ITEM 2.2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information we believe is relevant to an assessment and understanding of our results of operations, financial condition, liquidity and cash flows for the periods presented below. This discussion should be read in conjunction with the interim unaudited condensed consolidated financial statements and related notes contained elsewhere in this Quarterly Report and Item 1A-Risk Factors in this Quarterly Report and in our 20212022 Annual Report. As discussed in the section above titled “Cautionary Note Regarding Forward-Looking Statements,” the following discussion contains forward-looking statements that are based upon our current expectations, including with respect to our future revenues and operating results. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of various factors. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included under Part II, Item 1A below as well as in our 20212022 Annual Report.
Unless otherwise provided, references to the “Company,” “we,” “us” and “our” refer to Entera Bio Ltd. and its consolidated subsidiary.
Overview
We are a clinical-stage biopharmaceutical company focused on the development and commercialization of orally delivered large molecule therapeutics for use in areas with significant unmet medical need and where adoption of injectable therapies is limited due to cost, convenience and compliance challenges for patients. We were organized under the laws of the State of Israel on September 30, 2009 and commenced operations on June 1, 2010. We have developed a proprietary platform that enables the oral delivery of injectable proteins and large molecules. Our platform has been tested successfully on numerous molecules of broad characteristics and size. We have advanced our lead oral PTH product, EB613 to Phase 3 (potentially pivotal), and, in December 2018, we entered into a research collaboration and license agreement with Amgen, Inc., referred to as Amgen, for the use of Entera’s oral delivery platform in the field of inflammatory diseases.Overview
Our leadEntera 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 are EB613 forin the treatmentclinical stage of osteoporosis and EB612 for the treatment of hypoparathyroidism. Bothdevelopment: EB613 and EB612EB612. Both candidates are oral formulationsfirst-in-class daily mini tablets of human parathyroid hormone (hPTH (1-34), or PTH. An injectable formulationteriparatide). To date, Entera’s proprietary PTH tablets have been safely administered to a total of PTH has been approved72 healthy subjects in Phase 1 studies and 153 patients across Phase 2 studies in osteoporosis and hypoparathyroidism, two diseases that remain underserved with the United States for more than a decade for bothcurrent standard of these indications (PTH 1-34 for Osteoporosiscare and PTH 1-84 for Hypoparathyroidism). Currently, the leading products are administered via injection. In total, more than 260 healthy volunteers and patients have received multiple doses of various formulations of our oral PTH (1-34) in clinical trials.which disproportionately affect women.
In addition to these product candidates, we have various internal early stage research programs targeting GLP-2, kappa opioid receptors and hGH..
Osteoporosis
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. Forteo®Osteoporosis is a once-daily subcutaneous injectable form of PTH (1-34) marketed by Eli Lillymost frequently associated with menopause in women, aging in both women and Company (“Eli Lilly”), that was approved by the U.S. Foodmen and Drug Administration (the “FDA”) in 2002 for the treatment of osteoporosisglucocorticoid 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 United Statesresorption of mineralized tissue; and is widely considered one(ii) bone formation, where cells called osteoblasts are responsible for bone matrix synthesis and subsequent mineralization of the most effective treatments duebone. 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 its ability to build bone. Because our product candidate EB613 is delivered in a patient-friendly oral formulation, we believe it will reduce the treatmentfrail and cost burden on patients and lead to significantly higher patient and physician acceptance compared to injectable PTH. In 2020, we engaged a third-party firm to conduct two primary market research studies with clinicians who treat osteoporosis patients. In these two studies, the responses to the prospect of prescribing an oral PTH with demonstrated safety and efficacy were overwhelmingly positive and driven by expected improvements in patient compliance, ease of administration and reduced costs.fracture-prone bones.
In November 2018, we had a pre- Investigational New Drug (“IND”) meeting withCurrent 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 FDA to discuss EB613RANK-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 the treatment of osteoporosis program, and, in December 2020, we announced that the FDA had reviewed our IND application for EB613 and informed us that we may proceed with our U.S. clinical trial.osteoporosis.
WeTo date, we have completed two multi-stage Phase 1 clinical trials of EB613 and a six-month Phase 2 double-blind, placebo-controlled dose-ranging trial of EB613 in patients with osteoporosis.osteoporosis in Israel. The dose ranging Phase 2 trial studied five once-daily doses of EB613 (0.5mg, 1.0mg, 1.5mgstudy in postmenopausal women with low bone mass met its primary —change in P1NP at Month 3— and 2.5mg) and placebo for six months and assessed safety, tolerability, bone biomarkers andkey secondary endpoints including bone mineral density (BMD). Based on these trials, at Month 6 and was presented in a late-breaker oral presentation at the 2021 ASBMR Annual Meeting.
In November 2018, we had a Pre-Investigational New Drug (“Pre-IND”) meeting with the FDA to discuss our EB613 appears to be safe and well tolerated with no serious drug-related adverse events reported and produced clinically and statistically significant increases in BMD at month six. The adverse events seen in these trials are consistent with those seen in other published third party trialsprogram for the treatment of PTH (1-34).osteoporosis. In December 2020, we announced that the FDA had approved our 2020 IND Application. In December 2021, we held an end-of-Phase 2 meeting with the FDA to review the Phasesix-month phase 2 results and a proposed Head-to-Head Non-Inferiority Phase 3 study protocol including various aspects ofvs. Forteo®, our nonclinical and clinical development plan and the use of BMD, rather than fracture incidence, as the primary endpoint to support a New Drug Application, or NDA.potential NDA submission. In our End of Phase 2 Meeting Minutes received in January 2022, the FDA expressed concern that a Head-to-Head study phase 3 design vs. Forteo® may not be favorable to support an NDA for EB613.
During early 2022 and considering FDA’s suggestions and emerging data from the ASBMR-FNIH SABRE program1, we redesigned our pivotal phase 3 study for EB613 as a placebo-controlled trial with a total hip (TH) BMD primary endpoint. A Type C meeting with the FDA in relation to Entera’s re-designed Phase 3 registrational study was held in August 2022 and in October 2022, we announced FDA’s concurrence on the major design elements of the protocol; and that (1) a single Phase 3 placebo-controlled study with a TH BMD primary endpoint along with (2) a comparative PK study vs. Forteo® could support an NDA submission of EB613 (oral hPTH (1-34), teriparatide tablets) under the 505(b)(2) regulatory pathway.
In February 2023, we submitted the revised phase 3 protocol as part of a Type D meeting with FDA in February 2023. On April 3rd, 2023, we reported the outcome of our Type D meeting and the FDA’s written responses to our two questions. On the first question, “Based on the FDA’s feedback provided in the Type C meeting written response August 19, 2022, and subsequent teleconference held on September 27, 2022, the Sponsor has updated the Phase 3 protocol design including the use of Total Hip Bone Mineral Density (BMD) as the primary endpoint. Does the FDA concur that the revised protocol meets its expectations?” the FDA responded that it is not opposed to the use of BMD as a surrogate for fracture, including initiating a study under the proposed Foundation for the National Institutes of Health Bone Quality Project (FNIH BQP) pathway, which is undergoing review. The FDA re-confirmed to Entera that a 24-month placebo-controlled phase 3 trial with the primary efficacy analysis at 24 months was acceptable and provided some guidance on the statistical evaluation of the study.
On the second question, “Does FDA agree that the design of the population PK (pharmacokinetic) and exposure response evaluation incorporated in the draft Phase 3 study protocol meets FDA expectations?” FDA responded that the Company’s proposed PK sampling scheme in the phase 3 study seems reasonable.
On April 3rd, the Company announced that it plans on continuing its dialogue with FDA in light of its review of the FNIH-BQP criteria and will not plan to initiate a phase 3 study for EB613 until such a time that FDA provides final guidance on the evaluation of its primary endpoint.
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. Historically,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 treatmentscirculatory and central nervous systems. The most common cause of hypoparathyroidism is damage to, or removal of, the parathyroid glands due to surgery for hypoparathyroidism have been calcium supplements, active vitamin D analogs (calcitriol or similar drugs) and occasionally phosphate binders, the chronic use of which results in serious side effects and significant costs to patients and the healthcare system. A once-daily injectable form of PTH (1-84), marketed as Natpara®, has been approved for the treatment of hypoparathyroidism; however, Natpara is currently the subject of an FDA recall and is not currently available. another condition.
Our lead product candidate for hypoparathyroidism, EB612, is delivered orallythe first oral formulation of PTH (1-34, teriparatide) hormone replacement treatment developed in a mini tablet form. The FDA and can be administered in customized doses several times a day. Studies performed by researchers at the National InstitutesEuropean Medicines Agency have granted EB612 orphan drug designation for the treatment of Health, or NIH,hypoparathyroidism. We believe that EB612 may have shown that dosing PTH multiple times per day significantly increases the efficacy of therapy and may be more effective for treating hypoparathyroidism. These studies found that the total daily PTH dose required to maintain serum calcium in the normal or near-normal range was reduced by 50% with twice-daily PTH (1-34) and also demonstrated that twice-daily dosing achieved better control over serum calcium and urinary calcium excretion asinherent advantages compared to once-daily dosing. In addition, based oninjectable forms, including convenience of administration without any special preparation of the market research we conducted in osteoporosis, we believe patients generally prefer orally-administered drugs. For these reasons, we believe EB612 dosed twomedication, as well as convenience of storage (room temperature or more times during the day may be clinically superior to the existing daily therapy and has the potential to become the standard of care, if approved,refrigeration for hypoparathyroidism.
long term storage). In 2015, we successfully completed a Phase 2a trial for EB612. Although ourthis pilot four-month Phase 2a trial involved a smaller number of patients, was conducted for a shorter duration and did not include an initial dose optimization period, in each case in comparison to the design of the pivotal trial used for regulatory approval of NatparaNatpara® (the REPLACE trial), our trial showed the potential for similar efficacy. In the third quarter of 2019, we reported the results ofstudy achieved its primary and secondary endpoints, including a second Phase 2 clinical trial that included one day of dosing with EB612 to evaluate the pharmacokinetic/pharmacodynamics, or PK/PD, profile of various EB612 dose regimens compared with Natpara. The results from this study demonstrated that EB612 was effectively delivered into the blood streamreduction in calcium supplements, reductions in serum phosphate and activated PTH-dependent biological pathways that are inadequately activated in patients with hypoparathyroidism. In addition, the various dosing regimens demonstrated positive impacts on serum calcium,24-hour urine calcium excretion, maintenance of ACa within the reference range, and serum phosphate levels. No serious adverse events were reported. an improvement in quality of life.
1 FNIH BQP is also known as the ASBMR FNIH-SABRE, American Society for Bone and Mineral Research-Foundation for the National Institutes of Health (FNIH) Strategy to Advance BMD as a Regulatory Endpoint (SABRE)
We have since developed an improved formulation of EB612 based on new intellectual property, and optimization of theits PK profile and the potential for hypoparathyroidism and are evaluating this in preclinical and human PK/PD studies in 2022. These data will help determinereduced daily dosing for hypoparathyroidism. We expect to carry out a PK study for the design of a pivotal Phase 2b or Phase 3 trialnew formulation of EB612 in patients with hypoparathyroidism in which the dose frequency would be titrated to control hypocalcemia, normalize serum phosphate and reduce renal calcium excretion.
After our planned completionfirst half of additional formulation and development activities, we expect to initiate a multi-site Phase 2b/3 clinical trial of EB612 for the treatment of hypoparathyroidism, which will further evaluate the dosage, effectiveness and safety profile of EB612 in an expanded population of patients with hypoparathyroidism. We expect that this Phase 2b/3 trial, when initiated, will be designed to replicate the REPLACE trial in many aspects and to achieve a significant reduction in urinary calcium.2023. If successful, the phase 2b/3 clinical trial of EB612 in hypoparathyroidism may potentially support a submission for regulatory approval of EB612.
In addition to the utilization of our technology to develop our own internal drug candidates, we intend to use our technology as a platform for the oral delivery of other novel protein and large molecule therapeutics. We believe our proprietary technology has advantages over alternative delivery options, and may enable us to create a potential pipeline of products across a range of therapeutic indications. We have generated data on a number of additional proteins and peptides in molecules as large as 150 kilodaltons, or kDa, and may develop these candidates further internally, or explore potential business development collaborations to advance these therapies through clinical development and generate funding.
In December 2018, we entered into a research collaboration and license agreement with Amgen. Under the agreement, we and Amgen have agreed to collaborate on the development and discovery of clinical candidates in the field of inflammatory disease and other serious illnesses. Specifically, we and Amgen have agreed to use our proprietary drug delivery platform to help Amgen develop oral formulations for up to three large molecule drug candidates within Amgen’s pipeline. Further, under the terms of the agreement, we have agreed to conduct preclinical development activities, at Amgen’s expense, and Amgen will be responsible for research, clinical development, manufacturing and commercialization of any of the resulting programs, at its expense. We will be eligible to receive from Amgen aggregate payments of up to $270 million upon achievement of various clinical and commercial milestones or Amgen’s exercise of its option to select up to two additional programs to include in the collaboration, as well as tiered royalty payments based on percentages ranging from the low to mid-single digits based on the level of Amgen’s net sales of any applicable products, if approved. We will retain all intellectual property rights to our drug delivery technology, which under this collaboration will be licensed to Amgen exclusively for Amgen’s selected drug targets. Amgen will retain all rights to its large molecules, including any subsequent improvements.
In February 2021, we announced that we had initiated a new research program for an oral glucagon-like peptide-2 (GLP-2) analog based on the Company’s platform technology. GLP-2, a peptide produced in the intestine and the central nervous system via the brainstem and hypothalamus, is known to enhance intestinal absorption, specifically the increased absorption of nutrients. The only GLP-2 analog currently on the market, teduglutide, was approved in 2012 as a once daily injection for the treatment of short bowel syndrome in the United States and Europe, registering global sales of $613 million in 2020. In preclinical models, our oral formulation of a GLP-2 analog has shown a comparable pharmacokinetic profile to a subcutaneous injection. In addition, GLP-2 analogs are an important category of new therapies for many metabolic diseases and therefore we believe this product candidate is well positioned for partnering opportunities.
We intend to utilize future funds, as available, to advance EB613 and EB612 through clinical development and ultimately towards regulatory approval. To date, we have funded our operations through both public and private sales of our Ordinary Shares and other equity or equity-linked securities, convertible debt, government grants and through revenues generated from research collaboration and our license agreement with Amgen. We have no products that have received regulatory approval and have never generated revenue from product sales.
Since our inception, we have raised a total of $84.7 million in various public and private equity offerings, as well as from grants, and the exercise of options and warrants.. Since inception, we have incurred significant losses. For the three months ended March 31, 2022 and 2021, our operating losses were $3.8 and $2.3 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future. As of March 31, 2022, we had an accumulated deficit of $86.2 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 the collaboration with Amgen or any future collaborations into which we may enter.
As of March 31, 2022, we had cash and cash equivalents of $20.1 million. 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, government grants, 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.
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, 2021, expressing the existence of substantial doubt about our ability to continue as a going concern. The unaudited condensed 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 curtail or cease operations. See “Item 1A—Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital” in our 2021 Annual Report.
As of March 31 2022, we had 21 full-time employees and five consultants who provide services to us on a part-time basis. Our operations are located in Jerusalem, Israel.
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.Agreement. Pursuant to the Amgen Agreement, we and Amgen havehad 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$725 thousand in the first quarter of 2019, of which $500,000$500 thousand was attributed to the right to use the intellectual property and $225,000$225 thousand was attributed to the pre-clinical R&D services that we arewere 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,Since 2019, Amgen has paid $968,000$1.2 million for pre-clinical R&D services.
Under certain circumstances, Amgen also has options, limited in time, to select up to two additional programs to include in the collaboration. Amgen is responsible for the clinical development, regulatory approval, manufacturing and worldwide commercialization of the programs. Pursuant to the terms of the Amgen Agreement, Amgen ishad been required to make aggregate payments to us 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.
UnderOn May 2, 2023, 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 technologyCompany and Amgen is responsible for the filing and prosecution of any other jointly-owned developments. Amgen has the primary rightagreed 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 accordance with its entirety or with respect to a specific development program. Both parties can terminate the agreementterms, effective on such date. See Part II, Item 5 of this Quarterly Report for a material breach by the other party that goes uncured, subject to a 90-day notice period.more information.
The Israeli Innovation Authority Grants
We have received grants of approximately $0.5 million from the IIAIsraeli Innovation Authority (“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 theplus 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.grant plus interest thereon. Following the signing of the Amgen Agreement, we have beenwere required to pay 5.38% of each payment by Amgen and up to 600% of the grant received. As ofreceived plus interest. Through March 31, 2022,2023, we had paid royalties to the IIA in the amount of $79,000$95 thousand related to the Amgen Agreement.Agreement and other Master Service Agreements (“MTA”).
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
RevenueFinancial Overview
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 three months ended March 31, 2023 and 2022, our operating losses were $2.2 million and $3.8 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future. As of March 31, 2023, we had an accumulated deficit of $97.7 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 unaudited condensed 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” contained in our 2022 Annual Report.
As of March 31, 2023, we had cash and cash equivalents of $10.7 million. We believe that our existing cash resources will be sufficient to meet our projected operating requirements into the third quarter of 2024, which includes 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®. Our ability to commence such studies will depend on finalizing discussions with the FDA and will require 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.
As of March 31 2023, we had 18 full-time employees and five consultants who provide services to us on a part-time basis. Our operations are located in Jerusalem, Israel.
Revenue
To date, we have not generated any revenue from sales of our products, and we do not expect to receive any revenue from our product candidates unless and until we obtain regulatory approval and successfully commercialize our products.
Under the Amgen Agreement, from 2019 through March 31, 2022,2023, we had received an aggregate amount of $968,000 from Amgen for research and development services.$1.7 million.
We recognize revenues, including revenues under the Amgen Agreement, 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 because 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 that we provide from time-to-time under the Amgen Agreement 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 sincebecause royalties are payable based on future commercial sales, as defined in the Amgen Agreement and there were no commercial sales as of the date of the financial statementsMarch 31, 2023.
For the three months ended March 31, 2022 and 2021, we recognized revenues from the Amgen Agreement in the total amounts of $38,000 and $157,000, respectively.15
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.
Research expenses are generally recognized as incurred. An intangible asset arising from the development of our product candidates is recognized if certain capitalization conditions are met. For the three months ended March 31, 2022 and 2021, we did not capitalize any development costs.
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 three months ended March 31, 20222023 and 2021,2022, our research and development expenses were $1.7$0.9 million and $1.1$1.7 million, respectively. Research and development expenses for both the three months ended March 31, 20222023 and 20212022 were primarily for the development of EB613. 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),Income, Net
Financial expenses (income),income, net is composed primarily of exchange rate differences of certain currencies against our functional currency.
Taxes on Income
We have not generated taxable income since our inception, and, as of March 31, 2022,2023, we had carry-forward tax losses of $58.9$69.2 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.
As of March 31, 2022, ourThe Company’s subsidiary, Entera Bio, Inc., is taxed separately under U.S. tax laws. As of March 31, 2023, Entera Bio Inc. had no carry forward tax losses.
loss carry-forwards of $26 thousand.
Results of Operations
Comparison of Three Months Ended March 31, 20222023 and 20212022
| | Three Months Ended
March 31, | | | Increase (Decrease) | | | Three Months Ended
March 31, | | | Increase (Decrease) | |
| | 2022 | | | 2021 | | | $ | | | % | | | 2023 | | | 2022 | | | $ | | | | % | |
| | (In thousands, except for percentage information) | | | (In thousands, except for percentage information) | |
Revenues | | $ | 68 | | | $ | 157 | | | $ | (89 | ) | | | (57 | )% | | $ | - | | | $ | 68 | | | $ | (68 | ) | | (100 | )% |
Cost of revenues | | $ | 54 | | | $ | 73 | | | (19 | ) | | (26 | )% | | $ | - | | | $ | 54 | | | (54 | ) | | (100 | )% |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Research and development expenses | | $ | 1,690 | | | $ | 1,124 | | | $ | 566 | | | 50 | % | | $ | 931 | | | $ | 1,690 | | | $ | (759 | ) | | (45 | )% |
General and administrative expenses | | $ | 2,171 | | | $ | 1,309 | | | $ | 862 | | | | 66 | % | | $ | 1,294 | | | $ | 2,171 | | | $ | (877 | ) | | (40 | )% |
Other income | | $ | (12 | ) | | $ | (10 | ) | | $ | (2 | ) | | 20 | % | | $ | (13 | ) | | $ | (12 | ) | | $ | (1 | ) | | (8 | )% |
Operating loss | | $ | 3,835 | | | $ | 2,339 | | | $ | 1,496 | | | 64 | % | | $ | 2,212 | | | $ | 3,835 | | | $ | (1,623 | ) | | (42 | )% |
Financial income, net | | $ | (44 | ) | | $ | (29 | ) | | $ | (15 | ) | | 52 | % | | $ | (22 | ) | | $ | (44 | ) | | $ | 22 | | | (50 | )% |
Income tax benefit | | $ | (7 | ) | | $ | (14 | ) | | $ | 7 | | | | (50 | )% | | $ | - | | | $ | (7 | ) | | $ | 7 | | | (10 | )% |
Net loss | | $ | 3,784 | | | $ | 2,296 | | | $ | 1,488 | | | | 65 | % | | $ | 2,190 | | | $ | 3,784 | | | $ | (1,594 | ) | | (42 | )% |
Revenue
Revenues for the three months ended March 31, 2022 and 2021of $68,000 were $68,000 and $157,000, respectively. For both the three months ended March 31, 2022 and 2021, the majority of our revenues weremainly attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement and other Material Transfer Agreements, or MTA agreements.Agreement. We did not recognize any revenue for the three months ended March 31, 2023 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 three months ended March 31, 2022 of $54,000 were mainly attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement. The decrease in cost was $54,000 compareddue to $73,000the lack of revenues under the Amgen Agreement, as described above, for the three months ended March 31, 2021 and were primarily attributed to salaries and related expenses in connection with the R&D services provided to Amgen and other MTA agreements.2023.
Research and Development Expenses
Research and development expenses for three months ended March 31, 20222023 were $1.7$0.9 million, as compared to $1.1$1.7 million for the three months ended March 31, 2021.2022. The increasedecrease of $0.6$0.8 million was primarily due to an increasea decrease of $0.5$0.6 million in continued materials and production costs and pre-clinical activity as part of the preparation for our Phase 3 clinical trial for EB613others consultants and an increase of $0.3 million in employees compensation, including share-based compensation. The increase was partially offset by a decrease of $0.2 million in other clinical trial expenses related to our Phase 2 trial for EB613 that was completed in June 2021.employee compensation including share-based compensation.
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 20222023 were $2.2$1.3 million, as compared to $1.3$2.2 million for the three months ended March 31, 2021.2022. The increasedecrease of $0.9 million was mainly attributable to an increasea decrease of $0.6 million in employee compensation, including share-based compensation, granted to non-executive directors, an increasea decrease of $0.2 million in professional fees and an increasea decrease of $0.1 million in D&O insurance costs.
Financial Income, Net
Financial income, net for the three months ended March 31, 2023 and 2022 was $22,000 and 2021 was $44,000, and $29,000, respectively. Our financial income is composed mainly 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. For the three months ended March 31, 20222023 and 2021,2022, our operating losses were $3.8$2.2 million and $2.3 million.$3.8 million, respectively. As of March 31, 2022,2023, we had an accumulated deficit of $86.2$97.7 million. 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 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. If we are unable to raise the requisite funds, we will need to curtail or cease operations. See in “Item 1A-Risk Factors” in our 20212022 Annual Report.
Since our inception, we have raised a total of $84.7 million, including $25.3 million through our Prior ATM Program and our ATM Programs (each as defined below), of which $21.8 million was raised in 2021,completed or terminated 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, throughas of March 31, 2022,2023, we had have received approximately $1.4$1.7 million under the Amgen Agreement.
As of March 31, 2022,2023, we had cash and cash equivalents of $20.1 $10.7 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,On September 2, 2022, we entered into an equity distribution agreementa Sales Agreement with Canaccord GenuitySVB Securities 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 price of up to $13.9 million (the “Prior ATM Program”). The sales agent was entitled to a fixed commission of 3% of the aggregate gross proceeds as well as and reimbursement of expenses.
On July 13, 2020, we filed with the SEC a shelf registration statement on a Form F-3 for the registration of our Ordinary Shares that we may from time to time offer and sell in one or more offerings, with an aggregate offering price of up to $100 million. In addition, certain Ordinary Shares under such Form F-3 were offered, issued and sold pursuant to Prior ATM Program and the ATM Program (as defined below). However, following our transition from foreign private issuer to domestic issuer status beginning January 1, 2022 and the filing of our 2021 Annual Report, we are no longer be able to make use of such shelf registration statement on Form F-3 and will need to file a new registration statement on a form applicable to domestic issuers, such as Form S-3, should we wish to engage in further public offerings of our Ordinary Shares, including further sales pursuant to the ATM Program.
The Prior 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, may had been able to offer and sell up to 5,000,000 Ordinary Shares (the “ATM“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. For the year ended DecemberAs of March 31, 2021,2023, we had not sold an aggregate of 2,546,265 Ordinary Sharesany shares under the PriorSVB ATM Program and 1,764,860 Ordinary Shares under the ATM Program, the aggregate proceeds of which amounted to $21.8 million, net of issuance costs. As noted above, unless and until we file a new registration statement with the SEC with respect to the ATM Program, and the SEC declares such registration statement effective, we may not effect any further sales under the ATM Program. We can provide no assurance that any such new registration statement will be filed or become effective.
Funding Requirements
We believe that our existing capital resources not including potential milestone payments, will be sufficient to meet our projected operating requirements into the fourththird quarter of 2022.2024, which includes 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®. Our ability to commence such studies will depend on finalizing discussions with the FDA and will require 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 maybe the different from the actual results ,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 |
| | • | the impact of COVID-19 on our clinical trials, regulatory timelines, business operations and financial stability; and
|
| • | our ability to establish collaborations on favorable terms, if at all. |
We are in the process of evaluating various financing alternatives in the public or private equity markets, and 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.
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 unaudited condensed consolidated financial statements as of and for the three months ended March 31, 20222023 included elsewhere in this Quarterly Report note that there is substantial doubt about our ability to continue as a going concern as of such date. This means that our management has expressed substantial doubt about our ability to continue our operations without an additional infusion of capital from external sources. The unaudited condensed 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
Three Months Ended March 31, 20222023 compared to Three Months Ended March 31, 20212022
The following table sets forth the primary sources and uses of cash for each of the periods set forth below:
| | Three Months Ended March 31,
(unaudited) | | |
Three Months Ended March 31,
(unaudited)
| |
| | 2022 | | | 2021 | | | 2023 | | | 2022 | |
| | (in thousands) | | | (in thousands) | |
Net Cash used in operating activities | | $ | (4,792 | ) | | $ | (2,321 | ) | | $ | (1,609 | ) | | $ | (4,792 | ) |
Net Cash used in investing activities | | (23 | ) | | - | | | | (11 | ) | | | (23 | ) |
Net Cash provided by financing activities | | | - | | | | 10,109 | | | | - | | | | - | |
Net (decrease) increase in cash and cash equivalents | | $ | (4,815 | ) | | $ | 7,788 | | |
Net decrease in cash and cash equivalents | | | $ | (1,620 | ) | | $ | (4,815 | ) |
Net Cash Used in Operating Activities
Net cash used in operating activities for the three months ended March 31, 2023 was $1.6 million, consisting primarily of our operating loss of $2.2 million and a decrease of $0.1 million in our working capital, which was partially offset by approximately $0.5 million of share-based compensation and depreciation expenses.
Net cash used in operating activities for the three months ended March 31, 2022 was $4.8 million, consisting primarily of our operating loss of $3.8 million and an increase of $2.0 million in our working capital, which was partially offset by approximately $1.0 million of share-based compensation and depreciation expenses.
Net cash used in operating activities for the three months ended March 31, 2021 was $2.3 million consisting primarily of our operating loss of $2.3 million and an increase of $0.3 million in working capital which were offset by $0.3 million of share-based compensation expense.
The increasedecrease of $2.5$3.2 million in cash used in operating activities for the three months ended March 31, 20222023 compared to the same period in 20212022 was mainly attributed to an increasea decrease of $1.5$1.6 million in our operating loss, a decrease of $1.6$2.1 in working capital mainly due to a decrease in payments to suppliers and services providers, which were partially offset by an increasea decrease of $0.6$0.5 million in share-based compensation.
Net Cash Used in Investing Activities
Net cash used in investing activities for the three months ended March 31, 2023 and 2022 consisted primarily of the purchase of property and equipment.
Net Cash Provided by Financing Activities
For the three months ended March 31, 2021, no cash was used in or provided by investing activities.
Net Cash Provided by Financing Activities
For the three months ended March 31,2023 and 2022, no cash was used in or provided by financing activities.
Net cash provided by financing activities for the three months ended March 31, 2021 consisted primarily of the net proceeds of $9.9 million from the issuance of Ordinary Shares under our ATM Program, and exercises of options and warrants.
Contractual Obligations
Contractual Obligations
There have not been any material changes in our assessment of material contractual obligations and commitments as set forth in Item 7 “Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20212022 Annual Report.
Critical Accounting Policies and Estimates