Table of Contents
|
|
Page |
|
|
7 |
|
|
7 |
|
|
37 |
|
|
76 |
|
|
77 |
|
|
77 |
|
|
77 |
|
|
|
|
|
78 |
|
|
78 |
|
|
78 |
|
|
78 |
|
|
88 |
|
|
89 |
|
|
119 |
|
|
119 |
|
|
119 |
|
|
119 |
|
|
|
|
|
120 |
|
|
120 |
|
|
129 |
|
|
139 |
|
|
142 |
|
|
143 |
|
|
|
|
|
144 |
|
|
144 |
|
|
146 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) contains “forward-looking
statements,” as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Various statements in this report are “forward-looking statements” within the
meaning of the PSLRA and other U.S. Federal securities laws. In addition, historic results of scientific research and clinical and preclinical
trials do not guarantee that the conclusions of future research or trials would not be different, and historic results referred to in
this Annual Report may be interpreted differently in light of additional research and clinical and preclinical trial results. Forward-looking
statements include all statements that are not historical facts. We have based these forward-looking statements largely on our management’s
current expectations and future events and financial trends that we believe may affect our financial condition, results of operations,
business strategy and financial needs. Forward-looking statements involve substantial risks and uncertainties. All statements, other than
statements of historical facts, included in this report regarding our strategy, future operations, future financial position, projected
costs, prospects, plans and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties
and are based on information currently available to our management. Words such as, but not limited to, “anticipate,” “believe,”
“contemplates,” “continue,” “could,” “design,” “estimate,” “expect,”
“intend,” “likely,” “may,” “ongoing,” “plan,” “potential,” “predict,”
“project,” “will,” “would,” “seek,” “should,” “target,” or the
negative of these terms and similar expressions or words, identify forward-looking statements. The events and circumstances reflected
in our forward-looking statements may not occur and actual results could differ materially from those projected in our forward-looking
statements. These factors include those described in “Item 1A-Risk Factors” of this Annual Report on Form 10-K. Meaningful
factors which could cause actual results to differ include, but are not limited to:
|
• |
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. |
All forward-looking statements contained in this Annual Report are expressly qualified
in their entirety by the cautionary statements contained or referred to in this section. We caution investors not to rely too heavily
on the forward-looking statements we make or that are made on our behalf. Except as required by applicable law, we are under no duty,
and expressly disclaim any obligation, to update or revise publicly any forward-looking statements, whether as a result of new information,
future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in any annual, quarterly
or current reports that we may file with the Securities and Exchange Commission (“SEC”).
We encourage you to read the discussion and analysis of our financial condition and
our consolidated financial statements contained in this Annual Report. We also encourage you to read Item 1A of this Annual Report, entitled
“Risk Factors,” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of
Operation-Liquidity and Capital Resources” of this Annual Report for additional discussion of the risks and uncertainties associated
with our business. There can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially
realized, that they will have the expected consequences to, or effects on, us. Therefore, no assurance can be given that the outcomes
stated in such forward-looking statements and estimates will be achieved.
PART I
Unless the context otherwise requires, all references in this Annual Report on Form
10-K to the “Company,” “Entera,” “we,” “our,” and “us” refer to Entera Bio
Ltd., an Israeli company, including its consolidated subsidiary.
ITEM 1.
BUSINESS
Overview
Entera is a clinical stage biopharmaceutical company and a leader in the development
of orally delivered macromolecule therapeutics, including peptides and therapeutic proteins. Currently, most protein therapies are administered
via frequent intravenous, subcutaneous, or intramuscular injections. In chronic diseases where patients require persistent management,
these cumbersome, often painful and high-priced injections can create a major treatment gap. Furthermore, from a technical standpoint,
oral delivery of therapeutic proteins has historically been challenging due to enzymatic degradation within the gastrointestinal tract,
poor absorption into the blood stream and variable drug exposures. Entera’s proprietary technology is designed to deliver orally
administered proteins with sufficient bioavailability to meet treatment goals, using white mini tablets (around 6mm in diameter) of the
desired protein.
We strategically focus on underserved, chronic medical conditions where oral administration
of a mini tablet peptide or peptide replacement therapy has the potential to significantly shift a treatment paradigm.
We currently have two product candidates in the clinical stage of development: EB613
and EB612. Both candidates are first-in-class daily mini tablets of human parathyroid hormone (hPTH (1-34), teriparatide). To date, Entera’s
proprietary PTH tablets have been safely administered to a total of 72 healthy subjects in Phase 1 studies and 153 patients across Phase
2 studies in osteoporosis and hypoparathyroidism, two diseases that remain underserved with the current standard of care and which disproportionately
affect women. In addition to these product candidates, we have various internal early stage research programs in other approved peptides
such as GLP-2 and hGH, as well as outside early stage collaborations to potentially diversify our revenue stream.
Pipeline
The following chart summarizes the current
stage of development of each of our current product candidates and their potential indications.
Our Product Candidates
The following table summarizes our clinical stage product candidates. We retain global
rights to both EB613 and EB612.
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 |
Our lead product candidates, EB613 for the treatment of osteoporosis and EB612 for
the treatment of hypoparathyroidism are first-in-class mini tablet formulations of synthetic human PTH (1-34) (teriparatide), designed
to have differing pharmacokinetic, or PK, profiles. We believe these product candidates, if approved, have the potential to become standards
of care for patients with osteoporosis and hypoparathyroidism.
Additionally, given our expertise in oral PTH, we may investigate the efficacy of
alternative oral PTH tablets for the treatment of delayed-union or non-union fractures independently or in collaboration with a strategic
partner. Currently, no pharmacological treatments are approved to stimulate bone healing, treat delayed union fractures or treat patients
with non-union following a fracture. A number of studies suggest that PTH could be beneficial in the treatment of such fractures by potentially
accelerating union and/or reduce the risk of non-union.
Our Strategy
Our goal is to develop first-in-class orally delivered therapies for underserved,
chronic medical conditions where a mini tablet peptide or peptide replacement therapy has the potential to significantly shift a treatment
paradigm. We are developing our product candidates to potentially become the first oral, daily mini tablet peptide or peptide replacement
therapies designed for patients to live injection-free as they actively manage their chronic diseases. We aspire to continue to validate
our platform across a variety of additional high value therapeutic proteins. Our strategy to achieve these goals includes:
|
• |
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. |
PTH
Parathyroid hormone (PTH) is an 84-amino acid hormone that regulates calcium and phosphate
homeostasis and bone metabolism in the body. In healthy individuals, PTH is generally produced at very low basal levels, at a blood concentration
of 15 - 25 pg/mL. On top of the basal PTH levels, there are physiological pulses two to three times per day that result in
transient increases in PTH levels reaching up to 65 pg/mL. The changes in PTH secretion are in response to ionized calcium concentrations
in the blood resulting from the entry of calcium from nutrients in the intestine and resorption of calcium from bone.
PTH in Osteoporosis
The effects of PTH on bone depends on the duration of exposure. The physiological
pulses help encourage bone turnover through activation of both osteoblasts and osteoclasts, the two main types of cells responsible for
bone remodeling. In the absence of adequate parathyroid function producing these pulses, it is difficult for the body to regulate homeostatic
processes, and osteoporosis may ensue. The synthetic analog of PTH, human parathyroid hormone (1-34) peptide, Forteoâ
(teriparatide), has been approved in the United States and the EU (Forsteo®)
and has been a mainstay anabolic (bone forming) therapy for the treatment of osteoporosis patients since 2002 and 2003, respectively.
Forteo® requires a daily subcutaneous injection.
EB613: First Daily Osteoanabolic Mini Tablets for the Treatment
of Osteoporosis
EB613 is the first once daily mini tablet formulation of hPTH (1-34), (teriparatide)
and has the same amino acid sequence as Forteoâ
(teriparatide daily subcutaneous injection), a leading anabolic agent which achieved peak annual sales of $1.7 billion prior to patent
expiration.
![](https://www.sec.gov/Archives/edgar/data/0001638097/000117891323001272/image00016.jpg)
Osteoporosis is a disease characterized by low bone mass and structural deterioration
of bone tissue, which leads to greater fragility of bones and an increase in fracture risk. Osteoporosis is most frequently associated
with menopause in women, aging in both women and men and glucocorticoid steroid use (greater than three months). The bone remodeling cycle
can be separated into two distinct processes: (i) bone resorption, where cells called osteoclasts function in the resorption of mineralized
tissue; and (ii) bone formation, where cells called osteoblasts are responsible for bone matrix synthesis and subsequent mineralization
of the bone. In healthy individuals, bone resorption is matched by new bone formation. Osteoporosis develops as the balance between bone
resorption by osteoclasts and bone formation by osteoblasts is not maintained, and not enough bone tissue is formed, leading to frail
and fracture-prone bones.
Prevalence
The Bone Health & Osteoporosis Foundation (formerly named the National Osteoporosis
Foundation) estimates that 10.2 million Americans have osteoporosis and that an additional 40 million have low bone mass. More than
two million osteoporosis-related fractures occur annually in the United States and more than 70% of these occur in women. In U.S. women
55 years of age and older, the hospitalization burden, including hospital costs of osteoporotic fractures is greater than that of myocardial
infarction, stroke, or breast cancer. Furthermore, it estimated that the number of fractures in the United States due to osteoporosis
will rise to three million by 2025, resulting in an estimated $25.3 billion in costs each year. Worldwide, osteoporosis affects an estimated
200 million women, according to the International Osteoporosis Foundation, or IOF, and causes more than 8.9 million fractures annually,
which is equivalent to an osteoporotic fracture occurring approximately every three seconds. The IOF has estimated that 1.6 million hip
fractures occur worldwide each year, and by 2050 this number could reach between 4 to 6 million. The IOF estimates that, in Europe alone,
the annual cost of osteoporotic fractures could surpass €76 billion by 2050.
Current Osteoporosis Treatment Paradigm
The goal of pharmacological treatment of osteoporosis is to maintain or increase bone
mass and strength and to prevent fractures throughout a patient’s life. Ensuring that nutrients important to bone health is vital
to the prevention and treatment of osteoporosis, and calcium and vitamin D3
supplements are often required to achieve that goal. However, many patients with osteoporosis require prescription drug therapy to reduce
their risks of fractures. It is critical to identify patients who have significant bone loss. Pharmacologic therapy is strongly recommended
for patients with a T-score of -2.5 or lower in the spine, femoral neck, total hip, or 1/3 radius.
Osteoporosis drugs may be divided into two categories: antiresorptive and anabolic.
Drugs that inhibit bone resorption include oral and injectable options such as estrogen (for postmenopausal women), oral and intravenous
bisphosphonates, selective estrogen receptor modulators (SERMs), the RANK-ligand inhibitor (denosumab) and (salmon) calcitonin. The three
currently approved osteoanabolic drugs that stimulate bone formation all require daily or monthly subcutaneous injections: teriparatide
(hPTH[1-34]); abaloparatide (a PTH-related protein analog); and romosozumab (an antibody that inhibits sclerostin and also inhibits bone
resorption). There are currently no FDA-approved oral anabolic treatments for osteoporosis.
One substantial limitation of currently approved anabolic therapies is that osteoporotic
patients often report that the injections are inconvenient and occasionally painful. Many are unwilling to use injections even when their
physicians recommend it. In a recent review of bone anabolic drugs, the need for subcutaneous administration was cited as a major
reason for why anabolic medications are not a first-line treatment choice for osteoporosis. Thus, we believe that there is a substantial
need for a more generally acceptable oral anabolic alternative with bioavailability adequate to produce therapeutic effects.
Classification and Guidelines
According to the AACE 2020 Guidelines, injectable anabolic agents, such as teriparatide,
abaloparatide or romosozumab, can be considered as initial therapy for patients who are at very high fracture risk (which include women
who have had multiple vertebral fractures or hip fractures and high risk patients who have very low T-scores), and who have had an inadequate
response to antiresorptive therapies. For patients undergoing treatment, stable or increasing BMD at the spine and hip indicates a satisfactory
response. If BMD decreases significantly, patients should be evaluated for noncompliance, among other factors.
![](https://www.sec.gov/Archives/edgar/data/0001638097/000117891323001272/image00020.jpg)
In July 2022, we engaged a third-party firm to conduct primary market research with
endocrinologist and general practice clinicians who treat osteoporosis patients and to analyze prescription and sales data for osteoporosis
treatments. According to IQVIA, reported sales and qualitative surveys, it is estimated that less than 10% of osteoporosis patients use
current anabolic drugs (including the injectable PTH receptor activators currently available).
Phase 1 Safety, PK and PD Data for Entera Oral
PTH Tablet Programs
Our Oral PTH formulations, including EB613 and EB612, have been administered collectively
to a total of 72 healthy subjects in two Phase 1 studies. In the first Phase 1a study of 42 healthy subjects, escalating single doses
of oral PTH tablets containing up to 1.8 mg of hPTH(1-34) were well tolerated. There were no serious adverse events (SAEs) reported.
In the subsequent Phase 1b study of 30 healthy subjects, single doses of five formulations of oral PTH tablets containing up to 3 mg
of hPTH(1-34), administered collectively a total of 280 times (up to 14 times per person) were well tolerated, with no SAEs reported.
Adverse events considered by the investigator as possibly or probably drug-related were all transient and mild and included mild hypercalcemia
(calcium of 2.56, 2.62 mmol/L, both levels went back to normal within one hour) (N=2), mild tachycardia (N=3), headache (N=2), nausea
(N=1), anemia (N=1), and mild knee cramp (N=1).
In the Phase 1 studies in healthy subjects, the PK profile of EB613 daily tablets
was characterized by a rapid increase in plasma hPTH(1-34) levels, with peak concentrations of the drug observed within 30 minutes after
dose, with a rapid decline thereafter. The blood half-life of hPTH(1-34) in humans is less than five minutes (see Forteo® USPI).
Due to this very short elimination time and a short absorption phase, hPTH(1‑34) levels decrease below limit of quantitation within
two hours after the 0.5 mg x3 dose (1.5 mg hPTH[1‑34]) thus no drug accumulation is expected with once daily tablet dosing. Total
systemic exposure (AUC) following the administration of three 0.5 mg EB613 daily tablets (as were tested in Phase 2) was similar to that
of a 0.02 mg subcutaneous injection of Forteo®.
EB613 Phase 2 Study in Post-Menopausal Women
with Low Bone Mass and Osteoporosis
The Phase 2 clinical trial of EB613 was a dose-ranging, placebo-controlled, double-blind
study in 161 postmenopausal women with osteoporosis or low BMD conducted at four leading medical centers in Israel. The trial evaluated
0.5 mg to 2.5 mg daily tablets on BMD, pharmacodynamic bone markers, including P1NP and Osteocalcin - bone formation markers, CTX - a
bone resorption marker, and various safety endpoints. The initial treatment regimen included a top dose of 1.5 mg.
A planned limited interim analysis of the first 80 patients indicated that a dose
higher than 1.5 mg could produce greater effects on bone formation. A 2.5 mg dose was added, and enrollment of new patients in the
0.5 and 1.0 mg groups was ended. After orthostasis, an adverse event (AE), typical across PTH receptor activating agents, was observed
in patients initiating the constant 2.5 mg dose, the protocol was subsequently amended to introduce a titration regimen whereby patients
received 1.5 mg for one month, 2.0 mg for the next month and 2.5 mg during the remaining four months. There were no reported drug-related
SAEs. All adverse events were mild or moderate in intensity.
Safety
The most common drug-related adverse events associated with the discontinuation of
the Phase 2 clinical study’s medication were headache, nausea, dizziness and presyncope. There were no treatment emergent hypercalcemia
adverse events, and serial serum chemistry evaluations found no increase in group mean calcium or changes in calcium exceeding predefined
limits in patients treated with EB613 2.5 mg daily tablets. Only one subject in the EB613 2.5 mg titrated group did not tolerate 2.5 mg
but continued in the study and was asymptomatic with a reduced 1.5 mg dose.
Bone Biomarkers (PD Effect)
The primary bone biomarker endpoint of the Phase 2 clinical study—change in
P1NP at Month 3—was met. Statistically significant increases were observed in P1NP (key anabolic marker) at Month 1 (p<0.001),
Month 2 (p<0.005) and Month 3 (p<0.05) for the 2.5 mg EB613 dose group. Similar to the increase in P1NP, a significant increase
in Osteocalcin was also observed in the 2.5 mg group after 3 months (P <0.01). A statistically significant decrease also occurred in
Serum CTX (marker of resorption) from baseline to Month 6 (p<0.01).
The decrease in bone resorption (CTX) resulting from EB613 daily tablets was unanticipated
based on historical results from subcutaneously daily injectable PTH, Forteo® however, we believe that this was a potentially positive
development, reflecting a lower rate of bone turnover. The finding of no increase in P1NP after three months and decreased bone resorption
that persists through six months may indicate that the “anabolic window” remains open after six months of treatment with EB613.
Clinical trials have shown that early changes in biomarkers of bone formation and resorption are associated with long-term BMD changes
in women taking antiresorptive or anabolic drugs. Furthermore, significant dose response was observed for 0.5, 1.0, 1.5 and 2.5 mg of
EB613 on P1NP, Osteocalcin.
Bone Mineral Density
Dose-related changes in BMD were also observed at the total hip (TH), femoral neck
(FN) and lumbar spine (LS) locations with a linear regression showing a statistically significant dose response at all sites; TH (p=0.008),
FN (p=0.001), and LS (p<0.0001).
The placebo-adjusted increases in TH BMD (1.84%) and FN BMD (2.76%) for the pooled
(titrated and non-titrated) 2.5 mg EB613 daily tablets were both statistically significant (P<0.02 and P<0.002, respectively). The
increases in proximal femoral BMD (TH and FN) after six months of EB613 daily tablet treatment were unanticipated given that the reported
subcutaneous Forteo® injection increases are typically small and not significant (TH 0.1% and FN 0.3% p=NS (Leder, 2015) at six months.
The placebo-adjusted increase in LS BMD was 3.78% in the EB613 2.5 mg non-titrated dose group. This increase compares to the 3.9% placebo-adjusted
increase versus placebo seen in a previously reported study (Leder, 2015). Increases in TH (2.07%) and FN (2.92%) BMD in the 2.5 mg EB613
daily tablet titrated group were greater than those previously reported with Forteo®️ at six months (0.1% and 0.3%) (Leder,
2015).
The results of the Phase 2 study supported the selection of the 2.5 mg dose with a
titration regimen to be used in the proposed pivotal Phase 3 study of EB613.
FDA End of Phase 2 Meeting (EOP2) and Phase
3 Plans
After successful completion of the Phase 2 dose ranging study of EB613, we held an
end-of-Phase 2 meeting at the end of 2021 with the FDA to discuss various aspects of our nonclinical and clinical development plan. The
meeting focused on the potential use of BMD, rather than fracture incidence, as the primary endpoint, and a 12-month non-inferiority head-to-head
study versus Forteo® phase 3 study design to support an NDA under the 505(b)2 regulatory pathway.
Early in the first quarter of 2022, Entera received EOP2 minutes from the FDA, suggesting
that a non-inferiority head-to-head study versus Forteo® Phase 3 design may not be favorable to the success of the study and potential
approvability of EB613 oral PTH tablets. The agency also commented on a possible exploration of a placebo controlled phase 3 study and
a potential Total Hip (TH) BMD endpoint given recently published 24-month Surrogate Threshold Effects (STEs) that are considered associated
with fracture risk reduction .
We subsequently requested an additional EOP2 to the FDA to seek agreement on the specifications
and control of the drug substance, drug product and excipients to support the Phase 3 study and eventual product registration. The meeting
request was granted, and we received a written response from the FDA towards the end of the first quarter of 2022, confirming that the
specifications for the drug substance, excipients and drug product appear reasonable and that final determination on the adequacy of the
proposed excipients and drug product specification will be made during the NDA review. The FDA also provided guidance regarding the proposed
process scale-up, process qualification approach and stability plan for EB613.
FDA Type C Meeting
In July 2022, we announced that the FDA had granted our request for a Type C meeting
based on the revised phase 3 registrational study plan for EB613. In October 2022, we announced the successful conclusion of our Type
C meeting and the FDA’s agreement that a single Phase 3 placebo-controlled study could support a NDA submission of EB613 oral PTH
tablets under the 505(b)(2) regulatory pathway.
The FDA also agreed (i) that TH BMD could serve as the primary endpoint for the registrational
study of EB613 in post-menopausal women patients diagnosed with osteoporosis, (ii) with the proposed 2:1 randomization (EB613 vs. placebo)
design and (iii) that 400 patients exposed to EB613 would be sufficient to support both the safety and efficacy assessments for the NDA.
Furthermore, the FDA agreed with our proposed enrollment of post-menopausal women diagnosed with osteoporosis based on a BMD T-score of
≤-2.5 to -3.0 and no major fracture history. This patient population is consistent with that studied during our Phase 2 six-month
dose ranging study of EB613, which met all primary and key secondary endpoints of biochemistry and BMD. Finally, we agreed to submit relative
PK data, comparing EB613 versus the subcutaneous injection of teriparatide, Forteo® to support a NDA under the 505(b)2 regulatory
pathway.
FDA Type D Meeting
In
February 2023, we announced that a Type D meeting protocol review had been accepted by the FDA to provide responses by March 30th,
2023. The pivotal, Phase 3 study protocol is entitled “A 24-Month Phase 3, Randomized, Double-Blind, Global Multicenter Study Comparing
the Effects of Oral hPTH(1-34) (EBP05[EB613]) Daily Tablets vs. Placebo on Bone Mineral Density (BMD) in Postmenopausal Women with Osteoporosis.”
The objective of the Type D meeting review is to confirm that the protocol fully meets FDA’s expectations, including the analysis
of the primary endpoint and the population PK evaluations, ahead of potential initiation of the Phase 3 study in the second half of 2023.
EB612: First Daily PTH Replacement Therapy Tablets for the Treatment of Hypoparathyroidism
Hypoparathyroidism is a rare condition in which the body either fails to produce sufficient
amounts of PTH or the PTH produced lacks normal biologic activity. Individuals with a deficiency of parathyroid hormone may exhibit hypocalcemia
and hyperphosphatemia. Hypocalcemia can cause weakness, muscle cramps, excessive nervousness, headaches and uncontrollable twitching and
tetany. Hyperphosphatemia can result in soft tissue calcium deposition, which may lead to severe issues, including damage to the circulatory
and central nervous systems. The most common cause of hypoparathyroidism is damage to, or removal of, the parathyroid glands due to surgery
for another condition.
PTH in Hypoparathyroidism
In contrast to osteoporosis, longer persistence of PTH in plasma is a desirable property
for the treatment of hypoparathyroidism. Here hormone replacement therapy is warranted.
Prevalence
It is estimated that hypoparathyroidism affects approximately 200,000 people across
the United States, the European Union and Japan, with approximately 43% of cases characterized as mild, 39% characterized as moderate,
and 18% characterized as severe.
Limitations of current treatments for hypoparathyroidism
Historically, the treatments for hypoparathyroidism have been calcium supplements,
vitamin D supplements and phosphate binders. Although calcium and vitamin D can help alleviate hypocalcemia, their chronic use can result
in many serious side effects. Hypoparathyroid patients often need to take large doses of calcium throughout the day in order to maintain
serum calcium near the lower limit of the normal range. Moreover, ordinary vitamin D is generally insufficient, as the body cannot produce
adequate quantities of 1,25-dihydroxy vitamin D, the active hormone derived from vitamin D. Drugs like calcitriol and alfacalcitol must
often be prescribed to stimulate calcium absorption. If excess calcium is absorbed, it then falls upon the kidneys to dispose of excess
calcium. Endogenous PTH normally regulates renal calcium excretion, but this regulation is defective in patients with hypoparathyroidism.
Over many years of treatment, kidney stones may develop, and kidney failure may ultimately occur due to either kidney stones or deposition
of calcium phosphate in kidney tissue (called nephrocalcinosis). Despite the use of calcium and vitamin D supplements and other medications,
many patients with hypoparathyroidism continue to experience physical and cognitive symptoms.
An injectable form of full length human PTH (1-84) marketed under the name Natpara®,
was approved for the treatment of hypoparathyroidism in 2015. However, it was recalled in 2019 due to a plastic particulate and will be
permanently phased out globally by the end of 2024. There are two injectable PTH candidates for hypoparathyroidism undergoing clinical
development: TransCon™ PTH developed by Ascendis Pharma (PDUFA date of April 30, 2023, for adults with hypoparathyroidism;
European MAA decision expected in the fourth quarter of 2023) and Eneboparatide, a parathyroid hormone receptor 1 (PTHR1) agonist developed
by Amolyt Pharma (Phase 3 initiation expected in the first half of 2023). Both TransCon™ PTH and Eneboparatide require a daily subcutaneous
injection.
EB612
Our product candidate for hypoparathyroidism, EB612, is the first oral formulation
of PTH (1-34, teriparatide) hormone replacement treatment developed in a mini tablet form. The FDA and the EMA have granted EB612 orphan
drug designation for the treatment of hypoparathyroidism. We believe that EB612 may have inherent advantages compared to injectable forms,
including convenience of administration without any special preparation of the medication, as well as convenience of storage (room temperature
or refrigeration for long term storage).
Phase 2a Clinical Trial
In 2015, we successfully completed a multicenter Phase 2a clinical trial of EB612
in hypoparathyroidism patients. This study demonstrated the safety and tolerability of EB612 administered four times daily for 16 weeks
to patients with hypoparathyroidism. In this study, patients were titrated up to a maximum of 12 EB612 0.75 mg tablets a day (total daily
dose of 9 mg) according to each subject’s albumin-adjusted serum calcium (ACa), and supplement treatment regimen. Of the 19 enrolled
patients, 17 completed the trial. No drug-related serious adverse events were reported and most of the adverse events were not considered
study drug-related. The study achieved its primary and secondary endpoints, including a reduction in calcium supplements, reductions in
serum phosphate and 24-hour urine calcium excretion, maintenance of ACa within the reference range, and an improvement in quality of life.
Specific results of this trial included:
|
• |
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. |
Phase 2 PK/PD Clinical Trial
We initiated a two-part Phase 2 PK/PD trial in 2014. This trial was designed to provide
a bridge from one of our completed Phase 2a trials, which was conducted prior to the marketing approval of Natpara, and our planned future
clinical trials, and to also allow us to better understand the relative strength and dose of our product as compared to the then marketed
product, Natpara. The relevant endpoints for the PK/PD trial included an examination of levels of PTH (1-34), PTH (1-84) (Natpara), serum
calcium, serum phosphate, urinary calcium and urinary phosphate.
In November 2018, we announced the completion of part I of this Phase 2 PK/PD trial
which showed (i) an increase in the serum calcium by an average of approximately 0.3 mg/dL over baseline, with such increase maintained
over a 24-hour period; (ii) a decrease in serum phosphate by an average of 0.5 mg/dL below baseline with such decrease maintained over
a 24-hour period; (iii) an increase in average levels of serum active vitamin D of approximately 90% on the day of treatment as compared
to baseline; and (iv) a decrease in average levels of 24-hour urinary calcium of approximately 30% on the day of treatment as compared
to baseline. The concentration of PTH (1-34) in blood after administration of Oral PTH (1-34) in the trial was sufficient to produce the
observed pharmacodynamic effects and did not induce hypercalcemia. No serious adverse events were reported.
The second part of the PK/PD trial evaluated a variety of dosing treatment regimens
with a high and low dose of EB612 as well as Natpara with patients also receiving calcium supplements and either alfacalcidol or calcitriol.
There were no treatment-emergent adverse events of hypercalcemia, as well as no treatment-emergent serious adverse events reported in
the trial. In September 2019, we presented the results of Part 2 at the American Society for Bone and Mineral Research (ASBMR) Annual
Meeting.
Planned Additional Clinical Development and
Regulatory Pathway
We have since developed an improved formulation of EB612 based on new intellectual
property, which we have designed to optimize its PK profile and the potential for reduced daily dosing. We expect to carry out a PK study
for the new formulation of EB612 in the first half of 2023. We anticipate that the outcome of the PK study will help determine the design
of a Phase 2/3 trial of EB612 in patients with hypoparathyroidism. If successful, the phase 2/3 clinical trial of EB612 in hypoparathyroidism
may potentially support a submission for regulatory approval of EB612.
Our Technology
We are focused on the development and commercialization of product candidates that
leverage our proprietary platform technology for the oral delivery of large molecule therapeutics, including peptides and therapeutic
proteins. Historically, peptides, proteins and other large molecule therapeutics have typically been delivered via frequent and often
painful injections because oral administration leads to poor absorption into the blood stream (bioavailability) due to enzymatic degradation
within the gastrointestinal tract and poor permeability though the intestinal wall.
Our proprietary technology is designed to address both issues by utilizing a combination
of a synthetic absorption enhancer, or carrier molecule, to facilitate the enhanced absorption of large molecules, and protease inhibitors
to prevent enzymatic degradation. By designing our product candidates to address both the issues of absorption and degradation, we have
been able to significantly increase bioavailability and decrease the variability of the PTH dose delivered in our clinical trials to date.
The carrier molecule enables transport across the intestinal membrane via transcellular absorption without compromising the integrity
of the intestinal wall. Because of the weak association between the carrier molecule and the therapeutic agent, the interaction is designed
to be reversible and occurs spontaneously by simple dilution on entering the blood. We select protease inhibitors and other excipients
that act by specifically inhibiting several gastrointestinal enzymes designed to assist in the degradation and digestion of proteins without
interfering with normal gastrointestinal activity.
Development and License Agreements
In addition to the development of our product candidates, we have an early stage research
collaboration and license agreement with Amgen, Inc. (“Amgen”) centered on combining our proprietary drug delivery platform
with drugs selected by Amgen to create new products. In January 2019, we received a non-refundable and non-creditable initial technology
access fee of $725,000 from Amgen, of which $500,000 was attributed to the right to use our intellectual property, and $225,000 was attributed
to the pre-clinical R&D services that we are obligated to perform under the agreement. We are eligible to receive from Amgen aggregate
payments of up to $270 million upon achievement of various clinical and commercial milestones or at Amgen’s exercise of options
to select up to two additional programs to include in the collaboration, as well as tiered royalty payments. Through December 31, 2022,
we had received an aggregate of $968,000 from Amgen for research and development services.
Intellectual Property
Our success depends in part on our ability to protect the proprietary nature of our
product candidates, technology, and know-how; operate without infringing on the proprietary rights of others and preventing others from
infringing on our proprietary rights. We seek to protect our proprietary position by, among other methods, seeking patent protection in
the United States and in certain other jurisdictions for our product candidates and other technology that we consider important to the
development of our business, where such protection is available. We believe that our success will depend in part on our ability to obtain
patent protection for our intellectual property. We also intend to rely on trade secret protection, know-how and the exploitation of in-licensing
opportunities to develop our proprietary position.
Patent Rights
As of March 27, 2023, our global patent portfolio included the following patents and
patent applications:
Patents claiming compositions comprising a protein, an absorption enhancer and a protease
inhibitor as well as methods for oral administration of a protein with an enzymatic activity, which compositions cover EB612 and EB613,
have been issued in the United States, Australia, Japan, China, Hong Kong, Israel, Canada, New Zealand and Russia and have been granted
by the European Patent Office (EPO) and validated accordingly in Belgium, France, Germany, Great Britain, Ireland, Italy, Liechtenstein,
Luxembourg, Netherlands, Spain, Sweden, and Switzerland. Related patent applications are pending before the European Patent Office (EPO)
and in the United States, Hong Kong, Brazil, China and India. Patents specifically covering PTH have already been granted in the United
States, Hong Kong, Israel, Russia and Japan, and have been granted by the EPO and validated in Belgium, France, Germany, Great Britain,
Ireland, Italy, Liechtenstein, Luxembourg, Netherlands, Spain, Sweden, and Switzerland. In addition, patent applications which specifically
cover PTH are currently pending in Hong Kong, Brazil, China and India. The current issued patent in China is limited to insulin. This
issued patent and any patent that may issue from the pending patent applications are currently expected to expire in August 2029, assuming
all annuity and maintenance payments are paid thereon. Rights to these patents and patent applications were assigned to us pursuant to
the Patent Transfer Agreement with Oramed.
Three patent families filed in various jurisdictions, which we believe, if issued
as patents containing substantially the same claims as those in the applications, would cover certain oral administration technologies.
The mentioned technologies include compositions and drug delivery devices which utilize an absorption enhancer to enable the absorption
of a therapeutically active agent in a controlled manner. We believe that certain of the pending claims contained in these patent applications,
if issued in substantially the same form, would cover the formulations of EB612 and EB613. Patent applications covering certain formulations
with a controlled absorption profile were filed with the EPO and in the United States, Canada, Hong Kong, Israel and Mexico (the application
filed in Israel has matured into a patent and a divisional application has been filed therein). Other patent applications covering certain
formulations for co-administration with an antacid or protease inhibitor were filed with the EPO and in the United States, Canada and
Hong Kong (the application in the United States has matured into a patent, and a divisional application has been filed therein). Any patents
that issue from these patent applications are expected to expire in February 2036, assuming all annuity and maintenance payments are paid
thereon. Patent applications covering certain formulations and regimens were filed with the EPO and in the United States, Australia, Brazil,
Canada, China, Hong Kong, India, Israel, Japan, Mexico, New Zealand, Singapore, South Africa and South Korea (the application filed in
New Zealand has matured into a patent). Any patents that issue from this patent application are expected to expire in August 2037, assuming
all annuity and maintenance payments are paid thereon.
Three patent families were filed in various jurisdictions, which we believe, if issued
as patents containing substantially the same claims as those in the applications, would contain method of treatment claims covering the
use of orally administered PTH for the treatment of osteoporosis (filed with the EPO and in the United States, Canada, China, Hong Kong,
Israel and Japan; the applications in Japan and Israel have matured into patents, and a divisional applications has been filed therein),
hypoparathyroidism (filed with the EPO and in the United States, Brazil, Canada, Hong Kong, Israel and Japan; the applications in Japan
and Israel have matured into patents, and divisional applications have been filed therein) and bone fractures and related conditions (filed
with the EPO and in the United States, Canada and Hong Kong). Any patents that issue from these patent applications are expected to expire
in February 2036, assuming all annuity and maintenance payments are paid thereon, and while not considering patent term extension when
applicable.
Seven international PCT patent applications have been filed in 2023, which we believe,
if issued as patents containing substantially the same claims as those in the applications, would cover new discoveries for the oral delivery
of large molecules. Any patents that issue from these patent applications are expected to expire in February 2043, assuming all annuity
and maintenance payments are paid thereon and while not considering patent term extension when applicable.
The term of individual patents depends upon the legal term for patents in the countries
in which they are granted. In most countries, including the United States, the patent term is generally 20 years from the earliest claimed
filing date of a non-provisional patent application in the applicable country. In the United States, a patent’s term may, in certain
cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the USPTO in examining and granting
a patent or may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and
having an earlier expiration date. The Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration date
of a U.S. patent as partial compensation for the useful patent term lost, if any, during the FDA regulatory review process. However, a
patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of the product’s approval
by the FDA. The patent term extension period is generally one-half the time between the effective date of the IND and the submission date
of the NDA for the product, plus the time between the submission date of the NDA and the approval of the application. Only one patent
applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration
of the patent. Only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. Moreover,
we may not receive an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration
of relevant patents or otherwise failing to satisfy applicable requirements. Similar provisions are available in the EU and certain other
foreign jurisdictions to extend the term of a patent that covers an approved drug. However, the length of any extension, if granted, could
be less than we request.
Trade Secrets
In addition to patent rights, we also rely on unpatented trade secrets and know-how
to protect our proprietary technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology,
in part, by entering into confidentiality agreements with our employees, consultants, contractors, manufacturers, outside scientific collaborators
and sponsored researchers, members of our board of directors, technical review board and other advisors upon their engagement. These agreements
generally provide that all confidential information developed or made known to the individual during the individual’s relationship
with us is to be kept confidential and not to be disclosed to third parties except in specific limited circumstances. We also generally
require signed confidentiality or material transfer agreements from any company that is to receive our confidential information. In the
case of employees, consultants, and contractors, the agreements also generally provide that all inventions conceived by the individual
while rendering services to us shall be assigned to us as our exclusive property. There can be no assurance, however, that we have entered
into agreements with all applicable parties, that all persons who we desire to sign such agreements will sign, or if they do, that such
agreements will not be breached, that we would have adequate remedies for any breach, or that our unpatented trade secrets or know-how
will not otherwise become known or be independently developed by competitors. Additionally, to the extent that our commercial partners,
collaborators, employees, and consultants use intellectual property owned by others in their work for us, disputes may arise as to the
rights in related or resulting know-how and inventions. For this and a more comprehensive discussion of risks related to our intellectual
property, see “Item 1A.-Risk Factors-Risks Related to Our Intellectual Property.”
Commercialization Strategy
We hold global rights to all of our internally developed product candidates (including
EB613 and EB612), which provide us the optionality to grow our internal pipeline independently or license selected rights to our product
candidates in different geographies or throughout the world. We aim to maximize the value of our product candidates by either independently
commercializing our products in one or more major geographies by building an internal sales and marketing organization, or by seeking
collaborations with third parties with commercialization infrastructure, in either case subject to applicable regulatory approval.
Competition
The medical and pharmaceutical industries in which we operate are highly competitive
and subject to rapid and significant technological change and changes in practice. While we believe that our technology, knowledge, experience
and scientific resources provide us with competitive advantages, we face competition from many different sources, including large pharmaceutical,
specialty pharmaceutical, biotechnology, and generic drug companies and academic and government institutions. We believe that the key
competitive factors that will affect the development and commercial success of our oral PTH product candidates for osteoporosis, hypoparathyroidism,
non-union fractures, and any other product candidates that we develop, are the efficacy, safety and tolerability profile, convenience
in dosing, product labeling, price and availability of reimbursement from the government and other third-parties. Our commercial opportunity
could be reduced or eliminated if our competitors have products that are better in one or more of these categories.
We expect that, if approved, our oral PTH product candidates for osteoporosis, hypoparathyroidism,
non-union fractures, and other product candidates that we develop, would compete with a number of existing products. Furthermore, we believe
that we face competition in relation to our oral drug delivery platform, as we believe that other non-invasive medical drug delivery technologies,
including alternative oral delivery systems as well as transdermal patches, are being developed by other parties. Many of our potential
competitors have substantially greater financial, technical, commercial and human resources than we do and significantly more experience
in the discovery, development and regulatory approvals of product candidates, and the commercialization of those products. Accordingly,
our competitors may be more successful than us in obtaining FDA approval for product candidates and achieving widespread market acceptance.
See “Item 1A.-Risk Factors-Risks Related to Commercialization of Our Product Candidates.”
The Israeli Innovation Authority (IIA) Grants
We have received grants of approximately $0.5 million from the IIA to partially fund
our research and development. The grants are subject to certain requirements and restrictions under the Israeli research law, which we
refer to as the Research Law. In general, until the grants are repaid with interest, royalties are payable to the Israeli government in
the amount of 3% on revenues derived from sales of products or services developed in whole or in part using the IIA grants, including
EB613, EB612 and any other oral PTH product candidates we may develop. The royalty rate may increase to 5%, with respect to approved applications
filed following any year in which we achieve sales of over $70 million.
The amount that must be repaid may be increased up to six times the amount of the grant received plus interest.
The rate of royalties may be accelerated, and the royalty liability may increase (up to three times the amount of the grant amount and
the interest) if manufacturing of the products developed with the grant money is transferred outside of the State of Israel. As of December
31, 2022, the total royalty amount that would be payable by the Company to the IIA, before interest and payments as described above, is
approximately $460 thousand. Through December 31, 2022, we had paid royalties in the amount of $83 thousand to the IIA.
In addition to paying any royalties due, we must abide by other restrictions associated
with receiving such grants under the Research Law that continue to apply even following repayment to the IIA. These restrictions may impair
our ability to outsource manufacturing, engage in change of control transactions or otherwise transfer our “know-how” (in
its meaning under the Research Law) in or outside of Israel, and may require us to obtain the approval of the IIA for certain actions
and transactions and pay additional royalties and other amounts to the IIA. We may not receive the required approvals for any proposed
transfer and, even if received, we may be required to pay the IIA a portion of the consideration that we receive upon any transfer of
such technology to a non-Israeli entity up to 600% of the grant amounts and the interest. The IIA approved the Company’s Research
Collaboration and License Agreement with Amgen Inc. as of December 2018, subject to payments to the IIA in the rate of 5.38% out of any
payment received from Amgen for the license and up to a total amount of six times the amount of the IIA funding and the interest. In addition,
as disclosed under “Manufacturing”, we have signed a contract with a U.K.-based contract manufacturing organization to produce
and supply tablets for trials performed worldwide. We believe that, because production is not being done for commercial purposes, the
entry into the production agreement in the U.K. will not affect the royalty rates to be paid to the IIA. Should it turn out that this
position is not acceptable to the IIA, the maximum royalties to be paid to the IIA will be three times the amount of the grants and the
interest. In addition, any change of control and any change of ownership of our Ordinary Shares that would cause a non-Israeli citizen
or resident to become an interested party as defined in the Research Law (which includes any person who holds 5% or more of our outstanding
shares) requires written notice to the IIA. Such a non-Israeli interested party is required to sign an undertaking towards the IIA in
which it undertakes to comply with the Research Law. If we fail to comply with the Research Law, we may be forced to return the grants
and/or be subject to other payments to the IIA, monetary fines and/or criminal charges.
Oramed Patent Transfer Agreement
In 2010, in connection with our establishment as a joint venture between D.N.A Biomedical
Solutions Ltd. (“D.N.A Biomedical”) and Oramed Ltd. (“Oramed”), a subsidiary of Oramed Pharmaceuticals, Inc.,
we entered into a patent license agreement with Oramed pursuant to which Oramed granted us a worldwide, royalty-bearing, exclusive, irrevocable,
perpetual and sub-licensable license under certain Oramed patent rights, to develop, manufacture and commercialize products for certain
indications to be specified by us and Oramed, other than diabetes, obesity and influenza. In February 2011, D.N.A Biomedical and Oramed
entered into a share purchase agreement for the sale by Oramed to D.N.A Biomedical of 47% of our Ordinary Shares at the time of the transaction
in February 2011. In connection with this transaction, in February 2011 we entered into a Patent Transfer Agreement with Oramed to replace
the original 2010 license agreement.
Pursuant to the terms of the Patent Transfer Agreement, Oramed assigned to us all
of its right, title and interest in the previously licensed patent rights, and, in return, we granted to Oramed a worldwide, royalty-free,
exclusive, irrevocable, perpetual and sublicensable license under the assigned patent rights to develop, manufacture and commercialize
products or otherwise exploit such patent rights in the fields of diabetes and influenza. Additionally, we agreed not to engage, directly
or indirectly, in any activities in the fields of diabetes and influenza. In consideration for such assignment, we agreed to pay Oramed
royalties equal to 3% of our net revenues generated, directly or indirectly, from exploitation of the assigned patent rights, including
the sale, lease or transfer of the assigned patent rights or sales of products or services covered by the assigned patent rights. Either
party may terminate the Patent Transfer Agreement for the other party’s uncured material breach upon 45 days’ written notice
(and immediately upon written notice in the event of an incurable breach), or if the other party undergoes certain insolvency-related
events. The royalty obligations imposed on us will survive termination of the Patent Transfer Agreement.
Manufacturing
We do not own or operate facilities for large scale product manufacturing, storage
and distribution, or testing, nor do we expect to in the future. Our current facility is limited to small-mid scale manufacturing, storage
and distribution of materials and oral drug formulations for clinical studies. Our facility has ISO:9001:2015 quality management systems
accreditation from The Standards Institution of Israel for the production and development of functional excipients for oral drug formulations
to be used in clinical trials. The facility includes a dedicated Class D clean room for tablet production and a dedicated chemical synthesis
room designed to meet ISO 8 specifications.
Our manufacturing activities include the chemical synthesis of one of our non-active
but functional drug components in our facility. In addition, we have a contract with a contract manufacturing organization, to produce
and supply tablets for trials performed worldwide, including formulation and production of the final drug, packaging, storage and distribution.
The manufacturer’s facility is an FDA/EMA inspected-GMP site and we expect future clinical studies with our oral PTH (1-34) tablets,
as well as the potential commercial supply, if approved, will be provided by the same subcontractor. This contract is not exclusive and
we may enter into additional contracts. Our QA/QC analytical laboratory performs part of the release and stability testing for PTH tablets
manufactured by the contract manufacturing facility. In addition, our research and development team supports the manufacturing activities
and develops/optimizes analytical methods used by the contract manufacturer in order to meet regulatory requirements for our clinical
trials. Various materials included in the drug formulation and materials procured for the chemical synthesis are commercially available
from various accredited suppliers. We do not have supply contracts with all such vendors and are not bound to any specific vendor at this
point in time. However, it is our intention to complete such contracts in anticipation of commercial manufacturing activities, so that
if approved, we will have such contracts in place.
Government Regulation and Product Approval
Government authorities in the United States, at the federal, state and local level,
and in other countries and jurisdictions, including the EU, extensively regulate, among other things, the research, development, testing,
manufacture, pricing, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing,
post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals
in the United States and in other countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations
and other regulatory authorities, require the expenditure of substantial time and financial resources.
Review and Approval of Drugs in the United States
In the United States, our product candidates are regulated by the FDA as drugs under
the Federal Food, Drug, and Cosmetic Act, or the FDCA, the Public Health Service Act, or the PHSA, and regulations implemented by the
FDA. The failure to comply with the applicable requirements at any time during the product development process, including preclinical
testing, clinical testing, the approval process or post-approval process, may subject an applicant to delays in the conduct of clinical
trials, regulatory review and approval, and/or administrative or judicial sanctions. These sanctions may include, but are not limited
to, the FDA’s refusal to allow an applicant to proceed with clinical testing, refusal to approve pending applications, license suspension
or revocation, withdrawal of an approval, warning letters, adverse publicity, customer notifications, product recalls, product seizures,
refusal to grant export or import approval total or partial suspension of production or distribution, consent decrees, injunctions, fines,
and civil or criminal investigations and penalties brought by the FDA or Department of Justice, or other governmental entities.
The process required by the FDA before a new drug or biologic may be marketed in the
United States generally involves satisfactorily completing each of the following steps:
|
• |
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. |
Preclinical Studies and Investigational New Drug Application
Preclinical tests include laboratory evaluations of product chemistry, formulation
and stability, as well as animal studies to evaluate the potential for efficacy and toxicity. The conduct of the preclinical tests and
formulation of the compounds for testing must comply with federal regulations and requirements. The results of the preclinical tests,
together with manufacturing information and analytical data, are submitted to the FDA as part of an IND application. Some preclinical
tests may continue even after submission of the IND application. The IND automatically becomes effective 30 days after receipt by the
FDA, unless before that time the FDA raises concerns or questions about the product or conduct of the proposed clinical trial, including
concerns that human research volunteers will be exposed to unreasonable health risks. In that case, the IND sponsor and the FDA must resolve
any outstanding FDA concerns before the clinical trial can begin.
As a result, submission of the IND may result in the FDA not allowing the clinical
trials to commence or allowing the clinical trial to commence on the terms originally specified by the sponsor in the IND. If the FDA
raises concerns or questions either during this initial 30-day period, or at any time during the IND process, it may choose to impose
a partial or complete clinical hold. This order issued by the FDA would delay a proposed clinical trial until all outstanding concerns
have been adequately addressed and the FDA has notified the company that investigations may proceed. This could cause significant delays
or difficulties in completing planned clinical trials in a timely manner.
Clinical Trials
Clinical trials involve the administration of the investigational product candidate
to healthy volunteers or patients with the disease to be treated under the supervision of a qualified principal investigator in accordance
with GCP requirements. Clinical trials are conducted under trial protocols detailing, among other things, the objectives of the clinical
trial, inclusion and exclusion criteria, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated.
A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.
A sponsor who wishes to conduct a clinical trial outside the United States may, but
need not, obtain FDA authorization to conduct the clinical trial under an IND. If a clinical trial outside the United States is not conducted
under an IND, the sponsor may submit data from the clinical trial to the FDA in support of a NDA so long as the clinical trial is conducted
in consistent with GCP and in compliance with an international guideline for the ethical conduct of clinical research known as the Declaration
of Helsinki and/or the laws and regulations of the country or countries in which the clinical trial is performed, whichever provides the
greater protection to the participants in the clinical trial.
Further, each clinical trial must be reviewed and approved by an IRB either centrally
or individually at each institution at which the clinical trial will be conducted. The IRB will consider, among other things, clinical
trial design, patient informed consent, ethical factors, the safety of human subjects and, where appropriate, the protection of privacy
of the human subjects. An IRB must operate in compliance with the FDA regulations. The FDA, IRB, the clinical trial sponsor, or the principal
investigator may suspend or discontinue a clinical trial at any time for various reasons, including a finding that the clinical trial
is not being conducted in accordance with FDA requirements or the subjects or patients are being exposed to an unacceptable health risk.
Clinical testing also must satisfy extensive GCP rules and the requirements for informed consent. Additionally, some clinical trials are
overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data and safety monitoring board
or committee. This group may recommend continuing the clinical trial as planned, make changes in clinical trial conduct, or cessation
of the clinical trial at designated check points based on access to certain data from the clinical trial.
Clinical trials typically are conducted in three sequential phases, but the phases
may overlap or be combined. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Additional
studies may be required after approval.
|
• |
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.” |
In some cases, the FDA may approve a NDA or BLA for a product candidate but require
the sponsor to conduct additional clinical trials to further assess the drug’s safety and effectiveness after NDA or BLA approval.
Such post-approval trials are typically referred to as Phase 4 clinical trials. These studies are used to gain additional data from the
treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs approved under accelerated
approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for approval,
a company may be able to use the data from these clinical trials to meet all or part of any Phase 4 clinical trial requirement or to request
a change in the product labeling. Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal
of approval for products.
Compliance with Current Good Manufacturing Practice Requirements
Before approving a NDA or BLA, the FDA typically will inspect the facility or facilities
where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities
are in full compliance with cGMP requirements and able to assure consistent production of the product within required specifications.
The PHSA emphasizes the importance of manufacturing control for products like biologics whose attributes cannot be precisely defined.
Manufacturers and others involved in the manufacture and distribution of products
must also register their establishments with the FDA and certain state regulatory bodies. Both U.S. and non-U.S. manufacturing establishments
must register and provide additional information to the FDA upon their initial participation in the manufacturing process. Any product
manufactured by or imported from a facility that has not registered, whether U.S. or non-U.S., is deemed misbranded under the FDCA. Establishments
may be subject to periodic unannounced inspections by government authorities to ensure compliance with cGMPs and other laws. Inspections
must follow a “risk-based schedule” that may result in certain establishments being inspected more frequently. Manufacturers
may also have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing
inspection by the FDA may lead to a product being deemed to be adulterated.
Review and Approval of a New Drug Application and Biologics License
Application
The results of product candidate development, preclinical testing and clinical trials,
including negative or ambiguous results as well as positive findings, are submitted to the FDA as part of a NDA or BLA requesting approval
to market the product. The NDA or BLA also must contain extensive manufacturing information and detailed information on the composition
of the product and proposed labeling as well as payment of a user fee.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each NDA or BLA must
be accompanied by a user fee, which the FDA adjusts on an annual basis. Fee waivers or reductions are available in certain instances,
such as a waiver of the application fee for an initial application filed by a small business. Moreover, no user fees are assessed on NDAs
or BLAs for products designated as orphan drugs, unless the product has a non-orphan indication for use.
The FDA has 60 days after submission of the application to conduct an initial review
to determine whether it is sufficient to accept for filing based on the agency’s threshold determination that it is sufficiently
complete to permit substantive review. Once the submission has been accepted for filing, the FDA begins an in-depth review of the application.
Under the goals and policies under the PDUFA, the FDA has ten months from the filing date in which to complete its initial review of a
standard application and respond to the applicant, and six months for a priority review of the application. The FDA does not always meet
its PDUFA goal dates for standard and priority applications. The review process may often be significantly extended by FDA requests for
additional information or clarification. The review process and the PDUFA goal date may be extended by three months if the FDA requests,
or the applicant otherwise provides additional information or clarification regarding information already provided in the submission within
the last three months before the PDUFA goal date.
Under the FDCA and the PHSA, the FDA may approve a NDA or BLA if it determines that
the product is safe, pure and potent and the facility where the product will be manufactured meets standards designed to ensure that it
continues to be safe, pure and potent.
On the basis of the FDA’s evaluation of the application and accompanying information,
including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter.
An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. If the
application is not approved, the FDA will issue a complete response letter, which will contain the conditions that must be met in order
to secure final approval of the application, and, when possible, will outline recommended actions the sponsor might take to obtain approval
of the application. Sponsors that receive a complete response letter may submit to the FDA information that represents a complete response
to the issues identified by the FDA. Such resubmissions are classified under PDUFA as either Class 1 or Class 2. The classification of
a resubmission is based on the information submitted by an applicant in response to an action letter. Under the goals and policies agreed
to by the FDA under PDUFA, the FDA has two months to review a Class 1 resubmission and six months to review a Class 2 resubmission from
the date of receipt. The FDA will not approve an application until issues identified in the complete response letter have been addressed.
The FDA may also refer the application to an advisory committee for review, evaluation
and recommendation as to whether the application should be approved. Typically, an advisory committee is a panel of independent experts,
including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application
should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions.
If the FDA approves a new product, it may limit the approved indications for use of
the product. It may also require that contraindications, warnings or precautions be included in the product labeling. In addition, the
FDA may call for post-approval studies, including Phase 4 clinical trials, to further assess the product’s safety after approval.
The agency may also require testing and surveillance programs to monitor the product after commercialization, or impose other conditions,
including distribution restrictions or other risk management mechanisms, including a REMS, to help ensure that the benefits of the product
outweigh the potential risks. A REMS can include medication guides, communication plans for healthcare professionals, and elements to
assure safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing,
dispensing only under certain circumstances, special monitoring, and the use of patent registries. The FDA may prevent or limit further
marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types of changes to
the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing
requirements and FDA review and approval.
The Drug Price Competition and Patent Term Restoration Act, or the Hatch-Waxman Act,
added Section 505(b)(2) to the FDCA, allowing a company to submit an NDA application that relies on clinical trial data not conducted
by or for the application, such as published scientific literature and prior FDA findings of safety and efficacy of another company’s
drug. An NDA application under Section 505(b)(2) is typically used when the applicant product modifies or improves a predicate drug leading
to a new drug product. Because an application under Section 505(b)(2) can rely on prior clinical trial data and published scientific literature,
FDA approval is generally quicker than a normal NDA application. However, an application under Section 505(b)(2) can also be delayed if
the predicate drug is still under patent or exclusivity protections.
Fast Track, Breakthrough Therapy and Priority Review Designations
The FDA is authorized to designate certain products for expedited review if they are
intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition, or in the event of an
emergency. These programs are fast track designation, breakthrough therapy designation and priority review designation.
Specifically, the FDA may designate a product for fast track review if it is intended,
whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening disease or condition,
and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may
have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s application before
the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data
submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule
for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal
for reviewing a fast track application does not begin until the last section of the application is submitted. In addition, the fast track
designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical
trial process.
Second, in 2012, Congress enacted the Food and Drug Administration Safety and Innovation
Act, or FDASIA. This law established a new regulatory scheme allowing for expedited review of products designated as “breakthrough
therapies.” A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or
more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the
product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial
treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including
holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development
and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and
taking other steps to design the clinical trials in an efficient manner.
Third, the FDA may designate a product for priority review if it is a product that
treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on
a case-by-case basis, whether the proposed product represents a significant improvement when compared with other available therapies.
Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial
reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious
outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention
and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application
from ten months to six months.
Fourth, the Secretary of Health and Human Services may authorize unapproved drugs
and biologics to be marketed in the event an actual or potential emergency has been designated by the U.S. government. After an emergency
has been designated, the FDA may issue an Emergency Use Authorization, or EUA, for the use of a specific product based on criteria established
by the FDCA. An EUA is product specific and is subject to specific conditions and restrictions. Once the emergency underlying the EUA
ends, then the EUA terminates.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a product for a serious or life-threatening
condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the product
has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval
for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on
irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversible morbidity or mortality
or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative
treatments. Products granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted
traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as
a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit but is not itself
a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate
clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a product,
such as an effect on IMM. The FDA has indicated that intermediate clinical endpoints generally may support accelerated approval where
the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis
for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a product.
The accelerated approval pathway is most often used in settings in which the course
of a disease is long and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect
on the surrogate or intermediate clinical endpoint occurs rapidly.
The accelerated approval pathway is usually contingent on a sponsor’s agreement
to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the product’s clinical benefit.
As a result, a product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion
of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval
studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the product from the market on an
expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by
the FDA.
Post-Approval Regulation
Once regulatory approval for marketing of a product or new indication for an existing
product is obtained, the sponsor will be required to comply with post-approval regulatory requirements, including any post-approval requirements
that the FDA may have imposed as a condition of approval. The sponsor will be required to report certain adverse reactions and production
problems to the FDA, provide updated safety and efficacy information and comply with requirements concerning advertising and promotional
labeling requirements. Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA
and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with
ongoing regulatory requirements, including cGMP regulations, which impose certain procedural and documentation requirements upon drug
manufacturers. Accordingly, the sponsor and its third-party manufacturers must continue to spend time, money and effort in the areas of
production and quality control to maintain compliance with cGMP regulations and other regulatory requirements.
A product may also be subject to official lot release, meaning that the manufacturer
is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official
release, the manufacturer must submit samples of each lot, together with a release protocol showing a summary of the history of manufacture
of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may in addition perform
certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory
research related to the safety, purity, potency, and effectiveness of pharmaceutical products.
After an approval is granted, the FDA may withdraw the approval if compliance with
regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of
previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes,
or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition
of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS
program. Other potential consequences include, among other things:
|
• |
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. |
The FDA strictly regulates marketing, labeling, advertising and promotion of products
that are placed on the market. Drugs and biologics may be promoted only for the approved indications and in accordance with the provisions
of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses,
and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
Orphan Drug Designation
Orphan drug designation in the United States is designed to encourage sponsors to
develop drugs intended for rare diseases or conditions. In the United States, a rare disease or condition is statutorily defined as a
condition that affects fewer than 200,000 individuals in the United States, or that affects more than 200,000 individuals in the United
States and for which there is no reasonable expectation that the cost of developing and making available the drug for the disease or condition
will be recovered from sales of the drug in the United States.
Orphan drug designation qualifies a company for tax credits, waiver of the NDA user
fee and may confer market exclusivity for seven years following the date of the drug’s marketing approval, if granted by the FDA,
if a product that has orphan designation subsequently receives the first FDA approval of that drug for the disease for which it has such
designation. This means that the FDA may not approve any other applications, including an NDA to market the same drugs or even in a different
formulation for the same indication for seven years, except in limited circumstances such as a showing of clinical superiority over the
product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity. An application for designation
as an orphan product can be made any time prior to the filing of an application for approval to market the product. A product becomes
an orphan product when it receives orphan drug designation from the Office of Orphan Products Development, or OOPD, at the FDA based on
acceptable confidential requests made under the regulatory provisions. The product must then go through the review and approval process
like any other product.
A sponsor may request orphan drug designation of a previously unapproved product or
new orphan indication for an already marketed product. In addition, a sponsor of a product that is otherwise the same product as an already
approved orphan drug may seek and obtain orphan drug designation for the subsequent product for the same rare disease or condition if
it can present a plausible hypothesis that its product may be clinically superior to the first, approved product. More than one sponsor
may receive orphan drug designation for the same product for the same rare disease or condition, but each sponsor seeking orphan drug
designation must file a complete request for designation, and only the first sponsor that obtains approval for that drug for the orphan
indication will obtain market exclusivity, effectively preventing the FDA from approving products under development by competitors for
the same drug and same indication, unless the competitor is able to demonstrate that the product under development is clinically superior
to the approved product or the approved product is not available in sufficient quantities. To permit the FDA to end another manufacturer’s
orphan exclusivity period, the FDA must determine that the manufacturer has demonstrated clinical superiority by showing the later drug
is safer, more effective, or otherwise makes a major contribution to patient care.
The period of exclusivity begins on the date that the marketing application is approved
by the FDA and applies only to the indication for which the product has been designated. The FDA may approve a second application for
the same product for a different use or a subsequent application for a different drug for the same indication. Orphan drug designation
neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or
approval process.
Biosimilars and Exclusivity
The ACA, which was signed into law on March 23, 2010, included a subtitle called the
Biologics Price Competition and Innovation Act of 2009 or BPCIA. The BPCIA established a regulatory scheme authorizing the FDA to approve
biosimilars and interchangeable biosimilars. The FDA has issued several draft guidance documents outlining an approach to review and approval
of biosimilars. Complexities associated with the larger, and often more complex, structures of biological products, as well as the processes
by which such products are manufactured, pose significant hurdles to implementation, which are still being worked out by the FDA.
Under the BPCIA, a manufacturer may submit an application for licensure of a biologic
product that is “biosimilar to” or “interchangeable with” a previously approved biological product or “reference
product.” In order for the FDA to approve a biosimilar product, it must find that there are no clinically meaningful differences
between the reference product and proposed biosimilar product in terms of safety, purity, and potency. For the FDA to approve a biosimilar
product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same
clinical results as the reference product, and (for products administered multiple times) that the biologic and the reference biologic
may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to
exclusive use of the reference biologic.
Under the BPCIA, an application for a biosimilar product may not be submitted to the
FDA until four years following the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years
from the date on which the reference product was approved. Even if a product is considered to be a reference product eligible for exclusivity,
another company could market a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s
own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their
product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products.
Patent Term Extension
A patent claiming a new drug or biologic product may be eligible for a limited patent
term extension under the Hatch-Waxman Act, which permits a patent extension of up to five years beyond the expiration date of a U.S. patent
as partial compensation for the useful patent term lost, if any, during the FDA regulatory review process. However, a patent term extension
cannot extend the remaining term of a patent beyond a total of 14 years from the date of the product’s approval by the FDA. The
patent term extension period granted is typically one-half the time between the effective date of the first IND and the submission date
of the NDA for the product, plus the time between the submission date of the NDA and the approval of that application. Only one patent
applicable to an approved product is eligible for the extension, and the application for the extension must be submitted prior to the
expiration of the patent in question. A patent that covers multiple products for which approval is sought can only be extended in connection
with one of the products. The USPTO reviews and approves the application for any patent term extension or restoration in consultation
with the FDA.
Regulation Outside the United States
In order to market any product outside of the United States, a company must also comply
with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy that govern,
among other things, clinical trials, marketing authorization, commercial sales and distribution of drug products. Whether or not it obtains
FDA approval for a product, the company would need to obtain the necessary approvals by the comparable non-U.S. regulatory authorities
before it can commence clinical trials or marketing of the product in those countries or jurisdictions. The approval process ultimately
varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The
time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA
approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in
obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.
Regulation and Marketing Authorization in the European Union
The European Medicines Agency, or EMA, is the scientific agency of the European Union,
or EU, that coordinates the evaluation and monitoring of new and approved medicinal products such as drugs and biologics. It is responsible
for the scientific evaluation of applications for EU marketing authorizations, as well as the development of technical guidance and the
provision of scientific advice to sponsors.
The process regarding approval of medicinal products in the EU follows roughly the
same lines as in the United States and likewise generally involves satisfactorily completing each of the following:
|
• |
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.
|
Preclinical Studies
Preclinical tests include laboratory evaluations of product chemistry, formulation
and stability, as well as studies to evaluate the potential efficacy and toxicity in animals. The conduct of the preclinical tests and
formulation of the compounds for testing must comply with the relevant EU regulations and requirements. The results of the preclinical
tests, together with relevant manufacturing information and analytical data, are submitted as part of the CTA when seeking approval to
start a clinical trial, and with the MAA when seeking marketing authorization.
Clinical Trial Approval
Requirements for the conduct of clinical trials in the EU including cGCP, are implemented
in the currently Clinical Trials Directive 2001/20/EC and the GCP Directive 2005/28/EC. Pursuant to Directive 2001/20/EC and Directive
2005/28/EC, as amended, a system for the approval of clinical trials in the EU has been implemented through national legislation of the
EU member states. Under this system, approval must be obtained from the competent national authority in which a trial is planned to be
conducted, or in multiple member states if the clinical trial is to be conducted in a number of member states. To this end, a CTA is submitted,
which must be supported by an investigational medicinal product dossier, or IMPD, and further supporting information prescribed by Directive
2001/20/EC and Directive 2005/28/EC and other applicable guidance documents. Furthermore, a clinical trial may only be started after a
competent ethics committee has issued a favorable opinion on the clinical trial application in that country.
On January 31, 2022, the Clinical Trials Regulation (EU) No. 536/2014 replaced the
current Clinical Trials Directive 2001/20/EC. To ensure that the rules for clinical trials are identical throughout the EU, the Clinical
Trials Regulation (EU) No. 536/2014 was passed as a regulation which is directly applicable in all EU member states. The Clinical Trials
Directive 2001/20/EC will, however, still apply three years from the date of entry into application of the Clinical Trials Regulation
to (i) clinical trials applications submitted before the entry into application and (ii) clinical trials applications submitted within
one year after the entry into application if the sponsor opts for the old system.
Regulation (EU) No 536/2014 aims to simplify and streamline the approval of clinical
trial in the EU. The main characteristics of the regulation include:
|
• |
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. |
Marketing Authorization
Authorization to market a product in the member states of the EU proceeds under one
of four procedures: a centralized procedure, a mutual recognition procedure, a decentralized procedure or a national procedure.
Centralized Procedure
The centralized procedure enables applicants to obtain a marketing authorization that
is valid in all EU member states based on a single application. Certain medicinal products, including products developed by means of biotechnological
processes must undergo the centralized authorization procedure for marketing authorization, which, if granted by the European Commission,
based on the opinion of the EMA, is automatically valid in all EU member states. Sponsors may elect to file an MAA through the centralized
procedures for other classes of products.
The centralized procedure is mandatory for certain types of products such as, medicines
derived from biotechnology processes such as genetic engineering, advanced-therapy medicines such as gene-therapy or tissue engineered
medicine, orphan medicines, and medicinal products containing a new active substance indicated for the treatment of HIV, AIDS, cancer,
diabetes, neurodegenerative disorders, autoimmune and other immune dysfunctions, and viral diseases. The centralized authorization procedure
is optional for other medicinal products if they contain a new active substance, if the applicant shows that the medicinal product concerned
constitutes a significant therapeutic, scientific or technical innovation, or that the granting of authorization is in the public interest
of the EU.
Administrative Procedure
Under the centralized procedure, the EMA’s Committee for Human Medicinal Products,
or CHMP serves as the scientific committee that renders opinions about the safety, efficacy and quality of medicinal products for human
use on behalf of the EMA. The CHMP is composed of experts nominated by each member state’s national authority for medicinal products,
with one of them appointed to act as Rapporteur for the coordination of the evaluation with the possible assistance of a further member
of the Committee acting as a Co-Rapporteur. After approval, the Rapporteur(s) continue to monitor the product throughout its life cycle.
The CHMP has 210 active days to adopt an opinion as to whether a marketing authorization should be granted. The process usually takes
longer in case additional information is requested, which triggers clock-stops in the procedural timelines. The process is complex and
involves extensive consultation with the regulatory authorities of member states and a number of experts. When an application is submitted
for a marketing authorization in respect of a drug which is of major interest from the point of view of public health and in particular
from the viewpoint of therapeutic innovation, the applicant may, pursuant to Article 14(9) Regulation (EC) No 726/2004, request an accelerated
assessment procedure. If the CHMP accepts such request, the time-limit of 210 days will be reduced to 150 days but it is possible that
the CHMP can revert to the standard time-limit for the centralized procedure if it considers that it is no longer appropriate to conduct
an accelerated assessment. Once the procedure is completed, a European Public Assessment Report, or EPAR, is produced. If the opinion
is negative, information is given as to the grounds on which this conclusion was reached. After the adoption of the CHMP opinion, a decision
on the MAA must be adopted by the European Commission, after consulting the EU member states, which in total can take more than 60 days.
After a drug has been authorized and launched, it is a condition of maintaining the marketing authorization that all aspects relating
to its quality, safety and efficacy must be kept under review.
Conditional Approval
In specific circumstances, EU legislation (Article 14(7) Regulation (EC) No 726/2004
and Regulation (EC) No 507/2006 on Conditional Marketing Authorisations for Medicinal Products for Human Use) enables applicants to obtain
a conditional marketing authorization prior to obtaining the comprehensive clinical data required for an application for a full marketing
authorization. Such conditional approvals may be granted for products (including medicines designated as orphan medicinal products), if
(1) the risk-benefit balance of the product is positive, (2) it is likely that the applicant will be in a position to provide the required
comprehensive clinical trial data, (3) the product fulfills unmet medical needs, and (4) the benefit to public health of the immediate
availability on the market of the medicinal product concerned outweighs the risk inherent in the fact that additional data are still required.
A conditional marketing authorization may contain specific obligations to be fulfilled by the marketing authorization holder, including
obligations with respect to the completion of ongoing or new studies, and with respect to the collection of pharmacovigilance data. Conditional
marketing authorizations are valid for one year, and may be renewed annually, if the risk-benefit balance remains positive, and after
an assessment of the need for additional or modified conditions and/or specific obligations. The timelines for the centralized procedure
described above also apply with respect to the review by the CHMP of applications for a conditional marketing authorization.
Marketing Authorization Under Exceptional Circumstances
As per Article 14(8) Regulation (EC) No 726/2004, products for which the applicant
can demonstrate that comprehensive data (in line with the requirements laid down in Annex I of Directive 2001/83/EC, as amended) cannot
be provided (due to specific reasons foreseen in the legislation) might be eligible for marketing authorization under exceptional circumstances.
This type of authorization is reviewed annually to reassess the risk-benefit balance. The fulfillment of any specific procedures/obligations
imposed as part of the marketing authorization under exceptional circumstances is aimed at the provision of information on the safe and
effective use of the product and will normally not lead to the completion of a full dossier/approval.
Period of Authorization and Renewals
A marketing authorization will be valid for five years in principle, and the marketing
authorization may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by a national
authority. To this end, the marketing authorization holder must provide the EMA or the competent authority with a consolidated version
of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing authorization was granted,
at least nine months before the marketing authorization ceases to be valid. Once renewed, the marketing authorization will be valid for
an unlimited period, unless the European Commission or the national authority decides, on justified grounds relating to pharmacovigilance,
to proceed with one additional five-year renewal. Any authorization that is not followed by the actual placing of the drug on the EU market
(in case of centralized procedure) or on the market of the authorizing member state within three years after authorization will cease
to be valid, the so-called “sunset clause.”
Orphan Drug Designation and Exclusivity
The European Commission can grant orphan medicinal product designation to products
for which the sponsor can establish that it is intended for the diagnosis, prevention, or treatment of (1) a life-threatening or
chronically debilitating condition affecting not more than five in 10,000 people in the EU, or (2) a life threatening, seriously debilitating
or serious and chronic condition in the EU and that without incentives it is unlikely that sales of the drug in the EU would generate
a sufficient return to justify the necessary investment. In addition, the sponsor must establish that there is no other satisfactory method
approved in the EU of diagnosing, preventing or treating the condition, or if such a method exists, the proposed orphan drug will be of
significant benefit to patients.
Orphan drug designation provides a number of benefits, including fee reductions, regulatory
assistance, and the possibility to apply for a centralized EU marketing authorization (see “Government Regulation and Product Approval-Regulation
Outside the United States-Centralized Authorization Procedure”), as well as 10 years of market exclusivity following a marketing
authorization. During this market exclusivity period, neither the EMA, nor the European Commission nor the Member States can accept an
application or grant a marketing authorization for a medicinal product containing a similar active substance or substances as contained
in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. The market exclusivity period for
the authorized therapeutic indication may be reduced to six years if, at the end of the fifth year, it is established that the orphan
drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance
of market exclusivity. In addition, a competing similar medicinal product may be authorized prior to the expiration of the market exclusivity
period, including if it is shown to be safer, more effective or otherwise clinically superior to the already approved orphan drug or if
the holder of the marketing authorization for the already approved orphan drug is unable to supply sufficient quantities of the product.
If the MAA of a medicinal product designated as an orphan drug includes the results
of all studies conducted in compliance with an agreed PIP, and a corresponding statement is subsequently included in the marketing authorization
granted, the ten-year period of market exclusivity will be extended to twelve years.
Regulatory Data Protection
EU legislation also provides for a system of regulatory data and market exclusivity.
Upon receiving marketing authorization, new chemical entities approved on the basis of complete independent data package benefit from
eight years of data exclusivity and an additional two years of market exclusivity. Data exclusivity prevents regulatory authorities in
the EU from referencing the innovator’s data to assess a generic or biosimilar (abbreviated) application. During the additional
two-year period of market exclusivity, a generic or biosimilar marketing authorization can be submitted, and the innovator’s data
may be referenced, but no generic or biosimilar medicinal product can be marketed until the expiration of the market exclusivity. The
overall ten-year period will be extended to a maximum of eleven years if, during the first eight years of those 10 years, the marketing
authorization holder, or MAH, obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation
prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound
is considered to be a new chemical entity and the innovator is able to gain the period of data exclusivity, another company nevertheless
could also market another version of the drug if such company obtained marketing authorization based on an MAA with a complete independent
data package of pharmaceutical test, pre-clinical tests and clinical trials. However, products designated as orphan medicinal products
enjoy, upon receiving marketing authorization, a period of 10 years of orphan market exclusivity (see also “Government Regulation
and Product Approval-Regulation and Marketing Authorization in the European Union-Orphan Drug Designation and Exclusivity”). Depending
upon the timing and duration of the EU marketing authorization process, products may be eligible for up to five years’ supplementary
protection certificates, or SPCs. Such SPCs extend the rights under the basic patent for the drug.
Regulatory Requirements After a Marketing Authorization Has Been
Obtained
If we obtain authorization for a medicinal product in the EU, we will be required
to comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products:
Pharmacovigilance and Other Requirements
We will, for example, have to comply with the EU’s stringent pharmacovigilance
or safety reporting rules, pursuant to which post-authorization studies and additional monitoring obligations can be imposed.
Other requirements relate to, for example, the manufacturing of products and APIs
in accordance with good manufacturing practice standards. EU regulators may conduct inspections to verify our compliance with applicable
requirements, and we will have to continue to expend time, money and effort to remain compliant. Non-compliance with EU requirements regarding
safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can
also result in significant financial penalties in the EU. Similarly, failure to comply with the EU’s requirements regarding the
protection of individual personal data can also lead to significant penalties and sanctions. Individual EU member states may also impose
various sanctions and penalties in case we do not comply with locally applicable requirements.
Manufacturing
The manufacturing of authorized drugs, for which a separate manufacturer’s license
is mandatory, must be conducted in compliance with the EMA’s cGMP requirements and comparable requirements of other national authorities,
which mandate the methods, facilities and controls used in manufacturing, processing and packing of drugs to assure their safety and identity.
The EMA enforces its cGMP requirements through mandatory registration of facilities and inspections of those facilities. The EMA may have
a coordinating role for these inspections while the responsibility for carrying them out rests with the member states competent authority
under whose responsibility the manufacturer falls. Failure to comply with these requirements could interrupt supply and result in delays,
unanticipated costs and lost revenues, and could subject the applicant to potential legal or regulatory action, including but not limited
to warning letters, suspension of manufacturing, seizure of product, injunctive action or possible civil and criminal penalties.
Marketing and Promotion
The marketing and promotion of authorized drugs, including industry-sponsored continuing
medical education and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the EU.
The applicable regulations aim to ensure that information provided by holders of marketing authorizations regarding their products is
truthful, balanced and accurately reflects the safety and efficacy claims authorized by the EMA or by the national authority of the authorizing
member state. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential
civil and criminal penalties.
Clinical Testing in Israel
In order to conduct clinical trials on humans in Israel, prior authorization must
be obtained from the medical director of the institution (i.e., the Director of Hospital - DOH) in which the clinical trials are scheduled
to be conducted. All clinical trials must first be approved by the Institutional Review Board (IRB) / Independent Ethics Committee (IEC)
which may request additional prior approval from the Israeli Ministry of Health (IMOH), as required under the Guidelines for Clinical
Trials in Human Subjects implemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), 5740-1980,
as amended from time to time. Pursuant to the Israeli Public Health Regulations, such authorization generally cannot be granted unless,
among other things, the relevant institutions ethics committee has provided its prior approval of the testing and that the trial complies
with the standards set forth by the Declaration of Helsinki.
The IRB/IEC and IMOH prioritizes the safety, rights and the wellbeing of the participants
are addressed, as well as among other things, evaluating the anticipated benefits that are likely to be derived from the project to determine
if it justifies the risks and inconvenience to be inflicted on the participating human subjects. The institution may also conduct audits
to insure that all international GCP and IMOH guidelines are being adhered to in order to maintain the proper conduct and accuracy of
the information gathered in the course of the clinical testing.
Other Healthcare Laws
Health care providers, physicians and third-party payers play a primary role in the
recommendation and prescription of drug products that are granted marketing approval. Arrangements with third-party payers and customers
are subject to broadly applicable fraud and abuse and other health care laws and regulations. In the United States, such restrictions
under applicable federal and state healthcare laws and regulations, include the following:
|
• |
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. |
Because of the breadth of these laws and the narrowness of the statutory exceptions
and safe harbors available, it is possible that some of our future business activities could be subject to challenge under one or more
of such laws. Efforts to ensure that our business arrangements with third parties will comply with applicable laws and regulations will
involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with
current or future statutes, regulations or case law involving applicable fraud and abuse or other health care laws and regulations. If
our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be
subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded health care programs,
such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or
entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil
or administrative sanctions, including exclusions from government funded health care programs.
Environmental, Health and Safety
We are further subject to various foreign, national, federal, state and local laws
and regulations relating to environmental, health and safety matters, in a number of jurisdictions, governing, inter alia, (i) the use,
storage, registration, handling, emission and disposal of chemicals, waste materials and sewage; and (ii) chemical, air, water and ground
contamination, air emissions and the cleanup of contaminated sites, including any contamination that results from spills due to our failure
to properly dispose of chemicals, waste materials and sewage. Our operations at our Jerusalem research and development facility use chemicals
and produce waste materials and sewage. Our activities require permits from various governmental authorities including, local municipal
authorities, the Ministry of Environmental Protection and the Ministry of Health. The Ministry of Environmental Protection and the Ministry
of Health, local authorities and the municipal water and sewage company may conduct periodic inspections in order to review and ensure
our compliance with the various regulations.
Although we do not believe that we will be required to make material operating or
capital expenditures in connection with such laws and regulations, we may be required to incur significant costs to comply with these
laws and regulations in the future, and complying with these laws and regulations may result in a material adverse effect upon our business,
financial condition and results of operations. Further, our failure to comply with such laws and regulations could have a material adverse
effect on our business and reputation, result in an interruption or delay in the development or manufacture of our products, or increase
the costs for the development or manufacture of our products.
In addition, laws and regulations relating to environmental, health and safety matters
are often subject to change. In the event of any changes or new laws or regulations, we could be subject to new compliance measures or
to penalties for activities which were previously permitted. For instance, Israeli regulations were promulgated in 2011 relating to the
discharge of industrial sewage into the sewer system. These regulations establish new and potentially significant fees for discharging
forbidden or irregular sewage into the sewage system.
Pharmaceutical Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any
drug products for which we plan to seek regulatory approval. Sales of any of our product candidates, if approved, will depend, in part,
on the extent to which the costs of the products will be covered by third-party payors, including government health programs such as Medicare
and Medicaid, commercial health insurers and managed care organizations. Concerns about drug pricing have been expressed by both members
of the United States Congress and the administration. The process for determining whether a payer will provide coverage for a drug product
may be separate from the process for setting the price or reimbursement rate that the payer will pay for the drug product once coverage
is approved. Third-party payers may limit coverage to specific drug products on an approved list, or formulary, which might not include
all of the approved drugs for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved
for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness
of the product, in addition to the costs required to obtain FDA, EMA or other comparable regulatory approvals. Our product candidates
may not be considered medically necessary or cost-effective. A payer’s decision to provide coverage for a drug product does not
imply that an adequate reimbursement rate will be approved. Third-party reimbursement may not be sufficient to enable us to maintain price
levels high enough to realize an appropriate return on our investment in product development.
The containment of healthcare costs has become a priority of governments, and the
prices of drugs have been a focus in this effort. Third-party payers are increasingly challenging the prices charged for medical products
and services and examining the medical necessity and cost effectiveness of medical products in addition to their safety and efficacy.
If these third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover
our products if approved under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products
at a profit. The U.S. government, state legislatures and non-U.S. governments have shown significant interest in implementing cost containment
programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements
for substitution of generic products for branded prescription drugs. Adoption of such controls and measures, and tightening of restrictive
policies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the product candidates
that we are developing and could adversely affect our net revenue and results.
Pricing and reimbursement schemes vary widely from country to country. Some countries
provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion
of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. The conduct
of such studies could be expensive and result in delays in our commercializing efforts. The EU provides options for its member states
to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices
of medicinal products for human use. EU member states may approve a specific price for a drug product or may instead adopt a system of
direct or indirect controls on the profitability of the company placing the drug product on the market. Other member states allow companies
to fix their own prices for drug products, but monitor and control company profits. The downward pressure on health care costs in general,
particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new
products. In addition, in some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing
within a country. There can be no assurance that any country that has price controls or reimbursement limitations for drug products will
allow favorable reimbursement and pricing arrangements for any of our products.
The marketability of any products for which we receive regulatory approval for commercial
sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on
managed care in the United States has increased and we expect will continue to increase the pressure on drug pricing. Coverage policies,
third-party reimbursement rates and drug pricing regulation may change at any time. Even if favorable coverage and reimbursement status
is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates
may be implemented in the future.
Health Care Reform
In the United States, there have been and continue to be a number of significant legislative
initiatives to contain healthcare costs. The ACA was enacted in the United States in March 2010 and contains provisions that may reduce
the profitability of drug products, including, for example, increased rebates for drugs subject to the Medicaid Drug Rebate Program, extension
of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based
on pharmaceutical companies’ share of sales to federal health care programs.
In addition, other legislative changes have been proposed and adopted since the ACA
was enacted. These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year, effective April 1, 2013
and, due to subsequent legislative amendments to the statute, will stay in effect through 2027, unless additional Congressional action
is taken; however, pursuant to the CARES Act, and subsequent legislation, these reductions are suspended from May 1, 2020 through March
31, 2022 due to the COVID-19 pandemic. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other
things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover
overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and other healthcare funding,
which could have a material adverse effect on customers for our drugs, if approved, and, accordingly, our financial operations.
Moreover, recently there has been heightened governmental scrutiny over the manner
in which manufacturers set prices for their commercial products. There have been several recent U.S. Congressional inquiries and proposed
and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship
between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement
methodologies for drugs. The FDA released a final rule on September 24, 2020, effective November 30, 2020, providing guidance for states
to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services,
or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors
under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates
a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between
pharmacy benefit managers and manufacturers. At the state level, legislatures have increasingly passed legislation and implemented regulations
designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions
on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation
from other countries and bulk purchasing. Although a number of these, and other proposed measures may require authorization through additional
legislation to become effective, Congress has indicated that it will continue to seek new legislative measures to control drug costs.
Additionally, CMS issued a final rule, effective on July 9, 2019, that requires direct-to-consumer
advertisements of prescription drugs and biological products, for which payment is available through or under Medicare or Medicaid, to
include in the advertisement the Wholesale Acquisition Cost, or list price, of that drug or biological product if it is equal to or greater
than $35 for a monthly supply or usual course of treatment. Prescription drugs and biological products advertisements that are in violation
of these requirements will be included on a public list.
Any adopted health reform measure could reduce the ultimate demand for our products,
if approved, or put pressure on our product pricing. Individual states in the United States have also become increasingly active in passing
legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases,
designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual
hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in
their prescription drug and other healthcare programs. We expect that additional state and federal healthcare reform measures will be
adopted in the future.
We expect that additional state and federal healthcare reform measures, as well as
legal changes by foreign governments, will be adopted in the future, any of which could limit the amounts that governments will pay for
healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
Employees
As of December 31, 2022, we had 20 employees and consultants based in Israel, including
our Chief Executive Officer and Chief Operating Officer, as well as 15 other full-time employees, two part time employees, and one part-time
consultant who serves as our Chief Financial Officer. In addition, we employ a number of specialized outside advisors and expert consultants
based in the United States, United Kingdom and Europe, including our Chief Medical Officer. The distribution of our full-time employees
according to main areas of activity is set forth in the following table:
|
|
Employees |
|
Area of Activity: |
|
|
|
Research and development |
|
|
15 |
|
General and administrative |
|
|
2 |
|
Total |
|
|
17 |
|
Israeli labor laws govern the length of the workday and workweek, minimum wages for
employees, procedures for hiring and dismissing employees, determination of severance pay, annual leave, sick days, advance notice of
termination, payments to the National Insurance Institute, and other conditions of employment and include equal opportunity and anti-discrimination
laws. While we are not, and none of our employees is, party to any collective bargaining agreements, certain provisions of the collective
bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations
(including the Industrialists’ Associations) are applicable to our employees in Israel by order of the Israeli Ministry of the Economy.
These provisions primarily concern pension fund benefits for all employees, insurance for work-related accidents, recuperation pay and
travel expenses. We generally provide our employees with benefits and working conditions beyond the required minimums. We have never experienced
any employment-related work stoppages and believe our relationships with our employees are good.
Facilities
For more information regarding our facilities, see “Item 2—Properties”
contained in this Annual Report on Form 10-K.
Legal Proceedings
For more information regarding legal proceedings, see ‘Item 3—Legal Proceedings”
contained in this Annual Report on Form 10-K.
Additional Information
Our website is at www.enterabio.com.
We make available, free of charge, on our investor relations section under the heading “SEC Filings” our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed with or furnished to
the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after
we electronically file such material with, or furnish it to, the SEC. Our website address is included in this report only as an inactive
textual reference. Information contained on, or available through, our website is not incorporated by reference in, or made a part of,
this report.
ITEM 1A.
RISK FACTORS
You should carefully consider the risks described
below, as well as other information contained in this Annual Report, including the consolidated financial statements and the notes thereto
and “Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of
any of the events discussed below could significantly and adversely affect our business, prospects, results of operations, financial condition,
and cash flows.
Any investment in our securities involves a
high degree of risk. You should consider carefully the following factors and all other information contained in this Annual Report before
you make a decision to invest in our Ordinary Shares and publicly traded warrants to purchase our Ordinary Shares listed on the Nasdaq
under the symbol ENTXW (the “IPO Warrants”). If any of the negative events referred to below occur, our business, prospects,
financial condition and results of operations could be materially and adversely affected. In any such case, the trading price of our Ordinary
Shares could decline, and you could lose all or part of your investment.
Risk Factor Summary
Our business is subject to a number of risks, including risks that may prevent us
from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and
prospects. These risks are discussed more fully later in this Item 1A, and include, but are not limited to, the following:
|
• |
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. |
Risks Related to Our Financial Position
We have incurred significant losses since our
inception and anticipate that we will continue to incur substantial losses for the next several years.
We have incurred net losses in each year since our inception, including net losses
of $13.1 million in 2022 and $12.2 million in 2021. As of December 31, 2022 we had an accumulated deficit of $95.5 million. We expect
to continue to incur substantial losses for the next several years, and we expect these losses to increase as we continue our development
of and potentially seek regulatory approval for, EB613 and EB612 and potentially develop future product candidates, including an additional
oral PTH formulation for non-union fractures. We anticipate that our net losses and accumulated deficit for the next several years will
be significant as we conduct our planned operations. Given our current plans, we anticipate that our existing cash and cash equivalents
will be sufficient to fund our operations into the third quarter of 2024. This assumes capital required to fund our ongoing operations,
including R&D and completion of the Phase 1 PK study related to the new formulation of EB612. This does not include the capital required
to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis and comparative PK study of EB613 and Forteo®. Delays in securing
additional capital or entering into strategic collaborations to capitalize the EB613 Phase 3 program will result in delays in this program.
Accordingly, these factors, among others, raise substantial doubt about our ability to continue as a going concern. Our expectations are
based on management’s current assumptions, clinical development plans and regulatory submission timelines, which may prove to be
wrong, and we could spend our available financial resources much faster than we currently expect. Because of the numerous risks and uncertainties
associated with the development and commercialization of our product candidates, we are unable to accurately predict the timing or amount
of the development and clinical expenses or when, or if we will be able to achieve, or maintain, profitability. In addition, our expenses
could increase if we are required by the FDA or comparable foreign regulatory authorities to perform preclinical or clinical studies or
trials in addition to those currently expected, or if there are any delays in completing our clinical trials or the development and potential
commercialization of EB613 or any other product candidates. The amount of our future net losses will depend, in part, on the amount and
timing of our expenses, our ability to generate revenue and our ability to raise additional capital. These net losses have had, and will
continue to have, an adverse effect on our stockholders’ equity and working capital.
Management has performed an analysis of our
ability to continue as a going concern. In addition, our independent registered public accounting firm has raised substantial doubt as
to our ability to continue as a going concern.
Based on its assessment, management has raised substantial doubt about our ability
to continue as a going concern. In addition, our independent registered public accounting firm expressed substantial doubt as to our ability
to continue as a going concern in their report accompanying our audited consolidated financial statements. As of March 27, 2023, we had
cash and cash equivalents of approximately $11.0 million. Given our current plans, we anticipate that our existing cash and cash equivalents
will be sufficient to fund our operations into the third quarter of 2024. This assumes capital required to fund our ongoing operations,
including R&D and completion of the Phase 1 PK study related to the new formulation EB612. This does not include the capital required
to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis and comparative PK study of EB613 and Forteo®. Our expectations
are based on management’s current assumptions, clinical development plans and regulatory submission timelines, which may prove to
be wrong, and we could spend our available financial resources much faster than we currently expect. Our ability to continue as a going
concern will depend on our ability to obtain additional financing. The Company constantly evaluates options with respect to various financing
alternatives including public or private equity offerings, debt financings and strategic collaborations to finance future clinical trials,
including the Phase 3 pivotal study for EB613 in osteoporosis and comparative PK study of EB613 and Forteo®, research and development
activities and general and administrative expenses. A going concern opinion could impair our ability to finance our operations through
public or private equity offerings, or debt financings, or a combination of one or more of these funding sources. Any additional equity
or debt financing could be extremely dilutive to our current shareholders. Additional capital may not be available on reasonable terms,
or at all, and we may be required to delay, terminate or significantly curtail our operations, or enter into arrangements with collaborative
partners or others that may require us to relinquish rights to certain aspects of our product candidates, or potential markets that we
would not otherwise relinquish. If we are unable to obtain capital, our business, including our ability to conduct studies and develop
our product candidates, would be jeopardized and we may not be able to continue operations.
Due to our limited resources and access to
capital, we must and have in the past decided to prioritize development of certain product candidates; these decisions may prove to have
been wrong and may adversely affect our current and any potential future revenues.
Because we have limited resources and access to capital to fund our operations, we
must decide which product candidates to pursue and the amount of resources to allocate to each product candidate. As such, we are currently
primarily focused on the development of EB613 and EB612 for the treatment of osteoporosis and hypoparathyroidism, respectively. Our decisions
concerning the allocation of research, collaboration, management and financial resources toward particular compounds, product candidates
or therapeutic areas may not lead to the development of viable commercial products and may divert resources away from better opportunities.
Similarly, our current or potential decisions to delay, terminate or collaborate with third parties with respect to certain product development
programs may also be sub-optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the
market potential of our product candidates or misread trends in the biopharmaceutical industry, our business, financial condition and
results of operations could be materially adversely affected.
We will require substantial additional funding,
which may not be available to us on acceptable terms, or at all, and, if not available, may require us to delay, reduce or cease our product
development activities and operations.
We are currently advancing our lead product candidate EB613 through clinical development.
Developing therapeutics, including conducting preclinical studies and clinical trials, is expensive. We will require substantial additional
capital in order to complete research and development, clinical trials, file with the regulatory agencies, including the FDA and EMA,
secure commercial manufacturing supply for and commercialize our product candidates. If the FDA or comparable foreign regulatory authorities
require that we perform additional preclinical studies or clinical trials at any point, our expenses would further increase beyond what
we currently expect, and the anticipated timing of any future clinical development activities and potential regulatory approvals may be
delayed depending upon our allocation of resources and available funding. Additional funds may not be available when we need them on terms
that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, or on acceptable terms, we may be required
to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for one or more of our product
candidates or delay, limit, reduce or terminate our establishment of manufacturing, sales and marketing capabilities or other activities
that may be necessary to commercialize our product candidates.
We expect that we would need to raise additional funds to support the execution of
our long-term growth strategy, including for a potential Phase 3 trial of EB613 and a comparative PK trial of EB613 with Forteo®,
additional non-clinical and clinical studies for EB612, and further development of our technology platform and pre-clinical product candidates.
We can provide no assurance that additional funding will be available on a timely basis, on terms acceptable to us, or at all. Because
successful development of our product candidates is uncertain, we are unable to estimate the actual amount of financing we will require
to complete research and development and to commercialize our product candidates. The amount and timing of our funding requirements will
depend on many factors, including but not limited to:
|
• |
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.
|
Many of these factors are outside of our control. Based upon our currently expected
level of operating expenditures, we believe that we will be able to fund our operations into the third quarter of 2024. This assumes capital
required to fund our ongoing operations, including R&D and completion of the Phase 1 PK study related to the new formulation EB612.
This does not include the capital required to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis and comparative PK study
of EB613 and Forteo®. Delays in securing additional capital or entering into strategic collaborations to capitalize the EB613 Phase
3 program will result in delays in this program. Our expectations are based on management’s current assumptions, clinical development
plans and regulatory submission timelines, which may prove to be wrong, and we could spend our available financial resources much faster
than we currently expect. This period could be shortened if there are any unanticipated increases in spending on development programs
or other unanticipated increases in spending related to circumstances outside of our control, including, without limitation, costs associated
with litigation or other legal proceedings, hiring of additional consultants and personnel or procurement of additional raw materials.
Our existing cash and cash equivalents will not be sufficient to obtain regulatory approval for any of our product candidates. Accordingly,
we continue to require substantial additional capital. In order to fund our future capital needs, we may seek additional funding through
equity or debt financings, development partnering arrangements, lines of credit or other sources. These conditions raise substantial doubt
about our ability to continue as a going concern, and we will be required to raise additional funds, seek alternative means of financial
support, including strategic partnerships, or both, in order to continue operations. The accompanying financial statements have been prepared
assuming that we will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty.
If we are unable to raise the requisite funds, we will need to delay the initiation of core activities, curtail or cease operations.
Our fundraising efforts in the future to secure additional financing will divert our
management from our day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.
In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.
If we are unable to raise additional capital when required or on acceptable terms, we may be required to significantly delay, reduce or
discontinue the development or commercialization of one or more of our product candidates or curtail our operations, which will have an
adverse effect on our business, operating results and prospects.
We have a limited operating history and no
history of late stage clinical studies and commercializing pharmaceutical products, which may make it difficult to evaluate the prospects
for our future viability and making an investment in our Ordinary Shares unsuitable for many investors.
We began operations in 2010. Our operations to date have been limited to financing
and staffing our company, developing our drug delivery technology and early clinical development of our product candidates. We have not
yet demonstrated an ability successfully to complete a large-scale, pivotal clinical trial, obtain marketing approval, manufacture a commercial
scale product or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions
about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing
pharmaceutical products.
Raising additional capital may cause dilution
to our shareholders, and these financings, or disputes with shareholders in connection therewith, may restrict our operations or require
us to relinquish substantial rights or result in unanticipated legal or other costs.
Until such time, if ever, as we can generate substantial product revenue, we expect
to finance our cash needs through a combination of public or private equity offerings, debt financings and strategic collaborations. We
do not have any committed external sources of funds and we will need to raise additional capital. To the extent that we raise additional
capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these new
securities may include liquidation or other preferences that adversely affect the rights of a holder of our Ordinary Shares. Debt financing,
if available at all, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as
incurring additional debt, making capital expenditures, or declaring dividends, and may be secured by all or a portion of our assets.
Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting
fees, printing and distribution expenses and other costs and such efforts may divert our management from their day-to-day activities,
which may compromise our ability to develop and market our product candidates. We may also be required to recognize non-cash expenses
in connection with certain securities we may issue, such as convertible notes and warrants, which could cause our operating results to
fluctuate on a quarterly basis.
If we raise additional funds through collaborations, strategic alliances, or licensing
arrangements with third parties, we may have to relinquish valuable rights to our technologies, product candidates, or future revenue
streams, or grant licenses on terms that are not favorable to us. We cannot assure you that we will be able to obtain additional funding
if and when necessary. If we are unable to obtain adequate financing on a timely basis, we could be required to delay, scale back or eliminate
one or more of our development programs or grant rights to develop and market product candidates that we would otherwise prefer to develop
and market ourselves.
The requirements of being a public company
may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are
no longer an Emerging Growth Company.
As a public company, we are required to comply with various regulatory and reporting
requirements, including those required by the SEC. Complying with these reporting and regulatory requirements are time consuming, result
in increased costs to us and could have a negative effect on our business, results of operations and financial condition.
We are subject to the reporting requirements of the Exchange Act, and the requirements
of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources.
The Exchange Act requires that we file annual and current reports with respect to our business and financial condition. The Sarbanes-Oxley
Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are implementing
procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Complying with these
requirements is costly and time consuming. In the event that we are unable to demonstrate compliance with our obligations as a public
company in a timely manner, or are unable to produce timely or accurate financial statements, we may be subject to sanctions or investigations
by regulatory authorities, such as the SEC or Nasdaq, investors may lose confidence in our operating results and the price of our Ordinary
Shares could decline. These activities may divert management’s attention from other business concerns, which could have a material
adverse effect on our business, financial condition, results of operations and cash flows.
As an emerging growth company, we may take advantage of certain temporary exemptions
from various reporting requirements including, but not limited to, not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act and the rules and regulations of the SEC thereunder. We plan to take advantage of these exemptions
but we cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur
unexpected expenses. We will remain an emerging growth company until the earliest of: (a) the last day of our fiscal year during which
we have total annual gross revenues of at least $1.07 billion; (b) the last day of our fiscal year following the fifth anniversary of
the completion of our IPO, specifically, December 31, 2023; (c) the date on which we have, during the previous three-year period, issued
more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a large accelerated filer, or Large Accelerated
Filer, under the Exchange Act with at least $700 million of equity securities held by non-affiliates. We cannot predict or estimate the
amount of additional costs we may incur as a result of no longer being an Emerging Growth Company or the timing of such costs.
Our Ordinary Shares and IPO Warrants are listed on Nasdaq. As a public company listed
on Nasdaq, we incur significant legal, accounting and other expenses. In addition, changing laws, regulations and standards, in the United
States or Israel, relating to corporate governance and public disclosure and other matters, may be implemented in the future, which may
increase our legal and financial compliance costs, make some activities more time consuming and divert management’s time and attention
from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ
from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate
legal proceedings against us and our business may be harmed. Furthermore, because we are a publicly traded company in the United States
and subject to U.S. rules and regulations, it is more expensive for us to obtain director and officer liability insurance, and we may
be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors may also make it more difficult
for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified
executive officers.
Risks Related to Our Business and the Development of Our Product
Candidates
All of our product candidates are in preclinical
or clinical development and we have not yet successfully completed the development of any product candidates.
We are a clinical-stage company focused on the development of orally delivered peptide
and protein therapeutics to treat unmet medical needs. We commenced operations in 2010 and have a limited operating history. Since inception,
we have devoted substantially all of our resources to the development of our technology platform, the clinical and preclinical advancement
of our product candidates, the creation, licensing and protection of related intellectual property rights and the provision of general
and administrative support for these operations. We have not yet obtained regulatory approval for any product candidates in any jurisdiction
or generated any revenues from any product sales. If any of our current or future product candidates fails in clinical trials or preclinical
development, or does not gain regulatory approval, or if our product candidates following regulatory approval, if any, do not achieve
market acceptance, we may never become profitable or sustain profitability.
We commenced our first clinical trials with our oral PTH candidates in osteoporosis
and hypoparathyroidism, and we have a limited operating history of developing products upon which our business and prospects can be evaluated.
In addition, our Phase 2 clinical trial for EB613 for osteoporosis was the largest clinical trial we have conducted to date, and we have
never conducted clinical trials of a size required for regulatory approvals. Furthermore, we have not yet demonstrated an ability to successfully
overcome many of the risks and uncertainties frequently encountered by companies in rapidly evolving fields, such as the oral delivery
of protein therapeutics.
To become and remain profitable, we must succeed in developing and commercializing
products that generate significant revenues. This will require us to be successful in a range of challenging activities for which we are
only in the preliminary stages, including developing product candidates, completing pre-clinical and clinical trials for such product
candidates, obtaining regulatory approval for them, and manufacturing, marketing and selling those products for which we may obtain regulatory
approval. We may never succeed in these activities and, even if we do, we may never generate revenue from product sales that is significant
enough to achieve profitability. Our ability to generate future revenue from product sales depends heavily on our success in many areas,
including but not limited to:
|
• |
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. |
If we are unsuccessful in accomplishing any of these objectives, we may not be able
to develop product candidates, raise capital, expand our business or continue our operations. Even if one or more of the product candidates
that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved
product candidate. Because of the numerous risks and uncertainties with pharmaceutical product development, we are unable to accurately
predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we achieve profitability
in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become or remain profitable would depress
our market value and could impair our ability to raise capital, expand our business, develop other product candidates, or continue our
operations. A decline in the value of our company could also cause you to lose all or part of your investment.
We depend on enrollment of patients in our
clinical trials for our product candidates. If we are unable to enroll an adequate number of volunteers or patients in our clinical trials,
our research and development efforts could be materially adversely affected.
Successful and timely completion of clinical trials will require that we enroll enough
volunteers in early studies, or patients with a specific disease in later trials. Trials may be subject to delays as a result of enrollment
taking longer than anticipated or subject withdrawal. Enrollment depends on many factors, including the size and nature of the patient
population, eligibility criteria for the trial, the proximity of patients to clinical sites, the design of the clinical protocol, the
number of competing clinical trials, the availability of drugs approved for the indication the clinical trial is investigating, and clinicians’
and patients’ perceptions as to the potential advantages of the product being studied in relation to other available therapies.
Our most advanced programs, EB613 and EB612 may compete with marketed drugs, such as Forteo®, Tymlos®, Evenity®, and osteoanabolic
drugs in clinical development for osteoporosis and drugs in clinical development for hypoparathyroidism such as TransCon™ PTH or
Eneboparatide. Furthermore, EB612 has orphan drug designation in the United States and in the EU, which means that the potential patient
population is limited. These factors may make it difficult for us to enroll enough subjects to complete our clinical trials in a timely
and cost-effective manner. Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down
development of our product candidates and any potential approvals and delay or potentially jeopardize our ability to commence product
sales and generate revenue. In addition, some of the factors that cause, or lead to, a delay in the commencement or completion of clinical
trials may also ultimately lead to the denial of regulatory approval of our product candidates.
We may not be successful in our efforts to
use and expand our drug delivery technology to other product candidates.
An element of our strategy is to combine our oral drug delivery technology platform
with a variety of peptides and therapeutic proteins and large molecule active pharmaceutical ingredients, or APIs, to build a pipeline
of product candidates and progress these product candidates through clinical development for the treatment of a variety of different types
of diseases. We intend to use our technology in combination with known APIs, to validate our platform and potentially minimize risk and
development timelines.
Our initial product candidates combine our oral drug delivery technology with PTH,
a hormone that has been used in injectable form for many years for the treatment of osteoporosis and hypoparathyroidism. Our business
is substantially dependent on our ability to complete the development of, obtain regulatory approval for, and successfully commercialize
our oral PTH product candidates in a timely manner. If we are unable to validate our oral drug delivery technology with our PTH product
candidates, in particular our lead candidate EB613, we may be unsuccessful in leveraging our oral drug delivery technology for use with
other APIs. In addition, we have modified the formulation of oral PTH to develop new formulations for applications in hypoparathyroidism
and other indications. If we are not successful in optimizing the formation of our PTH product candidates for additional indications,
or if we are not otherwise able to obtain regulatory approval for them or successfully commercialize them, our business and prospects
may be severely limited.
In addition, our technology makes use of synthetically bioengineered ingredients.
Although our product candidates utilize a synthesized PTH molecule with a known mechanism of action, they may cause patients to exhibit
safety or immune responses that do not match the biological effect of a human protein produced by the parathyroid gland. Such responses
could result in increased regulatory scrutiny, delays or other impediments to our planned development or the public acceptance and commercialization
of our products. Even if we are successful in expanding our drug delivery technology to other APIs for other indications, the potential
product candidates that we identify may not be suitable for clinical development, to the extent they are shown to have harmful side effects
or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance.
We may never successfully develop or commercialize our technology with other APIs, which could limit our business and prospects.
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.
All of our product candidates are still in clinical or non-clinical development and
although our product candidates have undergone or will undergo safety testing, not all adverse effects of drugs can be predicted or anticipated.
Unforeseen side effects from any of our product candidates could be recognized either during clinical development or, if such side effects
are rare, after our product candidates have been approved by regulatory authorities and the approved product has been marketed, resulting
in the exposure of additional patients. While our oral PTH programs have exhibited no serious drug related adverse events in our clinical
trials to date, the results of future clinical trials may show that our product candidates cause undesirable or unacceptable side effects,
which could interrupt, delay or halt clinical trials, and result in delay of, or failure to obtain, marketing approval from the FDA, the
EMA and other regulatory authorities, or result in marketing approval from the FDA, the EMA and other regulatory authorities with restrictive
label warnings or potential product liability claims. For instance, other PTH products have historically been issued with labels that
disclose a potential risk of osteosarcoma based on non-clinical studies.
Additionally, the FDA and foreign regulatory agency regulations require that we report
certain information about adverse medical events if our products may have caused or contributed to those adverse events. The timing of
our obligation to report would be triggered by the date on which we become aware of the adverse event as well as the nature of the event.
We may fail to report adverse events we become aware of within the prescribed timeframe. We may also fail to appreciate that we have become
aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected
or removed in time from the use of our products. If we fail to comply with our reporting obligations, the FDA or a foreign regulatory
agency could take action including criminal prosecution, the imposition of civil monetary penalties or seizure of our products.
If any of our product candidates receives marketing approval and we or others later
identify undesirable or unacceptable side effects caused by such products:
|
• |
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. |
Any of these events could prevent us or any potential collaborators from achieving
or maintaining market acceptance of the affected product or could substantially increase commercialization costs and expenses, which in
turn could delay or prevent us from generating significant revenue from the sale of our products.
We manage our business and develop our technology
with a small number of employees and key advisors with deep functional domain expertise, and, in the event of their loss or unavailability,
we may not be able to grow our business or develop and commercialize our products.
We are highly dependent on the biopharmaceutical research and development, clinical, regulatory, CMC and
strategic expertise of our core executive team and key advisors across these domains, including Miranda Toledano, our Chief Executive
Officer. Our success depends upon the continued contributions of these senior executives, employees and advisors, many of whom have substantial
scientific and technical experience with, and have been instrumental to our regulatory, clinical development and technology platform.
Furthermore, recruiting and retaining new executive talent and qualified scientific personnel to perform future research and clinical
development work will be critical to our success. Competition for skilled personnel is intense and turnover rates are high, and our ability
to attract and retain qualified personnel may be limited. The loss or unavailability of the services of any of our key employees and consultants
for any significant period of time or our inability to attract and retain qualified skilled personnel could have a material adverse effect
on our business, technology, prospects, financial condition and results of operations. We do not maintain “key man” life insurance
policies for any of our employees.
We expect to grow our organization, particularly
in the United States, specifically to supplement and expand our senior management, clinical development and regulatory capabilities and
marketing infrastructure, and we may experience difficulties in managing these changes and this growth, which could disrupt our operations.
As our clinical development and commercialization plans and strategies develop, we
expect to supplement and expand our employee base, particularly in the United States, for clinical development, regulatory, operational,
sales, marketing, financial and other capabilities and with senior managers who are either based in the United States or who have significant
U.S. public company experience. These changes may result in significant shifting of responsibilities or replacement of key personnel.
The need to identify, recruit, maintain, motivate and integrate additional employees and senior members of management, including senior
executives, is expected to impose significant responsibilities on our senior executives and may divert a disproportionate amount of their
attention away from our day-to-day activities. The addition of such employees and managers may have an impact on the decisions that we
make over time.
In conjunction with the addition of these employees and senior members of management,
we intend to grow our company. Due to our limited financial resources and the limited size of our management team, it is possible that
our management, finance, development personnel, systems and facilities currently in place may not be adequate to support this future growth.
We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise
to operational errors, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected
growth could require significant expenditures and may divert financial resources from other projects, such as the development of existing
and additional product candidates. If we are unable to effectively manage our expected growth, our expenses may increase more than expected,
our ability to generate or grow revenue could be reduced and we may not be able to implement our strategy. Our future financial performance
and our ability to develop our product candidates and compete effectively with others in our industry will depend, in part, on our ability
to effectively manage any future growth. In addition, pursuant to both Israeli law and Nasdaq rules, we have appointed independent directors,
which may result in a change in the company’s direction over time.
We are increasingly dependent on information
technology systems, infrastructure and data, and our internal computer systems, or those of our collaborators, third-party clinical research
organizations or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of
our product development programs.
We are increasingly dependent upon information technology systems, infrastructure
and data. Despite the implementation of security measures, our internal computer systems and those of our development partners, third-party
clinical research organizations, data management organizations and other contractors and consultants are vulnerable to damage from service
interruption or destruction, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical
failures. In addition, such systems are subject to compromise from internal threats, such as theft, misuse, unauthorized access or other
improper actions by employees, third-party service providers and other third parties with otherwise legitimate access to our systems.
Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks
could include the deployment of harmful malware, denial-of service, social engineering and other means to affect service reliability and
threaten data confidentiality, integrity and availability. It is possible that we may not be able to anticipate, detect, appropriately
react and respond to, or implement effective preventative measures against all cybersecurity incidents. Our key business partners face
similar risks, and a security breach of their systems could adversely affect our security posture.
While we have not experienced any such system failure, accident or security breach
to date, if such an event were to occur and cause interruptions in our operations, it could cause damage or destroy assets, compromise
business systems, or otherwise result in a material disruption of our programs and business operations. Security breaches further pose
a risk that sensitive data, including intellectual property, clinical data, trade secrets or personal information may be exposed to unauthorized
persons or to the public, altered or lost. For example, the loss of clinical trial data for any of our product candidates could delay
our ability to report such data, result in delays in our regulatory approval efforts and significantly increase our costs to recover or
reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or
other data or applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary
information, we could incur liabilities, damages or damage to our reputation and the further development of our product candidates could
be delayed. We do not currently maintain a cyber insurance policy and therefore the successful assertion of one or more large claims against
us in connection with a breach or other cybersecurity-related matter could materially adversely affect our business, financial condition
and operating results.
We rely on email and other messaging services in connection with our operations. We
may be targeted by parties using fraudulent spoofing and phishing emails to misappropriate passwords, payment information or other personal
information or to introduce viruses through Trojan horse programs or otherwise through our networks, computers, smartphones, tablets or
other devices. Despite our efforts to mitigate the effectiveness of such malicious email campaigns through a variety of control and non-electronic
checks, spoofing and phishing may damage our business and increase our costs. Any of these events or circumstances could materially adversely
affect our business, financial condition and operating results.
We may be required to expend significant capital and other resources to protect against,
respond to, and recover from any potential, attempted, or existing cybersecurity incidents. As cybersecurity incidents continue to evolve,
we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate
and remediate any information security vulnerabilities. In addition, our remediation efforts may not be successful. Moreover, there could
be public announcements regarding any cybersecurity incidents and any steps we take to respond to or remediate such incidents, and if
securities analysts or investors perceive these announcements to be negative, it could, among other things, have a substantial adverse
effect on the price of our Ordinary Shares. There can be no assurance that our efforts will prevent service interruptions, or identify
breaches in our systems, that could adversely affect our business and operations and/or result in the loss of critical or sensitive information
or the illegal transfer of funds to unknown persons, which could result in financial, legal, business or reputational harm, and may harm
our relationships with third parties.
Our employees may engage in misconduct or other
improper activities, including noncompliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees
could include intentional failures to comply with the regulations of the FDA or foreign regulators, failure to provide accurate information
to regulatory authorities, failure to comply with manufacturing standards we have established, failure to comply with federal and state
health care fraud and abuse laws and regulations in the United States and abroad, failure to report financial information or data accurately,
disclose unauthorized activities to us or failure to comply with our own internal company policies. In particular, sales, marketing and
business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct,
kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting,
marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also
involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause
harm to our reputation. We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter employee
misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks
or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these
laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our
rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
In addition, during the course of our operations, our directors, executives and employees
may have access to material, nonpublic information regarding our business, our results of operations or potential transactions we are
considering. We may not be able to prevent a director, executive or employee from trading in our Ordinary Shares on the basis of, or while
having access to, material, nonpublic information. If a director, executive or employee was to be investigated or an action was to be
brought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and our stock
price. Such a claim, with or without merit, could also result in substantial expenditures of time and money and divert attention of our
management team from other tasks important to the success of our business.
We are subject to risks related to restrictive
data privacy regulations governing the collection, use, processing and cross-border transfer of personal information.
In the ordinary course of our business, we may collect, process, use, store or transfer
sensitive data in our data centers and on our networks, including intellectual property, proprietary business information (both ours and
that of our customers, suppliers and business partners) and personally identifiable information, including in connection with conducting
clinical trials. We are subject to strict data privacy laws and regulations in the United States, United Kingdom, EU, Israel and other
jurisdictions in which we operate, as well as contractual obligations, governing the collection, transmission, storage and use of personal
information. The legislative and regulatory landscape for data privacy and protection continues to evolve around the world and are increasingly
rigorous, with new and constantly changing requirements applicable to our business, including the U.S.’s federal Health Insurance
Portability and Accountability Act of 1996, as amended, or HIPAA, the EU General Data Protection Regulation ((EU) 2016/679), or the GDPR,
the Israeli Privacy Protection Law, 5741-1981, and other laws and regulations governing the collection, use, disclosure and transmission
of data. The enforcement practices of these laws and regulations are likely to remain uncertain for the foreseeable future. These laws
and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they
will be interpreted and applied in ways that may have a material adverse effect on our results of operations, financial condition and
cash flows.
For example, in the United States, various federal and state regulators have adopted,
or are considering adopting, laws and regulations concerning personal information and data security. Certain state laws may be more stringent
or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state
laws, and such laws may differ from each other, all of which may complicate compliance efforts. For example, the California Consumer Privacy
Act, or the CCPA, which increases privacy rights for California residents and imposes obligations on companies that process their personal
information, came into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to
California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales
of personal information. On November 3, 2020, California voters approved a new privacy law, the California Privacy Rights Act, or CPRA,
which significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain personal information and
creating a new state agency to oversee implementation and enforcement efforts. Many of the CPRA’s provisions have become effective
on January 1, 2023. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches
that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with,
data breach litigation. In addition, laws in all 50 U.S. states require businesses to provide notice to consumers whose personal information
has been disclosed as a result of a data breach. State laws are changing rapidly and there is discussion in Congress of a new comprehensive
federal data privacy law to which we would become subject if it is enacted.
In addition, outside the United States, laws, regulations and standards in many jurisdictions
apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information. For example,
the GDPR greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for
handling personal data. EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds
to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet
such obligations. The GDPR, together with national legislation, regulations and guidelines of the EU member states governing the processing
of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise
process personal data. Specifically, the GDPR’s requirements including having legal bases for processing personal information relating
to identifiable individuals and transferring such information outside of the European Economic Area, including to the United States, and
other countries providing details to those individuals regarding the processing of their personal information, keeping personal information
secure, having data processing agreements with third parties who process personal information, responding to individuals’ requests
to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent
national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments
and record-keeping. The GDPR imposes additional responsibilities and liabilities in relation to personal data that we process and authorizes
fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater. The U.K. has transposed
the GDPR into domestic law, with its version of the GDPR that took effect on January 1, 2021, which could expose us to two parallel regimes,
each of which potentially authorizes similar fines for certain violations. As such, we may be required to put in place additional mechanisms
ensuring compliance with the new data protection rules.
All of these evolving compliance and operational requirements impose significant costs,
such as costs related to organizational changes, implementing additional protection technologies, training associates and engaging consultants,
which are likely to increase over time. In addition, such requirements may require us to modify our data processing practices and policies,
distract management or divert resources from other initiatives and projects. Any failure or perceived failure to comply with the requirements
of privacy laws and regulations, including the CCPA, GDPR and related national data protection laws of the member states of the EU and
the U.K., may result in damage to our reputation and our relationship with our customers, as well as proceedings or litigation by governmental
agencies or customers, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines,
sanctions, awards, penalties or judgments, which could have a material adverse effect on our business, prospects, financial condition
and results of operations.
Global economic conditions may negatively affect us and may magnify
certain risks that affect our business.
In recent months, record levels of inflation have resulted in significant volatility
and disruptions in the global economy. In response to rising inflation, central banks in the markets in which we operate, including the
United States Federal Reserve, have tightened their monetary policies and raised interest rates, and such measures may continue if there
is a period of sustained heightened inflation. Higher interest rates and volatility in financial markets could lead to additional economic
uncertainty or recession. Increased inflation rates have increased our and our suppliers’ operating costs, including labor costs,
raw materials costs, manufacturing costs, freight costs and R&D costs. In addition to rising inflation, the global economy has also
been impacted by fluctuating foreign exchange rates and geopolitical tensions, such as the ongoing conflict between Russia and Ukraine,
which has spurred rising energy costs and exacerbated disruptions to the global supply chain caused by the COVID-19 pandemic
and the government and societal responses to the pandemic. Supply chain disruptions could continue to result in delays in our R&D
and clinical initiatives. As we have substantial international operations, fluctuations in exchange rates between the currencies in which
we operate, which could increase our operating costs and adversely affect our results of operations, and cash flows. The duration and
extent of such macroeconomic developments are uncertain and we cannot accurately predict whether we will be able to effectively and timely
mitigate their impact on our business.
Risks Related to Regulatory Approval of Our Product Candidates
Clinical
drug development is expensive, time consuming and uncertain. Development programs are subject to regulatory requirements, unanticipated
delays and we may ultimately not be able to obtain regulatory approvals for the commercialization of our product candidates.
Our lead product candidates are orally delivered tablet formulations of the synthetic
form of the first 34 amino acids of human PTH, teriparatide. We are developing EB613 to treat osteoporosis and EB612 to treat hypoparathyroidism.
These product candidates have not yet reached late-stage clinical development and are subject to the risks of failure inherent in regulatory
assessments and drug development. The clinical development, manufacturing, quality assurance, labeling, storage, record-keeping, advertising,
promotion, pharmacovigilance, import, export, marketing and distribution of our product candidates is subject to extensive regulation
by the FDA in the United States and by comparable authorities in foreign markets. We are not permitted to market our product candidates
in the United States until we receive approval of a new drug application, or NDA, or biologics license application, or BLA, from the FDA
or in any other country until we receive marketing approval from the applicable regulatory authorities in such countries. We have not
yet submitted a marketing application, or received marketing approval, for any of our product candidates and have limited experience in
conducting and managing the clinical trials necessary to obtain regulatory approvals. The process of obtaining regulatory approvals is
expensive, often takes many years, and can vary substantially based upon the type, complexity, and novelty of the products involved, as
well as the target indications. Approval policies or regulations may change and the regulatory agencies have substantial discretion in
the approval process for products, including the ability to delay, limit or deny approval of a product candidate for many reasons. Obtaining
approval of an NDA, BLA, or other marketing application can be a lengthy, expensive and uncertain process. Despite the time and expense
invested in clinical development of product candidates, regulatory approval is never guaranteed.
The FDA or comparable foreign regulatory authorities can delay, limit or deny approval
of a product candidate for many reasons, including:
|
• |
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. |
Each of our oral PTH product candidates, including EB613 and EB612,
are still in clinical development and face a variety of risks and uncertainties, including the following:
|
• |
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. |
If we are unsuccessful in dealing with any of these risks, or if we or a potential
partner are unable to successfully commercialize our oral PTH or any other product candidates we may develop in the future, it would likely
have a material adverse effect on our business, prospects, financial condition and results of operations. \
In addition, before we can submit an application for regulatory approval in the United
States, we must conduct a pivotal trial that will be substantially broader than our completed Phase 2 trials in osteoporosis and hypoparathyroidism
(with the earlier formulation of EB612). We will also need to agree on a protocol with the FDA for a Phase 3 clinical trial before commencing
the trial. Phase 3 clinical trials frequently produce unsatisfactory results even when prior clinical trials were successful. Therefore,
even if the results of our Phase 2 trials are successful, the results of the additional trials that we conduct may or may not be successful.
Further, our product candidates may not be approved even if they achieve their primary endpoints in Phase 3 clinical trials. The FDA,
EMA or other regulatory agencies may require that we conduct additional clinical, nonclinical, manufacturing validation or drug product
quality studies beyond those planned and submit data from such trials before considering or reconsidering the application. Depending on
the extent of these or any other studies, approval of any applications that we submit may be delayed by several years or may require us
to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be considered
sufficient by the FDA, EMA or other regulatory agencies. If any of these outcomes occur, we would not receive approval for our oral PTH
tablet or other product candidates we may develop in the future.
In addition, the FDA, EMA or other regulatory agencies may also approve a product
candidate for fewer or more limited indications than we request, may impose significant limitations related to use restrictions for certain
age groups, warnings, precautions or contraindications or may grant approval contingent on the performance of costly post-marketing clinical
trials or risk mitigation requirements. The FDA, EMA or other regulatory agencies may also not accept the labeling claims that we believe
would be necessary or desirable for the successful commercialization of our product candidates.
The commencement and completion of clinical
trials can be delayed or prevented for a number of reasons.
EB613
completed a six-month placebo-controlled Phase 2 double-blind, dose-ranging trial. In November 2018, we had a Pre-Investigational New
Drug (“Pre-IND”) meeting with the FDA to discuss our EB613 program for the treatment of osteoporosis. In December 2020, we
announced that the FDA had reviewed our October 2020 IND Application and informed us that we may proceed with our U.S. clinical pharmacology
study. In December 2021, we held an end-of-Phase 2 meeting with the FDA to review the six-month phase 2 results and a proposed Head-to-Head
Non-Inferiority Phase 3 study protocol vs. Forteo®, our nonclinical and clinical development plan and the use of BMD, rather than
fracture incidence, as the primary endpoint to support an NDA. Following our End of Phase 2 Meeting with the FDA and pursuant to the FDA’s
concern that a Head-to-Head study phase 3 design may not be favorable to support an NDA for EB613, we redesigned the pivotal phase 3 study
for EB613 based on the FDA’s suggestion to explore a placebo-controlled trial. A Type C meeting with the FDA in relation to Entera’s
proposed Phase 3 registrational study was held in the second half of 2022 and in October 2022, the Company concluded its Type C meeting
and the FDA agreed that a single Phase 3 placebo-controlled study could support an NDA submission of EB613 (oral hPTH (1-34), teriparatide
tablets) under the 505(b)(2) regulatory pathway. The FDA also agreed that Total BMD could serve as the primary endpoint of the registrational
study in post-menopausal osteoporosis patients.
In addition, we expect to carry out a PK study for the new formulation of EB612 in
the first half of 2023. We anticipate that the outcome of the PK study will help determine the dosing and design of a Phase 2 or Phase
3 trial of EB612 in patients with hypoparathyroidism. If successful, the phase 2/3 clinical trial of EB612 in hypoparathyroidism may potentially
support a submission for regulatory approval of EB612. Drug development is a long, expensive and uncertain process, and delay or failure
can occur at any stage of any of our clinical trials for a number of reasons including:
|
• |
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.
|
If changes in regulatory requirements and guidance occur, we may need to significantly
amend clinical trial protocols or submit new clinical trial protocols with appropriate regulatory authorities to reflect these changes.
Amendments may require us to renegotiate terms with CROs or investigators, or resubmit clinical trial protocols to IRBs or ethics committees
for re-examination, which may impact the costs, timing or successful completion of a clinical trial. Our clinical trials may be suspended
or terminated at any time by the FDA (for trials in the United States), other regulatory authorities (for trials conducted outside the
United States), the IRB /ethics committee overseeing any given clinical trial, any of our clinical trial sites with respect to that site,
or us, due to a number of factors, including:
|
• |
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. |
Moreover, principal investigators for our clinical trials may serve as scientific
advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances,
we are required to report some of these relationships to the FDA. The FDA may conclude that a financial relationship between us and a
principal investigator has created a conflict of interest or otherwise affected the investigator’s conduct of the trial. The FDA
may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial
itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately
lead to the denial of marketing approval of one or more of our product candidates.
If we do not succeed in conducting and managing our non-clinical development activities
or clinical trials, or in obtaining regulatory approvals, we might not be able to commercialize our product candidates, or might be significantly
delayed in doing so, which could have a material adverse effect on our business, prospects, financial condition and results of operations.
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.
We currently have no products approved for sale and we cannot guarantee that we will
ever have marketable products. Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or
inconclusive results, and we or any of our current and future collaborators may decide, or regulators may require us, to conduct additional
clinical or non-clinical testing. We will be required to demonstrate with substantial evidence through well-controlled clinical trials
that our product candidates are safe and effective for use in a diverse population before we can obtain regulatory approvals for their
commercial sale. Success in early clinical trials does not mean that future clinical trials will be successful because product candidates
in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and other regulatory
authorities despite having progressed through initial clinical trials. Product candidates that have shown promising results in early clinical
trials may still suffer significant setbacks in subsequent clinical trials. Similarly, the outcome of non-clinical testing and early clinical
trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict
final results. Progress in trials of one product candidate does not indicate that we will make similar progress in additional trials for
that product candidate or in trials for our other product candidates. A number of companies in the pharmaceutical industry, including
those with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials, even after obtaining
promising results in earlier clinical trials.
The design of a clinical trial can determine whether its results will support approval
of a product. We may be unable to design and/or execute a clinical trial to support regulatory approval. Flaws in the design of a clinical
trial may not become apparent until the clinical trial is well advanced or completed. In addition, we or our investigators may have little
control over whether subjects comply with important aspects of clinical trial protocols. In particular, in trials of our oral PTH, if
subjects do not comply with restrictions on eating and drinking before and after administration of our product candidates, interaction
between the drug and food in the gastrointestinal tract, or a “food effect,” may decrease the bioavailability and increase
the variability of drug delivered to the subject, which may negatively impact efficacy.
In some instances, there can be significant variability in safety and/or efficacy
results between different trials of the same product candidate due to numerous factors, including changes in trial protocols, differences
in size and type of the patient populations, adherence to the dosing regimen and other trial protocols, modifications in the formulation
throughout the course of development and the rate of dropout among clinical trial participants. While we have not had any serious adverse
events in our clinical trials to date that are believed to be related to our oral PTH product candidates, we may need to change future
trial designs in response to adverse events that occur during future clinical development. We do not know whether any Phase 2, Phase 3
or other clinical trials we or any of our collaborators may conduct will demonstrate consistent or adequate efficacy and safety to obtain
regulatory approval to market our product candidates.
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.
Even if marketing approval is obtained for our product candidates, a regulatory authority
may still impose significant restrictions on a product’s indications, conditions for use, distribution or marketing or impose ongoing
requirements for potentially costly post-market surveillance, post-approval studies or clinical trials, all of which may result in significant
expense and limit our ability to commercialize our products. Our products will also be subject to ongoing requirements governing the labeling,
packaging, storage, advertising, distribution, promotion, recordkeeping and submission of safety and other post-market information, including
adverse events, and any changes to the approved product, product labeling or manufacturing process. In addition, manufacturers of drug
products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for
compliance with cGMP, requirements and other regulations.
If we, our drug products or the manufacturing
facilities for our drug products, fail to comply with applicable regulatory requirements, a regulatory agency may:
|
• |
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. |
We cannot predict the likelihood, nature or extent of government regulation that may
arise from future legislation or administrative action, either in the United States or abroad, and compliance with such regulation may
be expensive and consume substantial financial and management resources. If we or any future marketing collaborators or contract manufacturers
are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies or are not able to maintain
regulatory compliance, it could delay or prevent the promotion, marketing or sale of our products, which would adversely affect our business
and results of operations.
Healthcare legislative changes
may harm our business and future prospects.
Healthcare costs have risen significantly over the past decade. Globally, governments
are becoming increasingly aggressive in imposing health care cost-containment measures. Certain proposals, if passed, would impose limitations
on the prices we will be able to charge for the products that we are developing, or the amounts of reimbursement available for these products
from governmental agencies or third-party payors. These limitations could in turn reduce the amount of revenues that we will be able to
generate in the future from sales of our products and licenses of our technology.
In the United States, the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003, or MMA, changed the way Medicare covers and pays for pharmaceutical products. The MMA expanded Medicare coverage for outpatient
drug purchases by those covered by Medicare under a new Part D and introduced a new reimbursement methodology based on average sales prices
for Medicare Part B physician-administered drugs. In addition, the MMA authorized Medicare Part D prescription drug plans to limit the
number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of
drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives and other
provisions of the MMA could decrease the coverage and price that we receive for any approved products and could seriously harm our future
business prospects. While this law applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage
policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from this law
may result in a similar reduction in payments from private payors.
In March 2010, President Obama signed into law the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, a sweeping law intended to broaden
access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency
requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health
policy reforms. The ACA, among other things, increased rebates a manufacturer must pay to the Medicaid program, addressed a new methodology
by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled,
implanted or injected, established a new Medicare Part D coverage gap discount program, in which manufacturers must provide 75% point-of-sale
discounts on products covered under Part D and implemented payment system reforms including a national pilot program on payment bundling
to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services
through bundled payment models. Further, ACA imposed a significant annual fee on companies that manufacture or import branded prescription
drug products. Substantial new provisions affecting compliance were enacted, which may affect our business practices with health care
practitioners. The ACA appears likely to continue the pressure on pharmaceutical pricing and may also increase our regulatory burdens
and operating costs.
In addition, other legislative changes have been proposed and adopted in the United
States since the ACA was enacted. In 2011, the U.S. Congress enacted the Budget Control Act of 2011, or the Budget Control Act, which
included provisions intended to reduce the federal deficit. The Budget Control Act resulted in the imposition of 2% reductions in Medicare
payments to providers beginning in 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027
absent additional congressional action. However, pursuant to the CARES Act, and subsequent legislation, these reductions are suspended
from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. In January 2013, the American Taxpayer Relief Act of 2012 was signed
into law, which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for
the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare
and other healthcare funding, which could have a material adverse effect on customers for our drugs, if approved, and accordingly, our
financial operations. If government spending is further reduced, anticipated budgetary shortfalls may also impact the ability of relevant
agencies, such as the FDA, to continue to function at current levels, which may impact the ability of relevant agencies to timely review
and approve research and development, manufacturing and marketing activities, which may delay our ability to develop, market and sell
any product candidates we may develop. In addition, any significant spending reductions affecting Medicare, Medicaid or other publicly
funded or subsidized health programs that may be implemented, or any significant taxes or fees that may be imposed on us, as part of any
broader deficit reduction effort or legislative replacement to the Budget Control Act, could have an adverse impact on our anticipated
product revenues.
There have been changes and modifications to certain aspects of the ACA, and we expect
such changes and modifications to continue. In 2017, the U.S. Congress enacted the Tax Cuts and Jobs Act, or the 2017 Tax Act, which eliminated
the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage
for all or part of a year that is commonly referred to as the “individual mandate.” On January 22, 2018, President Trump signed
a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain fees mandated by the ACA, including
the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans and the annual fee imposed on certain
health insurance providers based on market share. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the ACA,
effective January 1, 2019, to close the coverage gap in most Medicare drug plans. In July 2018, CMS, published a final rule permitting
further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment
program in response to the outcome of federal district court litigation, regarding the method CMS uses to determine this risk adjustment.
On January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through
May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain
governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others,
reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers
to obtaining access to health insurance coverage through Medicaid or the ACA. Changes and modifications to the ACA are likely to continue,
with unpredictable and uncertain results.
Recently, there has been heightened governmental scrutiny over the manner in which
manufacturers set prices for their commercial products. There have been several recent U.S. Congressional inquiries and proposed and enacted
federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between
pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies
for drugs. On September 24, 2020, the FDA released a final rule providing guidance for states to build and submit importation plans for
drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services, or HHS, finalized a regulation removing
safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through
pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions
reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and
biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and
marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk
purchasing.
On November 20, 2020, the HHS Office of Inspector General finalized further modifications
to the federal Anti-Kickback Statute. Under the final rules, the HHS Office of Inspector General added safe harbor protections under the
Anti-Kickback Statute for certain coordinated care and value-based arrangements among clinicians, providers, and others, yet removed safe
harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy
benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected
at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.
This rule (with exceptions) became effective January 19, 2021. We continue to evaluate what effect, if any, these rules will have on our
business. CMS issued a final rule, effective on July 9, 2019, that requires direct-to-consumer advertisements of prescription drugs and
biological products, for which payment is available through or under Medicare or Medicaid, to include in the advertisement the Wholesale
Acquisition Cost, or list price, of that drug or biological product if it is equal to or greater than $35 for a monthly supply or usual
course of treatment. Prescription drugs and biological products that are in violation of these requirements will be included on a public
list. Any adopted health reform measure could reduce the ultimate demand for our products, if approved, or put pressure on our product
pricing. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations
designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain
product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other
countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures
to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.
We expect that additional state and federal healthcare reform measures will be adopted in the future.
The delivery of healthcare in the EU, including the establishment and operation of
health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy.
National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing
and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU member states have
resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing
EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of
our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize any products for which we
obtain marketing approval. Both in the United States and in the EU, legislative and regulatory proposals have been made to expand post-approval
requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative
changes will be enacted, or whether the regulations, guidance or interpretations will be changed, or what the impact of such changes on
the marketing approvals of our product candidates, if any, may be.
Our relationships with customers and payors
are subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which, if violated, could expose us
to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm and diminished
profits and future earnings.
Healthcare providers, physicians and others will play a primary role in the recommendation
and prescription of any products for which we obtain marketing approval. Our future arrangements with third-party payors and customers
may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations, primarily in the United States, that may
constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which
we obtain marketing approval. Restrictions under applicable healthcare laws and regulations, include the following:
|
• |
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. |
Because of the breadth of these laws and the narrowness of the statutory exceptions
and safe harbors available, it is possible that some of our future business activities could be subject to challenge under one or more
of such laws.
Efforts to ensure that our business arrangements with third parties will comply with
applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude
that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse
or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental
regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion
from U.S. government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations.
If any of the physicians or other providers or entities with whom we expect to do business with are found to be not in compliance with
applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare
programs.
Risks Related to Commercialization of Our Product Candidates
We are likely to face significant competition,
and if our competitors’ products are more effective, safer or less expensive than ours, our commercial opportunities will be negatively
affected. Our lead product candidates, if approved, would compete with existing products.
Our industry is highly competitive and subject to rapid and significant technological
change. While we believe that our technology, drug candidates, knowledge, experience and scientific resources provide us with competitive
advantages, we face competition from many different sources, including large pharmaceutical, specialty pharmaceutical, biotechnology and
generic drug companies and academic and government institutions. These organizations may have significantly greater resources than we
do and conduct similar research, seek and obtain patent protection that may impact our freedom to operate and establish collaborative
arrangements for research, development, manufacturing and marketing of products that compete with our product candidates. We believe that
the key competitive factors that will affect the development and commercial success of our oral PTH product candidates, and any other
product candidates that we develop, are efficacy, safety and tolerability profile, convenience in dosing, product labeling, price and
availability of reimbursement from the government and other third-parties. Our commercial opportunity could be reduced or eliminated if
our competitors have products that are better in one or more of these categories. Furthermore, our competitors may, among other things,
develop and commercialize products that are safer, more effective, less expensive, or more convenient or easier to administer, obtain
quicker regulatory approval, establish superior proprietary positions, have access to more manufacturing capacity, implement more effective
approaches to sales and marketing, or form more advantageous strategic alliances.
Our primary innovation is our development of an oral drug delivery technology for
peptides, therapeutic protein and other large molecules in small tablet form. If another company develops an alternative technology for
oral delivery of such molecules in small tablet form that is equal to or better than our technology, we may be unable to compete.
The osteoporosis market is already served by a variety of competing products based
on a number of APIs. Many of these existing products have achieved widespread acceptance among physicians, patients and payors for the
treatment of osteoporosis. We anticipate that our product candidate EB613, if approved, will compete with other osteoanabolic drugs such
as daily subcutaneous Forteo®, generic teriparatide daily subcutaneous injections, daily subcutaneous injectable Tymlos® and
EVENITY® which requires monthly injections, and the rest of the pharmacological treatments for osteoporosis which include anti-resorptive
agents such as the bisphosphonates and Prolia®. Many of these products are available on a generic basis, and EB613 may not demonstrate
sufficient additional clinical benefits to physicians and patients or be priced adequately to support reimbursement. In many cases, insurers
or other third-party payors, particularly Medicare, seek to encourage the use of generic products. Furthermore, our competitors in this
market are large pharmaceutical companies and the alternatives have been on the market for many years and have widespread market acceptance.
Ascendis Pharma has reported that it is developing a long-acting, oral prodrug formulation
of PTH for the treatment of hypoparathyroidism. In 2022, Ascendis reported top-line results from its Phase 3 trial. In addition, Ascendis
submitted an NDA to the FDA and a Marketing Authorisation Application (“MAA”) to the EMA. We believe that our key competitor
in hypoparathyroidism treatment, if approved, could be TransCon™ PTH which requires daily subcutaneous injections. If we obtain
regulatory approval for EB612, it may compete with TransCon(TM PTH which by that time will have been marketed for several years and may
have wide-spread market acceptance that may be difficult to overcome. Moreover, although we have obtained orphan drug designation
for EB612 for the treatment of hypoparathyroidism, we may be unable to maintain the benefits associated with orphan drug designation,
including the potential for market exclusivity.
We are subject to manufacturing risks that
could substantially increase our costs and limit supply of our products.
The process of manufacturing our products is complex, highly regulated and subject
to several risks, including:
|
• |
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. |
We currently have no sales, marketing or distribution
infrastructure. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely
affect the commercialization of our products. If we enter into collaborations to market and sell any approved products, our revenue may
be lower and we will be dependent on the efforts of a third party.
We have no established sales, marketing or distribution operations. If our product
candidates are approved and we were to commercialize these products, such activities would be expensive and time consuming. If we elect
to fund and undertake commercialization activities on our own, we may need to obtain additional expertise and additional capital, which
may not be available to us on acceptable terms or at all. In addition, the costs of establishing sales and marketing operations may be
incurred in advance of any approval of our product candidates. Moreover, we may not be able to hire a sales force that is sufficient in
size or has adequate expertise in the medical markets that we intend to target. Any failure or delay in the development of our internal
sales, marketing and distribution capabilities would adversely affect the commercialization of our products.
Alternatively, we may consider entering into a collaboration to commercialize our
oral PTH candidates globally or in selected regions. Any such collaborator would be responsible for, or substantially support, late stage
clinical trials of our oral PTH product candidates, as well as regulatory approvals and registrations. These arrangements are typically
complex and time consuming to negotiate. To the extent that we enter into collaboration agreements with respect to marketing, sales or
distribution, our product revenue may be lower than if we directly marketed and sold any approved products. In addition, any revenue we
receive will depend in whole or in part upon the efforts of these third-party collaborators, which may not be successful and are generally
not within our control. If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully
commercialize any approved products. If we are not successful in commercializing any approved products, either on our own or through collaborations
with one or more third parties, our future product revenue will suffer and we may incur significant additional losses.
Even if approved, if any of our product candidates
do not achieve broad market acceptance among physicians, patients, the medical community and third-party payors, our revenue generated
from their sales will be limited.
The commercial success of our product candidates will depend upon their acceptance
among physicians, patients and the medical community. The degree of market acceptance of our product candidates will depend on a number
of factors, including:
|
• |
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. |
If any of our product candidates are approved, but do not achieve an adequate level
of acceptance by physicians, patients and the medical community, we may not generate sufficient revenue from these products, and we may
not become or remain profitable. In addition, efforts to educate the medical community and third-party payors on the benefits of our product
candidates may require significant resources and may never be successful.
Even if we obtain regulatory approval of any
of our product candidates in a major pharmaceutical market such as the United States or the EU, we may never obtain approval or commercialize
our products in other major markets, which would limit our ability to realize their full market potential.
In order to market any products in a country or territory, we must establish and comply
with numerous and varying regulatory requirements of such countries or territories regarding safety and efficacy. Clinical trials conducted
in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean
that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product
testing and validation and additional administrative review periods. Seeking regulatory approvals in all major markets could result in
significant delays, difficulties and costs for us and may require additional preclinical studies or clinical trials which would be costly
and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our
products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated
delays. In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory
approval in other countries. We do not have any product candidates approved for sale in any jurisdiction, including international markets,
and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements
in international markets or to obtain and maintain required approvals, our target market will be reduced and our ability to realize the
full market potential of our products will be harmed.
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.
The successful commercialization of our product candidates, if approved, will depend,
in part, on the extent to which coverage and reimbursement for our products will be available from government and health administration
authorities, private health insurers and other third-party payors. To manage healthcare costs, many governments and third-party payors
increasingly scrutinize the pricing of new technologies and require greater levels of evidence of favorable clinical outcomes and cost-effectiveness
before extending coverage. In light of such challenges to prices and increasing levels of evidence of the benefits and clinical outcomes
required of new technologies, we cannot be sure that coverage will be available for our oral PTH product candidates, if approved, or any
other product candidate that we commercialize and, if available, that the reimbursement rates will be adequate. If we are unable to obtain
adequate levels of coverage and reimbursement for our product candidates, their marketability will be negatively and materially impacted.
Reimbursement may impact the demand for, or the price of, any product for which we
obtain marketing approval. In addition, third-party payors are likely to impose strict requirements for reimbursement in order to limit
off-label use of a higher priced drug. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party
payor’s determination that use of a product is:
|
• |
a covered benefit under its health plan; |
|
• |
safe, effective and medically necessary; |
|
• |
appropriate for the specific patent; |
|
• |
neither experimental nor investigational. |
Third party payors may deny coverage and reimbursement status altogether of a given
drug product, or cover the product but establish prices at levels that are too low to enable us to realize an appropriate return on our
investment in product development. Because the coverage and reimbursement policies may change frequently, in some cases at short notice,
even when there is favorable coverage and reimbursement, future changes may occur that adversely impact the favorable status. Further,
the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports
of drugs from countries where they may be sold at lower prices than in the United States.
The unavailability or inadequacy of third-party coverage and reimbursement could have
a material adverse effect on the market acceptance of our product candidates and the future revenues we may expect to receive from those
product candidates. In addition, we are unable to predict what additional legislation or regulation relating to the healthcare industry
or third-party coverage and reimbursement may be enacted in the future, or what effect such legislation or regulation would have on our
business.
Obtaining coverage and reimbursement approval for a product from a government or other
third-party payors is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness
data for the use of our products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage
and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for our product candidates, if approved.
Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our future products. If reimbursement
is not available, or is available only to limited levels, we may not be able to commercialize our product candidates, profitably or at
all, even if approved.
We may become exposed to costly and damaging
liability claims, either when testing our product candidates in the clinic or at the commercial stage; and our product liability insurance
may not cover all damages from such claims.
We are exposed to potential product liability and professional indemnity risks that
are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products. Currently we have no products
that have been approved for commercial sale; however, the current and future use of product candidates by us in clinical trials, and the
sale of any approved products in the future, may expose us to liability claims. These claims might be made by patients that use the product,
healthcare providers, pharmaceutical companies, our collaborators or others selling such products. Any claims against us, regardless of
their merit, could be difficult and costly to defend and could materially adversely affect the market for our product candidates or any
prospects for commercialization of our product candidates. Regardless of the merits or eventual outcome, liability claims may result in:
|
• |
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; |
|
• |
the inability to commercialize any products we develop. |
Although the clinical trial process is designed to identify and assess potential side
effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If any of our product
candidates were to cause adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to
substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients
who should not use our product candidates.
Although we maintain limited product liability insurance for our product candidates,
it is possible that our liabilities could exceed our insurance coverage. We intend to expand our insurance coverage to include the sale
of commercial products if we obtain marketing approval for any of our product candidates. However, we may not be able to maintain insurance
coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful
product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets
may not be sufficient to cover such claims and our business operations could be impaired.
Should any of the events described above occur, this could have a material adverse
effect on our business, financial condition and results of operations.
Risks Related to Our Dependence on Third Parties
We are highly dependent upon our ability to
enter into agreements with collaborators to develop, commercialize and market our products.
We may enter into collaborations with third parties that we believe could provide
us with funding, research support, and other milestone payments. We face significant competition in seeking appropriate collaborators.
Our ability to reach a definitive agreement for a collaboration will depend upon, among other things, our assessment of the collaborator’s
resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a
number of factors. These factors may include the design or results of clinical trials, the likelihood of approval by the FDA, the EMA
or similar regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing
and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our
ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry
and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications
that may be available for collaboration and whether such a collaboration could be more attractive than the one with us for our product
candidate.
Collaborations are complex and time-consuming to negotiate and document. If we are
unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, and are unable to raise supplemental
capital otherwise, we may have to delay, curtail the development of a product candidate, reduce or delay one or more of our other development
programs, delay potential commercialization of a product candidate or reduce the scope of any sales or marketing activities, or increase
our expenditures and undertake development or commercialization activities at our own expense. If we fail to enter into collaborations
and do not have sufficient funds or expertise to undertake the necessary development or commercialization activities ourselves, we may
not be able to further develop our product candidates or bring them to market or continue to develop our technology platforms and our
business may be materially and adversely affected.
Any collaboration we enter into may pose a number of risks, including the following:
|
• |
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. |
If we enter into collaborations to develop and potentially commercialize any product
candidates, we may not be able to realize the benefit of such transactions if we or our collaborator elects not to exercise the rights
granted under the agreement or if we or our collaborator are unable to successfully integrate a product candidate into existing operations
and company culture. In addition, if our agreement with any of our collaborators terminates, our access to technology and intellectual
property licensed to us by that collaborator may be restricted or terminate entirely, which may delay our continued development of our
product candidates utilizing the collaborator’s technology or intellectual property or require us to stop development of such product
candidates completely. We may also find it more difficult to find a suitable replacement collaborator or attract new collaborators, and
our development programs may be delayed or the perception of us in the business and financial communities could be adversely affected.
All of the risks relating to product development, regulatory approval and commercialization described in this Annual Report also apply
to the activities of any of our future program collaborators.
We may not be able to secure and maintain research
institutions to conduct our clinical trials.
We rely on research institutions to conduct our clinical trials. Specifically, the
limited number of centers experienced with pharmaceutical product candidates heightens our dependence on such research institutions. Our
reliance upon research institutions, including hospitals and clinics, provides us with less control over the timing and cost of clinical
trials and the ability to recruit subjects. If we are unable to reach agreements with suitable research institutions on acceptable terms,
if any resulting agreement is terminated, if research institutions are closed down by public authorities for reasons outside of our control,
or if we cannot fulfill contractual commitments, we may be unable to quickly replace the research institution with another qualified institution
on acceptable terms. Furthermore, we may not be able to secure and maintain suitable research institutions to conduct our clinical trials.
Independent clinical investigators and CROs
that we engage to conduct our clinical trials may not devote sufficient time or attention to our clinical trials or be able to repeat
their past success.
We expect to continue to depend on independent clinical investigators and CROs to
conduct our clinical trials. CROs may also assist us in the collection and analysis of data. There is a limited number of third-party
service providers that specialize or have the expertise required to achieve our business objectives. Identifying, qualifying and managing
performance of third-party service providers can be difficult, time consuming and cause delays in our development programs. These investigators
and CROs will not be our employees and we will not be able to control, other than by contract, the amount of resources, including time,
which they devote to our product candidates and clinical trials. If independent investigators or CROs fail to devote sufficient resources
to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval
and commercialization of any product candidates that we develop. In addition, the use of third-party service providers requires us to
disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. Further,
the FDA and other regulatory authorities require that we comply with standards and GCP requirements for conducting, recording and reporting
clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality
of trial subjects are protected. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators
and trial sites. If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may
be deemed unreliable and the FDA, EMA or comparable regulatory authorities may require us to perform additional clinical trials before
approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority
will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product
produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay
the regulatory approval process. Failure of clinical investigators or CROs to meet their obligations to us or comply with GCP procedures
could adversely affect the clinical development of our product candidates and harm our business.
If the third parties or consultants that assist us in conducting our clinical trials
do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements
with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere
to our clinical trial protocols or GCPs, or for any other reason, we may need to conduct additional clinical trials or enter into new
arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials may be extended,
delayed or terminated or may need to be repeated. If any of the foregoing were to occur, we may not be able to obtain, or may be delayed
in obtaining, regulatory approval for the product candidates being tested in such trials, and will not be able to, or may be delayed in
our efforts to, successfully commercialize these product candidates.
We contract with third parties for the supply
of materials used in drug formulation for clinical testing and expect to contract with third parties for the manufacturing of our product
candidates for large-scale testing. This reliance on third parties increases the risk that we will not have sufficient quantities of our
product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization
efforts.
We anticipate continuing our engagement of third parties to provide our clinical supply
as we advance our product candidates into and through clinical development. We expect in the future to use third parties for the manufacture
of our product candidates for clinical testing, as well as for commercial manufacture. We plan to enter into long-term supply agreements
with several manufacturers for commercial supplies. We may be unable to reach agreement on satisfactory terms with contract manufacturers
to manufacture our product candidates. Additionally, the facilities to manufacture our product candidates must be the subject of a satisfactory
inspection before the FDA, the EMA or other regulatory authorities approve an NDA or grant a marketing authorization for the product candidate
manufactured at that facility. We will depend on these third-party manufacturers for compliance with the FDA’s and EMA’s requirements
for the manufacture of our finished products. We do not control the manufacturing process of, and are completely dependent on, our contract
manufacturers for compliance with cGMPs. If our manufacturers cannot successfully manufacture material that conforms to our specifications
and the FDA, European Commission and other regulatory authorities’ cGMP requirements, they will not be able to secure and/or maintain
regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers
to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority
does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we
may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval
for or market our product candidates, if approved, and may subject us to recalls or enforcement action for products already on the market.
Our failure or the failure of our third party subcontractors and suppliers to comply
with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension
or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any
of which could significantly and adversely affect supplies of our product candidates that we may develop.
Reliance on third-party manufacturers entails risks to which we would not be subject
if we manufactured the product candidates ourselves, including:
|
• |
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. |
Any of these factors could cause the delay of approval or commercialization of our
product candidates, cause us to incur higher costs or prevent us from commercializing our product candidates successfully. Furthermore,
if any of our product candidates are approved and contract manufacturers fail to deliver the required commercial quantities of finished
product on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement manufacturers capable
of production at a substantially equivalent cost, in substantially equivalent volumes and quality and on a timely basis, we would likely
be unable to meet demand for our products and could lose potential revenue. It may take several years to establish an alternative source
of supply for our product candidates and to have any such new source approved by the FDA, the EMA or any other relevant regulatory authorities.
We maintain our cash at financial institutions,
often in balances that exceed federally insured limits.
A portion of our cash may be held in accounts at U.S. banking institutions. Cash held
in non-interest-bearing and interest-bearing operating accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”)
insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance
limitations. The FDIC took control of Silicon Valley Bank (“SVB”), on March 10, 2023. We maintained certain operating accounts
with SVB prior to its closure and have since transferred all of our deposits previously held with the bank to other banking institutions.
The FDIC also took control of Signature Bank (“Signature Bank”) on March 12, 2023. We did not maintain any accounts with Signature
Bank. The Federal Reserve announced that account holders with Signature Bank would be made whole. However, as the FDIC continues to address
the situation with SVB, Signature Bank and other banking institutions, the risk of loss in excess of insurance limitations and otherwise
has increased across financial institutions. Any loss that we may experience in the future could have a material and adverse effect on
our ability to pay our operational expenses or make other payments and may require us to move our accounts to other banks, which could
cause delays in making payments to our vendors and employees, among other counterparties, and cause other business and operational disruptions.
Risks Related to Our Intellectual Property
If we fail to establish, maintain, defend and
enforce intellectual property rights with respect to our technology, our business, prospects, financial condition and results of operations
may be materially adversely affected.
Our success depends in large part on our ability to obtain and maintain protection
with respect to our intellectual property and proprietary technology. Our product candidates utilize our proprietary technology and know-how
relating to the oral delivery of large molecules for the treatment of certain conditions with oral PTH. We seek to protect our proprietary
position by filing patent applications in the United States and certain foreign jurisdictions relating to our product candidates and technologies
that are important to our business. This process is expensive, complex and time-consuming, and we may not be able to file and prosecute
all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify
patentable aspects of our research and development output before it is too late to obtain patent protection. If we do not adequately obtain,
maintain, protect and enforce our proprietary rights in our technologies, competitors may be able to use our technologies and erode or
negate any competitive advantage we may have, which could have a material adverse effect on our business and our ability to achieve profitability.
We have limited patent protection with respect to our product candidates and technologies.
We have been issued a patent with claims generally directed to compositions comprising a protein, an absorption enhancer and a protease
inhibitor, as well as methods for oral administration of a protein with an enzymatic activity in each of the United States, Australia,
Canada, Japan, New Zealand, China, Israel and Russia. Related patent applications are pending in the United States, the EU, Hong Kong,
Brazil, China and India. We have also filed patent applications derived from seven patent families in various jurisdictions that currently
contain claims directed to oral administration technologies, including compositions and drug delivery devices utilizing an absorption
enhancer and methods of treating osteoporosis, hypoparathyroidism and bone fractures and related conditions with orally administered parathyroid
hormone. Certain of these patent applications have already matured into patents in the United States, Israel and Japan. Other applications
are in prosecution. We have also recently filed additional seven international patent applications (patent families) with claims
pertaining to a novel oral delivery platform, with claims directed at compositions comprising a protein, an absorption enhancer and an
alkaline polymer, and methods of oral administration these compositions. We cannot be certain that patents will be issued or granted
with respect to any of our pending or future patent applications, or that issued or granted patents will not later be found to be invalid
or unenforceable. The patent position of pharmaceutical companies is generally uncertain because it involves complex legal and factual
considerations. The standards applied by the United States Patent and Trademark Office, or USPTO, and foreign patent offices in granting
patents are not always applied uniformly or predictably, and can change. For example, there is no uniform worldwide policy regarding patentable
subject matter or the scope of claims allowable in pharmaceutical or biotechnology patents. Even if our pending patent applications issue
as patents, such patents may not cover our product candidates in the United States or in other countries. Accordingly, we cannot predict
whether additional patents protecting our technology will issue in the United States or in non-U.S. jurisdictions, or whether any patents
that do issue will have claims of adequate scope to provide us with a competitive advantage.
The issuance of a patent is not conclusive as to its inventorship, scope, validity
or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges
may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability
to stop others from using or commercializing technology and products similar or identical to ours, or limit the duration of the patent
protection covering our technology and product candidates. In addition, patents have a limited lifespan. In the United States and most
foreign jurisdictions, the natural expiration of a patent is generally 20 years after its effective filing date. Various extensions may
be available; however, the life of a patent and the protection it affords is limited. For example, the Drug Price Competition and Patent
Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration date
of a U.S. patent as partial compensation for the useful patent term lost, if any, during the FDA regulatory review process. However, a
patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of the product’s approval
by the FDA, only one patent applicable to an approved drug is eligible for the extension, and only those claims covering the approved
drug, a method for using it or a method for manufacturing it may be extended. We may not be granted an extension because we may fail to
satisfy applicable requirements and even if we are granted an extension, the applicable time period or the scope of patent protection
afforded could be less than we request. In addition, if we encounter delays in obtaining regulatory approvals, the period of time during
which we could market a product under patent protection could be reduced. Even if patents covering our product candidates are obtained,
once such patents expire, we may be vulnerable to competition from similar or generic products. Given the amount of time required for
the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly
after such candidates are commercialized. As a result, we cannot provide any assurance that any of our issued patents or any patents that
may be issued to us in the future will provide sufficient protections for our technology or product candidates, in whole or in part, or
will effectively prevent competitors from commercializing similar or identical technologies and products.
Our issued patents may not be sufficient to provide us with a competitive advantage.
For example, competitors and other third parties may be able to circumvent our patents by developing similar or alternative technologies
or products in a non-infringing manner. We may also grant licenses under our intellectual property that may limit our ability to exploit
such intellectual property. For example, we are party to a patent transfer agreement, or the Patent Transfer Agreement, with Oramed Ltd.,
or Oramed, pursuant to which we have granted Oramed an exclusive, worldwide, royalty-free, irrevocable and perpetual license, with the
right to sublicense, under certain of our patent rights to develop, manufacture and commercialize covered products or otherwise exploit
such patent rights in the fields of diabetes and influenza and we have agreed not to, directly or indirectly, engage in any activities
within the fields of diabetes and influenza. Even if such agreement were to be terminated, Oramed would retain its exclusive license under
such patent rights.
In the future, we may enter into additional collaborative agreements or license agreements
with third parties which may subject us to obligations that must be fulfilled and require us to manage complex relationships with third
parties. If we are unable to meet our obligations or manage our relationships with our collaborators under these agreements, our revenue
may decrease. From the standpoint of our future strategic collaborators, the strength of the intellectual property under which we may
grant licenses can be a determinant of the value of these relationships. If we are unable to secure, protect and enforce our intellectual
property, it may become more difficult for us to attract strategic collaborators. The loss or diminution of our intellectual property
rights could also result in a decision by future third-party collaborators to terminate their agreements with us. In addition, these agreements
may be complex and may contain provisions that could give rise to legal disputes, including potential disputes concerning financial obligations
or ownership of intellectual property and data under such agreements. Such disputes can lead to lengthy, expensive litigation or arbitration,
requiring us to divert management time and resources to such dispute. Any such development could have a material adverse effect on our
business, prospects, financial condition and results of operations.
We may become involved in proceedings to protect
or enforce our proprietary rights, which could be expensive and time consuming, and may ultimately be unsuccessful.
Competitors or other third parties may infringe or otherwise violate our patents,
trademarks, copyrights or other intellectual property rights. To counter infringement or other violations, we may be required to file
claims, which can be expensive and time consuming. Any such claims could provoke these parties to assert counterclaims against us, including
claims alleging that we infringe their patents or other intellectual property rights. In addition, in a patent infringement proceeding,
a court may decide that one or more of the patents we assert is invalid or unenforceable, in whole or in part, construe the patent’s
claims narrowly or refuse to prevent the other party from using the technology at issue on the grounds that our patents do not cover the
technology. In any intellectual property litigation, even if we are successful, any award of monetary damages or other remedy we receive
may not be commercially valuable. Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of
litigation. Third parties may also raise challenges to the validity of our patent claims before administrative bodies in the United States
or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review and
inter partes review proceedings and equivalent proceedings in foreign jurisdictions such as opposition proceedings. If third parties
have prepared and filed patent applications in the United States that also claim technology to which we have rights, we may have to participate
in interference proceedings in the USPTO, to determine priority of invention for patent applications filed before March 16, 2013, or in
derivation proceedings to determine inventorship for patent applications filed after such date. Such proceedings could result in the revocation
of, cancellation of, or amendment to our patents in such a way that they no longer cover our product candidates or provide us with any
competitive advantage.
In addition, we may be subject to third-party challenges regarding our exclusive ownership
of our intellectual property. If a third party were successful in challenging our exclusive ownership of any of our intellectual property,
we may lose our right to use such intellectual property, such third party may be able to license such intellectual property to other third
parties, including our competitors, and third parties could market competing products and technology.
In addition, during the course of this kind of litigation or proceedings, there could
be public announcements of the results of hearings, motions or other interim proceedings or developments or public access to related documents.
If investors perceive these results to be negative, the market price for our Ordinary Shares could be significantly harmed. Any of the
foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and
prospects.
Our commercial success depends significantly
on our ability to operate without infringing the patents and other proprietary rights of third parties. We may face claims that we are
violating the intellectual property rights of others.
Our success will depend in part on our ability to operate without infringing the proprietary
rights of third parties. Other entities may have or obtain patents or other proprietary rights that could limit our ability to make, use,
sell, offer for sale or import our product candidates and future approved products or impair our competitive position. We may face claims,
including from direct competitors, asserting that the commercial use of our technology infringes or otherwise violates the intellectual
property rights of others. We cannot be certain that our technologies and processes do not violate the intellectual property rights of
others. Third parties may assert infringement claims against us based on existing or future intellectual property rights. We expect that
we may increasingly be subject to such claims as our product candidates approach commercialization, and as we gain greater visibility
as a public company. We may not be aware of all such intellectual property rights potentially relating to our product candidates and their
uses. Thus, we do not know with certainty that our oral PTH (1-34) tablet or any other product candidate, or our commercialization thereof,
does not and will not infringe or otherwise violate any third party’s intellectual property.
If we were found to infringe or otherwise violate the intellectual property rights
of others, we could face significant costs to implement work-arounds, and we cannot provide any assurance that any such work-around would
be available or technically equivalent to our current technology. In such cases, we might need to license a third party’s intellectual
property, and such required licenses might not be available on acceptable terms, or at all. Even if we were able to obtain a license,
it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us and could require us to make
substantial licensing and royalty payments. We could be forced, including by court order, to cease commercializing the infringing technology
or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found
to have willfully infringed a patent or other intellectual property right. A finding of infringement could prevent us from commercializing
our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we
have misappropriated the confidential information or trade secrets of third parties could expose us to similar liabilities and have a
similar negative impact on our business.
The pharmaceutical and biotechnology industries have produced a significant number
of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods
of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform or predictable.
There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and pharmaceutical
industries generally, and these lawsuits can be very time consuming and costly. If we are sued for patent infringement, we would need
to demonstrate that our products or methods either do not infringe the patent claims of the relevant patent or that the patent claims
are invalid, and we may not be successful in doing so. Proving invalidity is difficult. For example, in the United States, proving invalidity
requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are
successful in these proceedings, we may incur substantial costs and divert management’s time and attention in defending these proceedings,
which could have a material adverse effect on our business.
Also, to the extent that our agreements provide that we will defend and indemnify
our suppliers, service providers, future strategic collaborators or any other party for claims against them relating to any alleged infringement
of the intellectual property rights of third parties in connection with such suppliers’, service providers’, strategic collaborators’
or other parties’ use of our technologies, we may incur substantial costs defending and indemnifying such parties to the extent
they are subject to these types of claims. Any claims brought against us, any suppliers, service providers, future strategic collaborators
or any other party indemnified by us alleging that we have violated the intellectual property of others could have a material adverse
effect on our business, prospects, financial condition and results of operations.
We may not be able to protect and enforce our
intellectual property rights throughout the world.
We currently have limited patent protection for our product candidates and technologies,
and filing, prosecuting, maintaining and defending patents on product candidates in all countries throughout the world would be prohibitively
expensive. In addition, we may not pursue or obtain patent protection in all major markets. In addition, the legal systems of some countries,
particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those
relating to life sciences. This could make it difficult for us to stop the infringement of our other intellectual property rights. For
example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to certain third parties.
Furthermore, many countries limit the enforceability of patents against third parties, including government agencies or government contractors.
In these countries, patents may provide limited or no benefit.
Competitors may use our technologies in jurisdictions where we have not obtained or
are unable to adequately enforce patent protection to develop or commercialize their own products. These products may compete with our
future products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Proceedings to enforce our patent rights in such jurisdictions, whether or not successful, could result in substantial costs and divert
our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly,
put our patent applications at risk of not issuing and provoke third parties to assert claims against us. We may not prevail in any lawsuits
that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce
our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual
property that we develop or license.
In addition, changes in the law and legal decisions by courts in the United States
and foreign countries may affect our ability to obtain adequate protection for our technology and to enforce our intellectual property.
Changes in U.S. patent law could diminish the
value of our future patents, if issued, thereby impairing our ability to protect our product candidates.
As is the case with other pharmaceutical companies, our success is heavily dependent
on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involve both technological
and legal complexity. Therefore, obtaining and enforcing pharmaceutical patents is costly, time-consuming and inherently uncertain. In
addition, the United States has recently enacted wide-ranging patent reform legislation, which includes provisions that affect the way
patent applications are prosecuted, redefine prior art, may affect patent litigation, and switch the U.S. patent system from a “first
to invent” system to a “first inventor to file” system. It is not clear what, if any, impact such legislation will have
on the operation of our business. Additionally, the United States Supreme Court has ruled on several patent cases in recent years, either
narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations.
In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created
uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and
the USPTO, the laws and regulations governing patents could change in unpredictable ways that could increase the uncertainties and costs
surrounding the prosecution of our patent applications and the enforcement or defense of any U.S. patents that may issue to us in the
future, all of which could have a material adverse effect on our business and financial condition.
Intellectual property litigation may lead to
unfavorable publicity that harms our reputation and causes the market price of our Ordinary Shares to decline.
During the course of any intellectual property litigation, there could be public announcements
of the results of hearings, rulings on motions, and other interim proceedings. If securities analysts or investors regard these announcements
as negative, the perceived value of our product candidates or future products, services or intellectual property could be diminished and
the market price of our Ordinary Shares may decline as a result. Furthermore, such negative publicity could severely impair our capability
to enter into future agreements with key commercial collaborators.
Obtaining and maintaining our
patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by government
patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other government
fees on patents and/or applications will be due to be paid to the USPTO and various government patent agencies outside of the United States
over the lifetime of our owned patents and/or applications and any patent rights we may own or license in the future. The USPTO and various
non-U.S. government patent agencies require compliance with several procedural, documentary, fee payment and other similar provisions
during the patent application process. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in
accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the
patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential
competitors might be able to enter the market and this circumstance could have a material adverse effect on our business.
Under applicable employment laws, we may not
be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise
of some of our former employees. In addition, our Israeli employees may be entitled to seek compensation for their inventions irrespective
of their contractual agreements with us.
Our agreements with our employees and key consultants generally include non-competition
provisions. These provisions prohibit such employees and key consultants, if they cease working for us, from competing directly with us
or working for our competitors or clients for a limited period of time. We may be unable to enforce these provisions under the laws of
the jurisdictions in which our employees and consultants work and it may be difficult for us to restrict our competitors from benefitting
from the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers
seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee
will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy
of a company’s confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that
such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees
or consultants and our ability to remain competitive may be diminished. In addition, a significant portion of our intellectual property
has been developed by our employees and consultants in the course of their employment or consulting relationship with us. Under the Israeli
Patent Law, 5727-1967, inventions conceived by an employee or consultant during the scope of his or her employment or consulting relationship
with a company are regarded as “service inventions.” Even when our agreements with our employees and consultants include provisions
regarding the assignment and waiver of rights to additional compensation in respect of inventions created within the course of their employment
or consulting relationship with us, including in respect of service inventions, we cannot guarantee that such provisions will be upheld
by Israeli courts, as a result of uncertainty under Israeli law with respect to the efficacy of such provisions. If we are required to
pay additional compensation or face disputes relating to service inventions, our results of operations could be adversely affected.
We may not be able to protect the confidentiality
of our technology, which, if disseminated, could negatively impact our plan of operations.
In addition to seeking patent protection, we also rely on trade secret protection
and confidentiality agreements to protect proprietary know-how that may not be patentable, processes for which patents may be difficult
to obtain and/or enforce, and other elements of our technology. Any disclosure to or misappropriation by third parties of our confidential
proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, which would harm our
competitive position. While we strive to maintain systems and procedures to protect the confidentiality of our trade secrets and technical
know-how, these systems and procedures may fail to provide an adequate degree of protection. For example, although we generally enter
into agreements with our employees, consultants, advisors, and other collaborators restricting the disclosure and use of trade secrets,
technical know-how and confidential information, we cannot provide any assurance that these agreements will be sufficient to prevent unauthorized
use or disclosure of our trade secrets and technical know-how, that these agreements will not be breached or that we have executed agreements
with all parties who may have had access to our proprietary information. We may not have adequate remedies in the case of a breach of
any such agreements, and our competitors or others may independently develop substantially equivalent or superior proprietary information
and techniques or otherwise gain access to our trade secrets or know-how. Monitoring and policing unauthorized use and disclosure of intellectual
property is difficult. Further, the laws of certain foreign countries do not protect proprietary rights to the same extent or in the same
manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual
property both in the United States and abroad. If we are unable to prevent material disclosure of the intellectual property related to
our technologies to third parties, or if our competitors or other third parties independently develop any of our trade secrets, we will
not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results
of operations and financial condition.
We currently have relationships with different consultants who perform research and
development activities for us and who are not employed by us, and we may enter into additional relationships of such nature in the future.
We have limited control over the activities of these consultants and can expect only limited amounts of their time to be dedicated to
our activities. These persons may have consulting, employment or advisory arrangements with other entities that may conflict with or compete
with their obligations to us. We typically require our consultants to sign agreements that require such consultants to treat our proprietary
information and results of studies as confidential. However, in connection with each such relationship, we may not be able to maintain
the confidentiality of our technology, the dissemination of which could hurt our competitive position and results of operations. To the
extent that our scientific consultants develop inventions or processes independently that may be applicable to our product candidates,
disputes may arise as to the ownership of the proprietary rights to such information, and we may expend significant resources in such
disputes and we may not win those disputes.
We may be subject to claims by third parties
asserting that we or our employees, consultants or contractors have misappropriated their intellectual property, or claiming ownership
of what we regard as our own intellectual property.
Certain of our employees, consultants and contractors were previously employed at
other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our
employees, consultants and contractors do not use the proprietary information or know-how of others in their work for us, we may be subject
to claims that we or these employees, consultants or contractors have used or disclosed intellectual property, including trade secrets
or other proprietary information, of any such employee’s, consultant’s or contractor’s former employer. Litigation may
be necessary to defend against these claims and, even if we are successful in defending ourselves, could result in substantial costs to
us or be distracting to our management. If we do not succeed with respect to any such claims, in addition to paying monetary damages and
possible ongoing royalties, we may lose valuable intellectual property rights or personnel. Any of the foregoing could have a material
adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
In addition, while we typically require our employees, consultants and contractors
who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may
be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Further,
such assignment agreements may not be self-executing, may be insufficient in scope or may be breached, and we may be forced to bring claims
against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
If we fail in prosecuting or defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against
such claims, litigation could result in substantial costs and be a distraction to management.
If trademarks and trade names related to our
product candidates are not adequately protected, then we may not be able to build name recognition in our markets of interest and our
business may be adversely affected.
We do not currently own or use any registered trademarks for our product candidates.
In the future, our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic
or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we
need to build name recognition by potential collaborators or customers in our markets of interest. Any unauthorized use of these trademarks
could harm our reputation or commercial interests. In addition, our enforcement against third-party infringers or violators may be unduly
expensive and time-consuming, and the outcome may be an inadequate remedy. Over the long term, if we are unable to establish name recognition
based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.
Risks Related to Our Ordinary Shares and IPO Warrants
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.
The price of securities for publicly traded emerging biopharmaceutical and drug discovery
and development companies has been highly volatile and is likely to remain highly volatile in the future. The market price of our Ordinary
Shares and IPO Warrants on Nasdaq may fluctuate as a result of a number of factors, some of which are beyond our control, including, but
not limited to:
|
• |
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. |
In addition, the stock market in general has recently experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies. Broad market
and industry factors may materially affect the market price of companies’ stock, including ours, regardless of actual operating
performance.
We do not know whether a market for our Ordinary
Shares or IPO Warrants will be sustained and as a result, it may be difficult for holders of our Ordinary Shares or IPO Warrants to sell
their securities.
Although our Ordinary Shares and IPO Warrants are listed on Nasdaq, an active trading
market for our Ordinary Shares and IPO Warrants may not be sustained. The lack of an active market may impair the ability of holders of
our Ordinary Shares or IPO Warrants to sell their Ordinary Shares or IPO Warrants at the time they wish to sell them or at a price that
they consider reasonable. The lack of an active market may also reduce the value of our Ordinary Shares or IPO Warrants, and may cause
the trading price of our Ordinary Shares or IPO Warrants to be more volatile. An inactive market may also impair our ability to raise
capital by selling Ordinary Shares and may impair our ability to acquire other companies by using our Ordinary Shares or IPO Warrants
as consideration.
Our stock price may continue to be volatile,
and securities class action litigation has often been instituted against companies following periods of volatility of their stock price.
Any such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and
resources.
In the past, following periods of volatility in the overall market and the market
price of a particular company’s securities, securities class action litigation has often been instituted against these companies.
Although there is no such shareholder litigation currently pending or threatened against the Company, such litigation, if instituted against
us, could result in substantial costs and a diversion of our management’s attention and resources.
The IPO Warrants are speculative
in nature and are a risky investment. You may not be able to recover your investment in the IPO Warrants, and the IPO Warrants may expire
worthless.
The value of the IPO Warrants will depend on the value of our Ordinary Shares, which
will depend on factors related and unrelated to the success of our clinical development program or other factors as detailed above and
cannot be predicted at this time.
If the price per share of our Ordinary Shares does not increase to an amount sufficiently
above the applicable exercise price of the IPO Warrants during the period the IPO Warrants are exercisable, and if a public market for
our IPO Warrants does not develop, the IPO Warrants may not have any value, and you may be unable to recover any or all of your investment
in the IPO Warrants. There can be no assurance that the market price of the Ordinary Shares will ever equal or exceed the exercise price
of the IPO Warrants, and consequently, whether it will ever be profitable for holders of the IPO Warrants to exercise the IPO Warrants.
Holders of the IPO Warrants will have no rights
as shareholders until they acquire our Ordinary Shares.
Until a holder of an IPO Warrant acquires our Ordinary Shares upon exercise of the
IPO Warrants, the holder will have no rights with respect to our Ordinary Shares issuable upon exercise of the IPO Warrants, except as
set forth in the IPO Warrants. Upon exercise of your IPO Warrants, the holder will be entitled to exercise the rights of a shareholder
only as to matters for which the record date occurs on or after the exercise date, unless the IPO Warrants are settled via “cashless
exercise” in which case you will be entitled to exercise such rights only after the end of the relevant calculation period as defined
in our Registration Statement on Form F-1 (File No. 333-221472) filed with the SEC on June 27, 2018, under “Description of IPO Warrants - Exercisability,
Exercise Price and Term.”
Future sales by our shareholders may adversely
affect our stock price and our ability to raise funds in new stock offerings.
Sales of our Ordinary Shares or IPO Warrants in the public market could lower the
market price of our Ordinary Shares or IPO Warrants. Sales may also make it more difficult for us to sell equity securities or equity-related
securities in the future at a time and price that our management deems acceptable or at all. Most of our outstanding Ordinary Shares and
IPO Warrants are not restricted from resale. In the event of a sale of Ordinary Shares or IPO Warrants offered by selling shareholders,
the price of our Ordinary Shares or IPO Warrants could decline, and such decline could be material.
The market price of our Ordinary Shares and
IPO Warrants could be negatively affected by future sales of our securities.
If our shareholders, particularly our directors or our executive officers and their
affiliates, sell substantial amounts of our Ordinary Shares or IPO Warrants in the public market, or if there is a public perception
that these sales may occur in the future, the market price of our Ordinary Shares or IPO Warrants may decline. The perception in the public
market that our shareholders might sell our Ordinary Shares or IPO Warrants could also depress the market price of our Ordinary Shares
or IPO Warrants and could impair our future ability to obtain capital, especially through an offering of equity securities. In addition,
our sale of additional Ordinary Shares or other similar securities in order to raise capital might have a similar negative impact on the
share price of our Ordinary Shares or IPO Warrants. A decline in the price of our Ordinary Shares may impede our ability to raise capital
through the issuance of additional Ordinary Shares, IPO Warrants or other equity securities, and may cause holders of our Ordinary Shares
or IPO Warrants to lose part or all of their investment.
We have never paid, and we currently do not
intend to pay dividends.
We have never declared or paid any cash dividends on our Ordinary Shares. We currently
intend to retain any future earnings to finance operations and to expand our business and, therefore, do not expect to pay any cash dividends
in the foreseeable future. As a result, capital appreciation, if any, of our Ordinary Shares will be investors’ sole source of gain
for the foreseeable future. In addition, Israeli law may limit our declaration or payment of dividends, and may subject our dividends
to Israeli withholding taxes.
We may not have sufficient insurance to cover
our liability in any current or future litigation claims either due to coverage limits or as a result of insurance carriers seeking to
deny coverage of such claims.
We may face a variety of litigation-related liability risks. Our amended Articles
of Association, or Articles, other applicable agreements and/or Israeli law may require us to indemnify (and advance expenses to) our
current and past directors and officers and employees from reasonable expenses related to the defense of any action arising from their
service to us, including circumstances under which indemnification is otherwise discretionary. While our directors and officers are included
in a director and officer liability insurance policy, which covers all our directors and officers in some circumstances, our insurance
coverage does not cover all of our indemnification obligations and may not be adequate to cover any indemnification or other claims against
us. In addition, the underwriters of our present coverage may seek to avoid coverage in certain circumstances based upon the terms of
the respective policies. If we incur liabilities that exceed our coverage under our directors and officers insurance policy or incur liabilities
not covered by our insurance, we would have to self-fund any indemnification amounts owed to our directors and officers and employees
in which case our results of operations and financial condition could be materially adversely affected. Further, if D&O insurance
becomes prohibitively expensive to maintain in the future, we may be unable to renew such insurance on economic terms or unable renew
such insurance at all. The lack of D&O insurance may make it difficult for us to retain and attract talented and skilled directors
and officers to serve our company, which could adversely affect our business.
There is a risk that we may be a passive foreign
investment company, for U.S. federal income tax purposes for any taxable year, which generally would result in certain adverse U.S. federal
income tax consequences to our U.S. investors.
There is a risk that we may be treated as a passive foreign investment company, or
PFIC, for any taxable year. The application of the PFIC rules to a company like us is subject to uncertainties, and for the reasons described
below, we cannot express a view as to whether we will be a PFIC for the current or any future taxable year. In general, a non-U.S. corporation
is a PFIC for any taxable year in which (i) 75% or more of its gross income consists of passive income, or the income test, or (ii) 50%
or more of the average value of its assets consists of assets (generally determined on a quarterly basis) that produce, or are held for
the production of, passive income, or the assets test. Generally, passive income includes interest, dividends, rents, royalties and certain
gains, and cash is generally treated as a passive asset that produces passive income for PFIC purposes. The assets shown on our balance
sheet consist, and are expected to continue to consist, primarily of cash and cash equivalents for the foreseeable future. Therefore,
whether we will satisfy the assets test for the current or any future taxable year will depend largely on the quarterly value of our goodwill
and on how quickly we utilize our cash in our business. Because (i) the value of our goodwill may be determined by reference to the market
price of our Ordinary Shares, which has been, and may continue to be volatile given the nature and early stage of our business, (ii) we
hold, and expect to continue to hold, a significant amount of cash, and (iii) a company’s annual PFIC status can be determined only
after the end of each taxable year, we cannot express a view as to whether we will be a PFIC for the current or any future taxable year.
In addition, it is not clear how to apply the income test to a company like us, which is still developing its key intangible assets and
whose overall losses from research activities significantly exceed the amount of its income (including passive income). If our losses
from research and development activities are disregarded for purposes of the income test, we may be a PFIC for any taxable year if 75%
or more of our gross income (as determined for U.S. federal income tax purposes) for the relevant year is from interest and financial
investments. Because the revenue shown on our financial statements is not calculated based on U.S. tax principles, and because for any
taxable year we may not have sufficient (or any) non-passive revenue, there is a risk that we may be or become a PFIC under the income
test for any taxable year. If we were a PFIC for any taxable year during which a U.S. investor owned our Ordinary Shares (or under proposed
Treasury regulations, IPO Warrants), such U.S. shareholder generally will be subject to certain adverse U.S. federal income tax consequences,
including increased tax liability on gains from dispositions of the Ordinary Shares (or IPO Warrants) and certain distributions and a
requirement to file annual reports with the Internal Revenue Service. U.S. investors should consult with their tax advisers regarding
the application of the PFIC rules as they may relate to an investment in our company.
We are an emerging growth company and a smaller
reporting company, and our compliance with the reduced reporting and disclosure requirements applicable to emerging growth companies and
smaller reporting companies could make our Ordinary Shares less attractive to investors and may make it more difficult to raise capital
as and when we need it.
We are an emerging growth company, as defined in the Jumpstart our Business Startups
Act of 2012, referred to as the JOBS Act, and we expect to take advantage of certain exemptions from various reporting requirements that
are applicable to other public companies that are not emerging growth companies, including the auditor attestation requirements of Section
404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the
requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments
not previously approved and extended adoption period for accounting pronouncements.
Even after we no longer qualify as an emerging growth company, we may still qualify
as a “smaller reporting company,” which would allow us to continue to take advantage of many of the same exemptions from disclosure
requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act
and reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements.
We cannot predict whether investors will find our Ordinary Shares less attractive
as a result of our reliance on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be
a less active trading market for our ordinary shares and our stock price may be more volatile.
Additionally, because of the exemptions from various reporting requirements provided
to us as an emerging growth company, we may be less attractive to investors and it may be difficult for us to raise additional capital
as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our
reporting is not as transparent as the reporting of other companies in our industry. If we are unable to raise additional capital as and
when we need it, our financial condition and results of operations may be materially and adversely affected.
Our Ordinary Shares may be delisted from the
Nasdaq Capital Market if we are unable to maintain compliance with Nasdaq’s continued listing standards.
Nasdaq imposes, among other requirements, continued listing standards, including a
minimum bid requirement. The price of our Ordinary Shares must trade at or above $1.00 to comply with the minimum bid requirement for
continued listing on the Nasdaq Capital Market. On November 21, 2022, the Company received a notice (the “Notice”) from the
Nasdaq Stock Market LLC (“Nasdaq”), stating that the Company’s Ordinary Shares fail to comply with the $1.00 minimum
bid price requirement for continued listing on Nasdaq in accordance with Nasdaq Listing Rule 5550(a)(2) based upon the closing bid price
of the ordinary shares for the 30 consecutive business days prior to the date of the Notice. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A),
the Company was provided an initial compliance period of 180 calendar days, or until May 22, 2023, to regain compliance with the minimum
bid price requirement.
On March 23, 2023, Nasdaq notified us that we had regained compliance with the minimum
bid price requirement given that the closing bid price for our Ordinary Shares had been at or above $1.00 for 14 consecutive trading days,
from March 3rd through March 22, 2023.
There can be no assurance that we will maintain compliance with the $1.00 minimum
bid price requirement or comply with Nasdaq’s other continued listing standards in the future.
If we fail to maintain an effective system
of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result,
shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of
our Ordinary Shares.
Effective internal controls over financial reporting are necessary for us to provide
reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud among other objectives.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail
to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of
2002, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls
over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial
statements or identify other areas for further attention or improvement. Inferior internal controls could also subject us to regulatory
scrutiny and sanctions, impair our ability to raise revenue and cause investors to lose confidence in our reported financial information,
which could have a negative effect on the trading price of our Ordinary Shares.
We are required to disclose changes made in our internal controls and procedures and
our management is required to assess the effectiveness of these controls annually. However, for as long as we are an “emerging growth
company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness
of our internal controls over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal
controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls
could lead to financial statement restatements and require us to incur the expense of remediation.
If securities or industry analysts do not publish
research or reports or publish unfavorable research about our business, our share price and trading volume could decline.
The trading market for our Ordinary Shares depends in part on the research and reports
that securities or industry analysts publish about us or our business. We do not have control over these analysts and we do not have commitments
from them to write research reports about us. If securities or industry analysts do not commence coverage of our company, the trading
price for our shares may be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the
analysts who covers us downgrades our shares, our shares price would likely decline. If one or more of these analysts ceases to cover
us or fails to publish regular reports on us, interest in the purchase of our shares could decrease, which could cause our share price
or trading volume to decline.
Risks Relating to Our Incorporation and Location in Israel
The Israeli government grants we have received
for research and development expenditures restrict our ability to manufacture products and transfer technologies outside of Israel and
require us to satisfy specified conditions. If we fail to satisfy these conditions, we may be required to refund grants previously received
together with interest and penalties or to pay other amounts according to the formulas set out in the relevant laws.
Our research and development efforts have been financed, in part, through the grants
that we have received from the Israeli Innovation Authority (formerly known as the Office of Chief Scientist of the Israeli Ministry of
Economy), or the IIA. Pursuant to these grants, we must comply with the requirements of the Encouragement of Industrial Research, Development
and Technological Innovation in Industry Law 5744-1984 and the IIA regulations, or the Research Law. Until the grants are repaid with
interest, royalties are payable to the IIA in the amount of 3% on revenues derived from sales of products or services developed in whole
or in part using the IIA grants, including EB612, EB613 and any other oral PTH product candidates we may develop. The royalty rate may
increase to 5%, with respect to approved applications filed following any year in which we achieve sales of over $70 million.
Under the Research Law, we are prohibited from manufacturing products developed using
these grants outside of the State of Israel without special approvals. We may not receive the required approvals for any proposed transfer
of manufacturing activities. Even if we do receive approval to manufacture products developed with government grants outside of Israel,
the royalty rate may be increased and we may be required to pay up to three times the grant amounts and the interest, depending on the
manufacturing volume that is performed outside of Israel. This restriction may impair our ability to outsource manufacturing or engage
in our own manufacturing operations for those products or technologies. For additional information, see “Item 1-Business-The Israeli
Innovation Authority (IIA) Grant.”
Additionally, under the Research Law, we are prohibited from transferring in any manner
(including by way of license), the IIA-financed technologies and related rights (including know-how and other intellectual property rights)
in or outside of the State of Israel, except under limited circumstances and only with the approval of the IIA. We may not receive the
required approvals for any proposed transfer and, even if received, we may be required to pay the IIA a portion of the consideration that
we receive upon any transfer of such technology to a non-Israeli entity up to 600% of the grant amounts and the interest. The scope of
the IIA support received, the royalties that we have already paid to the IIA, the amount of time that has elapsed between the date on
which the know-how or other intellectual property rights were transferred and the date on which the IIA grants were received and the sale
price and the form of transaction will be taken into account in order to calculate the amount of the payment to the IIA. Approval to transfer
the technology to residents of the State of Israel is also required, and may be granted in specific circumstances only if the recipient
abides by the provisions of applicable laws, including the restrictions on the transfer of know-how and the obligation to pay royalties.
No assurance can be made that approval to any such transfer, if requested, will be granted. Transfer of know-how or rights outside of
the state of Israel without IIA approval is a criminal offense.
These restrictions may impair our ability to sell our technology assets or to perform
or outsource manufacturing outside of Israel, engage in change of control transactions or otherwise transfer our know-how outside of Israel
and may require us to obtain the approval of the IIA for certain actions and transactions and pay additional royalties and other amounts
to the IIA. In addition, any change of control and any change of ownership of our Ordinary Shares that would make a non-Israeli citizen
or resident an interested party, as defined in the Israeli Securities Law, 5728-1968, as amended, requires written notice to the IIA,
and our failure to comply with this requirement could result in monetary fines. Such non-Israeli interested parties, which include 5%
shareholders and shareholders who have the right to appoint a director to our board of directors, are required to sign an undertaking
towards the IIA in which they would undertake to comply with the Research Law. Shareholders that purchased Ordinary Shares in our IPO
would not be required to sign such an undertaking.
These restrictions will continue to apply even after we have repaid the full amount
of the grants and the interest. If we fail to satisfy the conditions of the Research Law, we may be required to refund grants previously
received together with interest and penalties, to make other payments to the IIA or become subject to criminal charges.
Legislative developments in Israel
may have an adverse effect on the Company’s business.
The Israeli government is currently pursuing extensive changes to Israel’s judicial
system. In response to the foregoing developments, certain leading international financial institutions, including investment banks, investors
and key economists, have indicated several causes for concern, including that such proposed changes, if adopted, may cause a downgrade
to Israel’s sovereign credit rating and Israel’s international standing, which would adversely affect the macroeconomic condition
in which we operate, and also potentially deter foreign investment into Israel or Israeli companies, which may hinder our ability to raise
additional funds, if deemed necessary by our management and board of directors.
Security, political and economic instability
in the Middle East may harm our business.
Our principal research and development facilities are located in Israel. In addition,
part of our key employees, officers and directors are residents of Israel. Accordingly, political, economic and military conditions in
the Middle East may affect our business directly. Since the establishment of the State of Israel in 1948, a number of armed conflicts
have occurred between Israel and its neighboring countries, Hamas (an Islamist militia and political group in the Gaza Strip) and Hezbollah
(an Islamist militia and political group in Lebanon). Recent political uprisings, social unrest and violence in various countries in the
Middle East, including Israel’s neighbor Syria, are affecting the political stability of those countries. This instability may lead
to deterioration of the political relationships that exist between Israel and certain countries and have raised concerns regarding security
in the region and the potential for armed conflict. In addition, Iran has threatened to attack Israel. Iran is also believed to have a
strong influence among the Syrian government, Hamas and Hezbollah. These situations may potentially escalate in the future into more violent
events which may affect Israel and us. These situations, including conflicts which involved missile strikes against civilian targets in
various parts of Israel have in the past negatively affected business conditions in Israel.
Any hostilities involving Israel or the interruption or curtailment of trade between
Israel and its present trading partners could have a material adverse effect on our business. Although such hostilities did not have a
material adverse impact on our business in the past, we cannot guarantee that hostilities will not be renewed and have such an effect
in the future. The political and security situation in Israel may result in parties with whom we have contracts claiming that they are
not obligated to perform their commitments under those agreements pursuant to force majeure provisions. These or other Israeli political
or economic factors could harm our operations and product development. Any hostilities involving Israel or the interruption or curtailment
of trade between Israel and its present trading partners could adversely affect our operations and could make it more difficult for us
to raise capital. We could experience disruptions if acts associated with this conflict result in any serious damage to our facilities.
Furthermore, several countries, as well as certain companies and organizations, continue to restrict business with Israel and Israeli
companies, which could have an adverse effect on our business and financial condition in the future. Our business interruption insurance
may not adequately compensate us for losses, if at all, that may occur as a result of an event associated with a security situation in
the Middle East, and any losses or damages incurred by us could have a material adverse effect on our business.
Our operations may be disrupted by the obligations
of personnel to perform military service.
Our employees in Israel, including executive officers, generally, may be called upon
to perform up to 42 days (and in some cases more) of annual military reserve duty until they generally reach the age of 45 (or older in
some cases) and, in emergency circumstances, could be called to active duty. In response to increased tension and hostilities, since September
2000 there have been occasional call-ups of military reservists, including in connection with the mid-2006 war in Lebanon and the December
2008, November 2012 and July 2014 conflicts with Hamas, and it is possible that there will be additional call-ups in the future. Our operations
could be disrupted by the absence of a significant number of our employees related to military service or the absence for extended periods
of one or more of our key employees for military service. Such disruption could materially adversely affect our operations, business and
results of operations.
Our business is subject to currency exchange
risk and fluctuations between the U.S. dollar and other currencies may negatively affect our earnings and results of operations.
The U.S. dollar is both our functional and reporting currency. As a result, our results
of operations may be adversely affected by exchange rate fluctuations between the U.S. dollar and the NIS. A significant portion of the
expenses associated with our Israeli operations, including personnel and facilities related expenses, are incurred in NIS. Consequently,
inflation in Israel will have the effect of increasing the cost of our operations in Israel unless it is offset on a timely basis by a
devaluation of the NIS relative to the U.S. dollar. In addition, if the value of the U.S. dollar decreases against the NIS, our earnings
may be negatively impacted. Moreover, exchange rate fluctuations in currency exchange rates in countries other than Israel where we operate,
perform our clinical trials or conduct business may also negatively affect our earnings and results of operations. We cannot predict any
future trends in the rate of inflation or deflation in Israel or the rate of devaluation or appreciation of the NIS against the U.S. dollar.
If the dollar cost of our operations in Israel increases, our dollar-measured results of operations will be adversely affected. For example,
in 2021, the value of the NIS appreciated against the U.S. dollar by 3.27%, which appreciation was partially offset by inflation in Israel
of 02.8%. In 2020, the value of the NIS appreciated against the U.S. dollar by 6.97%, the effect of which was partially offset by inflation
in Israel at a rate of approximately 0.7%. As a result of these fluctuations, our NIS denominated expenses were affected.
Potential future revenue may be derived from abroad, including outside of the United
States. As a result, our business and share price may be affected by fluctuations in foreign exchange rates with these other currencies,
which may also have a significant impact on our reported results of operations and cash flows from period to period. Currently, we do
not have any exchange rate hedging arrangements in place. Foreign currency fluctuations could materially adversely affect our results
of operations or could positively affect our results of operations in ways that may not necessarily be repeated in future periods.
It may be difficult to enforce a U.S. judgment
against us or our officers and directors, to assert U.S. securities laws claims in Israel or to serve process on our officers and directors.
We are incorporated under the laws of the State of Israel. Service of process upon
us, our directors and officers and the Israeli experts, if any, a significant number of whom reside outside the United States, may be
difficult to obtain within the United States. Furthermore, because the majority of our assets and investments, and several of our directors,
officers and such Israeli experts, if any, are located outside the United States, any judgment obtained in the United States against us
or any of them may be difficult to collect within the United States. In addition, such judgment may not be enforced by an Israeli court.
In addition, it may also be difficult for an investor to effect service of process
on these persons in the U.S. or to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse
to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum to bring
such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable
to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming
and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing
the matters described above. See the section in our Registration Statement on Form F-1 filed under the Securities Act with the SEC on
June 27, 2018, entitled “Enforceability of Civil Liabilities.” As a result of the difficulty associated with enforcing a judgment
against us in Israel, holders of our Ordinary Shares may not be able to collect any damages awarded by either a U.S. or foreign court.
Provisions of Israeli law and our Articles
may give rise to withholding obligations or delay, prevent or make difficult a change of control and therefore depress the price of our
shares.
Israeli corporate law regulates mergers, requires tender offers for acquisitions of
shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders
and regulates other matters that may be relevant to these types of transactions. For example, under Israel’s Companies Law, 5759-1999,
as currently amended or the Companies Law, upon the request of a creditor of either party to a proposed merger, the court may delay or
prevent the merger if it concludes that there exists a reasonable concern that as a result of the merger the surviving company will be
unable to satisfy the obligations of any of the parties to the merger. Additionally, a tender offer for all of a company’s issued
and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued
share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest
in the tender offer unless, following consummation of the tender offer, the acquirer would hold more than 98% of the company’s outstanding
shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six
months following the completion of the tender offer, petition an Israeli court to alter the consideration for the acquisition, unless
the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights.
Furthermore, Israeli tax considerations may make potential transactions unappealing
to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli
tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers,
Israeli tax law allows for tax deferral in certain circumstances that makes the deferral contingent on the fulfillment of numerous conditions,
including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating
companies are, subject to certain exceptions, restricted. Moreover, with respect to certain share swap transactions, the tax deferral
is limited in time, and when the time expires, tax then becomes payable even if no actual disposition of the shares has occurred.
Our Articles provide that our directors are elected on a staggered basis such that
a potential acquirer cannot readily replace our entire board of directors at a single general shareholders meeting.
These provisions could cause our Ordinary Shares to trade at prices below the price
for which third parties might be willing to pay to gain control of us. Third parties who are otherwise willing to pay a premium over prevailing
market prices to gain control of us may be unable or unwilling to do so because of these provisions of Israeli law and our amended Articles.
Your rights and responsibilities as a shareholder
are governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. companies.
We are incorporated under Israeli law. The rights and responsibilities of the holders
of our Ordinary Shares are governed by our Articles and Israeli law. These rights and responsibilities differ in some respects from the
rights and responsibilities of shareholders in typical U.S.-based corporations. In particular, a shareholder of an Israeli company has
a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and
other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting
of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized
share capital, mergers and acquisitions and interested party transactions requiring shareholder approval. In addition, a shareholder who
knows that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director
or executive officer in the company has a duty of fairness toward the company with regard to such vote or appointment. There is limited
case law available to assist us in understanding the implications of these provisions that govern shareholders’ actions, and these
provisions may be interpreted to impose additional obligations and liabilities on holders of our Ordinary Shares that are not typically
imposed on shareholders of U.S. corporations.
Our business could be negatively affected as
a result of actions of activist shareholders, and such activism could impact the trading value of our securities.
In recent years, certain Israeli issuers listed on United States exchanges have been
faced with governance-related demands from activist shareholders, unsolicited tender offers and proxy contests. Responding to these types
of actions by activist shareholders could be costly and time-consuming, disrupting our operations and diverting the attention of management
and our employees. Such activities could interfere with our ability to execute our strategic plan. In addition, a proxy contest for the
election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require
significant time and attention by management and our board of directors. The perceived uncertainties as to our future direction also could
affect the market price and volatility of our securities.
|
UNRESOLVED STAFF COMMENTS. |
None.
Our facilities in Israel, which house our research and development and certain production
and management functions, are located in Jerusalem, Israel. Most of our clinical development, clinical operations and regulatory functions
are located in the United States. Under a Lease Agreement with Unihead Biopark Ltd. as of December 31, 2022, we are leasing approximately
622 square meters of office and laboratory space pursuant to a lease agreement that will expire on June 30, 2023. Of the 622 square meters
leased, we utilize approximately 527 square meters for our operations and have agreed to sublease the remaining approximately 95 square
meters to a third-party until June 2023.
We believe that our current office and laboratory space in Israel is sufficient to
meet our anticipated needs for the foreseeable future and is suitable for the conduct of our business. We believe that suitable additional
space would be available if required in the future on commercially reasonable terms.
ITEM 3. |
LEGAL PROCEEDINGS. |
We are not currently a party to any material legal proceedings.
ITEM 4. |
MINE SAFETY DISCLOSURES. |
Not applicable.
PART II
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES. |
Market for our Ordinary Shares and IPO Warrants
Our Ordinary Shares and IPO Warrants are listed on the Nasdaq Capital Market under
the symbols “ENTX” and “ENTXW,” respectively.
As of March 27, 2023, there were approximately 44 holders of record of our Ordinary
Shares. This number does not include the number of persons whose shares are in nominee or in “street name” accounts through
brokers.
Dividends
If the Company decides to distribute a cash dividend, Israeli residents who are individuals
are generally subject to Israeli income tax at a rate of either 25% or 30%, if the recipient of such dividend is a “substantial
shareholder” at the time of distribution or at any time during the preceding 12-month period, unless the cash dividend is paid out
of income that has been tax exempt due to an “approved enterprise” status under the Law for the Encouragement of Capital Investments,
5719-1959, in which case the Company will be subject to corporate tax at a rate then in effect under Israeli law on the amount of cash
dividend and in addition, an Israeli shareholder, corporation or individual, will be subject to a tax rate of 20% on such cash dividend
distribution. In addition, Israeli resident corporations are generally exempt from Israeli corporate tax for dividends paid on our Ordinary
Shares. Pursuant to the Convention Between the Government of the United States of America and the Government of Israel with Respect to
Taxes on Income, as amended (the “U.S.-Israel Tax Treaty”), the maximum tax on dividends paid to a holder of our Ordinary
Shares who qualifies as a resident of the United States within the meaning of the U.S.-Israel Tax Treaty is 25% or 15% in case of dividends
paid out of the profits of an “approved enterprise”, subject to certain conditions. Furthermore, dividends not generated by
an “approved enterprise” paid to a U.S. corporation holding at least 10% of our issued voting power during the part of the
tax year which precedes the date of payment of the dividend and during the whole of its prior tax year (if any), are generally taxed at
a rate of 12.5%, subject to certain conditions. The Company has never declared or paid cash dividends on its Ordinary Shares.
The actual amount, timing, and frequency of future dividends, if any, will be at the
sole discretion of the board of directors and will be declared based upon various factors, many of which are beyond our control. The Company’s
current plans are to retain future earnings primarily to finance the development of its business and for other corporate purposes.
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
This Annual Report on Form 10-K contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of
1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange
Act”), about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results
of operations, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate to
historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results
as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently
subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied
by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities
and results anticipated in forward-looking statements. These factors include those contained in “Item 1A - Risk Factors” and
“Cautionary Statement Regarding Forward-Looking Statements” of this Annual Report on Form 10-K. We do not undertake any obligation
to update forward-looking statements except as required by applicable law. We intend that all forward-looking statements be subject to
the safe harbor provisions of PSLRA. These forward-looking statements reflect our views only as of the date they are made.
For purposes of this Item 7, references to the “Company,” “we,”
“us” and “our” refer to Entera Bio Ltd. and its consolidated subsidiary.
Overview
Entera is a clinical stage biopharmaceutical company and a leader in the development
of orally delivered macromolecule therapeutics, including peptides and therapeutic proteins. Currently, most protein therapies are administered
via frequent intravenous, subcutaneous, or intramuscular injections. In chronic diseases where patients require persistent management,
these cumbersome, often painful and high-priced injections can create a major treatment gap. Furthermore, from a technical standpoint,
oral delivery of therapeutic proteins has historically been challenging due to enzymatic degradation within the gastrointestinal tract,
poor absorption into the blood stream and variable drug exposures. Entera’s proprietary technology is designed to deliver orally
administered proteins with sufficient bioavailability to meet treatment goals, using white mini tablets (around 6mm in diameter) of the
desired protein.
We strategically focus on underserved, chronic medical conditions where oral administration
of a mini tablet peptide or peptide replacement therapy has the potential to significantly shift a treatment paradigm.
We currently have two product candidates in the clinical stage of development: EB613
and EB612. Both candidates are first-in-class daily mini tablets of human parathyroid hormone (hPTH (1-34), teriparatide). To date, Entera’s
proprietary PTH tablets have been safely administered to a total of 72 healthy subjects in Phase 1 studies and 153 patients across Phase
2 studies in osteoporosis and hypoparathyroidism, two diseases that remain underserved with the current standard of care and which disproportionately
affect women. In addition to these product candidates, we have various internal early stage research programs in other approved peptides
such as GLP-2 and hGH, as well as outside early stage collaborations to potentially diversify our revenue stream.
Since our inception, we have raised a total of $84.7 million from a combination of
public and private equity offerings, grants and the exercise of options and warrants. Since inception, we have incurred significant losses.
For the years ended December 31, 2022 and 2021, our operating losses were $13.0 million and $12.2 million, respectively, and we expect
to continue to incur significant expenses and losses for the foreseeable future. As of December 31, 2022, we had an accumulated deficit
of $95.5 million. Our losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical
trials, our expenditures on research and development activities, and payments under any future collaborations into which we may enter.
As a result of our recurring losses from operations, negative cash flows and lack
of liquidity, management is of the opinion that there is substantial doubt as to the Company's ability to continue as a going concern.
Our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and
for the year ended, December 31, 2022, expressing the existence of substantial doubt about our ability to continue as a going concern.
The audited consolidated financial statements included herein have been prepared assuming that we will continue as a going concern and
do not include adjustments that might result from the outcome of this uncertainty. If we are unable to raise the requisite funds, we will
need to delay certain program initiation, curtail or cease operations. See “Item 1A-Risk Factors-Risks Related to Our Financial
Position and Need for Additional Capital.”
As of December 31, 2022, we had cash and cash equivalents of $12.3 million.
We believe that our existing cash resources will be sufficient to meet our projected operating requirements into the third quarter of
2024, which include the capital required to fund our ongoing operations, including R&D and the completion of the Phase 1 PK study
related to the new formulation EB612. However, this does not include the capital required to fund our proposed Phase 3 pivotal study for
EB613 in osteoporosis and comparative PK study of EB613 and Forteo®. We currently do not have funding sufficient for such Phase 3
or PK studies, and our ability to commence such studies requires additional funding, which may not be available on reasonable terms, or
at all. Any delay or our inability to secure such funding will delay or prevent the commencement of these studies.
In order to fund further operations, we will need to raise additional capital. We
may raise these funds through a variety of means, including private or public equity offerings, debt financings, strategic collaborations
and licensing arrangements. Additional financing may not be available when we need it or may not be available on terms that are favorable
to us.
Patent Transfer, Licensing Agreements and Grant Funding
Oramed Patent Transfer Agreement
In 2011, we entered into a patent transfer agreement with Oramed, or the Patent Transfer
Agreement, pursuant to which Oramed assigned to us all of its rights, title and interest in the patent rights Oramed licensed to us when
we were originally organized, subject to a worldwide, royalty-free, exclusive, irrevocable, perpetual and sub-licensable license granted
to Oramed under the assigned patent rights to develop, manufacture and commercialize products or otherwise exploit such patent rights
in the fields of diabetes and influenza. Additionally, we agreed not to engage, directly or indirectly, in any activities in the fields
of diabetes and influenza. Under the terms of the Patent Transfer Agreement, we agreed to pay Oramed royalties equal to 3% of our net
revenues generated, directly or indirectly, from exploitation of the assigned patent rights, including the sale, lease or transfer of
the assigned patent rights or sales of products or services covered by the assigned patent rights.
Amgen Research Collaboration and License Agreement
On December 10, 2018, we entered into a research collaboration and license agreement
with Amgen, which we refer to as the Amgen Agreement, with respect to inflammatory disease and other serious illnesses. Pursuant to the
Amgen Agreement, we and Amgen have agreed to use our proprietary drug delivery platform to develop oral formulations for one preclinical
large molecule program that Amgen has selected. In exchange for entering into the agreement, Amgen paid us a non-refundable and non-creditable
initial access fee of $725,000 in the first quarter of 2019, of which $500,000 was attributed to the right to use the intellectual property
and $225,000 was attributed to the pre-clinical R&D services that we are obligated to perform under the Amgen Agreement. In addition,
under the Amgen Agreement, Amgen reimburses us for additional expenses that we incur for any work we do under the collaboration. Thus
far during our collaboration, Amgen has paid $968,000 for pre-clinical R&D services by the end of 2022.
Amgen is responsible for the clinical development, regulatory approval, manufacturing
and worldwide commercialization of the programs. Pursuant to the terms of the Amgen Agreement, Amgen is required to make aggregate payments
of up to $270 million upon achievement of various clinical and commercial milestones or its exercise of options to select the additional
two programs to include in the collaboration. In addition, Amgen is required to make tiered royalty payments ranging from the low to mid-single
digits as a percentage of Amgen’s net sales of the applicable products covered by the Amgen Agreement. Amgen’s obligation
to pay royalties with respect to a product in a particular country commences upon the first commercial sale of such product in such country
and expires on a country-by-country and product-by-product basis on the later of (a) the date on which the sale of the product is no longer
covered by a valid claim of a patent licensed to Amgen under the Amgen Agreement, and (b) the tenth anniversary of the first commercial
sale of such product in such country.
Under the Amgen Agreement, we granted Amgen an exclusive, worldwide, sub-licensable
license to certain of our intellectual property relating to our drug delivery technology to develop, manufacture and commercialize the
applicable products. We have retained all intellectual property rights to our drug delivery technology, Amgen will retain all rights to
its large molecules and any subsequent improvements, and ownership of certain intellectual property developed through the performance
of the collaboration is to be determined by U.S. patent law. Each party is responsible for the filing and prosecution of patents relating
to its owned developments and, with respect to any jointly-owned developments, we are responsible for the filing and prosecution of patents
solely claiming improvements to our drug delivery technology and Amgen is responsible for the filing and prosecution of any other jointly-owned
developments. Amgen has the primary right to enforce any such patents against third-party infringement with respect to a product that
has the same mechanism of action as one of the collaboration programs, subject to involvement by us in certain circumstances.
During certain periods covered by the Amgen Agreement, we may not alone, or with a
third party, research, develop, manufacture or commercialize certain products that interact with the targets of the applicable collaboration
programs. The collaboration is governed by a joint research committee, or JRC, made up of equal representatives of us and Amgen. The JRC
may establish additional subcommittees to oversee particular projects or activities. Subject to certain limitations, if the JRC is unable
to make a decision by consensus, the disagreement is to be resolved through escalation to specified senior executive officers of the parties,
although Amgen has the final decision-making ability with respect to certain pre-defined issues.
The term of the Amgen Agreement commenced on December 10, 2018, and unless earlier
terminated, continues in full force and effect, on a product-by-product basis, until expiration of the last-to-expire royalty term with
respect to such product. At any point in the research, development or commercialization process, subject to certain conditions, Amgen
can terminate the Amgen Agreement in its entirety or with respect to a specific development program. Both parties can terminate the agreement
for a material breach by the other party that goes uncured, subject to a 90-day notice period.
Israeli Innovation Authority Grants
We have received grants of approximately $0.5 million from the IIA to partially fund
our research and development. The grants are subject to certain requirements and restrictions under the Israeli Encouragement of Research,
Development and Technological Innovation in Industry Law 5477-1984, or the Research Law. In general, until the grants are repaid with
interest, royalties are payable to the Israeli government in the amount of 3% on revenues derived from sales of products or services developed
in whole or in part using the IIA grants, including EB613, EB612 and any other oral PTH product candidates we may develop. The royalty
rate may increase to 5%, with respect to approved applications filed following any year in which we achieve sales of over $70 million.
The amount that must be repaid may be increased up to six times the amount of the
grant received and the interest. The rate of royalties may be accelerated and the royalty liability may increase (up to three times the
amount of the grant amount and the interest), if manufacturing of the products developed with the grant money is transferred outside of
the State of Israel. Moreover, a payment of up to 600% of the grant received may be required upon the transfer of any IIA-funded know-how
to a non-Israeli entity. We signed a contract with a U.K.-based contract manufacturing organization to produce and supply pills for trials
performed worldwide. We believe that, because this production is not for commercial purposes, it will not affect the royalty rates to
be paid to the IIA. Should the IIA successfully take a contrary position, the maximum royalties to be paid to the IIA will be approximately
$1.5 million, which is three times the amount of the original grant (three times of the interest will also be added). Following the signing
of the Amgen Agreement, we have been required to pay 5.38% of each payment by Amgen and up to 600% of the grant received and the interest.
As of December 31, 2022, we had paid royalties to the IIA in the amount of $83,000 related to the Amgen Agreement.
In addition to paying any royalties due, we must abide by other restrictions associated
with receiving such grants under the Research Law that continue to apply following repayment to the IIA.
Financial Overview
Revenue
To date, we have not generated any revenue from sales of our products, and we do not
expect to receive any revenue from any product candidates that we develop unless and until we obtain regulatory approval and successfully
commercialize our products.
Under the Amgen Agreement, through December 31, 2022, we had received an additional
aggregate amount of $968,000 for research and development services.
Revenues, including revenues under the Amgen Agreement, are recognized according to
ASC 606, "Revenues from Contracts with Customers”.
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. We identified two performance obligations in the agreement: the
license to use the Company's proprietary drug delivery platform and pre-clinical research and development services (“pre-clinical
R&D services”). The license to our intellectual property has significant standalone functionality, since we are 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, we recognized the revenues related to this performance obligation in
December 2018 at the point in time that control of the license was transferred to Amgen. The preclinical R&D services include discovery,
research and design preclinical activities relating to the programs selected by Amgen. Revenues attributed to the preclinical R&D
services are recognized during the period the pre-clinical R&D services are provided according to the input model method on a cost-to-cost
basis. Each of these items met the definition of distinct performance obligation. The Company evaluated the standalone selling price of
the pre-clinical R&D services at $225,000 and the right to use the intellectual property at $500,000.
Under ASC 606, the consideration that we would be entitled to upon the achievement
of contractual milestones, which are contingent upon the occurrence of future events of development and commercial progress, are a form
of variable consideration. When assessing the portion, if any, of such milestone-related consideration to be included in the transaction
price, we first assess the most likely outcome for each milestone, and exclude the consideration related to milestones of which the occurrence
is not considered the most likely outcome. We then evaluate if any of the variable consideration determined in the first step is constrained.
Variable consideration is included in the transaction price if, in our judgment, it is 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 our anticipated performance and all information (historical, current
and forecasted) that is reasonably available. We did not recognize any revenues from 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:
|
• |
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). |
We did not recognize any revenues from royalties because royalties are payable based
on future commercial sales, as defined in the Amgen Agreement, and there have been no commercial sales.
For the years ended December 31, 2022 and 2021, we recognized revenues from the Amgen
Agreement and other material transfer agreements (“MTA”) in the total amounts of $134 thousand and $571 thousand, respectively.
Research and Development Expenses
Research and development expenses consist of costs incurred for the development of
our drug delivery technology and our product candidates. Those expenses include:
|
• |
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. |
Research and development activities are the primary focus of our business. Product
candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses
will increase significantly in future periods as we advance EB613 and EB612 into later stages of clinical development and invest in additional
preclinical candidates.
Our research and development expenses may vary substantially from period to period
based on the timing of our research and development activities, including due to the timing of initiation of clinical trials and the enrollment
of patients in clinical trials. For the years ended December 31, 2022 and 2021, our research and development expenses were $5.8 million
and $6.8 million, respectively. Research and development expenses for the years ended December 31, 2022 and 2021 were primarily for the
development of EB613 and EB612. The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably
estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if
any, in which material net cash inflows may commence from, any of our product candidates. This is due to numerous risks and uncertainties
associated with developing drugs, including:
|
• |
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. |
A
change in the outcome of any of these variables with respect to the development of EB613, EB612 or any other product candidate that we
may develop could mean a significant change in the costs and timing associated with the development of such product candidate. For example,
if the FDA or other regulatory authority were to require us to conduct preclinical and/or clinical studies beyond those which we currently
anticipate will be required for the completion of clinical development, if we experience significant delays in enrollment in any clinical
trials or if we encounter difficulties in manufacturing our clinical supplies, then we could be required to expend significant additional
financial resources and time on the completion of the clinical development.
General and Administrative Expenses
General and administrative expenses consist principally of salaries, benefits, share-based
compensation and related costs for directors and personnel in executive and finance functions. Other general and administrative expenses
include D&O insurance and other insurance, communication expenses, professional fees for legal and accounting services, patent counseling
and portfolio maintenance and business development expenses.
We expect that our general and administrative expenses will increase in the future
as we increase our headcount and expand our administrative function to support our operations.
Financial Expenses (Income), Net
Financial expenses (income), net are composed primarily of interest income and exchange
rate differences of certain currencies against our functional currency.
Income Tax Expenses (Benefit)
We have not generated taxable income since our inception, and as of December 31, 2022, we had carry-forward
tax losses of $67.1 million. We anticipate that we will be able to carry forward these tax losses indefinitely to future tax years. Accordingly,
we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carryforward tax losses. We provided
a full valuation allowance with respect to the deferred tax assets related to these carry forward losses of the Company.
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.
Results of Operations
Comparison of Years Ended December 31, 2022 and 2021
|
|
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 |
% |
Revenue
Revenues for the years ended December 31, 2022 and 2021 were $134,000 and $571,000,
respectively. For 2022 and 2021, the majority of our revenues were attributable to research and development, or R&D, services provided
to Amgen under the Amgen Agreement and other MTA agreements. The decrease in revenue for the year ended December 31, 2022 as compared
to the prior year period was primarily due to finalization of third year pre-clinical R&D services. We did not generate any revenues
prior to entering into the Amgen Agreement.
Cost of Revenues
Cost of revenues for the year ended December 31, 2022 were $101,000 compared to $373,000
for the year ended December 31, 2021 and were primarily attributed to salaries and related expenses in connection with the R&D services
provided under the Amgen Agreement and other MTA agreements. The decrease in cost of revenues for the year ended December 31, 2022 was
primarily due to decreased revenues under the Amgen Agreement, as described above.
Research and Development Expenses
Research and development expenses for the year ended December 31, 2022 were $5.8 million,
as compared to $6.8 million for the year ended December 31, 2021. The decrease of $1.0 million was primarily attributed to a decrease
of $0.6 million related to the completion of our Phase 2 trial for EB613 in September 2021, and a decrease of $0.9 million in pre-clinical
activities related to our planned Phase 3 clinical trial for EB613, which were partially offset by an increase of $0.3 million in continued
materials and production costs, strengthening the R&D organization in preparation for EB613’s proposed phase 3 study and
EB612’s proposed new formulation PK study and an increase of $0.2 million in employee compensation, primarily related to a one-time
payment to our former President of R&D.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2022 were $7.3
million, compared to $5.7 million for the year ended December 31, 2021. The increase of $1.6 million was primarily attributable to an
increase of $0.4 million in non-cash share-based compensation granted to directors and executive officers and an increase of $0.4 with
respect to a one-time payment to our former Chief Executive Officer. Additionally, there was an increase of $0.5 million in professional
fees and an increase of $0.3 million in D&O insurance costs.
Financial Expenses (Income), Net
Financial income, net for the year ended December 31, 2022 was $83,000, compared to
$29,000 financial expenses, net for the year ended December 31, 2021. Our financial expenses (income) is composed primarily of exchange
rate differences of certain currencies against our functional currency, which is the U.S. Dollar.
Liquidity and Capital Resources
Since inception, we have incurred significant losses. As a result of our recurring
losses from operations, negative cash flows from operating activities and lack of liquidity, our independent registered public accounting
firm included an explanatory paragraph in its report on our financial statements as of, and for the year ended, December 31, 2022, expressing
the existence of substantial doubt about our ability to continue as a going concern. For the years ended December 31, 2022 and 2021, our
operating losses were $13.0 million and $12.2 million, respectively. We expect to continue to incur significant expenses and losses for
the next several years as we advance our products through development and provide administrative support for our operations. As of December
31, 2022, we had an accumulated deficit of $95.5 million. Since our inception, we have raised a total of $84.7 million, including
$25.3 million through at-the-market-offering (“ATM”) programs, $14.3 million in our December 2019 private placement, $11.2
million in our IPO in 2018 and $33.9 million in aggregate funding from a combination of grants, exercise of options and warrants and private
placements of Ordinary Shares, preferred shares and debt prior to our IPO. In addition, as of December 31, 2022, we had received approximately
$1.4 million under the Amgen Agreement.
As of December 31, 2022, we had cash and cash equivalents of $12.3 million.
Our primary uses of cash have been to fund research and development, general and administrative and working capital requirements, and
we expect these will continue to be our primary uses of cash.
In July 2020, we entered into an equity distribution agreement with Canaccord Genuity LLC, as sales agent,
to implement an at-the-market offering program under which we, from time to time, were able to offer and sell our Ordinary Shares, having
an aggregate offering amount of up to $13.9 million. This ATM program terminated in accordance with its terms following our sale
of the full dollar amount of ordinary shares permitted thereunder. On May 7, 2021 we entered into an At Market Issuance Sales Agreement
with B. Riley Securities, Inc., as sales agent, under which we, from time to time, had been able to offer and sell up to 5,000,000 Ordinary
Shares . For the year ended December 31, 2021, we sold an aggregate of 4,386,728 ordinary shares under the foregoing ATM programs for
aggregate proceeds of $21.8 million, net of issuance costs.
Following our loss of foreign private issuer status on January 1, 2022, we were no
longer able to use our then-current ATM program, as offers and sales under which had been registered on our registration statement on
Form F-3, which may be used only by a foreign private issuer; therefore, we filed a new shelf registration statement on Form S-3 (file
no. 333-365286) on May 27, 2022 to, among other things, facilitate our use of the Amended B. Riley ATM Program and SVB ATM Program (each
as defined below). On May 27,2022 we entered into an Amended and Restated at Market Issuance Sales Agreement with B. Riley Securities,
Inc., as sales agent, under which we were able, from time to time, to offer and sell up to 5,000,000 Ordinary Shares (the “Amended
B. Riley ATM Program”). Effective August 30, 2022, we terminated the Amended B. Riley ATM Program, and we had not sold any shares
under such agreement.
On September 2, 2022, we entered into a Sales Agreement with SVB Securities LLC, as
sales agent, to implement an ATM program under which we may from time to time offer and sell up to 5,000,000 Ordinary Shares (the “SVB
ATM Program”) under our currently effective Registration Statement on Form S-3 and a related prospectus supplement forming a part
thereof. The sales agent is entitled to a fixed commission of 3% of the aggregate gross proceeds as well as and reimbursement of expenses.
As of December 31, 2022, we had not sold any shares under the SVB ATM Program.
Funding Requirements
We believe that our existing cash resources will be sufficient to meet our projected
operating requirements into the third quarter of 2024, which include the capital required to fund our ongoing operations, including R&D
and the completion of the Phase 1 PK study related to the new formulation EB612. However, this does not include the capital required to
fund our proposed Phase 3 pivotal study for EB613 in osteoporosis and comparative PK study of EB613 and Forteo®. We currently do
not have funding sufficient for such Phase 3 or PK studies, and our ability to commence such studies requires additional funding, which
may not be available on reasonable terms, or at all. Any delay or our inability to secure such funding will delay or prevent the
commencement of these studies.
We have based these estimates on assumptions that may prove to be wrong, and we may
use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the
development of our product candidates, and the extent to which we may enter into collaborations with third parties for development of
these or other product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated
with completing the development of our current and future product candidates. Our future capital requirements will depend on many factors,
including:
|
• |
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. |
We are in the process of evaluating various financing alternatives in the public or
private equity markets or through license of our technology to additional external parties through partnerships or research collaborations
as we 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 our ability to obtain such funding.
Other than the SVB ATM Program, we do not have any committed external sources of funds.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our
then-existing shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that may adversely
affect our existing shareholders’ rights as shareholders. Debt financing, if available, may involve agreements that include covenants
limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring
dividends and may include requirements to hold minimum levels of funding. If we raise additional funds through collaborations, strategic
alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue
streams or research programs or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through
equity or debt financings or collaborations, when needed, we may be required to delay, limit, reduce or terminate our product development
or future commercialization efforts or grant rights to develop and market our oral PTH product candidates and any other product candidates
that we would otherwise prefer to develop and market ourselves.
Our audited consolidated financial statements for the year ended December 31, 2022,
included elsewhere in this Annual Report on Form 10-K, note that there is substantial doubt about our ability to continue as a going concern
as of such date; and in its report accompanying our audited consolidated financial statements included herein, our independent registered
public accounting firm included an explanatory paragraph stating that our recurring losses from operations and our cash outflows from
operating activities raise substantial doubt as to our ability to continue as a going concern. This means that our management and our
independent registered public accounting firm have expressed substantial doubt about our ability to continue our operations without an
additional infusion of capital from external sources. The audited consolidated financial statements have been prepared on a going concern
basis and do not include any adjustments that may be necessary should we be unable to continue as a going concern. If we are unable to
finance our operations, our business would be in jeopardy and we might not be able to continue operations and might have to liquidate
our assets. In that case, investors might receive less than the value at which those assets are carried on our financial statements, and
it is likely that investors would lose all or a part of their investment.
Cash Flows
Year Ended December 31, 2022 Compared to Year Ended December 31,
2021
The following table sets forth the primary sources and uses of cash for each of the periods set forth below:
|
|
(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 |
|
Net Cash Used in Operating Activities
Net Cash used in operating activities for the year ended December 31, 2022 was $12.5
million, consisting primarily of our operating loss of $13.0 million and an increase of $1.8 million in our working capital, which
was partially offset by approximately $2.3 million of share-based compensation and depreciation expenses.
Net Cash used in operating activities for the year ended December 31, 2021 was $9.1 million, consisting
primarily of our operating loss of $12.2 million, which was partially offset by $1.7 million of share-based compensation, depreciation
and deferred income taxes, and a decrease of $1.4 million in our working capital.
The increase of $3.4 million in cash used in operating activities for the year ended December 31, 2022
compared to the same period in 2021 was mainly attributed to an increase of $0.8 million in our operating loss, and an increase of $3.2
million in working capital primarily due to payments to suppliers and services providers, which was partially offset by an increase of
$0.4 million in share-based compensation and depreciation expenses.
Net Cash Used in Investing Activities
Net Cash used in investing activities for the year ended December 31, 2022 and 2021
consisted primarily of the purchase of property and equipment and withdrawal of funds in connection with the retirement of certain employees.
Net Cash Provided by Financing Activities
Net Cash provided by financing activities for the year ended December 31, 2022 primarily
derived from net proceeds of $13 thousand from the exercise of options to purchase Ordinary Shares.
Net Cash provided by financing activities for the year ended December 31, 2021 primarily
derived from net proceeds of $21.8 million from the issuance of Ordinary Shares under our ATM and $3.6 million from the exercise of warrants
and options.
Contractual Obligations
The following tables summarize our contractual obligations and commitments as of December 31, 2022 that
will affect our future liquidity:
|
|
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 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Severance Obligations
We have long-term liabilities for severance pay that are calculated pursuant to Israeli
law generally based on the most recent salary of the relevant employees multiplied by the number of years of employment to the extent
not covered by our regular deposits with defined contribution plans. As of December 31, 2022, our severance pay liability, net was immaterial.
Because the timing of any such payments is not fixed and determinable, we have not included these liabilities in the table above.
Contingencies
We also have obligations to make future payments to third parties that become due
and payable on the achievement of certain milestones, such as royalties upon sale of products or revenues from the Amgen Agreement. We
have not included these commitments in our statements of financial position or in the table above because the achievement and timing of
these milestones is not fixed and determinable. These potential future commitments include a commitment to pay Oramed royalties equal
to 3% of our net revenues pursuant to the terms of the Patent Transfer Agreement between us and Oramed and a commitment to pay royalties
to the IIA.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with U.S. generally
accepted accounting principles, or GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly
from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future
financial statement presentation, financial condition, results of operations and cash flows will be affected.
While our significant accounting policies are more fully described in Note 2 to the
consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies
are the most critical to assist shareholders and investors reading the consolidated financial statements in fully understanding and evaluating
our financial condition and results of operations. These policies relate to the more significant areas involving management’s judgments
and estimates and they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about
the effect of the matters that are inherently uncertain.
Revenue Recognition
With respect to the Amgen Agreement, we used our judgement to identify our deliverables
in the agreement and whether the deliverables are distinct performance obligation. In addition, we use our judgement to determine the
allocation of the transaction price between our identified distinct performance obligations. We also used significant judgment in order
to determine the R&D services period. For a description of our revenue recognition policy see “Note 2-Summary of Significant
Accounting Policies-Revenue Recognition” of our audited consolidated financial statements for the year ended December 31, 2022,
included elsewhere in this Annual Report.
Share-Based Compensation
In 2013 and in 2018, we adopted share-based compensation plans for employees, directors
and service providers. Our share-based compensation plan adopted in 2013 governs the issuance of equity incentive awards prior to our
initial public offering, and the share-based compensation plan adopted in 2018 governs the issuance of equity incentive awards from and
after the closing of our initial public offering. As part of the plans, we grant employees, directors and service providers, from time
to time and at our discretion, options to purchase our Ordinary Shares and restricted share units. The fair value of the services received
in exchange for the grant of the options is recognized as an expense in our statements of comprehensive loss with a corresponding adjustment
to equity in our statements of financial position. The total amount is recognized as an expense ratably over the service period of the
options, which is the period during which all vesting conditions are expected to be met.
We estimate the fair value of our share-based compensation to employees, directors
and service providers using the Black-Scholes option pricing model, which requires the input of highly subjective assumptions, including
(a) the expected volatility of our shares, (b) the expected term of the award, (c) the risk-free interest rate, (d) expected dividends
and (e) the fair value of our Ordinary Shares at the date of grant.
The following table summarizes the allocation of our share-based compensation expense:
|
|
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 |
|
Recently Issued Accounting Pronouncements
Certain recently issued accounting pronouncements are discussed in Note 2 to the consolidated
financial statements included elsewhere in this Annual Report on Form 10-K.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.