENTERA BIO LTD
(U.S. dollars in thousands, except share and per share data)
Ordinary shares |
| |||||||||||||||||||||||
Number of shares issued | Amounts | Additional paid-in capital | Accumulated other Comprehensive income | Accumulated deficit | Total | |||||||||||||||||||
BALANCE AT JANUARY 1, 2021 | 21,057,922 | * | 77,708 | 41 | (70,239 | ) | 7,510 | |||||||||||||||||
Net loss | - | - | - | - | (12,187 | ) | (12,187 | ) | ||||||||||||||||
Exercise of warrants to ordinary shares | 3,175,050 | * | 3,158 |
| - | - | 3,158 | |||||||||||||||||
Issuance of shares due to the ATM program, net of issuance costs | 4,386,728 | * | 21,805 | - | - | 21,805 | ||||||||||||||||||
Exercise of options to ordinary shares | 177,711 | * | 418 | - | - | 418 | ||||||||||||||||||
Share-based compensation | - | - | 1,861 | - | - | 1,861 | ||||||||||||||||||
Vested restricted share units | 7,000 | * | - | - | - | - | ||||||||||||||||||
BALANCE AT DECEMBER 31, 2021 | 28,804,411 | * | 104,950 | 41 | (82,426 | ) | 22,565 | |||||||||||||||||
Net loss | - | - | - | - | (13,071 | ) | (13,071 | ) | ||||||||||||||||
Exercise of options to ordinary shares | 5,511 | * | 13 | - | - | 13 | ||||||||||||||||||
Share-based compensation | - | - | 2,247 | - | - | 2,247 | ||||||||||||||||||
BALANCE AT DECEMBER 31, 2022 | 28,809,922 | * | 107,210 | 41 | (95,497 | ) | 11,754 |
Year ended December 31 | ||||||||
2022 | 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | (13,071 | ) | (12,187 | ) | ||||
Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 64 | 53 | ||||||
Deferred income taxes | 174 | (217 | ) | |||||
Share-based compensation | 2,247 | 1,861 | ||||||
Finance expenses (income), net | (78 | ) | 18 | |||||
Changes in operating asset and liabilities: | ||||||||
Decrease (increase) in accounts receivable | (63 | ) | 72 | |||||
Decrease (increase) in other current assets | (40 | ) | 7 | |||||
Increase (decrease) in accounts payable | (149 | ) | 2 | |||||
Increase (decrease) in accrued expenses and other payables | (1,568 | ) | 1,471 | |||||
Decrease in contract liabilities | (15 | ) | (143 | ) | ||||
Net cash used in operating activities | (12,499 | ) | (9,063 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Funds with respect to employee rights upon retirement | (55 | ) | - | |||||
Purchase of property and equipment | (47 | ) | (17 | ) | ||||
Net cash used in investing activities | (102 | ) | (17 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of shares through ATM programs, net of issuance costs | - | 21,805 | ||||||
Exercise of options and warrants into shares | 13 | 3,576 | ||||||
Net cash provided by financing activities | 13 | 25,381 | ||||||
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED DEPOSITS | (12,588 | ) | 16,301 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT BEGINNING OF THE YEAR | 24,964 | 8,663 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT END OF THE YEAR | 12,376 | 24,964 | ||||||
Reconciliation in amounts on consolidated balance sheets: | ||||||||
Cash and cash equivalents | 12,309 | 24,892 | ||||||
Restricted deposits included in other current assets | 67 | 72 | ||||||
Total cash and cash equivalents and restricted deposits | 12,376 | 24,964 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW TRANSACTIONS: | ||||||||
Income taxes paid in cash during the year | 165 | 2 | ||||||
SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS: | ||||||||
Operating lease right of use assets obtained in exchange for new operating lease liabilities | - | 31 |
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 United States. 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 clinical development. Additionally, the Company intends to license its oral delivery technology to biopharmaceutical companies for use with their proprietary compounds. |
b. | The Company's ordinary shares, NIS 0.0000769 par value per share (“ordinary shares”), are listed on the Nasdaq Capital Market since July 2018 under the symbol “ENTX”. |
c. | On December 10, 2018, the Company entered into a research collaboration and license agreement with Amgen (the “Amgen Agreement”) for the use of the Company’s oral delivery platform in the field of 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 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. |
d. | Because the Company is engaged in research and development activities, it has not derived significant income from its activities and has incurred accumulated deficit in the amount of $95.5 million through December 31, 2022 and negative cash flows from operating activities. The Company's management is of the opinion that its available funds as of December 31, 2022 will allow the Company to operate under its current plans into the third quarter of 2024. This assumes the use of the Company’s capital to fund its ongoing operations, including R&D and the completion of the Phase 1 study related to the new formulation EB612. This does not include the capital required to fund the Company's proposed Phase 3 study for EB613 in osteoporosis and comparative study. 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, debt financing and strategic 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. The financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 are conducted. The consolidated financial statements are presented in U.S. dollars.
The functional currency of the subsidiary is the U.S. dollar. |
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. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
d. | Principles of consolidation The consolidated financial statements include the accounts of the Company and its subsidiary Entera Bio Inc. All inter-company transactions and balances have been eliminated in consolidation. |
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 cash 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. | Concentrations of credit risk |
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains cash held in checking accounts and deposits at financial institutions in major Israeli and U.S. banks. Management believes the Company is not exposed to significant credit risk to its current financial institution, but will continue to monitor regularly and adjust, if needed, to mitigate risk. The Company has established guidelines regarding diversification of its investments and their maturities, which are designed to maintain principal and maximize liquidity. To date, the Company has not experienced any losses associated with this credit risk and continues to believe that this exposure is not significant.
h. | 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.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
i. | 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 $132 and $137 for the years ended December 31, 2022 and 2021, respectively.
The Company expects to contribute to insurance companies approximately $132 for the year ending December 31, 2023 in connection with its expected severance liabilities for that year.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
j. | Leases |
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.
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.
k. | 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
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
l. | 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, 2022 and 2021, the Company did not recognize an impairment loss on its long-lived assets.
m. | 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 RSUs, using 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 calculates the fair value of stock-based option awards on the date of grant using the Black-Scholes option pricing model. The option-pricing model requires a number of assumptions, of which the most significant are the expected share price volatility and the expected option term. The computation of expected volatility is based on the historical volatility of the Company’s ordinary shares. The expected option term is calculated using the simplified method, as the Company has concluded that its historical share option exercise experience does not provide a reasonable basis to estimate expected option terms. The interest rate for periods within the expected term of an award is based on the U.S. Treasury yield curve in effect at the time of grant. The Company’s expected dividend rate is zero because the Company does not currently pay cash dividends on its shares and does not anticipate doing so in the foreseeable future.
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 has elected to account for forfeitures as they occur.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
n. | 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 the Israel Innovation Authority (the “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. At the time grants are received, successful development of the related projects is not assured, therefore, grants are deducted from the research and development expenses as the applicable costs are incurred, and presented in R&D expenses, net.
o. | Revenue recognition |
The Company recognized revenue from the Amgen Agreement 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 for the use of the Company’s oral delivery platform in the field of inflammatory diseases 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.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
o. | Revenue recognition (continued) |
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.
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. 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, 2022, 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.
Revenues attributed to 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.
In 2022 and 2021, the Company recorded revenues of $89 and $502, respectively, related to services provided under the Amgen Agreement.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
p. | Income taxes |
1) | Deferred taxes |
2) | Uncertainty in income taxes |
q. | 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, RSUs and warrants, exercisable into an aggregate of 6,255,235 shares and 6,517,102 shares for the years ended December 31, 2022 and 2021, respectively, because the effect would have been anti-dilutive.
r. | Legal and other contingencies |
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.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
s. | Newly issued and recently adopted accounting pronouncements: |
Recently issued accounting pronouncements 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 adoption of this guidance did not have material impact on the Company’s 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 early adopted this guidance effective January 1, 2022 and the impact of the adoption on the Consolidated financial statements was immaterial. |
Recently issued accounting pronouncements, not yet adopted
1) | 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 adoption of this guidance will not have material impact on the Company’s consolidated financial statements. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1) | The Company leases office and research and development space under several agreements. The annual lease consideration is a total of $166 and is linked to the Israeli CPI. The lease agreement expires 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 deposits to the leasing company, representing approximately three months of lease payments. The annual lease consideration is a total of $21. |
Year ended December 31, 2022 | Year ended December 31, 2021 | |||||||
Operating lease cost | 197 | 216 |
Supplemental cash flow information related to leases was as follows:
Year ended December 31, 2022 | Year ended December 31, 2021 | |||||||
Operating cash flows from operating leases | 197 | 216 |
Supplemental balance sheet information related to operating leases was as follows:
December 31, 2022 | December 31, 2021 | |||||||
Operating Leases | ||||||||
Operating lease right-of-use assets | 90 | 239 | ||||||
Current lease liabilities | 91 | 179 | ||||||
Non-current lease liabilities | - | 123 | ||||||
Total lease liabilities | 91 | 302 | ||||||
Weighted-average remaining lease term (in years) | 0.52 | 1.53 | ||||||
Weighted-average discount rate | 16 | % | 16 | % |
As of December 31, 2022, the maturity of lease liabilities under our non-cancelable operating leases are $91 to be paid in 2023.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
a. | Commitment to pay royalties to the government of Israel |
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 one of Oramed’s patents (the “IPR&D”). |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1) | Rights of the Company’s ordinary shares |
2) | Changes in share capital: |
a. | IPO warrants |
The exercise price and number of ordinary shares issuable upon exercise of each warrant are subject to standard adjustments. In addition, subject to certain exceptions, the exercise price was subject to reduction if, within two years following the date of original issuance of the warrants, which ended in July 2020, the Company sold or granted any warrant or option at an effective price per share of less than $8.00 (as adjusted in proportion with any adjustments made from time to time), based on a weighted average, as described in the warrant agreement. As described in note 5b below, the Company completed a financing round during such two-year period at a price per share lower than the $8.00, therefore, the exercise price of these warrants adjusted to $5.85 per share.
In March 2021, 4,500 IPO warrants were exercised into 2,250 ordinary shares for total consideration of $13 at an exercise price of $5.85 per ordinary share.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - SHARE CAPITAL (continued)
b. | In December 2019 and February 2020, the Company entered into subscription agreement with a selected group of accredited investors for the private placement of 6,047,706 ordinary shares for aggregate subscription proceeds to the Company of $14.3 million at a price of $2.37 per share. In addition, the Company granted 3,023,871 warrants, exercisable over a three-year period from the date of issuance to purchase up to 3,023,871 ordinary shares at a per share exercise price of $2.96 (“Investors Warrants”). In addition, the exercise price was subject to reduction if, within one year of the date of original issuance of the warrants which ended in December 2020, the Company issued ordinary shares at an effective price per share less than $2.96. Following the closing of the offering, the Company issued to a broker-dealer 184,515 warrants and 92,257 warrants with per share exercise prices of $2.37 to $2.96, respectively (“Broker Warrants”). |
On April 21, 2021, upon satisfaction of the sale price condition pursuant to the subscription agreement, the Company’s Board of Directors elected to accelerate the termination date of the Investors Warrants and Broker Warrants. In accordance with the terms of the applicable agreements, the holders had the opportunity to exercise their warrants until June 23, 2021, following which any unexercised warrants would terminate.
c. | On July 4, 2020, the Company filed a primary registration statement on form F-3 and established an at-the-market equity program (the " 2020 ATM Program") that allowed 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"). |
In 2021, the Company issued an additional 2,546,265 ordinary shares pursuant to the 2020 ATM Program for net proceeds of $9.9 million at a weighted average price of $3.99 per ordinary share.
d. | On May 7, 2021, the Company entered into a new at-the-market equity program (the "2021 ATM Program") that allowed the Company to issue up to additional five million ordinary shares, at the Company's discretion. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - SHARE CAPITAL (continued)
e. | In June and July 2021, the Company issued an aggregate of 1,840,463 ordinary shares pursuant to the 2021 ATM Program for net proceeds of $12.1 million at a weighted average price of $6.74 per ordinary share. |
f. | During the year ended December 31, 2021, several employees and service providers exercised 177,711 options into 177,711 ordinary shares for a total consideration of $418 at a weighted average price of $2.54 per ordinary share. |
g. | During the year ended December 31, 2022, one employee exercised 5,511 options into 5,511 ordinary shares for a total consideration of $13 at a price of $2.14 per ordinary share. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1) | Share-based compensation plan |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHARE-BASED COMPENSATION (continued)
2) | share-based compensation grants to employees and directors: |
a) | On January 4, 2021, options to purchase 1,314,218 ordinary shares were granted to the Company’s former Chief Executive Officer, Dr. Spiros Jamas with an exercise price of $1.24 per share. Prior to the terms of Dr. Jamas’ separation agreement (as described below), the options were to vest over four years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option to vest in twelve equal quarterly installments following the first anniversary of the grant date. The grant was subject to the approval by the Company’s shareholders, which approved the grant in March 2021. The fair value of the options at the date of grant was $1,320. |
b) | On April 7, 2021, the Company’s Board of Directors approved the following option grants: |
i. | Option 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 four 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 three 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. |
c) | 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 four 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. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHARE-BASED COMPENSATION (continued)
d) | 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 members on January 1, 2022. The options will vest over three 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 members on January 1, 2022. The options will vest over one 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. |
e) | On March 31, 2022, the Company’s Board of Directors approved the following option grants: |
i. | Options to purchase 80,000 ordinary shares to an executive officer and a service provider, in each case, with an exercise price of $2.86 per share. The fair value of the options was $147. |
ii. | Options to purchase 55,000 ordinary shares to certain executive officers with an exercise price of $2.86 per share. This grant was subject to shareholders' approval, which was obtained at a meeting of the Company’s shareholders held on September 7, 2022. The fair value of the options was $37. The options vest over four 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. |
f) | On April 28, 2022, the Company’s Board of Directors approved option grants to purchase 220,000 ordinary shares to employees with an exercise price of $2.57 per share. The options vest over four 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 was $364. |
g) | On May 11, 2022, the Company’s Board of Directors approved a grant of options to purchase 500,000 ordinary shares to Ms. Miranda Toledano, who was serving as the Company’s Chief Financial Officer at the time of the grant. Ms. Toledano has since been appointed the Company’s Chief Executive Officer (as described in Note 6(2)l below). This grant was subject to shareholders' approval, which was obtained at a meeting of the Company’s shareholders held on September 7, 2022. These options have an exercise price of $2.00 per share and vest over four 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 was $390. |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHARE-BASED COMPENSATION (continued)
h) | On July 15, 2022, the Company’s Board of Directors appointed Ms. Miranda Toledano as the Company’s Chief Executive Officer and approved a grant of options to purchase 600,000 ordinary shares at an exercise price of $1.40 per share, which are in addition to the options described in note 6(2)k above. This grant was subject to shareholders' approval, which was obtained at a meeting of the Company’s shareholders held on September 7, 2022. The options vest over four 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 applicable grant date. The fair value of the options was $524. |
i) | On June 15, 2022, the Company entered into a separation agreement with Dr. Phillip Schwartz, the Company’s former President of R&D, under which Dr. Schwartz agreed to continue to provide services to the Company until July 21, 2022 (the “Separation Date”). Pursuant to the terms of the separation agreement, which were approved by the Company’s shareholders on September 7, 2022, Dr. Schwartz received a full acceleration of his unvested options, as of the Separation Date, to purchase 68,750 ordinary shares granted in April 2021 that otherwise would have been forfeited. These options, together with 31,250 already vested options granted in April 2021 and 357,500 already vested options to purchase ordinary shares granted in 2017, will be exercisable for a period of 10 years from their respective initial grant dates. |
The acceleration described above was recognized as a "Type III" modification; therefore, on the shareholder approval date, the Company recognized the incremental costs of unvested options based on the fair value of the options on such date. In addition, the extension of the exercise period for the vested awards was recognized as a "Type I" modification. The total expense amount was $112 thousand, which was classified as additional share-based compensation costs in the research and development expenses.
In addition, the separation agreement provides for the following payments to Dr. Schwartz, all of which would have otherwise been payable in accordance with either Israeli law or pursuant to his existing employment agreement: a one-time cash separation payment in an amount equal to NIS 537,600 (approximately $156) and additional payments of NIS 737,771 (approximately $214) in respect of all other ongoing accrued benefits, subject to any mandatory deductions. The foregoing payments were recognized in the research and development expenses.
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2022 | 2021 | |||||||
Exercise price | $1.40-$2.86 | $1.24-$3.61 | ||||||
Dividend yield | - | - | ||||||
Expected volatility | 69%-70.2% | 68%-71% | ||||||
Risk-free interest rate | 1.35%-3.36% | 1.11%-0.94% | ||||||
Expected life - in years | 5.5-6.5 | 6.1-5.8 |
2022 | 2021 | |||||||||||||||
Number of options | Weighted average exercise price | Number of options | Weighted average exercise price | |||||||||||||
Outstanding at beginning of the year | 4,316,859 | $ | 3.63 | 2,570,109 | $ | 4.85 | ||||||||||
Granted | 2,458,863 | 2.29 | 1,975,586 | 1.95 | ||||||||||||
Exercised | (5,511 | ) | 2.14 | (177,710 | ) | 2.37 | ||||||||||
Forfeited | (902,009 | ) | 1.41 | (16,660 | ) | 2.37 | ||||||||||
Expired | (135,115 | ) | 3.80 | (34,466 | ) | 4.00 | ||||||||||
Outstanding at end of the year | 5,733,087 | $ | 3.30 | 4,316,859 | $ | 3.63 | ||||||||||
Exercisable at end of the year | 3,165,677 | $ | 4.06 | 2,068,067 | $ | 5.39 |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHARE-BASED COMPENSATION (continued)
The following tables summarizes information concerning outstanding and exercisable options as of December 31, 2022, in terms of ordinary shares:
December 31, 2022 | ||||||||||||||||||
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 | ||||||||||||||
- | 1,560 | 0.09 | 1,560 | 0.09 | ||||||||||||||
1.24 | 492,831 | 1.54 | 492,831 | 1.54 | ||||||||||||||
1.40 | 600,000 | 9.54 | - | - | ||||||||||||||
2.02 | 500,000 | 9.37 | - | - | ||||||||||||||
2.14 | 400,775 | 7.26 | 277,994 | 7.26 | ||||||||||||||
2.53 | 33,638 | 6.89 | 33,638 | 6.89 | ||||||||||||||
2.57 | 205,500 | 9.33 | - | - | ||||||||||||||
2.815 | 1,003,863 | 9.01 | 376,447 | 9.01 | ||||||||||||||
2.86 | 135,000 | 9.25 | - | - | ||||||||||||||
3.15 | 345,000 | 8.30 | 123,125 | 8.30 | ||||||||||||||
3.61 | 250,868 | 8.27 | 101,059 | 8.27 | ||||||||||||||
3.68 | 294,580 | 0.26 | 294,580 | 0.26 | ||||||||||||||
3.97 | 247,082 | 6.05 | 242,053 | 6.05 | ||||||||||||||
6.31 | 1,222,390 | 3.08 | 1,222,390 | 3.08 | ||||||||||||||
5,733,087 | 3,165,677 |
The aggregate intrinsic value of the total of the outstanding and exercisable options as of December 31, 2022, is $1.
The following table illustrates the effect of share-based compensation on the statements of operations:
2022 | 2021 | |||||||
Cost of revenues | 14 | 102 | ||||||
Research and development expenses | 708 | 661 | ||||||
General and administrative | 1,525 | 1,098 | ||||||
2,247 | 1,861 |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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. is taxed separately under the U.S. tax laws at a tax rate of 29% (Federal and state tax) |
B. | Losses for tax purposes carried forward to future years |
The balance of carryforward losses as of December 31, 2022 and 2021 are approximately $67.1 million and $56.1 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 2017. | |
D. | Loss (income) before income taxes is composed of the following |
Year ended December 31 | ||||||||
2022 | 2021 | |||||||
Entera Bio Ltd. | 12,997 | 12,362 | ||||||
Entera Bio Inc. | (65 | ) | (116 | ) | ||||
Total loss before taxes | 12,934 | 12,246 |
E. | Income tax expense (benefit): |
Year ended December 31 | ||||||||
2022 | 2021 | |||||||
Current: | ||||||||
Subsidiary: | (37 | ) | 158 | |||||
Total current income tax | (37 | ) | 158 | |||||
Deferred income taxes | 174 | (217 | ) | |||||
Total deferred income taxes | 174 | (217 | ) | |||||
Total income tax expense (benefit) | 137 | (59 | ) |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - INCOME TAX (continued)
F. | Deferred income taxes |
December 31, | ||||||||
2022 | 2021 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carry forward | 15,428 | 12,895 | ||||||
Research and development | 1,225 | 1,319 | ||||||
Share-based compensation | 877 | 876 | ||||||
Other | 158 | 152 | ||||||
Net deferred tax assets before valuation allowance | 17,688 | 15,242 | ||||||
Valuation allowance | (17,645 | ) | (15,025 | ) | ||||
Net deferred tax assets | 43 | 217 |
The Company has classified the net deferred tax assets as long-term. In assessing the likelihood of realizing deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences and carry forward losses become deductible. Based on the taxable loss in the Israel, management believes it was more likely than not that the deferred tax assets will not be realized in the Israel and believes it was more likely than not that deferred tax assets will be realized for the U.S. subsidiary. |
G. | Rollforward of valuation allowance: |
Balance at January 1, 2021 | 12,420 | |||
Additions | 2,605 | |||
Balance at January 1, 2022 | 15,025 | |||
Additions | 2,620 | |||
Balance at December 31, 2022 | 17,645 |
ENTERA BIO LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - 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 |
December 31, | ||||||||
2022 | 2021 | |||||||
Accrued expenses and other payables: | ||||||||
Employees and employees related | 154 | 147 | ||||||
Income tax | - | 134 | ||||||
Provision for vacation | 146 | 308 | ||||||
Accrued expenses | 933 | 2,212 | ||||||
1,233 | 2,801 |
a. | On January 2, 2023, 534,246 options to purchase ordinary shares were granted to six non-executive board members with an exercise price of $0.73 per share. The options will vest over one year in four equal quarterly installments starting on January 1, 2023. This grant was approved by the shareholders of the Company on October 4, 2021. |
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. |
Name | Age | Position |
Executive Officers | ||
Miranda J. Toledano (5) | 46 | Chief Executive Officer and Director |
Dana Yaacov-Garbeli | 39 | Chief Financial Officer |
Dr. Hillel Galitzer | 44 | Chief Operating Officer |
Dr. Arthur Santora | 72 | Chief Medical Officer |
Non-Employee Directors | ||
Gerald Lieberman (1) | 76 | Director, Chairman of the Board of Directors |
Dr. Roger J. Garceau (5) | 69 | Director, Chairman of the Scientific Advisory Committee |
Ron Mayron (1) (2) | 59 | Director, Chairman of the Compensation Committee |
Gerald M. Ostrov (1) (2) (3) | 73 | Director, Chairman of the Audit Committee |
Sean Ellis (1) (3) (4) | 48 | Director |
Yonatan Malca (1)(2) (3) (4) (5) | 56 | Director, Chairman of the Corporate Governance and Nomination Committee |
• | the Class I directors are Miranda J. Toledano, Roger Garceau and Ron Mayron; |
• | the Class II director is Yonatan Malca; and |
• | the Class III directors are Gerald Lieberman, Gerald M. Ostrov and Mr. Sean Ellis. |
Scientific Advisory Committee
Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Award(s) ($)(1) | All Other Compensation ($) | Total ($) | ||||||||||||||||
Miranda Toledano (2) | 2022 | 231 | �� | - | 382 | 66 | 679 | |||||||||||||||
Chief Executive Officer and director | 2021 | 17 | 65 | 82 | ||||||||||||||||||
Spiros Jamas (3) | 2022 | 255 | 95 | (256 | ) | 428 | 522 | |||||||||||||||
Former Chief Executive Officer | 2021 | 392 | - | 751 | - | 1,143 | ||||||||||||||||
Dr. Phillip Schwartz (4) | 2022 | 188 | 27 | 196 | 371 | 782 | ||||||||||||||||
Former President of R&D | 2021 | 453 | - | 183 | 49 | 685 | ||||||||||||||||
Dr. Hillel Galitzer | 2022 | 287 | 63 | 234 | 37 | 621 | ||||||||||||||||
Chief Operating Officer | 2021 | 319 | 260 | 61 | 640 |
(1) | Reflects the associated annual expense recorded in our financial statements for the year ended December 31, 2022, based on the grant date fair value of the share-based compensation granted in exchange for the directors’ and officers’ services computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation - Stock Compensation (“ASC Topic 718”). The assumptions used in calculating the amounts are discussed in the notes of the Company’s audited financial statements for the year ended December 31, 2022 included in this Annual Report. The fair value amount is recognized as an expense over the course of the vesting period of the options (subject to any applicable accounting adjustments during that period). |
(2) | Ms. Toledano was appointed as our Chief Business Officer, Chief Financial Officer and Head of Corporate Strategy in May 2022. Ms. Toledano was then appointed as our Chief Executive Officer in July 2022. The compensation for fiscal year 2021 and until May 2022 represents her compensation as a non-employee board member. |
(3) | Mr. Jamas served as our Chief Executive Officer from January 4, 2021 until July 13, 2022. Pursuant to the mutual separation agreement entered into between us and Mr. Jamas, he was entitled to a one-time lump sum payment of his annual base salary for a period of 13 months which is included in the table above. |
(4) | Dr. Schwartz served as the President of R&D during fiscal years 2021 and 2022 through his resignation on July 21, 2022. On June 15, 2022, Dr. Schwartz resigned from his position with the Company, effective July 21, 2022. The compensation for fiscal year 2022 represents his compensation received for services rendered through his resignation date. |
Number of Securities Underlying Unexercised Options | Option | |||||||||
Name | Exercisable | Unexercisable | Expiration Date | |||||||
Miranda Toledano | 33,638 | 17/1/2029 | ||||||||
Chief Executive Officer and director | 35,852 | 1/1/2031 | ||||||||
35,852 | 71,705 | (1) | 1/1/2031 | |||||||
500,000 | (2) | 16/05/2032 | ||||||||
600,000 | (3) | 15/07/2032 | ||||||||
Dr. Spiros Jamas Former Chief Executive Officer | 492,832 | - | 14/7/2023 | |||||||
Dr. Phillip Schwartz | 357,500 | - | 23/11/2027 | |||||||
Former President of R&D | 100,000 | - | 21/4/2031 | |||||||
Dr. Hillel Galitzer | 143,000 | - | 15/11/2023 | |||||||
Chief Operating Officer | 120,312 | 54,688 | (4) | 16/3/2030 | ||||||
46,875 | 78,125 | (5) | 21/4/2031 | |||||||
60,000 | (6) | 30/3/2032 |
(1) | The 71,705 unexercisable options as of December 31, 2022 will vest in eight equal quarterly installments beginning on March 31, 2023. |
(2) | Of the 500,000 unexercisable options as of December 31, 2022, 25% vest on May 16, 2023, the first anniversary of the grant date and the remaining 75% begin vesting in 12 equal quarterly installments over the following three years. |
(3) | Of the 600,000 unexercisable options as of December 31, 2022, 25% vest on July 15, 2023, the first anniversary of the grant date and the remaining 75% begin vesting in 12 equal quarterly installments over the following three years. |
(4) | The 54,688 unexercisable options as of December 31, 2022 will vest in five equal quarterly installments beginning on March 16, 2023. |
(5) | The 78,125 unexercisable options as of December 31, 2022 will vest in 10 equal quarterly installments from January 21, 2023. |
(6) | Of the 60,000 unexercisable options as of December 31, 2022, 25% vest on March 31, 2023, the first anniversary of the grant date and the remaining 75% will vest in 12 equal quarterly installments over the following three years. |
Name | Fees Earned or Paid in Cash ($) | Option Awards ($)(1) | All Other Compensation ($) | Total ($) | ||||||||||||
Gerald Lieberman | 61,000 | 196,000 | - | 257,000 | ||||||||||||
Dr. Roger J. Garceau | 41,000 | 196,000 | - | 237,000 | ||||||||||||
Yonatan Malca | 56,000 | 196,000 | - | 252,000 | ||||||||||||
Ron Mayron | 50,000 | 229,000 | - | 279,000 | ||||||||||||
Gerald M. Ostrov | 56,000 | 196,000 | - | 252,000 | ||||||||||||
Sean Ellis | 52,000 | 196,000 | - | 248,000 |
(1) | Reflects the associated annual expense recorded in our financial statements for the year ended December 31, 2022, based on the grant date fair value of the share-based compensation granted in exchange for the directors’ and officers’ services computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation - Stock Compensation (“ASC Topic 718”). The assumptions used in calculating the amounts are discussed in the notes of the Company’s audited financial statements for the year ended December 31, 2022 included in this Annual Report. The fair value amount is recognized as an expense over the course of the vesting period of the options (subject to any applicable accounting adjustments during that period). |
Name | Share Options | |||
Gerald Lieberman | 324,337 | |||
Dr. Roger J. Garceau | 449,739 | |||
Yonatan Malca | 177,047 | |||
Ron Mayron | 177,047 | |||
Gerald M. Ostrov | 177,047 | |||
Sean Ellis | 177,047 |
Employment Agreements
• | a one-time lump sum payment of Dr. Jamas’ annual base salary for a period of thirteen (13) months, for a total gross amount equal to $411,666.67, after the expiration of the revocation period; |
• | an extension of the exercise period for the vested portion of the share option granted to Dr. Jamas on January 4, 2021 pursuant to the terms of the Company’s 2018 Equity Incentive Plan, representing collectively 492,832 ordinary shares, through the end of a two-year period commencing on the Jamas Separation Date. |
In addition, the separation agreement provides for the following payments to Dr. Schwartz, all of which would have otherwise been payable in accordance with either Israeli law or pursuant to his existing employment agreement: a one-time cash separation payment in an amount equal to NIS 537,600 (approximately $155.9) and additional payments of NIS 737,771 (approximately $214.0) in respect of all other ongoing accrued benefits, subject to any mandatory deductions. The foregoing payments were recognized in the research and development expenses
• | each person or entity known by us to own beneficially 5% or more of our outstanding Ordinary Shares; |
• | each of our directors and executive officers individually; and |
• | all of our executive officers and directors as a group. |
Name | Number and Percentage of Ordinary Shares | |||||||
Number | Percent | |||||||
5% or Greater Shareholders (other than directors and executive officers) | ||||||||
D.N.A Biomedical Solutions Ltd.(1) | 3,762,960 | 13.1 | % | |||||
Gakasa Holdings LLC.(2) | 2,484,275 | 8.6 | % | |||||
Centillion Fund (3) | 2,396,953 | 8.3 | % | |||||
Executive Officers and Directors: | ||||||||
Yonatan Malca(4) | 143,798 | * | ||||||
Gerald Lieberman(5) | 494,515 | 1.7 | % | |||||
Dr. Roger J. Garceau(6) | 464,198 | 1.6 | % | |||||
Dr. Hillel Galitzer(7) | 385,856 | 1.3 | % | |||||
Dr. Arthur Santora(8) | 60,000 | * | ||||||
Miranda J. Toledano(9) | 296,105 | 1.0 | % | |||||
Gerald M. Ostrov(10) | 146,566 | * | ||||||
Sean Ellis(11) | 201,666 | * | ||||||
Dana Yaacov-Garbeli(12) | 151,580 | * | ||||||
Ron Mayron(13) | 132,353 | * | ||||||
All Directors and Executive Officers as a Group (10 persons)(14) | 2,476,637 | 8.0 | % |
(1) | D.N.A Biomedical Solutions Ltd.’s holdings consisted of 3,762,960 Ordinary Shares. D.N.A’s address is at Shimon Hatarsi 43 St., Tel Aviv, Israel. |
(2) | Based on the Schedule 13G/A filed by Gakasa Holdings LLC with the SEC on June 14, 2021 regarding its holdings as of May 19, 2021. Gakasa Holdings LLC’s address is 201 S. Biscayne Blvd., Suite 800, Miami, Florida. |
(3) | Based on the Schedule 13G/A filed by Centillion Fund Inc. with the SEC on November 18, 2022 regarding its holdings as of August 31, 2022. Centillion Fund Inc’s address is 10 Manoel Street, Castries, Saint Lucia LC04 101 |
(4) | Consists of (i) 7,232 Ordinary Shares and (ii) 136,566 Ordinary Shares underlying options to acquire Ordinary Shares. |
(5) | Consists of (i) 210,659 Ordinary Shares and (ii) 283,856 Ordinary Shares underlying options to acquire Ordinary Shares. |
(6) | Consists of (i) 4,940 Ordinary Shares and (ii) 459,258 Ordinary Shares underlying options to acquire Ordinary Shares. |
(7) | Consists of (i) 34,106 Ordinary Shares and (ii) 351,750 Ordinary Shares underlying options to acquire Ordinary Shares. |
(8) | Consists of 60,000 Ordinary Shares underlying options to acquire Ordinary Shares. |
(9) | Consists of (i) 56,800 Ordinary Shares and (ii) 239,305 Ordinary Shares underlying options to acquire Ordinary Shares. |
(10) | Consists of (i) 10,000 Ordinary Shares and (ii) 136,566 Ordinary Shares underlying options to acquire Ordinary Shares. |
(11) | Consists of (i) 62,100 Ordinary Shares (ii) 3,000 Ordinary Shares underlying warrant to acquire Ordinary Shares and (iii) 136,566 Ordinary Shares underlying options to acquire Ordinary Shares. |
(12) | Consists of (i) 56,580 Ordinary Shares and (ii) 95,000 Ordinary Shares underlying options to acquire Ordinary Shares. |
(13) | Consists of (i) 7,000 Ordinary Shares and (ii) 125,353 Ordinary Shares underlying options to acquire Ordinary Shares. |
(14) | Consists of (i) 449,417 ordinary Shares (ii) 3,000 Ordinary Shares underlying warrant to acquire Ordinary Shares and (iii) options to acquire 1,899,220 Ordinary Shares. |
Plan Category | Number of securities to be issued upon exercise of outstanding options, RSUs, warrants and rights (#) | Weighted-average exercise price of outstanding options, RSUs, warrants and rights ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (#) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | ||||||||||||
2013 Plan | 1,518,262 | $ | 5.71 | - | ||||||||
2018 Plan | 4,214,825 | $ | 2.04 | 922,080 | ||||||||
Equity compensation plans not approved by security holders | - | - | - | |||||||||
Total | 5,733,087 | $ | 3.30 | 922,080 |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
• | The amounts involved exceeded or will exceed the lesser of (i) $120,000 and (ii) one percent of the average of the Company’s total assets at year-end for the last two completed fiscal years; and |
• | A director, executive officer, holder of more than 5% of the outstanding share capital of the Company, or any member of such person’s immediate family had or will have a direct or indirect material interest. |
Kesselman & Kesselman (a member firm of PricewaterhouseCoopers International Limited, or PwC) has served as our independent registered public accounting firm for 2022 and 2021. The following table sets forth fees billed to us by our independent registered public accounting firm during the fiscal years ended December 31, 2022 and 2021 for (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees; (iii) services rendered during the period in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.
Year Ended December 31, | ||||||||
2022 | 2021 | |||||||
Audit fees (1) | $ | 194,000 | $ | 190,000 | ||||
Tax fees(2) | 7,500 | 6,500 | ||||||
Total fees | $ | 201,500 | $ | 196,500 |
(1) | Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements and services related to certain registration statements. |
(2) | Tax consulting services. |
Item 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
(a) | Documents filed as part of this report: |
(1) | Financial statements See Item 8 for Financial Statements included with this Annual Report. |
(2) | Financial Statement Schedules None. |
(3) | Exhibits: See below. |
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 31, 2023 | ENTERA BIO LTD. | ||
By: | /s/ Miranda J. Toledano | ||
Miranda J. Toledano | |||
Chief Executive Officer and Director |
Name | Title | Date | ||
/s/ Miranda J. Toledano | Chief Executive Officer and Director | March 31, 2023 | ||
Miranda J. Toledano | (Principal Executive Officer) | |||
/s/ Dana Yaacov-Garbeli | Chief Financial Officer | March 31, 2023 | ||
Dana Yaacov-Garbeli | (Principal Financial and Accounting Officer) | |||
/s/ Gerald Lieberman | Director | March 31, 2023 | ||
Gerald Lieberman | ||||
/s/ Roger J. Garceau | Director | March 31, 2023 | ||
Roger J. Garceau | ||||
/s/ Ron Mayron | Director | March 31, 2023 | ||
Ron Mayron | ||||
/s/ Yonatan Malca | Director | March 31, 2023 | ||
Yonatan Malca | ||||
/s/ Sean Ellis | Director | March 31, 2023 | ||
Sean Ellis | ||||
/s/ Gerald M. Ostrov | Director | March 31, 2023 | ||
Gerald M. Ostrov |