ITEM 2. MANAGEMENT’SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provideprovides 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, andPart II, Item 1A-Risk Factors in this Quarterly Report, and Item 1A-Risk Factors 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 operations, 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 Item 1A-Risk Factors 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
Entera is a clinical stage biopharmaceutical company and a leader in the development of orally delivered macromolecule therapeutics, including peptides and other therapeutic proteins. We apply our platform for use in areas with significant unmet medical need,Currently, most protein therapies are administered via frequent intravenous, subcutaneous, or intramuscular injections. In chronic diseases where adoption of injectable therapies is limited due to cost, conveniencepatients require persistent management, these cumbersome, often painful 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.
Oralhigh-priced injections can create a major treatment gap. Furthermore, from a technical standpoint, oral delivery of most therapeutic proteins ishas historically been challenging due to enzymatic degradation within the gastrointestinal tract, poor absorption into the blood stream enzymatic degradation within the gastrointestinal tract, and variable drug exposure.exposures. Entera’s proprietary oral drug delivery technology is designed to address these technical challenges usingdeliver orally administered proteins with sufficient bioavailability to meet treatment goals, in a synthetic absorption enhancer and protease inhibitors to prevent enzymatic degradation and support delivery to targeted tissues. Our platform has been tested pre-clinically and/or clinically on several molecules of broad characteristics and size. The Company’s most advanced product candidates, EB613 for the treatment of osteoporosis and EB612 for the treatment of hypoparathyroidism, aresimple tablet format (around 6mm in clinical development. The Company completed a phase 2 dose ranging study for EB613 in 2021. A Type C meeting with the FDA in relation to Entera’s proposed Phase 3 registrational study is expected in the second half of 2022. Additionally, the Company aims to license its oral delivery technology to biopharmaceutical companies for use with their proprietary compounds. Entera established such a collaboration with Amgen Inc., referred to as Amgen, in December 2018, for the use of Entera’s oral delivery platform in the field of inflammatory diseases.diameter).
Parathyroid hormone (PTH) is an 84-amino acid hormone andWe strategically focus on underserved, chronic medical conditions where oral administration of a mini tablet peptide or peptide replacement therapy has the primary regulator of calcium and phosphate metabolism in bone andpotential to significantly shift a treatment paradigm.
We currently have two product candidates in the kidney. Our lead productclinical stage of development: EB613 and EB612. Both candidates are EB613 for the treatmentfirst-in-class daily mini tablets of osteoporosis and EB612 for the treatment of hypoparathyroidism. Both EB613 and EB612 are first in class oral formulations of synthetic human PTHparathyroid hormone (hPTH (1-34), (teriparatide), a peptide consisting of the first 34 amino acids ofteriparatide). To date, Entera’s proprietary PTH which represent the functional region of the hormone. In total, more than 260 subjects have participated in Entera’s clinical trials to date. Entera’s oral PTH (1-34) formulationstablets have been safely administered collectively to a total of 22572 healthy subjects in two Phase 1 studies and three phase153 patients across Phase 2 studies (including 35 in osteoporosis and hypoparathyroidism, two phasediseases 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 targeting GLP-2, kappa opioid receptors and hGH, among other peptides. On May 2, hypoparathyroidism studies). Subjects2023, the results from our oral GLP-2 program were published in the phase 2 osteoporosis study received EB613 dailyInternational Journal of Peptide Research and Therapeutics, “Oral Delivery Technology Enabling Gastro-Mucosal Absorption of Glucagon-Like-Peptide-2 Analog (Teduglutide) - A Novel Approach for upInjection-Free Treatment of Short Bowel Syndrome.” We believe GLP-2 represents a strong candidate for our oral delivery platform and warrants further development as an injection -free alternative to six months.patients suffering from short bowel syndrome and other disorders requiring parenteral nutrition.
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. 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 tissuetissue; and (ii) bone formation, where cells called osteoblasts are responsible for bone matrix synthesis and subsequent mineralization of the bone.
Current osteoporosis pharmacologic treatment is segmented into anti-resorptive agents that suppress osteoclast-mediated In healthy individuals, bone resorption is matched by new bone formation. Osteoporosis develops as the balance between bone resorption by osteoclasts and anabolic agents that promote new bone formation by activating osteoblasts. Current anti-resorptive standards of care treatments include bisphosphonates, a rank-ligand inhibitor (such as Amgen’s denosumab, Prolia®), SERMS, estrogen/HRTosteoblasts is not maintained, and calcitonin. Current anabolic standard of care treatments include PTH receptor agonists (such as Forteo®not enough bone tissue is formed, leading to frail and Tymlos®) and Evenity®, Amgen’s anti-sclerostin monoclonal antibody. In contrast to the anti-resorptive drugs available, there are currently no oral anabolic treatments for osteoporosis.fracture-prone bones.
Forteo®Osteoporosis is a significant health issue facing our aging population. In the United States, with respect to hip fractures alone, 21% of women who suffer a hip fracture do not survive beyond one year, even after it is surgically repaired. Without surgery, the one-year mortality rate is approximately 70%. Post-menopausal osteoporosis afflicts more women globally than cancer and cardiovascular disease .
Current 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), a once-dailyoral 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 injectable form of PTH (1-34), (teriparatide), marketed by Eli Lillyinjections: teriparatide (hPTH[1-34]); abaloparatide (a PTH-related protein analog); and Company (“Eli Lilly”), is considered one of the most effective treatments in osteoporosis therapy due to its ability to buildromosozumab (an antibody that inhibits sclerostin and also inhibits bone (anabolic mechanism of action)resorption). Forteo® had peak sales surpassing $1.7 billion globally in 2017, prior to patent expiry. Entera’s EB613 has the same amino acid sequence as Forteo.® In February 2022, we engaged a third-party firm to conduct primary market research with endocrinologist and general practice clinicians who treat osteoporosis patients. According to these surveys, itIt is estimated that less than 10% of currently treated osteoporosis patients use currentagree to injectable osteoanabolic treatment despite guideline recommendations and the approval of generics. There are currently no FDA-approved oral anabolic drugs (including PTH receptor activators currently available). Despite the validated mechanism of action of these treatments patients are deterred by their high cost and injectable mode of administration. Furthermore, healthcare providers indicated that they would support the use of an oral PTH anabolic therapy earlier in the treatment paradigm due to its validated PTH receptor-activating bone formation mechanism of action and patients’ preference for an oral route of administration. Because our PTH product candidate,osteoporosis. EB613 is delivered in a patient-friendly, oralpositioned to potentially be the first, once daily osteoanabolic mini tablet formulation, we believe it will lead to significantly higher patienttreatment for women with high risk post-menopausal osteoporosis and physician acceptance compared to the injectable PTH standard treatments, thus addressing this significant unmet clinical need.no prior fractures.
To date, we have completed two Phase 1 clinical trials and a six-monthphase 2, 6-month, 161-patient, placebo-controlled Phase 2 double-blind, dose-ranging trial of EB613 in patients with osteoporosis in Israel. The dose ranging Phase 2 study in postmenopausal women with low bone mass met its primary and key secondary endpoints and was presentedwhich daily oral EB613 tablets produced rapid dose-proportional increases in a late-breaker oral presentation at the 2021 ASBMR Annual Meeting. For the primary efficacy endpoint: a statistically significant increase in P1NP (abiochemical markers of bone formation marker) at 3 months was achieved. A significant dose response was observed for 0.5, 1.0, 1.5(primary endpoint), reductions in markers of bone resorption, and 2.5 mg oral PTH doses on P1NP, Osteocalcin and bone mineral density (“BMD”). Subjects receiving the 2.5 mg dose of EB613 showed significant dose-related increases in BMD at theincreased lumbar spine, total hip, and femoral neck Bone Mineral Density (BMD, key secondary endpoint) in postmenopausal women with low BMD or osteoporosis. Results were reported at 6 months. Subjects receiving the 2.5 mg dose of EB613 daily for 6 months hadASBMR 2021 as a significant placebo adjusted increase of 3.78% in lumbar spine BMD (p<0.008) which is similar to the 3.9% increase in lumbar spine BMD seen with Forteo® at 6 months in clinical studies reported in published literature. Increases in total hip and femoral neck BMD were greater than those previously reported with Forteo.® EB613 exhibited was well tolerated, with no drug related serious adverse events. The most common adverse events included mild nausea, moderate back pain, moderate headache, and moderate upper abdominal pain.LB oral presentation.
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 reviewedapproved our October 2020 IND Application and informed us that we may proceed with our U.S. clinical pharmacology study. Application.
In December 2021, we held an end-of-Phase 2 meeting (EOP2) with the FDA to review the six-month phase 2 results and oura proposed Head-to-Head, Non-Inferiority (NI) Phase 3 study protocol, our nonclinical and clinical development plan and the use ofdesign vs. Forteo® , using BMD rather than fracture incidence, as the primary endpoint to support an NDA submission under the 505(b)2 pathway. In the minutes from our EOP2 meeting, which we received in January 2022, the FDA agreed that the use of BMD as a New Drug Application (“NDA”).primary endpoint in our proposed phase 3 study could support an NDA and that a new fracture study would not be required. However, the FDA expressed concern that a NI Head-to-Head phase 3 study design vs. Forteo® may not be favorable. The FDA also remarked that the ASBMR-FNIH SABRE1 program was evaluating BMD as a surrogate endpoint for fracture risk reduction across placebo-controlled studies; and that the FNIH framework could provide another approach to support a potential NDA for EB613.
FollowingIn early 2022, we redesigned our End of Phase 2 Meeting with the FDA, Entera redesigned the pivotal phase 3 study for EB613 basedas a placebo-controlled study with a total hip (TH) BMD primary endpoint, following the FDA’s EOP2 remarks and emerging data from the ASBMR-FNIH SABRE program. In August 2022, we held a Type C meeting with the FDA, and in October 2022, we announced the FDA’s concurrence on the FDA’s suggestion to explore a placebo-controlled trial. The study proposed is an 18-month randomized, double-blind, multicenter study comparing the effects of oral PTH (1-34), (teriparatide), EB613 compared to placebo in post-menopausal women with osteoporosis at high risk of fracture, followed by a six-month open-label extension where all patients will be transitioned to alendronate, a standard of care anti-resorptive therapy. Patients will be randomized in a 2:1 ratio to receive blinded treatments with either EB613 (N=400) 2.5 mg dose of oral PTH or Placebo (N=200). The six-month extension phasemajor design elements of the protocol; and that (1) a single Phase 3 placebo-controlledstudy is intended to provide informationwith a TH BMD primary endpoint along with (2) a comparative PK study vs. Forteo® could support a NDA submission of EB613 under the 505(b)(2) regulatory pathway.
In February 2023, we submitted a revised phase 3 protocol for EB613 as part of a Type D meeting with the FDA with further detail on the transition from EB613statistical evaluation of our TH BMD endpoint. On April 3, 2023, we reported that the FDA would not be opposed to a standard anti-resorptive therapy which has been shownEntera initiating the Phase 3 study under the proposed FNIH BQP pathway and that the Company’s proposed PK sampling scheme seemed reasonable. Also on April 3, 2023, we announced that we plan to maintain or augmentcontinue our dialogue with the increases in BMD following injectable PTH therapies, to preserve blindingFDA and await the final qualification of the prior therapyFNIH-BQP criteria and to ensure that patients randomized totheir guidance on the placebo arm also receive an osteoporosis treatment.
The primarystatistical evaluation of our BMD endpoint of thebefore initiating a phase 3 study for EB613.
1 FNIH BQP is the percent change in total hip BMD over 18 months of daily oral EB613 treatment as compared to the placebo. Change in total hip BMD is incorporatedalso known as the primary endpoint, in line with the FoundationASBMR FNIH-SABRE, American Society for Bone and Mineral Research-Foundation for the National Institutes of Health - American Society for Bone and Mineral Research Study(FNIH) Strategy to Advance Bone Mineral DensityBMD as a Regulatory Endpoint (FNIH-ASBMR SABRE). The FNIH-ASBMR SABRE submitted a Qualification Plan for percentage change in total hip bone BMD as a surrogate endpoint for fracture. This plan has been accepted by FDA’s Biomarker Qualification Program, with a request for submission of a Full Qualification Package. According to the FNIH’s June 1, 2022 press release, the FNIH-ASBMR SABRE plans to submit the Full Qualification Package, for final approval by the FDA, by the end of the year. The FNIH-ASBMR SABRE project investigators published meta-regression analyses based on patient-level BMD and fracture incidence data from 23 placebo-controlled fracture-endpoint studies across many classes of osteoporosis drugs, including subcutaneous teriparatide injection.(SABRE);
The FNIH-ASBMR SABRE project evaluations indicate that changes in total hip BMD (in comparison to lumbar spine or femoral neck BMD) is the best surrogate marker of an osteoporosis drug’s effects on vertebral, nonvertebral, all site and hip fracture risk. The FNIH-ASBMR SABRE proposal is that changes in total hip BMD that equal or exceed Surrogate Threshold Effects (STEs) indicate fracture risk reduction. In the planned oral PTH EB613 phase 3 study, statistical methods will compare the observed treatment effect of EB613 versus placebo, compared to the FNIH-ASBMR SABRE defined STEs associated with vertebral fracture, all site fracture and nonvertebral fracture risk reduction. The study will also look at secondary endpoints including changes in lumbar spine and femoral neck BMD and EB613’s effects on biochemical markers of bone formation and resorption.14
In the first half of 2022, Entera submitted to the FDA a Type C meeting request, briefing documents and its proposed Phase 3 design for a registrational study of EB613 based on this design. A Type C meeting with the FDA in relation to Entera’s proposed Phase 3 registrational study is expected in the second half of 2022.
Hypoparathyroidism
Hypoparathyroidism is a rare condition in which the body either fails to produce sufficient amounts of endogenous PTH or the PTH produced lacks normal biologic activity. Historically, the treatments for hypoparathyroidism have beenIndividuals with a deficiency of PTH 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 supplements, calcitriol or “active vitamin D” analogs and occasionally phosphate binders, the chronic use ofdeposition, which may result in serious side effectslead to severe issues, including damage to the circulatory and significant costs to patients and healthcarecentral nervous systems.
Natpara® (injectable PTH 1-84) for the treatment The most common cause of hypoparathyroidism was approved inis damage to, or removal of, the United States in 2015 and at least temporarily withdrawn from the U.S. market in September 2019parathyroid glands due to FDA’s concern about the potentialsurgery for rubber particulate formation in Natpara®. This concern is specific to their device and not part of EB612 given we are proposing a tablet form of PTH.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 may be administered in customized doses several times a day.the European Medicines Agency have granted EB612 orphan drug designation for the treatment of hypoparathyroidism. We believe that EB612 hasmay have inherent advantages compared to experimental daily injectable treatments, including convenience of administration, storage, and the potential to becomefor a standard of care, if approved, for hypoparathyroidism because of its oral administration, which is preferred by most patients based on clinician and third-party commercial research to date.
flexible titration schedule. In 2015, we successfully completed a Phase 2a trial for EB612. Although thisEB612, which was an open-label, multicenter pilot four-month Phase 2a trial involvedstudy, evaluating the safety, tolerability and PK of EB612 in 19 patients who had been diagnosed with hypoparathyroidism for at least a smaller numberyear and were taking ≥1gr/day of patients, was conductedcalcium and alfa-calcidol 25(OH)D 20ng/ml supplementation. Patients received PTH (1-34) 0.75 mg/dose tablets qid for 4 months (NCT02152228). The study achieved its primary and secondary endpoints, including a shorter duration and did not include an initial dose optimizationsignificant reduction in comparison to the designcalcium supplementation (42% reduction from baseline, (p=0.001), a decline of the pivotal trial used for regulatory approval of Natpara® (the REPLACE trial), our trial showed the potential for similar clinical benefit of EB612. EB612 induced a rapid decline23% (p=0.0003) in median serum phosphate levels two hours following the first dose that was maintained for the duration of the study, improvement in quality of life score and maintenance of targetmedian calcium levels above the lower target level for hypoparathyroidism patients (>7.5 mg/dL) throughout the study, even as patientsstudy. There were able to meaningfully reduce their calciumno treatment emergent adverse events of hypercalcemia reported and active vitamin D supplementation which is key to reducing common comorbidities of this disease.no treatment-emergent serious adverse events.
In the third quarter of 2019, we reported the results of 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 stream 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, urine calcium and serum phosphate levels. No serious adverse events were reported. The pilot 4-month Phase 2 results for EB612 were presented at ASBMR 2015 and published in a peer-reviewed journal, JBMR, in 2021. The Phase 2 PK-PD study versus Natpara® was presented at ASBMR 2019.
We have since developed what we believe could be an improved formulation of EB612 based on new intellectual property, optimization oftailored to optimize its PK profile and the potential for reduced daily dosingdosing. We initiated a PK study in May 2023, which is testing various potential drug candidates based on our new platform, including several which could be developed for the treatment of hypoparathyroidism. We expect to carry out a PKbegin reporting our results from this study forduring the new formulation of EB612 in the firstsecond half of 2023. We anticipate that the outcome of the PK study will help determine the design of a pivotal Phase 2b or Phase 3 trial 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. If successful, the phase 2b/3 clinical trial of EB612 in hypoparathyroidism may potentially support a submission for regulatory approval of EB612. Entera has received U.S. and European Union (“EU”) orphan drug designation for 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 additional approved and novel peptide and therapeutic proteins. 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 produce non-dilutive funding and diversify our revenue stream.
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. In addition, we are currently evaluating the potential for a strategic transaction involving EB613’s phase 3 clinical development and commercialization. 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 June 30, 2022 and 2021, our operating losses were $3.2 million and $2.6 million, respectively. In addition, for the six months ended June 30, 2022 and 2021, our operating losses were $7.1 and $4.9 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future. As of June 30, 2022, we had an accumulated deficit of $89.4 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 June 30, 2022, we had cash and cash equivalents of $17.3 million. We believe that our existing cash resources, not including potential milestone payments, will be sufficient to meet our projected operating requirements through the second quarter of 2023.
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 June 30, 2022, we had 22 full-time employees and four 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. 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.
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 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.
The Israeli Innovation Authority Grants
We have received grants of approximately $0.5 million from the Israeli Innovation AutorityAuthority (“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, referred to asor 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.
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The amount that must be repaidrate of royalties may be increased upaccelerated and the royalty liability may increase (up to sixthree times the amount of the grant received,amount and the rate of royalties may be accelerated,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.-basedglobal 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 June 30, 2022,2023, we had paid royalties to the IIA in the amount of $79,000$95 thousand related to theour former research collaboration and license agreement with Amgen Agreement.(the “Amgen Agreement”) and other master service agreements.
In addition to paying any royalties due, we must abide by other restrictions associated with receiving IIAsuch grants under the Research Law that continue to apply following repayment to the IIA.
Financial Overview
Since our inception, we have raised a total of $84.7 million from a combination of public and private equity offerings, IIA grants and the exercise of options and warrants. Since inception, we have incurred significant losses. For the three months ended June 30, 2023 and 2022, our operating losses were $2.3 million and $3.3 million, respectively. For the six months ended June 30, 2023 and 2022, our operating losses were $4.5 million and $7.1 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future.
As of June 30, 2023, we had an accumulated deficit of $100.0 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 any third-party 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 the initiation of certain programs and otherwise curtail or cease operations. See “Item 1A-Risk Factors-Risks Related to Our Financial OverviewPosition and Need for Additional Capital” contained in our 2022 Annual Report.
As of June 30, 2023, we had cash and cash equivalents of $9.1 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 our new generation platform and new formulations for 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 June 30 2023, we had 19 full-time employees, two part-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 June 30, 2022,March 31, 2023, we had receivedrecognized an aggregate amount of $968,000 from Amgen for research and development services. In addition, we have several Material Transfer Agreements, or MTA agreements, under which we generate revenue.
We recognize revenues, including revenues under the Amgen Agreement, according to$1.7 million in accordance with 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 As previously reported, we 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 underAmgen mutually terminated 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 because royalties are payable based on future commercial sales, as defined in the Amgen Agreement, and there have been no commercial sales.
For the three months ended June 30, 2022 and 2021, we recognized revenues from the Amgen Agreement and other MTA agreements in the total amounts of $44 thousand and $109 thousand, respectively. In addition, we recognized $112 thousand and $266 thousand under these agreements for the six months ended June 30, 2022 and 2021, respectively.May 2023.
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 and six months ended June 30, 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 June 30, 20222023 and 2021,2022, our research and development expenses were $1.4$1.2 million and $1.2$1.4 million, respectively. For the six months ended June 30, 20222023 and 2021,2022, our research and development expenses were $3.1$2.1 million and $2.4$3.1 million, respectively. Research and development expenses for both the three and six months ended June 30, 20222023 and 20212022 were primarily for the development of EB613.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 principallyprimarily of salaries, and related benefits, share-based compensation and related costs for employeesdirectors and directorspersonnel 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 counselingcosts associated with maintaining and prosecuting our intellectual property portfolio 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 (Income) Loss,Income, Net
Financial (income), loss ,netincome, 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 June 30, 2022,2023, we had carry-forward tax losses of $61.5$71.3 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 forwardcarry-forward losses of the Company.
As of June 30, 2022, ourThe Company’s subsidiary, Entera Bio, Inc., is taxed separately under U.S. tax laws. As of June 30, 2023, Entera Bio Inc. had no carry forward tax losses.loss carry-forwards of $26 thousand.
Results of Operations
Comparison of Three Months Ended June 30, 20222023 and 20212022
| | Three Months Ended
June 30, | | | Increase (Decrease) | | | Three Months Ended
June 30, | | | Increase (Decrease) | |
| | 2022 | | | 2021 | | | $ | | | % | | | 2023 | | | 2022 | | | $ | | | | % | |
| | (In thousands, except for percentage information) | | | (In thousands, except for percentage information) | |
Revenues | | $ | 44 | | | $ | 109 | | | $ | (65 | ) | | | (60 | )% | | $ | - | | | $ | 44 | | | $ | (44 | ) | | | (100 | )% |
Cost of revenues | | $ | 33 | | | $ | 99 | | | $ | (66 | ) | | (67 | )% | | $ | - | | | $ | 33 | | | $ | (33 | ) | | (100 | )% |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Research and development expenses | | $ | 1,394 | | | $ | 1,227 | | | $ | 167 | | | 14 | % | | $ | 1,209 | | | $ | 1,394 | | | $ | (185 | ) | | (13 | )% |
General and administrative expenses | | $ | 1,880 | | | $ | 1,364 | | | $ | 516 | | | | 38 | % | | $ | 1,135 | | | $ | 1,880 | | | $ | (745 | ) | | | (40 | )% |
Other income | | $ | (14 | ) | | $ | (11 | ) | | $ | (3 | ) | | 27 | % | | $ | (14 | ) | | $ | (14 | ) | | $ | - | | | - | % |
Operating loss | | $ | 3,249 | | | $ | 2,570 | | | $ | 679 | | | 26 | % | | $ | 2,330 | | | $ | 3,249 | | | $ | (919 | ) | | (28 | )% |
Financial (income) loss, net | | $ | (60 | ) | | $ | 24 | | | $ | (84 | ) | | (350 | )% | |
Financial income, net | | | $ | (5 | ) | | $ | (60 | ) | | $ | 55 | | | (92 | )% |
Income tax benefit | | $ | (4 | ) | | $ | (17 | ) | | $ | 13 | | | | (76 | )% | | $ | - | | | $ | (4 | ) | | $ | 4 | | | | (100 | )% |
Net loss | | $ | 3,185 | | | $ | 2,577 | | | $ | 608 | | | | 24 | % | | $ | 2,325 | | | $ | 3,185 | | | $ | (860 | ) | | | (27 | )% |
Revenue
Revenues for the three months ended June 30, 2022 and 2021of $44,000 were $44,000 and $109,000, respectively. For both the three months ended June 30, 2022 and 2021, the majority of our revenues weremainly attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement. We did not recognize any revenue for the three months ended June 30, 2023 due to termination of the Amgen Agreement, and other MTA agreements.effective May 2, 2023, under which we provided no revenue-generating services for 2023. We did not generate any revenues prior to entering into the Amgen Agreement.
Cost of Revenues
Cost of revenues for the three months ended June 30, 2022 of $33,000 were mainly attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement. The decrease in cost was $33,000 compareddue to $99,000the lack of revenues under the Amgen Agreement, as described above, for the three months ended June 30, 2021 and was 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 the three months ended June 30, 20222023 were $1.4$1.2 million, as compared to $1.2$1.4 million for the three months ended June 30, 2021. The increase of2022. We reduced pre-clinical costs by $0.2 million, which was primarily due tooffset by an increase of $0.2 million in pre-clinical activity as partmaterials and production costs in preparation of the preparation for our Phase 3 clinical trial for EB613 and an increase ofEB613. There were no special one-time payments in the current period such as the $0.2 million in employee's compensation mainly relatedpayment made to a former employee pursuant to the terms of his separation agreement with the President of R&D, including share-based compensation, which was 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.agreement.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 20222023 were $1.9$1.1 million, as compared to $1.4$1.9 million for the three months ended June 30, 2021.2022. The increasedecrease of $0.5$0.8 million was mainly attributable to an increasea decrease of $0.2 million in employee compensation, including share-based compensation, granted to non-executive directors, an increasea decrease of $0.2$0.3 million in professional fees and an increaseother consultants and a decrease of $0.1$0.2 million in D&O insurance costs.
Financial (Income) Loss (Income),Income, Net
Financial (income) loss,income, net for the three months ended June 30, 2023 and 2022 was $5,000 and 2021 was $(60,000) and $24,000,$60,000, respectively. Our financial income is composed mainly of exchange rate differences of certain currencies against our functional currency, which is the U.S. Dollar.
Comparison of Six Months Ended June 30, 20222023 and 20212022
| | Six Months Ended
June 30, | | | Increase (Decrease) | | | Six Months Ended
June 30, | | | Increase (Decrease) | |
| | 2022 | | | 2021 | | | $ | | | | % | | | 2023 | | | 2022 | | | $ | | | | % | |
| | (In thousands, except for percentage information) | | | (In thousands, except for percentage information) | |
Revenues | | $ | 112 | | | $ | 266 | | | $ | (154 | ) | | | (58 | )% | | $ | - | | | $ | 112 | | | $ | (112 | ) | | | (100 | )% |
Cost of revenues | | $ | 87 | | | $ | 172 | | | $ | (85 | ) | | (49 | )% | | $ | - | | | $ | 87 | | | $ | (87 | ) | | (100 | )% |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Research and development expenses | | $ | 3,084 | | | $ | 2,351 | | | $ | 733 | | | 31 | % | | $ | 2,140 | | | $ | 3,084 | | | $ | (944 | ) | | (31 | )% |
General and administrative expenses | | $ | 4,052 | | | $ | 2,674 | | | $ | 1,378 | | | | 52 | % | | $ | 2,429 | | | $ | 4,052 | | | $ | (1,623 | ) | | | (40 | )% |
Other income | | $ | (27 | ) | | $ | (22 | ) | | $ | (5 | ) | | 23 | % | | $ | (27 | ) | | $ | (27 | ) | | $ | - | | | - | % |
Operating loss | | $ | 7,084 | | | $ | 4,909 | | | $ | 2,175 | | | | 44 | % | | $ | 4,542 | | | $ | 7,084 | | | $ | (2,542 | ) | | (36 | )% |
Financial income, net | | $ | (104 | ) | | $ | (5 | ) | | $ | (99 | ) | | 1,980 | % | | $ | (27 | ) | | $ | (104 | ) | | $ | 77 | | | (74 | )% |
Income tax benefit | | $ | (11 | ) | | $ | (31 | ) | | $ | 20 | | | | (65 | )% | | $ | - | | | $ | (11 | ) | | $ | 11 | | | | (100 | )% |
Net loss | | $ | 6,969 | | | $ | 4,873 | | | $ | 2,096 | | | | 43 | % | | $ | 4,515 | | | $ | 6,969 | | | $ | (2,454 | ) | | | (35 | )% |
Revenue
Revenues for the six months ended June 30, 2022 and 2021of $112,000 were $112,000 and $266,000, respectively. For both the six months ended June 30, 2022 and 2021, the majority of our revenues weremainly attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement. We did not recognize any revenue for the six months ended June 30, 2023 due to finalization of third year pre-clinical R&D services and termination of the Amgen Agreement, and other MTA agreements.effective May 2, 2023. We did not generate any revenues prior to entering into the Amgen Agreement.
Cost of Revenues
Cost of revenues for the six months ended June 30, 2022 of $87,000 were mainly attributable to pre-clinical R&D services provided to Amgen under the Amgen Agreement. The decrease in cost was $87,000 compareddue to $172,000the lack of revenues under the Amgen Agreement, as described above, for the six months ended June 30, 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 six months ended June 30, 20222023 were $3.1$2.1 million, as compared to $2.4$3.1 million for the six months ended June 30, 2021.2022. The increasedecrease of $0.7$1.0 million was primarily due to an increase of $0.7 million in materials, production costs and pre-clinical activity as part of the preparation for our Phase 3 clinical trial for EB613 and an increase of $0.4 million in employee's compensation mainly related to the separation agreement with our Former President of R&D, which was offset by a decrease of $0.4 million in other clinical trial expensespre-clinical activity, a decrease of $0.1 million in share-based compensation and a decrease of $0.5 million related to our Phase 2 trial for EB613 that was completed in June 2021.a one-time payment made to a former employee pursuant to the terms of his separation agreement.
General and Administrative Expenses
General and administrative expenses for the six months ended June 30, 20222023 were $4.1$2.4 million, as compared to $2.7$4.1 million for the six months ended June 30, 2021.2022. The increasedecrease of $1.4$1.7 million was mainly attributable to an increasea decrease of $0.8$0.3 million in employee compensation and $0.5 million in share-based compensation, granted to non-executive directors and employees, an increasea decrease of $0.4$0.6 million in legal, accountingprofessional fees and other consultant fees,consultants and an increasea decrease of $0.2$0.3 million in D&O insurance costs.
Financial Income, Net
Financial income, net for the six months ended June 30, 2023 and 2022 was $27,000 and 2021 was $104,000, and $5,000, 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 June 30, 20222023 and 2021,2022, our operating losses were $2.3 million and $3.2 million, and $2.6 million, respectively. In addition, forFor the six months ended June 30, 20222023 and 2021,2022, our operating losses were $4.5 million and $7.1 and $4.9 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future.respectively. As of June 30, 2022,2023, we had an accumulated deficit of $89.4$100.0 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 Program (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 June 30, 2022,2023, we had have received approximately $1.4$1.7 million under the Amgen Agreement.
Agreement, which has since been terminated. As of June 30, 2022,2023, we had cash and cash equivalents of $17.3$9.1 million. Our primary uses of cash have been to fund research and development, general and administrative expenses 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 may from time to time were able to offer and sell our Ordinary Shares, having an aggregate offering amount of up to $13.9 million (the “Prior ATM Program”). Offers and sales under the Prior ATM Program had been registered on a registration statement on From F-3 (the “Prior Registration Statement”). 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 December 31, 2021, we sold an aggregate of 2,546,265 Ordinary Shares under the Prior 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, in each case in offerings registered under the Prior Registration Statement.
Following our loss of foreign private issuer status on January 1, 2022, we were no longer able to effect offers and sales under our Prior Registration Statement; 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 ATM Program. On May 27,2022 we entered into Amended Restated At Market Issuance Sales Agreement with B. Riley Securities, Inc., as sales agent, as a replacement to our May 2021 agreement, which we, from time to time, may had been able to offer and sell up to 5,000,000 Ordinary Shares (the “Amended ATM Program”). The sales agent is entitled to a fixed commission of 3% of the aggregate gross proceeds as well as and reimbursement of expenses. We have not sold any additional shares under the ATM Program or Amended ATM Program during the six months ended June 30, 2022.
Funding Requirements
We believe that our existing capital resources not including potential milestone payments, will be sufficient to meet our projected operating requirements throughinto the secondthird quarter of 2023.2024, 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; |
| • | 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 and six months ended June 30, 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
Six Months Ended June 30, 20222023 compared to Six Months Ended June 30, 20212022
The following table sets forth the primary sources and uses of cash for each of the periods set forth below:
| | Six Months Ended June 30,
(unaudited) | | | Six Months Ended June 30,
(unaudited) | |
| | 2022 | | | 2021 | | | 2023 | | | 2022 | |
| | (in thousands) | | | (In thousands) | |
Net Cash used in operating activities | | $ | (7,619 | ) | | $ | (4,442 | ) | | $ | (3,168 | ) | | $ | (7,619 | ) |
Net Cash used in investing activities | | $ | (42 | ) | | - | | | (12) | | | (42) | |
Net Cash provided by financing activities | | $ | 13 | | | | 22,775 | | | 5 | | | 13 | |
Net (decrease) increase in cash and cash equivalents | | $ | (7,648 | ) | | $ | 18,333 | | |
Net decrease in cash and cash equivalents | | | $ | (3,175 | ) | | $ | (7,648 | ) |
Net Cash Used in Operating Activities
Net cash used in operating activities for the six months ended June 30, 2023 was $3.2 million, consisting primarily of our operating loss of $4.5 million, which was partially offset by an increase of $0.3 million in our working capital and $1.0 million of share-based compensation and depreciation expenses.
Net cash used in operating activities for the six months ended June 30, 2022 was $7.6 million, consisting primarily of our operating loss of $7.1 million and an increasea decrease of $2.2 million in our working capital, which was partially offset by approximately $1.7 million of share-based compensation and depreciation expenses.
Net cash used in operating activities for the six months ended June 30, 2021 wasThe decrease of $4.4 million consisting primarily of our operating loss of $4.9 million and an increase of $0.4 million in our working capital which were partially offset by $0.9 million of share-based compensation expense.
The increase of $3.2 million in cash used in operating activities for the six months ended June 30, 20222023 compared to the same period in 20212022 was mainly attributed to an increasea decrease of $2.2$2.6 million in our operating loss and an increase of $1.8$2.5 million in working capital, mainlyprimarily due to a decrease in payments to suppliers and services providers, which were partially offset by an increasea decrease of $0.8$0.7 million in share-based compensation.
Net Cash Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2023 and 2022 consisted primarily of the purchase of property and equipment.
For the six months ended June 30, 2021, no cash was used in or provided by investing activities.
Net Cash Provided by Financing Activities
Net cashCash provided by financing activities for the six months ended June 30, 2023 consisted of the net proceeds of $5 thousand from the issuance of Ordinary Shares under the SVB ATM Program.
Net Cash provided by financing activities for the six months ended June 30, 2022 consisted of the net proceeds of $13 thousand from the exercise by a former employee of options to purchase Ordinary Shares.
Net cash provided by financing activities for the six months ended June 30, 2021 consisted primarily of the net proceeds of $19.4 million from the issuance of Ordinary Shares under our ATM Program and $3.4 million fromdue to exercise of options and warrants..
Contractual Obligations
On April 17, 2023, we entered into an amendment to our lease for our principal offices in Israel to extend the lease term by five years, or through 2028. As amended, the Company has the option to exit the lease earlier, in December 2024 and in June 2026. The average rent over the new five-year extension is $180 thousand per year.
ThereOther than as disclosed above, there have not been any material changes in our assessment of material contractual obligations and commitments as set forth in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20212022 Annual Report.
Critical Accounting Policies and Estimates
See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” and our consolidated financial statements and related notes included in the 20212022 Annual Report for accounting policies and related estimates we believe are the most critical to understanding our consolidated financial statements, financial condition and results of operations and which require complex management judgment and assumptions, or involve uncertainties. 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. There have been no changes to our critical accounting policies or their application since the date of the 20212022 Annual Report.
Recently Issued Accounting Pronouncements
Certain recently issued accounting pronouncements are discussed in Note 2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
ITEM 3.3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and regulations promulgated thereunder) as of June 30, 2022,2023, which we refer to as the Evaluation Date. Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings.
There have been no material changes with respect to the risk factors disclosed in Part I, Item 1A. of our 20212022 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.During the quarter ended June 30, 2023, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement”, as defined in Item 408 of Regulation S-K.
Exhibit No. | | Description of Exhibits |
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101.INS | | XBRL Instance Document. |
101.SCH | | XBRL Taxonomy Extension Schema Document. |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Management contract or compensation plan or arrangement
** Pursuant to Item 601(a)(5) of Regulation S-K, schedules and similar attachments to this exhibit have been omitted because they do not contain information material to an investment or voting decision and such information is not otherwise disclosed in such exhibit. The Company will supplementally provide a copy of any omitted schedule or similar attachment to the U.S. Securities and Exchange Commission or its staff upon request.Furnished herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereuntohereunto duly authorized.
| | ENTERA BIO LTD. | |
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Date: August 11, 20222023 | /s/ Miranda J. Toledano | |
| | Miranda J. Toledano
Chief Executive Officer | |
| | (Principal Executive Officer) | |
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Date: August 11, 20222023 | /s/ Dana Yaacov-Garbeli | |
| | Dana Yaacov-Garbeli
Chief Financial Officer | |
| | (Principal Financial and Accounting Officer) | |