| (i) | the majority of the votes voted in favor includes at least a majority of all the votes of shareholders who are not controlling shareholders of the company and shareholders who do not have a personal interest in the compensation policy, present and voting on the matter(excluding abstentions); or | • | the total of opposing votes from among the shareholders who are not controllingnon-controlling shareholders of the company orand shareholders who do not have a personal interest in the compensation policy and participating in the vote; abstentions shall not be included in the total of the votes of the aforesaid shareholders; or |
| (ii) | the total of opposing votes from among the shareholders described in subsection (i) abovematter does not exceed 2% of all the voting rights in the company. company. |
Nonetheless, even if the shareholders of the company do not approve the compensation policy, the board of directors of a company may still approve the compensation policy, provided that the compensation committee and, thereafter, the board of directors resolved,determine, based on detailed, documented, reasons and after a second reviewfurther discussion of the compensation policy, that the approval of the compensation policy is forin the benefitbest interest of the company. In December 2013, aOur current Compensation Policy was approved at the annual general meeting of our shareholders approved the Executive Compensation Policy which had been recommended by our Compensation Committee and approved by our Board of Directors. The term of this initial policy was for three years from the date of its approval, or until December 2016. In July 2016, a general meeting of our shareholders approved an extension and revision of the initial policy, which has been renamed the Compensation Policy for Executives and Directors, or Compensation Policy. The Compensation Policy governs the terms of compensation for our directors and office holders,held in accordance with the requirements of the Companies Law.2022. Below is a summary discussion of the main provisions of theour Compensation Policy:
The Compensation Policy includes among(among other issues prescribed by the Companies Law,things) a framework for establishing the terms of office and employment of our office holders, a recoupment policy and guidelines with respect to the structure of the variable pay of our office holders. Compensation is considered performance-based to the extent that a direct link is maintained between compensation and performance and that rewards are consistent with long-term stakeholder value creation. At the company level, we analyze the overall compensation trends of the market in order to make informed decisions about our compensation approach. According to the Compensation Policy, the fixed components of our office holder compensation will be examined at least every two years and compared to the market. Our Boardboard of Directorsdirectors may change the amount of the fixed components for one or more of our office holdersexecutives after receiving a recommendation for such from our compensation committee.Compensation Committee, provided such change is within the limits determined by the Compensation Policy. The change may be made if our Boardboard of Directorsdirectors concludes that such a change would promote our goals, operating plans and objectives and after taking into account the business and legal implications of the proposed change and its impact on our internal labor relations. Any such changes are subject to formal approval by the relevant parties. Under Israeli law, our board of directors has the authority to approve a change in the incentive structure of all executive officers, including the chief executive officer, up to an immaterial amount. The fixed component of compensation remunerates the specific role covered and scope of responsibilities. It alsoresponsibilities and reflects the experience and skills required for each position, as well as the level of excellence demonstrated and the overall quality of the office holder’s contribution to our business. The weighting of fixed compensation within the overall package is designed to reduce the risk of excessively risk-oriented behavior, to discourage initiatives focused on short-term results which might jeopardize our mid and long-term business sustainability and value creation, and to allow us a flexible compensation approach. We offer our employees benefit plans based on common practice in the local labor market of the office holder. As for the variableVariable components of compensation the types and amounts of such components will beare determined with an aim at creating maximum matchingalignment between the Compensation Policy and our operating plan and objectives. Variable components of compensation will beare primarily based on measurable long-term criteria. Nevertheless, we are allowed to basecriteria, except that a non-material partportion of variable compensation may be based on qualitative non-measurable criteria which focus on the office holder’s contribution to the Company. Our variable compensation aims to remunerate for achievements by directly linking pay to performance outcomes in the short and long term. To strengthen the alignment of shareholder interests and the interests of management and employees, performance measurements reflect our actual results overall, as well as that of the individual office holder. To support the aforementioned principles, we provide two types of variable compensation: short-term - annual bonus;bonuses; and long-term - stock option plans.equity compensation.
Annual bonuses will beare based on achievement of the business goals set out in our annual operating plan approved by the board of directors at the beginning of each year. The operating plan encompasses all aspects of our activities and as such sets the business targets for each member of the management team. Consequently, our Compensation Committee and Boardboard of Directorsdirectors should be able to judge the suitability of a bonus payment by deliberating retrospectively at year end and comparing actual performance and target achievements against the forecasted operating plan. The annual bonus mechanism will be directly tied to meeting objectives - both our business objectives and the office holder’s personal objectives. The Boardboard of Directors’directors’ satisfaction with the officer’s performance will also affect the bonus amount. Annual bonus payments are subject to the limitations set out in the Compensation Policy and also subject to the discretion of our Compensation Committee and approval by the Boardboard of Directors.directors. In order to maintain some measure of flexibility, after calculating the compensation amount, the Boardboard of Directorsdirectors may exercise discretion about the final amount of the bonus.bonus but may not increase the recommended bonus amount by more than 25%. Equity-based compensation may be granted in any form permitted under our share incentive plan in effect from time to time and shall be made in accordance with the terms of such share incentive plan. Equity-based compensation to office holders shall be granted from time to time and be individually determined and awarded according to the performance, educational background, prior business experience, qualifications, role and the personal responsibilities of each officer. The vesting period will generally be four years, with the vesting schedule to be determined in accordance with market compensation trends. Our policy is to grant equity-based compensation with exercise prices at market value. Furthermore, in order to create a ceiling for the variable compensation: (1) the aggregate value of annual grants to any one office holder (based on the Black Scholes calculation onas of the date of grant) will be no more than the higher of 2% of our market capitalization at the end of the measurement period or $1.5 million; and (2) it is our intention that the maximum outstanding equity awards under its share incentive plan will not exceed 12% of our total fully-diluted share capital. Our Boardboard of Directorsdirectors may, following approval by our Compensation Committee, make provisions with respect to the acceleration of the vesting period of any office holder’s awards, including, without limitation, in connection with a corporate transaction involving a change of control. 85
control (subject to any other approvals required by applicable law). We have also established a defined ratio between the variable and the fixed components of compensation, as well as a maximum amount for all variable components as of the date on which they are paid (or as of the grant date for non-cash variable equity components), and subject to the limitations on variable compensation components which are set out in the Compensation Policy. In all events, the weight of all the variable components (out of the total compensation amount which is to be granted for any year) will not be greater than 80% for each office holder and may vary from one office holder to the other. According to the Companies Law, our Compensation Policy provides that in the event of an accounting restatement, we shall be entitled to recover from office holders’ bonus compensation granted, earned or vested based on a pre-accounting restatement of our financial results in the amount of the excess over what would have been paid under the accounting restatement, with a three-year look-back period. However, the compensation recovery will not be triggered in the event of a financial restatement required due to changes in applicable financial reporting standards. In addition, in November 2023 we have established guidelines under whichadopted an office holder will refund to us partExecutive Officer Clawback Policy in accordance with the rules of the compensation received, if it was paid based on information that was retroactively restated in our financial reports. Office holders shall be required to make restitution for any payments made based on our operating performance, if such payments were based on false or restated financial statements prepared at any time during the three years preceding discovery of the error.SEC and Nasdaq. All compensation arrangements of office holders are to be approved in the manner prescribed by applicable law. Our Compensation Committee will review the Compensation Policy on an annual basis, and monitor its implementation, and recommend to our Boardboard of Directorsdirectors and shareholders to amend the Compensation Policy as it deems necessary from time to time. The term of the Compensation Policy is three years from the date of its adoption, or July 5, 2019. Following such three-year term, the Compensation Policy, including any revisions recommended by our Compensation Committee and approved by our Board of Directors, as applicable, will be brought once again to the shareholders for approval. Nominating Committee
Our Board of Directors does not currently have a nominating committee, having availed BioLineRx of the exemption available to foreign private issuers under the Marketplace Rules of the Nasdaq Stock Market. See “Item 16G. Corporate Governance.”
Investment Monitoring Committee Our Boardboard of Directorsdirectors has established an Investment Monitoring Committee which currently consists of the following fourthree members: Directors Dr. Michael Anghel (Chairperson) and Ms. Nurit Benjamini;Mr. Rami Dar; a director, Ms. Mali Zeevi, our Chief Financial Officer; and Mr. Raziel Fried, our BudgetTreasurer and Budgetary Control Manager and Treasurer.Director. The functionrole of the Investment Monitoring Committee includes providing recommendations to our Boardboard of Directorsdirectors regarding investment guidelines and performing an on-going review of the fulfillment of established investment guidelines. The Investment Monitoring Committee convenes for a meetingmeetings in accordance with our needs, but in any event at least twice per year. The Investment Monitoring Committee reports to our Board of Directors on a semi-annual basis. Internal Auditor Under the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee and nominated by the board of directors. An internal auditor may not be: a person (or a relative of a person) who holds more than 5% of the company’s shares; a person (or a relative of a person) who has the power to appoint a director or the general manager of the company; an executive officer or director of the company;company (or a relative thereof); or a member of the company’s independent accounting firm. The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as to approve the internal auditor’s work plan. Our internal auditor is Linur Dloomy, CPA (Israel)Tali Yaron Adv. (LLB, LLM), a partner of Brightman Almagor Zohar & Co. (a member firm ofdirector at Deloitte Touche Tohmatsu Limited).Israel. Approval of Related Party Transactions under Israeli Law Fiduciary duties of office holders The Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company. The duty of care of an office holder is based on the duty of care set forth in connection with the tort of negligence under the Israeli Torts Ordinance (New Version) 5728-1968. This duty of care requires an office holder to act with the degree of proficiencycare with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of care includes a duty to use reasonable means, in light of the circumstances, to obtain: information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and all other important information pertaining to these actions. The duty of loyalty requires an office holder to act in good faith and for the benefit of the company, and includes the duty to: refrain from any act involving a conflict of interest between the performance of his or her duties in the company and his or her other duties or personal affairs; refrain from any activity that is competitive with the business of the company; refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for himself or herself or others; and disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder. We may approve an act performed in breach of the duty of loyalty of an office holder provided that the office holder acted in good faith, the act or its approval does not harm the company, and the office holder discloses his or her personal interest, as described below. Disclosure of personal interests of an office holder and approval of acts and transactions The Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may have and all related material information or documents relating to any existing or proposed transaction by the company. An interested office holder’s disclosure must be made promptlycompany, and in any event no later than the first meeting of the board of directors at which the transaction is considered. An office holder is not, however, obliged to disclose sucha personal interest and related information if the personal interest of the office holder derives solely from the personal interest of his or her relative in a transaction that is not considered as an extraordinary transaction.transaction (as defined in the Companies Law). The term personal interest is defined under the Companies Law to include the personal interest of a person in an action or in the businesstransaction of a company, including the personal interest of such person’s relative or the interest of any corporationentity in which the person is an interested party,or any of his/her relatives serves as a director or the chief executive officer, owns at least 5% of its issued share capital or its voting rights or has the right to appoint a director or the chief executive officer, but excluding a personal interest stemming solely from the factownership of holding shares in the company.such entity. A personal interest furthermore includes the personal interest of a person for whom the office holder holds a voting proxy orand the personal interest of the office holder with respect to his or her vote on behalf of the shareholder for whom he or she holdsvoting as a proxy, even if suchthe shareholder itselfgranting the proxy has no personal interest in the approval of the matter. An office holder is not, however, obliged to disclose a personal interest if it derives solely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction.
Under the Companies Law, an extraordinary transaction which requires approval is defined as any of the following: a transaction other than in the ordinary course of business; a transaction that is not on market terms; or a transaction that may have a material impact on the company’s profitability, assets or liabilities. Under the Companies Law, once an office holder has complied with the disclosure requirement described above, a company may approve a transaction between the company and the office holder or a third party in which the office holder has a personal interest, or approve an action by the office holder that would otherwise be deemed a breach of duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed by the office holder in good faith. Under the Companies Law, unless the articles of association of a company provide otherwise, a transaction with an office holder a transactionor with a third party in which the office holder has a personal interest that is not an extraordinary transaction and an action of an office holder that would otherwise be deemed a breach of duty of loyalty that may have a material impact on a company’s profitability, assets or liabilities requires approval by the board of directors. Our Articles of Association do not provide otherwise. If the transaction or action considered is (i) an extraordinary transaction or (ii) an action of an office holder that would otherwise be deemed a breach of duty of loyalty and may have a material impact on a company’s profitability, assets or liabilities, then audit committee approval is required prior to approval by the board of directors. Under Amendment 20,the Companies Law, a transaction with an office holder in a public company regarding his or her terms of office and employment should be determined in accordance with the company’s compensation policy. Nonetheless, provisions were established that allow a company may, under special circumstances, to approve the terms of office and employment that are not in lineconsistent with the approved compensation policy. Accordingly, pursuant to Amendment 20, the approval requirements for the compensation and/or terms of office of a specific office holder may require the approval of each of the compensation committee, board of directors and the shareholders, in that order. As such, under Amendment 20, theThe following approvals are required for the following transactions: A transaction with an office holder in a public company that is neither a director nor the chief executive officer regarding his or her termsapproval of office and employment requires approval by the (i) compensation committee; and (ii) the board of directors. Approval of terms of office and employment for such officers which do not comply with the compensation policy may nonetheless be approved subject to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved the terms after having taken into account the various considerations and mandatory requirements set forth in Amendment 20 with respect to office holder compensation, and (ii) the shareholders of the company have approved the terms by means of the following special majority requirements, or the Special Majority Requirements, as set forth in Amendment 20, pursuant to which the shareholder approval must either include at least one-half of the shares held by non-controlling and disinterested shareholders who actively participate in the voting process (without taking abstaining votes into account), or, alternatively, the total shareholdings of the non-controlling and disinterested shareholders who vote against the transaction must not represent more than 2% of the voting rights in the company.
A transaction with the chief executive officer in a public company regarding his or her terms of office and employment requires approval by the (i) compensation committee; (ii) the board of directors; and (iii) the shareholders of the company by the Special Majority Requirements. Approval of terms of office and employment for the chief executive officer which do not comply with the compensation policy may nonetheless be approved subject to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved the terms after having taken into account the various considerations and mandatory requirements set forth in Amendment 20 with respect to office holder compensation and (ii) the shareholders of the company have approved the terms by means of the Special Majority Requirements, as detailed above.
A transaction with an office holder in a public company (including the chief executive officer) who is not a director regarding his or her terms of office and employment may be approved despite shareholder rejection, provided that a company’s compensation committee and thereafter the board of directors have determined to approve the proposal, based on detailed reasoning, after having re-examined the terms of office andor employment and taken the shareholder rejection into consideration. In addition, the compensation committee may exempt the transaction regarding terms of office and employment with a chief executive officer who has no relationship with the controlling shareholder or the company from shareholder approval if it has found, based on detailed reasons, that bringing the transaction to the approval of the shareholders meeting shall prevent the employmentofficers of a public company:
| • | Executive officers other than the Chief Executive Officer. A transaction with an office holder in a public company who is neither a director nor the chief executive officer regarding his or her terms of office and employment requires approval by the (i) compensation committee; and (ii) the board of directors. Approval of terms of office and employment for such officers which do not comply with the compensation policy may nonetheless be approved subject to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved the terms after having taken into account the various considerations and mandatory requirements set forth in the Companies Law with respect a compensation policy, and (ii) the shareholders of the company have approved the terms by means of the following special majority requirements, or the Special Majority Requirements, as set forth in the Companies Law, pursuant to which the shareholder approval must either include at least a majority of the shares held by non-controlling shareholders and disinterested shareholders who are present and vote on the matter (excluding abstentions), or, alternatively, the total shareholdings of the non-controlling shareholders and disinterested shareholders who vote against the transaction must not represent more than 2% of the voting rights in the company. However, a company’s compensation committee and board of directors, may, in special circumstances approve a transaction despite shareholder rejection, provided that the compensation committee and thereafter the board of directors have determined to approve the transaction based on detailed reasoning, after each having re- discussed the terms of office and employment, and taken the shareholder rejection into consideration. |
| • | Chief Executive Officer. A transaction with the chief executive officer in a public company regarding his or her terms of office and employment requires approval by the (i) compensation committee; (ii) the board of directors; and (iii) the shareholders of the company by the Special Majority Requirements. Approval of terms of office and employment for the chief executive officer which do not comply with the compensation policy may nonetheless be approved subject to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved the terms after having taken into account the various considerations and mandatory requirements set forth in the Companies Law with respect to a compensation policy and (ii) the shareholders of the company have approved the terms by means of the Special Majority Requirements, as detailed above. However, a company’s compensation committee and board of directors, may, in special circumstances approve a transaction with a chief executive officer (who is not a director) that is not approved by shareholders despite shareholder rejection, provided that the company’s compensation committee and thereafter the board of directors have determined to approve the transaction, based on detailed reasoning, after each having re-discussed the terms of office and employment, and taken the shareholder rejection into consideration. In addition, the compensation committee may exempt from shareholder approval the terms of office and employment of a candidate for the office of chief executive officer where such officer has no relationship with the controlling shareholder or the company, if it has found, based on detailed reasons, that bringing the transaction to the approval of the shareholders meeting shall prevent the employment of such candidate by the company. provided that the company. Such approval may be given only in respect of terms of office and employment which are in accordance with the company’s compensation policy. |
A transaction with a director in a public company regarding his or her terms of office and employment | • | Directors. A transaction with a director who is not the chief executive officer of a public company regarding his or her terms of office and engagement requires approval by the (i) compensation committee; (ii) the board of directors; and (iii) the shareholders of the company. Approval of terms of office and employment for directors of a company which do not comply with the compensation policy may nonetheless be approved subject to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved the terms after having taken into account the various considerations and mandatory requirements set forth in the Companies Law with respect to a compensation policy and (ii) the shareholders of the company have approved the terms by means of the Special Majority Requirements, as detailed above. In addition, pursuant to a relief provided under the Israeli Companies Regulations (Relief in Interested Party Transactions), 2000, the terms of office and engagement of a non-executive director are exempt from shareholder approval if the compensation committee and board of directors determined that (i) such terms of office are only for the benefit of the company, or (ii) the board of directors; and (iii) the shareholders of the company. Approval of terms of office and employment for directors of a company which do not comply with the compensation policy may nonetheless be approved subject to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved the terms after having taken into account the various considerations and mandatory requirements set forth in Amendment 20 with respect to office holder compensation and (ii) the shareholders of the company have approved the terms by means of the Special Majority Requirements, as detailed above. In addition, pursuant to a relief provided under the Companies Regulations (Relief in Interested Party Transactions), 2000, the compensation committee may exempt the transaction regarding terms of office and employment with a director, if the compensation committee and board of directors determined that such terms of office are only for the benefit of the company, or if the compensation terms of the director do not exceed the maximum compensation paid to external directors pursuant to the applicable regulations. |
A director who has a personal interest in a matter that is considered at a meeting of the board of directors or the audit committee may generally not be present at the meeting or vote on the matter unless a majority of the directors or members of the audit committee have a personal interest in the matter, or, unless the chairman of the audit committee or board of directors (as applicable) determines that he or she should be present to present the transaction that is subject to approval. If a majority of the directors have a personal interest in the matter, such matter also requires approval of the shareholders of the company.company by the Special Majority Requirements. With respect to compensation of an officer (including chief executive officer) or director who is also a controlling shareholder, see “— Disclosure of personal interests of a controlling shareholder and approval of transactions.” Disclosure of personal interests of a controlling shareholder and approval of transactions Under the Companies Law, the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a public company. See “— Audit Committee” for the general definition of controlling shareholder“controlling shareholder” under the Companies Law. The definition of “controlling shareholder” inIn connection with matters governing: (i) extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, (ii) certain private placements in which the controlling shareholder has a personal interest, (iii) certain transactions with a controlling shareholder or relative thereof with respect to services provided to or employment by the company, (iv) the terms of employment and compensation of the general manager, and (v) the terms of employment and compensation of office holders of the company when such terms deviate from the compensation policy previously approved by the company’s shareholders, the definition of “controlling shareholder” also includes shareholders that hold 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights in the company (and the holdings of two or more shareholders which each have a personal interest in such matter will be aggregated for the purposes of determining such threshold). Under Amendment 20,the Companies Law, extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest, as well as transactions for the provision of services, whether directly or indirectly, by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, require the approval of the audit committee, the board of directors and the shareholders, in that order. Extraordinary Transactions concerning the terms of engagement of a controlling shareholder or a controlling shareholder’s relative, whether as an office holder or an employee, require the approval of the compensation committee, the board of directors and the shareholders, in that order. In addition, theThe shareholder approval of such extraordinary transactions by the shareholders require at least a majority of the shares voted by the shareholders of the company participating and voting in a shareholders’ meeting, provided thatmust meet one of the following requirements is fulfilled:requirements: at least a majority of the shares held by shareholders who have no personal interest in the transaction who are present and are voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or the shares voted by shareholders who have no personal interest in the transaction who are present and vote against the transaction represent no more than 2% of the voting rights in the company. If such extraordinary transaction concerns the terms of office and employment of such controlling shareholder, in his capacity as an office holder or an employee of the company, such terms of office and employment approved by the compensation committee and board of directors shall be in accordance with the compensation policy of the company. Nonetheless, the compensation committee and the board of directors may, in special circumstances, approve terms of office and compensation of a controlling shareholder and whichthat do not comply with the company’s compensation policy, provided that the compensation committee and, thereafter, the board of directors approve such terms, based on, among other things, the considerations listed under Section 267B(a) and Parts A and B of Annex 1A ofmandatory requirements with respect to a compensation policy set forth in the Companies Law, as those are described above.Law. Following such approval by the compensation committee and board of directors, shareholder approval would be required.required by the special majority described above. To the extent that any such transaction with a controlling shareholder is for a period extending beyond three years, approval, in the same manner described above, is required once every three years, unless, with respect to extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, the audit committee determines that the duration of the transaction is reasonable given the related circumstances related thereto.related. Approval of Significant Private Placements
Under the Companies Law, a significant private placement of securities requires approval by the board of directors and the shareholders by a simple majority. A private placement is considered a significant private placement if it will cause a person to become a controlling shareholder (within the meaning of the Companies Law) or if all of the following conditions are met: (i) the securities issued amount to 20% or more of the company’s outstanding voting rights before the issuance; (ii) some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and (iii) the transaction will increase the relative holdings of a shareholder who holds 5% or more of the company’s outstanding share capital or voting rights or that will cause any person to become, as a result of the issuance, a holder of more than 5% of the company’s outstanding share capital or voting rights. However, pursuant to the Relief Regulations, the foregoing shareholder approval requirements shall not apply to a company whose shares are listed on a foreign exchange referenced in the second or third addendum to the Israeli Securities Law, 5728-1968, or the Israeli Securities Law, (which include, among others, the NASDAQ Capital Market), if the law of the foreign jurisdiction sets forth requirements regarding the approval of private placements and the company complies with such requirements as they apply to companies incorporated in such foreign jurisdiction. Duties of shareholders Under the Companies Law, a shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable manner in exercising its rights and performing its obligations to the company and other shareholders, and must refrain from abusing its power in the company, including, among other things, voting at general meetings of shareholders on the following matters: an amendment to the articles of association; an increase in the company’s authorized share capital; the approval of related party transactions and acts of office holders that require shareholder approval. approval under the Companies Law. A shareholder also has a general duty to refrain from discriminating against other shareholders. The remedies generally available upon a breach of contract will also apply to a breach of the above-mentioned duties, and in the event of discrimination against other shareholders, additional remedies are available to the injured shareholder. In addition, anya controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder, or has another power with respect to a company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance of this duty of fairness except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness, taking the shareholder’s position in the company into account.
Exculpation, insurance and indemnification of office holders Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care, but only if a provision authorizing such exculpation is included in its articles of association. Our Articles of Association include such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders. An Israeli company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either pursuant to an undertaking given by the company in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association: financialmonetary liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (i) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (1) no indictment was filed against such office holder as a result of such investigation or proceeding; and (2) no financial liability such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability (such as a criminal penalty) was imposed, it was imposed with respect to an offense that does not require proof of criminal intent;intent and (ii) in connection with a monetary sanction; a monetary liability imposed on an office holder in favor of an injured party at an Administrative Procedure (as defined below) pursuant to Section 52(54)(a)(1)(a) of the Israeli Securities Law; expenses incurred by an office holder or certain compensation payments made to an injured party that were instituted against an office holder in connection with an Administrative Procedure under the Israeli Securities Law, including reasonable litigation expenses and reasonable attorneys’ fees; and reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third party or in connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent. An “Administrative Procedure” is defined as a procedure pursuant to chapters H3 (Monetary Sanction by the Israeli Securities Authority), H4 (Administrative Enforcement Procedures of the Administrative Enforcement Committee) or I1 (Arrangement to prevent Procedures or Interruption of procedures subject to conditions) to the Israeli Securities Law, which may result in sanctions, including monetary sanctions and certain restrictions on serving as a director or senior officer of a public company for certain periods of time. An Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles of association: a breach of duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; a breach of duty of care to the company or to a third party, including a breach arising out of the negligent (but not intentional or reckless) conduct of the office holder; a financial liability imposed on the office holder in favor of a third party; a monetary liability imposed on the office holder in favor of an injured party in an Administrative Procedure pursuant to Section 52(54)(a)(1)(a) of the Israeli Securities Law; and expenses, including reasonable litigation expenses and reasonable attorneys’ fees, incurred by an office holder in connection with an Administrative Procedure instituted against him or her pursuant to certain provisions of the Israeli Securities Law. An Israeli company may not indemnify, exculpate or insure an office holder against any of the following, and any provision in a company’s articles of association which allows for any of the following is invalid: a breach of duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; a breach of duty of care to the company or to a third party, including a breach arising out of the negligent conduct of the office holder; and
a financial liability imposed on the office holder in favor of a third party.
An Israeli company may not indemnify or insure an office holder against any of the following:
a breach of duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder; an act or omission committed with intent to derive illegal personal benefit; or a fine, monetary sanction or forfeit levied against the office holder. Under the Companies Law and the regulations promulgated thereunder, exculpation, indemnification and insurance of office holders must be approved by the auditcompensation committee and the board of directors and, with respect to directors, by shareholders. An amendment to the Israeli Securities Lawchief executive officer and a corresponding amendment todirector, also by the shareholders. See “— Approval of Related Party Transactions under Israeli Law.” However, under regulations promulgated under the Companies Law, authorize the ISA to impose administrative sanctions against companies like ours, and theirinsurance of office holders for certain violations of the Israeli Securities Law or the Companies Law. These sanctions include monetary sanctionsshall not require shareholder approval and certain restrictions on serving as a director or senior officer of a public company for certain periods of time. The amendments to the Israeli Securities Law and to the Companies Law provide that only certain types of such liabilities may be reimbursedapproved by indemnificationonly the compensation committee, if the engagement terms are determined in accordance with the company’s compensation policy, that compensation policy was approved by the shareholders by the same special majority required to approve a compensation policy, and insurance. Specifically, legal expenses (including attorneys’ fees) incurred by an individual in the applicable administrative enforcement proceeding and certain compensation payable to injured parties for damages suffered by them are permitted to be reimbursed via indemnification or insurance, provided that such indemnificationthe insurance policy is on market terms and the insurance are authorized bypolicy is not likely to materially impact the company’s articles of association and receive the requisite corporate approvals.profitability, assets or obligations.
Our Articles of Association allowpermit us to exculpate, indemnify and insure our office holders for any liability imposed on them as a consequence of an act (including any omission) which was performed by virtue of being an office holder. In November 2011, our shareholders approved (i) the amendment of our Articles of Association to authorize indemnification and insurance in connection with administrative enforcement proceedings, including without limitation, the specific amendments to the Israeli Securities Law and the Companies Law described above and (ii) a new formfullest extent permitted by law. We have entered into agreements with each of indemnification letter for our directors and executive officers soexculpating them, to the fullest extent permitted by law, from liability to us for damages caused to us as a result of a breach of duty of care, and undertaking to reflectindemnify them to the amendmentfullest extent permitted by law. The indemnification for a monetary liability imposed in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court, is limited to events determined as foreseeable by the board of directors based on our Articlesactivities, and to an amount determined by the board of Association,directors as reasonable under the circumstances. The maximum indemnification amount for all office holders, cumulatively, for one or more of such events, shall be equal to the higher of (i) 25% of our total shareholders’ equity as reflected in our audited annual financial statements for the year preceding the year in which new form of letter was also approved in October 2011 by our Audit Committeethe event for which the indemnity is sought occurred, and Board of Directors, and in November 2011 by our shareholders.(ii) $5 million. The terms of such agreements are consistent with the provisions of theour Compensation Policy whichthat was approved by our shareholders in December 2013 and amended as describedJuly 2022. However, in the next paragraph. 91
opinion of the SEC, indemnification of office holders for liabilities arising under the Securities Act is against public policy and therefore unenforceable. Our office holders are currently covered by a directorsdirectors’ and officers’ liability insurance policy. The terms of such directors’ and officers’ insurance are consistent with the provisions of theour current Compensation Policy whichthat was approved by our shareholders in July 2016. The purpose of the amendment was to clarify that we are authorized to purchase insurance policies (including run-off policies) to cover the liability of directors and office holders that are in office at such time and that shall be in office from time to time, including directors and office holders that may have a controlling interest in the Company. Such insurance policies are authorized within the following limits: (1) the premium for each policy period shall not exceed $250,000, (2) the maximum aggregate limit of liability pursuant to the policies shall not exceed $20 million for each insurance period, and (3) the maximum deductible shall not exceed $250,000. In addition, the Compensation Committee is authorized to increase the coverage purchased and/or the premium paid for such policies by up to 20% per year, as compared to the previous year, or cumulatively for a number of years, without an additional shareholders’ approval to the extent permitted under the Companies Law. 2022. As of the date of this Annual Report on Form 20-F, except as disclosed in Item 8.A below, no claims forhave been filed under our directors’ and officers’ liability insurance have been filed under this policy, and we are not aware of any pending or threatened litigation or proceeding involving any of our directors or officers in which indemnification is sought. Pursuant to the approval of our shareholders at the annual general meeting held in September 2014, we carry directors’ and officers’ insurance covering each of our directors and executive officers for acts and omissions. See also “Related Party Transactions — Indemnification Agreements.” Therethere is no pending litigation or proceeding against any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
For significant ways in which our corporate governance practices differ from those required by the Marketplace Rules of the Nasdaq Stock Market, see “Item 16G. Corporate Governance.”75
D. Employees As of December 31, 2017,2023, we had 5179 employees, all43 of whom are employed in Israel except the three employeesand 36 of Agalimmune who are employedwhom in the U.K.U.S. Of our employees, 1915 hold M.D. or Ph.D. degrees. | | December 31, | | | December 31, | | | | 2015 | | | 2016 | | | 2017 | | | 2021 | | | 2022 | | | 2023 | | | | | | | | | | | | | | | | | | | | | Management and administration | | | 12 | | | | 11 | | | | 11 | | | 9 | | | 12 | | | 12 | | Research and development | | | 32 | | | | 28 | | | | 36 | | | 27 | | | 29 | | | 29 | | Sales and marketing | | | 4 | | | | 4 | | | | 4 | | | Commercialization and business development | | | | 2 | | | | 8 | | | | 38 | | Total | | | 48 | | | | 43 | | | | 51 | | | 38 | | | 49 | | | 79 | |
While none of our employees are party to any collective bargaining agreements, in Israel we are subject to certain labor statutes and national labor court precedent rulings, as well as to certain provisions of the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (includingand/or the Industrialists’ Associations)Association which are applicable to our employees by virtue of expansion orders issued in accordance with relevant labor laws by the Israel Ministry of Labor and Welfare, and which apply such agreement provisions to our employees even though they are not directly part of a union that has signed a collective bargaining agreement. The laws and labor court rulings that apply to our employees principally concern the minimum wage laws, procedures for dismissing employees, determination of severance pay, leaves of absence, (such as annual vacation or maternity leave), sick pay and other conditions for employment. The expansion orders which apply to our employees principally concern the requirement for length of the work dayworkday and work week, mandatory contributions to a pension fund, annual recreation allowance, travel expenses payment and other conditions of employment. We generally provide our employees with benefits and working conditions beyond the required minimums.
We have never experienced any employment-related work stoppages and believe our relationship with our employees is good. E. Share Ownership The following table sets forth information regarding the beneficial ownership of our outstanding ordinary shares as of March 5, 201815, 2024 of each of our current directors and executive officers individually and as a group. The percentages shown are based on 1,086,589,165 ordinary shares issued and outstanding as of March 15, 2024. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting power or investment power with respect to securities. All ordinary shares subject to options currently exercisable or exercisable into ordinary shares within 60 days of March 15, 2024, and underlying performance stock units (“PSUs”) that shall vest within 60 days of March 15, 2024, are deemed to be outstanding and beneficially owned by the shareholder holding such options or PSUs for the purpose of computing the number of shares beneficially owned by such shareholder. Such shares are also deemed outstanding for purposes of computing the percentage ownership of the person holding the option or PSU. They are not, however, deemed to be outstanding and beneficially owned for the purpose of computing the percentage ownership of any other shareholder. | | Number of | | | | | | | Ordinary Shares | | | | | | | Beneficially | | | Percent of | | | | Held | | | Class | | | | | | | | | Directors | | | | | | | | | | | | | | Aharon Schwartz(1) | | | 4,784,970 | | | | * | | B.J. Bormann(2) | | | 1,079,970 | | | | * | | Rami Dar(3) | | | 630,000 | | | | * | | Raphael Hofstein(4) | | | 1,079,970 | | | | * | | Avraham Molcho(5) | | | 1,079,970 | | | | * | | Sandra Panem(6) | | | 1,079,970 | | | | * | | Shaoyu Yan | | | - | | | | | | Gal Cohen | | | - | | | | | | | | | | | | | | | Executive officers | | | | | | | | | | | | | | | | | | Philip A. Serlin(7) | | | 12,120,645 | | | | 1.1 | % | Mali Zeevi(8) | | | 3,348,030 | | | | * | | Ella Sorani(9) | | | 3,195,930 | | | | * | | Holly May (10) | | | 3,567,645 | | | | * | | | | | | | | | | | All directors and executive officers as a group (12 persons)(11) | | | 31,967,100 | | | | 2.9
| % |
* Less than 1.0%. | | Number of | | | | | | | Ordinary Shares | | | | | | | Beneficially | | | Percent of | | | | Held | | | Class | | | | | | | | | Directors | | | | | | | | | | | | | | | Aharon Schwartz(1)
| | | | | | | * | | Michael J. Anghel(2) ��
| | | | | | | * | | Nurit Benjamini(3)
| | | | | | | * | | B.J. Bormann(4)
| | | | | | | * | | Raphael Hofstein(5)
| | | | | | | * | | Avraham Molcho(6)
| | | | | | | * | | Sandra Panem(7)
| | | | | | | * | | | | | | | | | | | Executive officers | | | | | | | | | | | | | | | | | | Philip A. Serlin(8)
| | | | | | | * | | Mali Zeevi(9)
| | | | | | | * | | David Malek(10)
| | | | | | | * | | Ella Sorani(11)
| | | | | | | * | | Abi Vainstein-Haras(12)
| | | | | | | * | | | | | | | | | | | All directors and executive officers as a group (12 persons)(13)
| | | | | | | 1.0 | % |
* | Less than 1.0%. | | | (1) | Includes 71,669 ordinary shares3,705,000 Ordinary Shares and 1,079,970 Ordinary Shares issuable upon exercise of outstanding options currently exercisable or exercisable within 60 days of March 5, 2018.15, 2024. Does not include 33,331 ordinary shares810,000 Ordinary Shares issuable upon exercise of outstanding options that are not exercisable within 60 days of March 5, 2018.15, 2024. | | |
(2) | Includes 71,669 ordinary shares1,079,970 Ordinary Shares issuable upon exercise of outstanding options currently exercisable or exercisable within 60 days of March 5, 2018.15, 2024. Does not include 33,331 ordinary shares810,000 Ordinary Shares issuable upon exercise of outstanding options that are not exercisable within 60 days of March 5, 2018.15, 2024. | | |
(3) | Includes 51,669 ordinary shares630,000 Ordinary Shares issuable upon exercise of outstanding options currently exercisable or exercisable within 60 days of March 5, 2018.15, 2024. Does not include 33,331 ordinary shares810,000 Ordinary Shares issuable upon exercise of outstanding options that are not exercisable within 60 days of March 5, 2018.15, 2024. | | |
(4) | Includes 71,669 ordinary shares1,079,970 Ordinary Shares issuable upon exercise of outstanding options currently exercisable or exercisable within 60 days of March 5, 2018.15, 2024. Does not include 33,331 ordinary shares810,000 Ordinary Shares issuable upon exercise of outstanding options that are not exercisable within 60 days of March 5, 2018.15, 2024. | | |
(5) | Includes 71,669 ordinary shares1,079,970 Ordinary Shares issuable upon exercise of outstanding options currently exercisable or exercisable within 60 days of March 5, 2018.15, 2024. Does not include 33,331 ordinary shares810,000 Ordinary Shares issuable upon exercise of outstanding options that are not exercisable within 60 days of March 5, 2018.15, 2024. | | |
(6) | Includes 51,669 ordinary shares1,079,970 Ordinary Shares issuable upon exercise of outstanding options currently exercisable or exercisable within 60 days of March 5, 2018.15, 2024. Does not include 33,331 ordinary shares810,000 Ordinary Shares issuable upon exercise of outstanding options that are not exercisable within 60 days of March 5, 2018.15, 2024. | | |
(7) | Includes 69,169 ordinary shares171,900 Ordinary Shares and 11,948,745 Ordinary Shares issuable upon exercise of outstanding options and PSUs currently exercisable or exercisable within 60 days of March 5, 2018.15, 2024. Does not include 33,331 ordinary shares11,996,775 Ordinary Shares issuable upon exercise of outstanding options and PSUs that are not exercisable within 60 days of March 5, 2018.15, 2024. | | |
(8) | Includes 301,631 issued ordinary shares328,665 Ordinary Shares and 3,019,365 Ordinary Shares issuable upon exercise of outstanding options and PSUs currently exercisable or exercisable within 60 days of March 5, 2018.15, 2024. Does not include 666,773 ordinary shares2,862,840 Ordinary Shares issuable upon exercise of outstanding equity instrumentsoptions and PSUs that are not exercisable within 60 days of March 5, 2018.15, 2024. | | |
(9) | Includes 174,343 ordinary shares66,150 Ordinary Shares and 3,129,780 Ordinary Shares issuable upon exercise of outstanding options and PSUs currently exercisable or exercisable within 60 days of March 5, 2018.15, 2024. Does not include 680,627 ordinary shares2,862,840 Ordinary Shares issuable upon exercise of outstanding equity instrumentsoptions and PSUs that are not exercisable within 60 days of March 5, 2018.15, 2024. | | |
(10) | Includes 274,545 ordinary shares3,567,645 Ordinary Shares issuable upon exercise of outstanding options and PSUs currently exercisable or exercisable within 60 days of March 5, 2018.15, 2024. Does not include 685,255 ordinary shares7,052,865 Ordinary Shares issuable upon exercise of outstanding equity instrumentsoptions and PSUs that are not exercisable within 60 days of March 5, 2018.15, 2024. | | |
(11) | Includes 42,125 ordinary shares issuable upon exercise of outstanding options within 60 days of March 5, 2018. Does not include 580,675 ordinary shares issuable upon exercise of outstanding equity instruments that are not exercisable within 60 days of March 5, 2018. | | | (12) | Includes 101,682 ordinary shares issuable upon exercise of outstanding options within 60 days of March 5, 2018. Does not include 736,318 ordinary shares issuable upon exercise of outstanding equity instruments that are not exercisable within 60 days of March 5, 2018. | | | (13) | Includes 1,351,509 ordinary shares issuable upon exercise of outstanding options within 60 days of March 5, 2018. Does not include 3,044,415ordinary shares issuable upon exercise of outstanding equity instruments that are not exercisable within 60 days of March 5, 2018.See footnotes (1)-(10) for certain information regarding beneficial ownership. |
Equity Compensation Plan 2003 Amended and Restated Share Incentive Plan In 2003, we adopted the BioLineRx Ltd. 2003 Share Incentive Plan, or the Plan. In August 2013, our board of directors approved certain amendments to the Plan and extended the term of the Plan until November 2023, and the Plan was renamed as the BioLineRx Ltd. 2003 Amended and Restated Share Incentive Plan. In January 2016, our board of directors approved amendments to the Plan in order to permit the granting of restricted share units, or RSUs, and PSUs to eligible grantees. In November 2023, our board of directors approved the extension of the term of the Plan for an additional six-month period, until May 2024. References below to the “Plan” refer to the Plan as amended in August 2013, January 2016 and November 2023. The Plan provides for the granting of options, ordinary shares, restricted stock unitsRSUs and performance stock unitsPSUs to our directors, employees, consultants and service providers, and to the directors, employees, consultants and service providers of our subsidiaries and affiliates. The Plan provides for equity grants to be made at the determination of our Boardboard of Directorsdirectors in accordance with applicable law. As of March 5, 2018, there were 10.9 million15, 2024, options to purchase 119,786,490 ordinary shares issuable upon the exercise ofand an aggregate 32,412,375 PSUs were outstanding equity grants under the Plan. In August 2013, our Board of Directors approved amendments to the Plan to take into account changes in laws and regulations that had occurred since its adoption and to extend the term of the plan until November 2023. In January 2016, our Board of Directors approved amendments to the Plan in order to permit the granting of restricted stock units, or RSUs, and performance stock units, or PSUs, to eligible grantees.
From time to time, our Boardboard of Directorsdirectors has approved an increase in the number of shares reserved for the purpose of equity grants pursuant to the Plan. As of March 5, 2018,15, 2024, 17.7 million ordinary shares were reserved for future issuance under the number of shares so reserved was 3.1 million.Plan. Administration of Our Plan
OurThe Plan is administered by our Boardboard of Directorsdirectors for the purposes of making equity grants and approving the terms of those grants, including, inexercise price (in the case of options, exercise price, method of payment,options), vesting schedule, acceleration of vesting and the other matters necessary in the administration of these plans.the Plan. Equity grants made under the Plan to eligible employees and office holders who are Israeli residents are made under Section 102 of the IsraelIsraeli Income Tax Ordinance [New Version], 5721-1961, or the Income Tax Ordinance, pursuant to which the securities granted must be allocated or issued to a trustee and be held in trust for two years from the date upon which such grant was made, provided that securities granted prior to January 1, 2006, or the ordinary shares issued upon exercise of options, are subject to being held in trust for two years from the endgrant. Under Section 102 of the year in which the securities are granted. Under Section 102,Income Tax Ordinance, any tax payable by an employee from the grant of securities or the exercise of options or vesting of RSUs or PSUs is deferred until the transfer of the securities (or ordinary shares issued upon the exercise of options)options or the vesting of RSUs or PSUs) by the trustee to the employee or upon the sale of the securities or ordinary shares, as the case may be, and gains may qualify to be taxed as capital gains at a rate equal to 25%, subject to compliance with specified conditions.
Options and RSUs granted under the Plan generally vest over four years, and theyyears. Options generally expire 10 years from the grant date. If we terminate an employeeemployee’s employment or service for cause, all of the employee’sgrantee’s vested and unvested optionsequity awards expire immediately from the time of delivery of the notice of discharge, unless determined otherwise by the Audit Committeecompensation committee or the Boardboard of Directors.directors. Upon termination of employment or service for any other reason including due to death or disability of the employee,other than for cause, vested options may be exercised within three months of the termination date or if termination of employment or service is due to death or disability of the employee, but in no event after the expiration date of the awards, within 12 months following such death or disability, in each case unless otherwise determined by the Compensation Committeecompensation committee or the Boardboard of Directors.directors. Vested options which are not exercised and unvested options, RSUs or PSUs return to the pool of reserved ordinary shares under the Plan for reissuance.future grants. The right to receive ordinary shares pursuant to PSUs granted under the Plan will vest upon the achievement by BioLineRx of certain performance goals to be established by the Boardboard of Directors.directors. In the event of a merger, consolidation, reorganization or similar transaction or our voluntary liquidation or dissolution, all of our unexercised vested equity grants and any unvested equity grants will be automatically terminated. However, in the event of a change of control, or merger, consolidation, reorganization or similar transaction resulting in the acquisition of at least 50% of our voting power, or the sale or transfer of all or substantially all of our outstanding shares assets, the equity grants then outstanding may be assumed or substituted for an appropriate number of shares of each class of shares or other securities and/or assets of the successor company in such transaction (or a parent or subsidiary or another affiliate of such successor company) as were distributed to our shareholders in respect of the transaction. In addition to the foregoing, our Boardboard of Directorsdirectors has approved the inclusion in the option agreements of the Company’s officers of a provision for accelerated vesting of options if both a change of control of the Company occurs and, following such change of control, the officer’s employment is terminated or there is a significant demotion in the officer’s new job or position. 95
F. Disclosure of a registrant’s action to recover erroneously awarded compensation. There was no erroneously awarded compensation that was required to be recovered pursuant to the BioLineRx Ld. Executive Officer Clawback Policy during the fiscal year ended December 31, 2023. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. Major Shareholders The following table sets forth certain information regardingwith respect to the beneficial ownership of our outstanding ordinary shares as of March 5, 201815, 2024, by each person who we knowor entity known by us to own beneficially owns 5.0% or more than 5% of the outstandingour ordinary shares. Each of our shareholders has identical voting rights with respect to its shares. All of the information with respect to beneficial ownership of theThe percentages shown are based on 1,086,589,165 ordinary shares is given to the best of our knowledge. The beneficial ownership of ordinary shares is based on the 106,268,860 ordinary sharesissued and outstanding as of March 5, 2018 and is determined in accordance with the rules of the SEC and generally includes any ordinary shares over which a person exercises sole or shared voting or investment power. For purposes of the table below, we deem shares subject to options or warrants that are currently exercisable or exercisable within 60 days of March 5, 2018, to be outstanding and to be beneficially owned by the person holding the options or warrants for the purposes of computing the percentage ownership of that person but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. To our knowledge, none of our shareholders of record are U.S. holders. Our principal shareholders do not have different or special voting rights.15, 2024.
| | Number of Ordinary Shares Beneficially Held | | | Percent of Class | | | | | | | | | BVF Partners L.P. (1) | | | 26,556,588 | | | | 24.99 | | Senvest Management, LLC (2) | | | 7,781,641 | | | | 7.32 | |
| | Number of Ordinary Shares Beneficially Held | | | Percent of Class | | Hong Seng Technology Limited(1) | | | 102,437,055 | | | | 9.4 | % |
(1) | Based upon information provided by the shareholder, or the BVF Group, in itson Schedule 13D filed with the SEC on August 8, 2017. BVF Partners L.P., or Partners, asOctober 26, 2023. According to the general partner of Biotechnology Value Fund, L.P., or BVF, and Biotechnology Value Fund II, L.P., or BVF2, the sole member of BVF Partners OS Ltd., or Partners OS, and the investment manager of Biotechnology Value Trading Fund OS LP, or Trading Fund OS, and certain Partners managed accounts, or the Partners Managed Accounts, may be deemed to beneficially own the 26,556,588Schedule 13D, includes 6,829,137 ADS, representing 102,437,055 ordinary shares beneficially ownedheld by Hong Seng Technology Limited. Lepu (Hong Kong) Co., Limited holds 66.67% equity interest of Hong Seng Technology Limited. Lepu Holdings Limited holds 99.5% equity interest of Lepu (Hong Kong) Co., Limited. Lepu Medical (Europe) Cooperatief U.A. holds 100% equity interest of Lepu Holdings Limited. Lepu Medical Technology (Beijing) Co., Ltd. holds 99.95% equity interest of Lepu Medical (Europe) Cooperatief U.A. Lepu Medical Technology (Beijing) Co., Ltd. is a company publicly listed on Shenzhen Stock Exchange in the aggregate by BVF, BVF2, Trading Fund OS and the Partners Managed Accounts. BVF Inc., as the general partner of Partners, may be deemed to beneficially own the 26,556,588 ordinary shares beneficially owned by Partners. Mark N. Lampert, as a director and officer of BVF Inc., may be deemed to beneficially own the 26,556,588 ordinary shares beneficially owned by BVF Inc. In addition to ADSs, the BVF Group is the beneficial owner of Series A warrants and Series B warrants issued by us in July 2017. All the warrants held by the BVF Group are subject to a blocker provision that precludes the holders from exercising the warrants to the extent that the holder and its affiliates would beneficially own in excess of 24.99% of our ordinary shares outstanding immediately after giving effect to such exercise. Accordingly, excluded from the number of ordinary shares beneficially held by the BVF Group are an aggregate of 2,412,438 ordinary shares underlying Series A warrants and 2,973,451 ordinary shares underlying Series B warrants. The address of the principal business office of BVF Partners L.P. is 1 Sansome Street, 30th Floor, San Francisco, California 94104.PRC (300003.SZ). |
To our knowledge, other than as disclosed in the table above, our other filings with the SEC and this Annual Report, there has been no significant change in the percentage ownership held by any major shareholder since January 1, 2021.
(2) | Based upon information provided by the shareholder in its Schedule 13G filed with the SEC on February 12, 2018. The securities indicated above are held in the accounts of Senvest Master Fund, LP, Senvest Israel Partners Master Fund, LP and Senvest Global (KY), LP or collectively, the Investment Vehicles. Senvest Management, LLC may be deemed to beneficially own the securities held by the Investment Vehicles by virtue of Senvest Management, LLC’s position as investment manager of the Investment Vehicles. Richard Mashaal may be deemed to beneficially own the securities held by the Investment Vehicles by virtue of Mr. Mashaal’s status as the managing member of Senvest Management, LLC. None of the foregoing should be construed in and of itself as an admission by either Senvest Management, LLC or Mr. Mashaal as to beneficial ownership of the securities indicated above. The address of the principal business office of Senvest Management, LLC is 540 Madison Avenue, 32nd Floor, New York, New York 10022. |
None of our shareholders has different voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
Record Holders Bank of New York Mellon, or BNY, is the holder of record for the Company’s American Depositary Receipt program, pursuant to which each ADS represents 15 ordinary shares. As of March 15, 2024, BNY held 993,504,176 ordinary shares representing 91% of our issued share capital held at that date. Certain of these ordinary shares were held by brokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficial holders or of the residence of beneficial holders. B. Related Party Transactions Agreements with Directors and Officers Employment Agreements We have entered into employment agreements with each of our executive officers. See “Item 6. Directors, Senior Management and Employees — Compensation — Compensation of Directors and Senior Management.” Indemnification Agreements Our Articles of Association and Compensation Policy approved by our shareholders permit us to exculpate, indemnify and insure our directors and office holders to the fullest extent permitted by the Companies Law.law. We have entered into agreements with each of our office holders exculpating them, to the fullest extent permitted by law, from liability to us for damages caused to us as a result of a breach of duty of care, and undertaking to indemnify them to the fullest extent permitted by law, including with respect to liabilities resulting from this offering to the extent that these liabilities are not covered by insurance. We have obtained directors’ and officers’ liability insurance for each of our officers and directors. See “Item 6. C — Directors, Senior Management and Employees — Board Practices — Exculpation, insurance and indemnification of office holders.” GSAP Agreement On February 9, 2023, we entered into an agreement with GSAP Biomed Ltd., or GSAP, pursuant to which GSAP undertook to provide ongoing quality assurance support services to us. This agreement was terminated effective January 1, 2024. Rami Dar, one of our directors (who formerly served as an external director, within the meaning of the Companies Law), who serves as the chairman of our audit committee and as a member of our compensation committee and investment monitoring committee, is a non-executive chairman of Novolog Ltd., which is the parent company of GSAP. During 2023, we paid GSAP NIS 408,000 (approximately $110,000) as compensation for the services provided thereunder. Gloria License Agreement and Securities Purchase Agreement On August 27, 2023, we entered into the License Agreement with HST and Gloria, collectively, the Purchaser Party,, pursuant to which we granted HST an exclusive, royalty-bearing, sublicensable license with respect to the intellectual property rights and know-how associated with motixafortide in order to develop and commercialize motixafortide in Asia (other than Israel and certain other countries) and to engage and authorize Gloria to perform services under the License Agreement in such territory. In connection with the License Agreement, on August 27, 2023, we also entered into a securities purchase agreement with HST and Gloria pursuant to which we agreed to sell and issue to HST, in a private placement, an aggregate of 6,829,137 of our ADSs. Aggregate gross proceeds from the sale were approximately $14.6 million. In connection with the closing of the private placement, Dr. Shaoyu Yan, a nominee of HST, was appointed to our board of directors to serve as one of our Class III directors until our annual general meeting of shareholders to be held in 2026. The appointment was made effective in November 2023. In addition, effective as of the annual general meeting to be held in 2026 and for so long as the Purchaser Party is the owner of at least 5% of our issued and outstanding ordinary shares, the Purchaser Party shall have the right, but not the obligation, to nominate one person for election by our shareholders to serve as a member of our board of directors, provided that such nominee provides the requisite certifications required for appointment as a director of a public company under Israeli law. C. Interests of Experts and Counsel Not applicable.
ITEM 8. FINANCIAL INFORMATION A. Consolidated Statements and other Financial Information See “Item 18. Financial Statements.” Legal Proceedings WeOn January 5, 2023, a putative securities class action complaint captioned Winston Peete v. BioLineRx Ltd. and Philip A. Serlin (Case no: Case 2:23-cv-00041 was filed in the U.S. District Court for the District of New Jersey by purported shareholder Winston Peete, naming us and our chief executive officer, Mr. Serlin, as defendants. The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, claiming that the defendants made false and materially misleading statements and failed to disclose material adverse facts pertaining to our financial position with regard to the development of motixafortide and that we would require a loan and a securities offering to commercialize motixafortide. The complaint asserts a putative class period of February 23, 2021 to September 19, 2022, inclusive and seeks certification as a class action and an unspecified amount of damages. On July 5, 2023, plaintiffs filed an amended complaint alleging the same claims and adding the Company’s Chief Financial Officer, Mali Zeevi, as a defendant. On September 5, 2023, defendants filed a motion to dismiss the amended complaint in its entirety. The motion has been fully briefed and is sub judice. In addition, on February 5, 2023, we received a lawsuit and motion to approve the lawsuit as a class action lawsuit pursuant to the Class Action Lawsuits Law 5766-2006 which was filed against us and Mr. Serlin in the Tel Aviv District Court (Economic Division). The motion asserts substantially similar allegations as the U.S. action described above. The motion asserts to define the class as all shareholders who held the company's securities traded on the TASE, on September 19, 2022 and the class period relates to the company's statements between February 23, 2021, and September 19, 2022. The total amount claimed, if the lawsuit is certified as a class action, as set forth in the motion is approximately NIS 113.5 million (approximately $32 million). The outcome of both legal proceedings is uncertain at this point. Based on an initial evaluation of the lawsuits, we believe that they are not involved in any material legal proceedings.without merit and intend to vigorously defend ourselves against such actions. Dividend Distributions We have never declared or paid cash dividends to our shareholders. Currently we do not intend to pay cash dividends. We currently intend to reinvest any future earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our Boardboard of Directorsdirectors and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, applicable Israeli law and other factors our Boardboard of Directorsdirectors may deem relevant. Israeli law limits the distribution of cash dividends to the greater of retained earnings or earnings generated over the two most recent years (referred to as the “profit test”), in either case provided that we reasonably believe that the dividend will not render us unable to meet our existing and foreseeable obligations when due (referred to as the “solvency test”). Notwithstanding the foregoing, in the event that a company does meet the profit test, dividends may be paid with the approval of a court, provided that the court is convinced that the company meets the solvency test. However, in accordance with the Relief Regulations, as a company whose shares are listed on a foreign exchange referenced in the second or third addendum to the Israeli Securities Law (which include, among others, the NASDAQ Capital Market), our board of directors may resolve to distribute a dividend by way of a share repurchase program if the company does not meet the profit test without seeking the approval of the court, subject to the following: (i) the company meets the solvency test; and (ii) we provide a notice to certain creditors regarding our intention to distribute a dividend by way of a share repurchase program in accordance with the notice requirements set forth in the Relief Regulations and no such creditor submits an objection within 30 days of the notice (otherwise, court approval would be required for such distribution in accordance with the requirements of the Companies Law). For information regarding taxation of dividends, see “Item 10E. Additional Information — Taxation — Israeli Tax Considerations.” B. Significant Changes None. ITEM 9. THE OFFER AND LISTING A. Offer and Listing Details Price Range of our ADSs
Our ADSs have been trading on Nasdaq under the symbol “BLRX” since July 2011. The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our ADSs on Nasdaq in dollars.
| | U.S.$ | | | | Price Per ADS | | | | High | | | Low | | Annual: | | | | | | | 2017 | | | 1.31 | | | | 0.81 | | 2016 | | | 1.30 | | | | 0.75 | | 2015 | | | 2.84 | | | | 1.23 | | 2014 | | | 3.07 | | | | 1.23 | | 2013 | | | 4.75 | | | | 1.58 | | | | | | | | | | | Quarterly: | | | | | | | | | First Quarter (through March 5, 2018) | | | 1.20 | | | | 0.94 | | Fourth Quarter 2017 | | | 1.31 | | | | 0.94 | | Third Quarter 2017 | | | 1.18 | | | | 0.81 | | Second Quarter 2017 | | | 0.92 | | | | 0.82 | | First Quarter 2017 | | | 1.30 | | | | 0.88 | | Fourth Quarter 2016 | | | 1.16 | | | | 0.92 | | Third Quarter 2016 | | | 1.28 | | | | 0.75 | | Second Quarter 2016 | | | 1.02 | | | | 0.79 | | First Quarter 2016 | | | 1.30 | | | | 0.90 | | | | | | | | | | | Most Recent Six Months: | | | | | | | | | March 2018 (through March 5, 2018) | | | 1.01 | | | | 0.97 | | February 2018 | | | 1.07 | | | | 0.94 | | January 2018 | | | 1.20 | | | | 1.06 | | December 2017 | | | 1.14 | | | | 1.05 | | November 2017 | | | 1.14 | | | | 0.94 | | October 2017 | | | 1.31 | | | | 1.03 | | September 2017 | | | 1.16 | | | | 1.03 | |
On March 5, 2018, the last reported sales price of our ADSs on Nasdaq was $1.01 per ADS. As of March 5, 2018, there was one shareholder of record of our ADSs. The number of record holders is not representative of the number of beneficial holders of our ADSs.
Price Range of our Ordinary Shares
Our ordinary shares have been trading on the TASE under the symbol “BLRX” since February 2007. The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on the TASE in NIS and dollars. Dollar per ordinary share amounts are calculated using the dollar representative rate of exchange on the date to which the high or low market price is applicable, as reported by the Bank of Israel.81
| | NIS | | | U.S.$ | | | | Price Per Ordinary Share | | | Price Per Ordinary Share | | | | High | | | Low | | | High | | | Low | | Annual: | | | | | | | | | | | | | 2017 | | | 4.67 | | | | 2.90 | | | | 1.26 | | | | 0.82 | | 2016 | | | 5.21 | | | | 3.07 | | | | 1.34 | | | | 0.79 | | 2015 | | | 10.23 | | | | 4.94 | | | | 2.57 | | | | 1.27 | | 2014 | | | 10.49 | | | | 4.76 | | | | 3.01 | | | | 1.24 | | 2013 | | | 17.99 | | | | 5.90 | | | | 4.89 | | | | 1.62 | | | | | | | | | | | | | | | | | | | Quarterly: | | | | | | | | | | | | | | | | | First Quarter (through March 5, 2018) | | | 4.03 | | | | 3.41 | | | | 1.18 | | | | 0.98 | | Fourth Quarter 2017 | | | 4.36 | | | | 3.35 | | | | 1.24 | | | | 0.95 | | Third Quarter 2017 | | | 4.19 | | | | 2.90 | | | | 1.16 | | | | 0.82 | | Second Quarter 2017 | | | 3.65 | | | | 2.92 | | | | 1.01 | | | | 0.82 | | First Quarter 2017 | | | 4.67 | | | | 3.52 | | | | 1.26 | | | | 0.92 | | Fourth Quarter 2016 | | | 4.31 | | | | 3.48 | | | | 1.12 | | | | 0.91 | | Third Quarter 2016 | | | 4.60 | | | | 3.07 | | | | 1.22 | | | | 0.80 | | Second Quarter 2016 | | | 3.92 | | | | 3.07 | | | | 1.04 | | | | 0.79 | | First Quarter 2016 | | | 5.21 | | | | 3.67 | | | | 1.34 | | | | 0.94 | | | | | | | | | | | | | | | | | | | Most Recent Six Months: | | | | | | | | | | | | | | | | | March 2018 (through March 5, 2018) | | | 3.50 | | | | 3.49 | | | | 1.01 | | | | 1.00 | | February 2018 | | | 3.62 | | | | 3.41 | | | | 1.03 | | | | 0.98 | | January 2018 | | | 4.03 | | | | 3.65 | | | | 1.18 | | | | 1.07 | | December 2017 | | | 4.05 | | | | 3.73 | | | | 1.14 | | | | 1.06 | | November 2017 | | | 3.93 | | | | 3.35 | | | | 1.12 | | | | 0.95 | | October 2017 | | | 4.36 | | | | 3.64 | | | | 1.24 | | | | 1.03 | | September 2017 | | | 4.02 | | | | 3.45 | | | | 1.14 | | | | 0.98 | |
On March 5, 2018, the last reported sales price of our ordinary shares on the TASE was NIS 3.50 per share, or $1.01 per share (based on the exchange rate reported by the Bank of Israel for such date). On March 5, 2018, the exchange rate of the NIS to the dollar was $1.00 = NIS 3.456, as reported by the Bank of Israel. As of March 5, 2018, there were two shareholders of record of our ordinary shares. The number of record holders is not representative of the number of beneficial holders of our ordinary shares.
B. Plan of Distribution Not applicable. C. Markets Our ADSs trade on the Nasdaq under the symbol “BLRX.” Our ordinary shares trade on the TASE under the symbol “BLRX.” D. Selling Shareholders Not applicable. E. Dilution Not applicable. F. Expenses of the Issue Not applicable. ITEM 10. ADDITIONAL INFORMATION A. Share Capital Not applicable. B. Articles of Association Our number with the Israeli Registrar of Companies is 513398750. Our purpose is set forth in Section 2A copy of our Articles of Association is attached as Exhibit 2.1 to this Annual Report. Other than as set forth below, the information called for by this Item is set forth in Exhibit 2.2 to this Annual Report and includes every lawful purpose.is incorporated by reference into this Annual Report.
See “Item 6. Directors, Senior Management and Employees — C. Board Practices.” Borrowing Powers Our ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our Articles of Association, unless the transfer is restricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. The ownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way by our Articles of Association or the laws of the State of Israel, except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.
Pursuant to the Companies Law and our Articles of Association, our Boardboard of Directorsdirectors may exercise all powers and take all actions that are not required under law or under our Articles of Association to be exercised or taken by our shareholders, including the power to borrow money for company purposes.
Our Articles of Association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law and must be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits and an issuance of shares for less than their nominal value (under certain circumstances), require a resolution of our Board of Directors and court approval. In May 2015, at an Extraordinary General Meeting of our shareholders, they approved a 1-for-10 reverse share split of our ordinary shares and a corresponding amendment to our Articles of Association, and further approved an increase to our share capital from NIS 7,500,000 divided into 75,000,000 ordinary shares of a nominal value of NIS 0.10 each to NIS 15,000,000 divided into 150,000,000 ordinary shares of nominal value NIS 0.10, and a corresponding amendment to our Articles of Association, effective immediately after the reverse share split became effective.Shareholder Meetings
Dividends
We may declare a dividend to be paid to the holders of our ordinary shares in proportion to their respective shareholdings. Under the Companies Law, dividend distributions are determined by the boardannual general meetings of directors and do not require the approval of the shareholders of a company unless the company’s articles of association provide otherwise. Our Articles of Association do not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by our Board of Directors.
Pursuant to the Companies Law, we may only distribute dividends from our profits accrued over the previous two years, as defined in the Companies Law, according to our then last reviewed or audited financial reports, provided that the date of the financial reports is not more than six months prior to the date of distribution, or we may distribute dividends with court approval. In each case, we are only permitted to pay a dividend if there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.
Election of Directors
Our ordinary shares do not have cumulative voting rights in the election of directors. As a result, the holders of a majority of the voting power represented at a shareholders meeting have the power to elect all of our directors, other than with respect to the special approval requirements for the election of external directors (unless we qualify as an Eligible Company and opt to follow the exemption provided under the Amendment to the Relief Regulations regarding appointment of external directors and composition of the Audit and Compensation Committees) described under “Item 6. Directors, Senior Management and Employees — Board Practices — External Directors.”
Pursuant to our Articles of Association, other than the external directors, for whom special election requirements apply under the Companies Law (unless we qualify as an Eligible Company and opt to follow the exemption provided under the Amendment to the Relief Regulations regarding appointment of external directors and composition of the Audit and Compensation Committees), our directors are elected at a general or special meeting of our shareholders and serve on the Board of Directors until they are removed by the majority of our shareholders at a general or special meeting of our shareholders or upon the occurrence of certain events, in accordance with the Companies Law and our Articles of Association. In addition, our Articles of Association allow our Board of Directors to appoint directors (other than external directors) to fill vacancies on the Board of Directors to serve until the next general meeting or special meeting, or earlier if required by our Articles of Association or applicable law. We have held elections for each of our non-external directors at each annual meeting of our shareholders since our initial public offering in Israel. Unless we qualify as an Eligible Company and opt to follow the exemption provided under the Amendment to the Relief Regulations regarding appointment of external directors and composition of the Audit and Compensation Committees, external directors are elected for an initial term of three years and may be removed from office pursuant to the terms of the Companies Law. See “Item 6. Directors, Senior Management and Employees — Board Practices — External Directors.”
Shareholder Meetings
Under Israeli law, we are required to hold anbe held at least once in every calendar year (within 15 months after the last preceding annual general meeting of our shareholders once every calendar year that must be no later than 15 months after the date of the previous annualshareholders). All general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Our Board of Directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law andin our Articles of Association provideas extraordinary meetings.
The Companies Law provides that our Boardan extraordinary general meeting of Directorsshareholders may be called by the board of directors as it deems fit. In addition, the board of directors is required to convene a specialan extraordinary general meeting of shareholders upon the written request of (a) any(i) two of ouror more directors or one quarter25% of our Board of Directorsthe directors in office, or (b)(ii) one or more shareholders holding, in the aggregate, either (1)at least (a) 5% of our outstanding sharesthe issued share capital and 1% of our outstandingthe voting powerrights; or (2)(b) 5% of our outstandingthe voting power. Subjectrights of the company. However, pursuant to the provisionsRelief Regulations, in the case of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetingsa company whose shares are the shareholders of recordlisted on a dateforeign exchange referenced in the second or third addendum to be decided bythe Israeli Securities Law (which include, among others, the NASDAQ Capital Market, such as us), the board of directors which may be between four and 40 days prior toshall convene an extraordinary meeting of shareholders upon the datewritten request of one or more shareholders holding, in the aggregate, at least (a) 10% of the meeting. Furthermore,issued share capital and 1% of the voting rights; or (b) 10% of the voting rights of the company, provided that if the law of the foreign jurisdiction, as it applies to companies incorporated in such jurisdiction, permit a shareholder holding less than 10% of the issued share capital or voting rights to request to convene such a shareholder meeting, the Relief Regulations shall not apply.
The Companies Law and our Articles of Association requirerequires that resolutions regarding the following matters must be passed at a general meeting of our shareholders: amendments to our Articles of Association;
appointment, termination or terminationthe terms of service of our auditors;
appointment of external directors and appointment and dismissal of external directors;(if applicable);
approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;certain related party transactions; director compensation, indemnification and change of the principal executive officer;
increases or reductions of our authorized share capital;
the exercise of our Boardboard of Director’sdirectors’ powers by a general meeting, if our Boardboard of Directorsdirectors is unable to exercise its powers and the exercise of any of its powers is required for our proper management.
The Companies Law requires thatShareholders entitled to participate and vote at our general meetings are the shareholders of record on a noticedate to be determined by the board of any annual or special shareholders meetingdirectors, which, according to the Relief Regulations, as a company listed on certain exchanges outside Israel (including the Nasdaq Capital Market), may be provided at least 21between 4 and 60 days prior to the meeting and if the agendadate of the meeting includesmeeting.
Under the appointmentCompanies Law, shareholder meetings generally require prior notice of not less than 21 days or, removal of directors, the approval of transactions with office holders or interested or related parties, the approval of a compensation policy with respect to office holders or an approvalcertain matters, such as election of a merger, notice must be provided at leastdirectors and affiliated party transactions, not less than 35 days prior to the meeting. Pursuant todays. Only shareholders of record as reflected on our Articles of Association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote before the shareholders at a general meeting.
Quorum
The quorum required for our general meetings of shareholders consists of at least two shareholders present in person, by proxy or written ballot who hold or represent between them at least 25% of the total outstanding voting rights.
A meeting adjourned for lack of a quorum is adjourned to the same day in the following weekregister at the same time and place orclose of business on a laterthe date if so specified infixed by the summons orboard of directors as the record date determining the then shareholders who will be entitled to vote, shall be entitled to notice of, the meeting. At the reconvened meeting, any number of our shareholders presentand to vote, in person or by proxy, shall constitute a lawful quorum.
Resolutions
Our Articles of Association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.
Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which the shareholder indicates how he or she votes on resolutions relating to the following matters:
an appointment or removal of directors;
an approval of transactions with office holders or interested or related parties;
an approval of a merger or any other matter in respect of which there is a provision in the articles of association providing that decisions of the general meeting may also be passed by written ballot;
authorizing the chairman of the board of directors or his relative to act as the company’s chief executive officer or act with such authority; or authorize the company’s chief executive officer or his relative to act as the chairman of the board of directors or act with such authority; and
other matters which may be prescribed by Israel’s Minister of Justice.
The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote. Our Articles of Association provides that our Board of Directors may prevent voting by means of a written ballot and this determination is required to be stated in the notice convening the general meeting.
The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its other shareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matters such as changes to the articles of association, increasing the company’s registered capital, mergers and approval of related party transactions. A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, any shareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under the company’s articles of association, can appoint or prevent the appointment of an office holder, is required to act with fairness towards the company. The Companies Law does not describe the substance of this duty except to state that the remedies generally available upon a breach of contract will also apply to a breach of the duty to act with fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.
Unless otherwise stated under the Companies Law, or provided in a company’s articles of association a resolution at a shareholders meeting requires approval by a simple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Under the Companies Law, unless otherwise provided in a company’s articles of association or under applicable law, all resolutions of the shareholders of a company require a simple majority.
Under Amendment 20, the board of directors of an Israeli publicly traded company is required to establish a compensation policy, to be approved by the shareholders of the company, pursuant to which the terms of office and compensation of the company’s officer holders will be decided (unless the company qualifies as an Eligible Company and opt to follow the exemption provided under the Amendment to the Relief Regulations regarding appointment of external directors and composition of the audit and compensation committees). The final adoption of such compensation policy is subject to the approval of the shareholders, which approval is subject to certain special majority requirements, as set forth in the Companies Law, pursuant to which one of the following must be met:
| (i) | the majority of the votes includes at least a majority of all the votes of shareholders who are not controlling shareholders of the company or who do not have a personal interest in the compensation policy and participating in the vote; abstentions shall not be included in the total of the votes of the aforesaid shareholders; or |
| (ii) | the total of opposing votes from among the shareholders described in subsection (i) above does not exceed 2% of all the voting rights in the company.
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For this purpose, under the Companies Law “personal interest” is defined as: (1) a shareholder’s personal interest in the approval of an act or a transaction of the company, including (i) the personal interest of his or her relative (which includes for these purposes any members of his/her (or his/her spouse’s) immediate family or the spouses of any such members of his or her (or his/her spouse’s) immediate family); and (ii) a personal interest of a body corporate in which a shareholder or any of his/her aforementioned relatives serves as a director or the chief executive officer, owns at least 5% of its issued share capital or its voting rights or has the right to appoint a director or chief executive officer, but (2) excluding a personal interest arising solely from the fact of holding shares in the company or in a body corporate.
In addition, pursuant to the Companies Law, terms of office and employment of office holders in a public company, and terms of employment and/or terms of office of a controlling shareholder in a public company, require the approval of the shareholders, which such approval is subject to the special majority required for approving the compensation policy (as detailed above). See “Item 6. Directors, Senior Management and Employees — Approval of Related Party Transactions under Israeli Law” for information regarding the shareholders’ approval, and any additional approvals that might be required, with respect to the approval of terms of office and employment of office holders in a public company, pursuant to the Companies Law.
In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential dividend or distribution rights that may be authorized in the future.
Access to Corporate Records
Under the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholders register and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the Israeli Companies Registrar and the ISA. Furthermore, any of our shareholders may request access to review any document in our possession that relates to any action or transaction with a related party, interested party or office holder that requires shareholder approval under the Companies Law. However, we may deny such a request to review a document if we determine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwise prejudice our interests.
Acquisitions under Israeli Law
Full Tender Offer
A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstanding share capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of the issued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the court within six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender, to determine whether the tender offer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights. If the shareholders who did not accept the tender offer hold 5% or more of the issued and outstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.
Special Tender Offer
The Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met. This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% or more of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.
A special tender offer must be extended to all shareholders of a company, but the offeror is not required to purchase shares representing more than 5% of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer.
If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.
Merger
The Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under the Companies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders’ meeting called with at least 35 days’ prior notice.
For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at the shareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or the right to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration offered to the shareholders.
Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may further give instructions to secure the rights of creditors.
In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed by each party with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.
Antitakeover Measures
The Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this annual report, we do not have any authorized or issued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, depending on the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our Articles of Association which requires the prior approval of the holders of a majority of our shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in the Companies Law as described above. In addition, the Israeli Securities Law and the rules and regulations of the TASE also limit the terms permitted with respect to a new class of shares created by a public company whose shares are traded on the TASE, and prohibit any such new class of shares from having voting rights.postponement or adjournment thereof.
C. Material Contracts For a discussion of our out-licensing and in-licensing agreements, see “Item 4. Information on the Company.” The following are summary descriptions of certain other material contracts to which we are a party. The descriptions provided below do not purport to be complete and are qualified in their entirety by the complete agreements, which are attached as exhibits to this Annual Report on Form 20-F. Clinical Trial CollaborationGloria License Agreement and SupplySecurities Purchase Agreement with MSD
In January 2016,On August 27, 2023, we entered into a collaboration agreementthe License Agreement with MSD,HST and Gloria, pursuant to support a Phase 2 study investigating our BL-8040which we granted HST an exclusive, royalty-bearing, sublicensable license with respect to the intellectual property rights and know-how associated with motixafortide in combination with KEYTRUDA® (pembrolizumab), MSD’s anti-PD-1 therapy,order to develop and commercialize motixafortide in patients with metastatic pancreatic cancer. The Phase 2 study will evaluate the clinical response, safetyTerritory and tolerability ofto engage and authorize Gloria to perform services under the combination of these therapies as well as multiple pharmacodynamic parameters, includingLicense Agreement in the ability to improve infiltration of T cells into the tumor and their reactivity. AccordingTerritory. Pursuant to the terms of the agreement,License Agreement, the Licensee made a $15 million upfront payment in October 2023, upon the closing of the transaction. We are entitled to up to $49 million based on the achievement of certain development and regulatory milestones in China and Japan, and up to $197 million in sales milestones based on defined sales targets of motixafortide in the Territory. Additionally, we are sponsoringeligible to receive tiered, double-digit royalties (ranging from 10-20%), on aggregate net sales of motixafortide in the Territory payable on a country-by-country basis until the longer of (i) fifteen years from the date of the first sale of motixafortide by Licensee, (ii) the last to expire valid claim of any licensed patents with respect to motixafortide in such country and performing(iii) the expiration of motixafortide’s orphan drug status in such country. The royalties payable by Licensee to us are to be reduced by 50% following the end of the initial royalty term and to also be reduced upon the occurrence of certain events, including, on a country-by-country basis, the entry of a generic product in such country.
In connection with the License Agreement, on August 27, 2023, we also entered into a securities purchase agreement with HST and Gloria pursuant to which we agreed to sell and issue to HST in a private placement an aggregate of 6,829,137 of our ADSs at a price of $2.136 per ADS. Aggregate gross proceeds from the sale were approximately $14.6 million. The private placement closed in October 2023. In connection with the closing of the private placement, Dr. Shaoyu Yan, a nominee of HST, was appointed by our board of directors to serve as one of our Class III directors until our annual general meeting of shareholders to be held in 2026. The appointment was made effective in November 2023. In addition, effective as of the 2026 annual general meeting and for so long as the Purchaser Party is the owner of at least 5% of our issued and outstanding ordinary shares, the Purchaser Party shall have the right, but not the obligation, to nominate one person for election by our shareholders to serve as a member of our board of directors, provided that such nominee provides the requisite certifications required for appointment as a director of a public company under Israeli law.
The License Agreement includes various development obligations for the Licensee pursuant to an agreed-upon development plan, including the execution of a registrational study in stem-cell mobilization and the execution of a randomized Phase 2b study in first-line pancreatic adenocarcinoma. Loan Agreements with Kreos Capital In October 2018, we entered into a loan agreement with Kreos Capital. The purpose of the loan was to finance the $10 million payment made by the Company to Biokine as part of the consideration for amending the license agreement for motixafortide. See “Item 4. Information on the Company — Business Overview — In-Licensing Agreements — motixafortide.” The loan had a 12-month interest-only period, which was initiatedconcluded in September 2016, and MSD is supplying its compound for purposes of the study. The parties have agreed on the establishment of2019, followed by a joint development committee which has the responsibility of coordinating all regulatory and other activities36-month repayment period beginning in October 2019. Borrowings under the agreement. Upon completionloan bore interest at a fixed rate of 9.5% per annum. As security for the study, orloan, Kreos Capital received a first-priority, secured interest in all Company assets, including intellectual property. In connection with providing the loan, Kreos Capital received a warrant to purchase 63,837 ADSs at any earlier point, both parties will havean exercise price of $14.10 per ADS. The warrant is exercisable for a period of ten years from the option to expand the collaboration to include a pivotal registration study.
Combination Study Agreement with Genentechdate of issuance. In September 2022, this loan was repaid in full.
In September 2016,2022, we entered into a collaborationnew loan agreement with Genentech to support several Phase 1b studies investigating BL-8040 in combination with TECENTRIQ® (atezolizumab), Genentech’s anti-PDL1 cancer immunotherapy, in multiple cancer indications.Kreos Capital, or the Loan Agreement. Under the collaboration agreement, GenentechLoan Agreement, Kreos Capital will sponsor and conduct several trialsprovide us with access to term loans in multiple solid cancer indications. In addition, we will sponsor and conductan aggregate principal amount of up to $40 million in three tranches as follows: (a) a study in AML patients. The Phase 1b studies, which are all expected to commenceloan in the second halfaggregate principal amount of 2017, will evaluate the clinical response, safety and tolerabilityup to $10 million, available for drawdown upon closing of the combinationLoan Agreement and until April 1, 2023, or Tranche A, (b) a loan in the aggregate principal amount of these therapies,up to $20 million, available for drawdown upon achievement of certain milestones and until April 1, 2024, or Tranche B, and (c) a loan in the aggregate principal amount of up to $10 million, available for drawdown upon achievement of certain milestones and until October 1, 2024, or Tranche C and together with Tranche A and Tranche B, the Loans. We drew down the initial tranche of $10 million following execution of the agreement in September 2022. We intend to use the proceeds of the Loans, together with cash on-hand, to facilitate the commercial launch of motixafortide in autologous stem cell mobilization for multiple myeloma patients, as well as multiple pharmacodynamic parameters, in hematologic malignancies and solid tumors.for general corporate purposes. Upon completionUntil July 1, 2023, Tranche A is payable on an interest-only basis, and thereafter in up to 36 equal monthly payments of principal and interest accrued thereon, subject to extension of the studies, both partiesinterest-only payment period if certain milestones are met, with a corresponding reduction in the principal and interest payment period through July 1, 2026. Until July 1, 2024, Tranche B is payable on an interest-only basis, and thereafter in up to 36 equal monthly payments of principal and interest accrued thereon, subject to extension of the interest-only payment period if certain milestones are met, with a corresponding reduction in the principal and interest payment period through July 1, 2027. Until January 1, 2025, Tranche C is payable on an interest-only basis, and thereafter in up to 30 equal monthly payments of principal and interest accrued thereon, subject to extension of the interest-only payment period if certain milestones are met, with a corresponding reduction in the principal and interest payment period through July 1, 2027.
Interest on each tranche of the Loans accrues at a fixed rate of 9.5% per annum from the drawdown date until repayment in full of the tranche. In addition, the Lender will be entitled to mid-to-high single-digit royalties on motixafortide sales for stem cell mobilization, up to a total maximum aggregate of $13.5 million. We may prepay all, but not less than all, of the outstanding balance of any of the Loans. In case of prepayment within 12 months of a drawdown, we will pay a sum equal to (i) the principal balance then outstanding, and (ii) an aggregate of all remaining interest payments that would have been paid on the optionLoans throughout the remainder of the term of the Loan, discounted back at the secured overnight financing rate administered by the Federal Reserve Bank of New York. In case of prepayment within 13-24 months of the effective date of the Loan Agreement, we will pay a sum equal to expand102% of principal balance then outstanding. In case of prepayment within 25-36 months of the collaborationeffective date of the Loan Agreement, we will pay a sum equal to include101% of the principal balance then outstanding. In connection with any prepayment, we will also pay an end of loan payment equal to 5% of the amount of each tranche drawn down upon the final repayment of each such tranche, or the End of Loan Payment, and any other unpaid fees or costs, if any. In addition, if we prepay the Loans in the first 24 months from the first drawdown and, in the event that the combined cash return to Kreos Capital from the drawn down Loans under the Loan Agreement, including prepayment amounts and any revenue based payments, or the Combined Loan Cash Economics, do not reach 1.3 times the aggregate amount of drawn down Loans, or the Minimum Cash Return Amount, we shall pay Kreos Capital an additional cash amount equal to the difference between the Combined Loan Cash Economics paid or payable and the Minimum Cash Return Amount. The Loans are subject to mandatory accelerated repayment provisions that require repayment of the outstanding principal amount of the Loans, and all accrued and unpaid interest thereon, upon the occurrence of an event of default, subject to certain limitations and cure rights. In addition, in the event of acceleration upon an event of default (a) we will be required to pay the aggregate of the monthly interest payments scheduled to be paid by the Company for the period from the date of acceleration to the expiry of the applicable Loan, in each case discounted from the applicable monthly repayment date to the date of prepayment at the rate of 2% per annum and (b) the End of Loan Payment. In connection with entering into the Loan Agreement, we agreed to pay the Lender a pivotal registration study.fee of up to $30,000 plus value-added-tax for legal and other ancillary fees. Pursuant to the Loan Agreement, upon the execution of the agreement, we agreed to pay Kreos Capital a transaction fee equal to $500,000, and, upon the drawdown of each tranche of the Loans, we shall pay Kreos Capital an advance payment of the last month’s payment of principal and interest for such tranche. Additionally, we will be required to pay an End of Loan Payment. Outstanding borrowings under the Loan Agreement are secured by (a) a first priority fixed charge over certain assets and intellectual property of the Company as well as all shares held by the Company in BioLineRx USA, Inc, or the Fixed Charge, (b) a first priority floating charge over all our assets as of the date of the Loan Agreement or thereafter acquired, other than the assets charged under the Fixed Charge or as otherwise specifically excluded pursuant to the terms of the floating charge, and (c) subject to the provisions of the Fixed Charge, a security interest in our intellectual property. The Loan Agreement contains customary representations and warranties, indemnification provisions in favor of the Lender, events of default and affirmative and negative covenants, including, among others, covenants that limit or restrict the Company’s ability to, among other things, incur additional indebtedness, merge or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity, and dispose of assets, in each case subject to certain exceptions. In addition, the Company is required to maintain a cash balance of at least $10 million. The Company has also granted Kreos Capital certain information rights. D. Exchange Controls There are currently no Israeli governmentgovernmental laws, decrees or regulations that restrict or that affect our exportimport or importexport of capital, including the availability of cash and cash equivalents for use by us and our wholly owned subsidiaries, or the remittance of dividends, interest or other payments to non-resident holders of our securities, including the availabilityexcept for shareholders who are subjects of cash and cash equivalents for use by us and our wholly-owned subsidiaries, exceptcountries that are, or have been, in a state of war with Israel or otherwise as set forth under “Item 10E. Additional Information — Taxation.” E. Taxation
The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our ordinary shares or ADSs, both referred to in this Item 10E as the ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign,non-U.S., including Israeli, or other taxing jurisdiction. Israeli Tax Considerations
The following is a summary of the material Israeli tax laws applicable to us. This section also contains a discussion of material Israeli tax consequences concerning the ownership and disposition of our shares. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. Because certain parts ofTo the extent that this discussion areis based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below. General Corporate Tax Structure in Israel Israeli companies are generally subject to corporate tax on their taxable income. The regular corporate tax rate in Israel was 25% for the year 2016, 24% for the year 2017, andis 23% for the year 2018 and thereafter. Capital gains derived by an Israeli company are now generally subject to tax at the same rate as the corporate tax rate. In May 2012,As of December 31, 2023, the Israeli Tax Authority, or ITA, approved our eligibility for tax benefits as a “Benefited Enterprise” under the Law for the Encouragementloss carryforwards of Capital Investments, 5719-1959, as amended, or Investments Law, with respect to a portion of the consideration deriving from certain of our development programs, or Eligible Projects. Subject to compliance with the applicable requirements, the portion of our undistributed income derived from our Benefited Enterprise programs will be entitled to a seven-year period of tax benefits due to the Company’s location in Modi’in (a tax exemption for a period of two years, followed by five years at the Benefited Enterprise tax rate of 25%) commencing in the first year in which we generate taxable income after setting off our losses for Israeli tax purposes from prior years in the amount ofBioLineRx were approximately $210$304 million. The seven-year period may not extend beyond 12 years from the beginning of the Benefited Enterprise’s election year. We received Benefited Enterprise status with respect to the Eligible Projects in 2009 and 2012 tax years, so depending on when the Benefited Enterprise programs begin to generate taxable income after offsetting tax losses, the benefit period could continue through 2023. However, any distribution of income derived from exempt income sourced in our Benefited Enterprise programs will result in such income being subject to a rate of corporate taxloss carryforwards have no greater than 25%.expiration date. We have the option to transition to a “Preferred Enterprise” regime under the Investments Law with respect to the year 2018 (through May 31, 2018), according to which all of our income which is eligible for benefits under the regime would be subject to flat corporate tax rates of 16% in 2018 and thereafter, whether or not distributed. A transition to a Preferred Enterprise regime may not be reversed.
In addition, the ITA approved certain of our operations as an “Industrial Enterprise” under the Investments Law, meaning that we are eligible for accelerated depreciation with respect to certain tangible assets belonging to our Benefited Enterprise.
Should we not meet the requirements for maintaining these benefits, they may be reduced or cancelled and, among other things, our income deriving from the Eligible Projects (assuming we are profitable for tax purposes after offsetting losses) would be subject to regular corporate tax rate in Israel at the standard rate. If these tax benefits are reduced or eliminated, the amount of taxes that we pay would likely increase, as all of our operations would consequently be subject to corporate tax at the standard rate, which could adversely affect our results of operations.
Taxation of Israeli Individual Shareholders on Receipt of Dividends. Israeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our ordinary shares (other than a pro-rata distribution of bonus shares or share dividends) at a rate of either 25% or 30%, if the recipient of such dividend is a substantial shareholder (as defined below) at the time of distribution or at any time during the preceding 12-month period 30%.period. Taxation of Israeli Resident Corporations on Receipt of Dividends. Israeli resident corporations are generally exempt from Israeli corporate tax for dividends paid on our ordinary shares. However, in the case of both Israeli individual shareholders and Israeli resident corporations, under the Investments Law, dividends distributed from taxable income accrued during the period of benefit of a Benefited Enterprise and which are attributable to a Benefited Enterprise are subject to tax at the rate of 20%, if the dividend is distributed during the tax benefit period under the Investment Law or within 12 years after that period. A weighted average rate may be set if the dividend is distributed from mixed types of income (regular and Benefited Enterprise income). Different tax rates might apply to dividends sourced from profits attributable to a Preferred Enterprise, but this matter is not currently relevant to the Company.
Taxation of Non-Israeli Shareholders on Receipt of Dividends. Non-residents of Israel (individuals or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25% (or 30% if such person is a “substantial shareholder” at the time receiving the dividend or on any date in the 12 months preceding such date), which tax will be withheld at the source, unless a lower rate is provided in the Income Tax Ordinance and/or regulations promulgated thereunder or under a tax treaty between Israel and the shareholder’s country of residence. Ifresidence and subject to the income outreceipt in advance of whicha valid certificate from the dividend is being paid is sourced from profits attributable to a Benefited Enterprise under the Investments Law, the rate is generally not more than 20%.Israeli Tax Authorities. Under the U.S.-Israel Tax Treaty (the “Treaty”), Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%, or 15% in the case of dividends paid out of the profits of a Benefited Enterprise, subject to certain conditions.. Where the recipient is a U.S. corporation owning 10% or more of the voting stock of the paying corporation during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any) and the dividend is not paid from the profits of a Benefited Enterprise, the Israeli tax withheld may not exceed 12.5%, subject to certain conditions. A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a regular basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a director, a general manager of the company or an officer,holders of similar offices in other bodies of persons, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or she is to exercise such right(s), and all regardless of the source of such right. A non-resident of Israel who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of such income, provided that: (1) such income was not derived from a business conducted in Israel by the taxpayer and(2) the taxpayer has no other taxable sources of income in Israel.Israel with respect to which a tax return is required to be filed and (3) the taxpayer is not obliged to pay excess tax. Payers of dividends on our shares, including the Israeli stockbroker effectuating the transaction or the financial institution through which the securities are held, are required, subject to any of the foregoing exemptions, reduced tax rates and the demonstration of a shareholder of his, her or its foreign residency, to withhold taxes upon the distribution of dividends at a rate of 25%, provided that the shares are registered with a nominee company. Taxation of Capital Gains. Israeli law imposes a capital gains tax on the sale or exchange of any capital assets by residents of Israel, as defined for Israeli tax purposes, and on the sale or exchange of assets located in Israel, including shares in Israeli companies, by non-residents of Israel, unless a specific exemption is available pursuant to the Income Tax Ordinance or the regulations thereunder or unless a tax treaty between Israel and the shareholder’s country of residence provides otherwise.otherwise and subject to the receipt in advance of a valid certificate from the Israeli Tax Authorities. The law distinguishes between real capital gain and inflationary surplus. The inflationary surplus is a portion of the total capital gain that is equivalent to the increase of the relevant asset’s purchase price which is attributable to the increase in the Israeli consumer price index or, in certain circumstances, a foreign currency exchange rate, between the date of purchase and the date of sale. The real capital gain is the excess of the total capital gain over the inflationary surplus. The inflationary surplus is generally exempt from tax. Capital Gains Taxes Applicable to Israeli Resident Shareholders. An individual is subject to a tax at a rate of 25% on real capital gains derived from the sale of shares, as long as the individual is not a substantial shareholder at the time of sale or at any time during the 12-month period preceding the company’s issuance of the shares. An individual who is a substantial shareholder at the time of sale or at any time during the preceding 12-month period is subject to tax at a rate of 30% in respect of real capital gains derived from the sale of shares issued by the company in which he or she is a substantial shareholder. 107
Real capital gains derived by an Israeli company are generally subject to tax at the same rate as the corporate tax rate (currently 23%). Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders. Shareholders that are not Israeli residents are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of our ordinary shares, provided that such shareholders did not acquire their ordinary shares prior to our initial public offering on the TASE and such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemptions if one or more Israeli residents (a) have a controlling interest of more than 25% or more in such non-Israeli corporation or (b) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. In addition, under the U.S.-Israel Tax Treaty, the sale, exchange or disposition of our ordinary shares by a shareholder who is a U.S. resident (for purposes of the U.S.-Israel Tax Treaty) holding the ordinary shares as a capital asset is exempt from Israeli capital gains tax unless (1) the shareholder holds, directly or indirectly, shares representing 10% or more of our voting capital during any part of the 12-month period preceding such sale, exchange or disposition; (2) the capital gains arising from such sale are attributable to a permanent establishment of the shareholder located in Israel; (3) a shareholder who is an individual is present in Israel for a period or periods aggregating 183 days or more during a taxable year. In either case, the sale, exchange or disposition of ordinary shares would be subject to Israeli tax, to the extent applicable;applicable (subject to the receipt in advance of a valid certificate from the Israeli tax authorities); however, under the U.S.-Israel Tax Treaty, the U.S. resident would be permitted to claim a credit for the tax against the U.S. federal income tax imposed with respect to the sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits. The U.S.-Israel Tax Treaty does not relate tocover U.S. state or local taxes. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale. The purchaser, the Israeli stockbrokers or financial institution through which the shares are held are obliged, subject to the above mentioned exemptions, to withhold tax upon the sale of securities on the amount of the consideration paid upon the sale of the securities (or on the real capital gain realized on the sale, if known), at the rate of 25% in respect of an individual or at a corporate rate in respect of a corporation (23%). Upon the sale of securities traded on a stock exchange, a detailed return, including a computation of the tax due, must be filed and an advance payment must be paid on January 31 and July 31 of every tax year in respect of sales of securities made within the previous six months (or within 30 days of the sale if the seller is not otherwise required to file a tax return in Israel). However, if all tax due was withheld at source according to applicable provisions of the Income Tax Ordinance and regulations promulgated thereunder, the aforementioned return need not be filed and no advance payment must be paid. Capital gain is also reportable on the annual income tax returns. Excess Tax. Individuals who are subject to tax in Israel (whether such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at a rate of 3% in 2017 and thereafter on annual income exceeding a certain threshold (NIS 640,000NIS 698,280 for 20172023 and thereafter, whichNIS 721,560 for 2024 (which amount is linked to the annual change in the Israeli consumer price index), including, but not limited to, dividends, interest and capital gains. U.S. Federal Income Tax Considerations
The following is a general summary of thecertain material U.S. federal income tax considerations relating to the purchase, ownership and disposition of our ordinary shares and ADSs by U.S. Investors (as defined below) that are initial purchasers of such ordinary shares or ADSs and that hold such ordinary shares or ADSs as capital assets.assets for U.S. federal income tax purposes (generally, property held for investment). This summary is based on the Internal Revenue Code of 1986, as amended, or the Code, the regulations of the U.S. Department of the Treasury issued pursuant to the Code, or the Treasury Regulations, the Treaty, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or to different interpretation. No ruling has been sought from the IRS with respect to any U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This summary is for general information only and does not address all of the tax considerations that may be relevant to specific U.S. Investors in light of their particular circumstances or to U.S. Investors subject to special treatment under U.S. federal income tax law (such as, without limitation, banks, insurance companies, tax-exempt entities, retirement plans, regulated investment companies, partnerships, dealers in securities, brokers, real estate investment trusts, grantor trusts, persons who acquire our ordinary shares through the exercise or cancellation of employee stock options or otherwise as compensation for their services, certain former citizens or residents of the United States, persons who acquire our ordinary shares or ADSs as part of a straddle, hedge, conversion transaction or other integrated investment, persons that have a “functional currency” other than the Dollar, persons that own (or are deemed to own, indirectly or by attribution) 10% or more of our ordinary shares or ADSs (by vote or value), persons subject to special tax accounting rules under section 451(b), or persons that generally mark their securities to market for U.S. federal income tax purposes). This summary does not address any U.S. state or local or non-U.S. tax considerations, or any U.S. federal estate, gift or alternative minimum tax considerations.considerations or any additional U.S. federal tax consequences other than U.S. federal income tax consequences. As used in this summary, the term “U.S. Investor” means a beneficial owner of our ordinary shares or ADSs that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or a trust that has validly elected to be treated as a U.S. person for U.S. federal income tax purposes, whose status as a U.S. person is not overwritten by an applicable tax treaty.
If an entity treated as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs, the tax treatment of such partnershipentity and each person treated as a partner thereof will generally depend upon the status and activities of the partnershipentity and such partner. A holderperson. An investor that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal income tax considerations applicable to it and its partners of the purchase, ownership and disposition of its ordinary shares or ADSs. Prospective investors should be aware that this summary does not address the tax consequences to investors who are not U.S. Investors. Prospective investors should consult their own tax advisors as to the particular tax considerations applicable to them relating to the purchase, ownership and disposition of their ordinary shares or ADSs, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.laws. Taxation of U.S. Investors The discussions under “— Distributions,” and under “— Sale, Exchange or Other Disposition of Ordinary Shares or ADSs” below assumes that we will not be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. However, we have not determined whether we will be a PFIC for the taxable year ending December 31, 2018,2024, and it is possible that we will be a PFIC for the taxable year ending December 31, 20182024 or in any subsequent year. For a discussion of the rules that would apply if we are treated as a PFIC, see the discussion under “— Passive Foreign Investment Company.” Distributions. We have no current plans to pay dividends. To the extent we pay any dividends, a U.S. Investor will be required to include in gross income as a taxable dividend the amount of any distributions made on the ordinary shares or ADSs, including the amount of any Israeli taxes withheld, when actually or constructively received, to the extent that those distributions are paid out of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. Any distributions in excess of our earnings and profits will be applied against and will reduce the U.S. Investor’s tax basis in its ordinary shares or ADSs and to the extent they exceed that tax basis, will be treated as gain from the sale or exchange of those ordinary shares or ADSs. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Investor should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. If we were to pay dividends to holders of our ordinary shares, we expect to pay such dividends in NIS; however, dividends paid to holders of our ADSs will be paid in dollars. A dividend paid in NIS, including the amount of any Israeli taxes withheld, will be includible in a U.S. Investor’s income as a dollar amount calculated by reference to the exchange rate in effect on the date such dividend is received, regardless of whether the payment is in fact converted into dollars. If the dividend is converted to dollars on the date of receipt, a U.S. Investor generally will not recognize a foreign currency gain or loss. However, if the U.S. Investor converts the NIS into dollars on a later date, the U.S. Investor must include, in computing its income, any gain or loss resulting from any exchange rate fluctuations. The gain or loss will be equal to the difference between (i) the dollar value of the amount included in income when the dividend was received and (ii) the amount received on the conversion of the NIS into dollars. Such gain or loss will generally be ordinary income or loss and United States source for U.S. foreign tax credit purposes. U.S. Investors should consult their own tax advisors regarding the tax consequences to them if we pay dividends in NIS or any other non-U.S. currency. Subject to certain significant conditions and limitations, including potential limitations under the United States-Israel income tax treaty,Treaty, any Israeli taxes paid on or withheld from distributions from us and not refundable to a U.S. Investor may be credited against the investor’s U.S. federal income tax liability or, alternatively, may be deducted from the investor’s taxable income. This election is made on a year-by-year basis and applies to all foreign taxes paid by a U.S. Investor or withheld from amounts paid to a U.S. Investor that year. Dividends paid on the ordinary shares or ADSs generally will constitute income from sources outside the United States and be categorized as “passive category income” or, in the case of some U.S. Investors, as “general category income” for U.S. foreign tax credit purposes.
As a result of recent changes to the U.S. foreign tax credit rules, a withholding tax generally will need to satisfy certain additional requirements in orders to be considered a creditable tax for a U.S. investor. We have not determined whether these requirements have been met and, accordingly, no assurance can be given that any withholding tax on dividends paid by us will be creditable. Since the rules governing foreign tax credits are complex, U.S. Investors should consult their own tax advisor regarding the availability of foreign tax credits in their particular circumstances. Dividends paid on the ordinary shares and ADSs will not be eligible for the “dividends-received” deduction generally allowed to corporate U.S. Investors with respect to dividends received from U.S. corporations. Distributions treated as dividends that are received by an individual U.S. Investor from “qualified foreign corporations” generally qualify for a reduced maximum tax rate so long as certain holding period and other requirements are met. Dividends paid by us inA non-U.S. corporation (other than a PFIC for the taxable year in which we are notthe dividend is paid or the preceding taxable year) generally will be considered to be a PFIC are expected to bequalified foreign corporation (i) if it is eligible for the reduced maximumbenefits of a comprehensive tax rate. However,treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program, or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. Any dividend paid by us in a taxable year in which we are a PFIC (or with respect to which we were a PFIC in the preceding taxable year) will be subject to tax at regular ordinary income rates. As mentioned above, we believe we were not a PFIC for our 2023 taxable year and have not determined whether we are currentlywill be a PFIC or not.for our 2024 taxable year. U.S. Investors should consult their own tax advisors regarding the availability of the lower rate for dividends paid with respect to our ordinary shares and ADSs. The additional 3.8% Medicare tax (described below) may apply to dividends received by certain U.S. Investors who meet certain modified adjusted gross income thresholds. Sale, Exchange or Other Disposition of Ordinary Shares and ADSs. Subject to the discussion under “— Passive Foreign Investment Company” below, a U.S. Investor generally will recognize capital gain or loss upon the sale, exchange or other taxable disposition of ordinary shares or ADSs in an amount equal to the difference between the amount realized on the sale, exchange or other taxable disposition and the U.S. Investor’s adjusted tax basis in such ordinary shares or ADSs. This capital gain or loss will be long-term capital gain or loss if the U.S. Investor’s holding period in the ordinary shares or ADSs exceeds one year. Preferential tax rates for long-term capital gain will apply to individual U.S. Investors. The deductibility of capital losses is subject to limitations. The gain or loss will generally be income or loss from sources within the United States for U.S. foreign tax credit purposes.purposes, subject to certain possible exceptions under the Treaty. The additional 3.8% Medicare tax (described below) may apply to gains recognized upon the sale, exchange, or other taxable disposition of our ordinary shares or ADSs by certain U.S. Investors who meet certain modified adjusted gross income thresholds. U.S. Investors should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currency other than Dollars upon the disposition of ordinary shares or ADSs. Medicare Tax. In addition, certain U.S. persons, including individuals, estates and trusts, will be subject to an additional 3.8% Medicare tax, or net investment income tax, on unearned income. For individuals, the additional Medicare tax applies to the lesser of (i) “net investment income” or (ii) the excess of “modified adjusted gross income” over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). “Net investment income” generally equals the taxpayer’s gross investment income reduced by the deductions that are allocable to such income. Investment income generally includes passive income such as interest, dividends, annuities, royalties, rents, and capital gains. U.S. Investors are urged to consult their own tax advisors regarding the implications of the additional Medicare tax resulting from their ownership and disposition of ordinary shares or ADSs. Passive Foreign Investment Company In general, a corporation organized outside the United States will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% of its gross income is “passive income” or (ii) on average at least 50% of its assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in the public offering. Assets that produce or are held for the production of passive income may include cash, even if held as working capital or raised in a public offering, as well as marketable debt securities and other assets that may produce passive income. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.
Under the tests described above, whether or not we are a PFIC will be determined annually based upon the composition of our income and the composition and valuation of our assets, all of which are subject to change. We believe that we were a PFIC for U.S. federal income tax purposes for taxable years ended prior to December 31, 2009 and for taxable years ended December 31, 2011, 2012 and 2014 through 2017.2019. We believe we were not a PFIC for taxable years ended 2009, 2010, 2013, 2020, 2021, 2022 and 2013,2023, and we have not determined whether we will be a PFIC for the taxable year ending December 31, 2018.2024. Because the PFIC determination is highly fact intensive and made at the end of each taxable year, there can be no assurance that we will not be a PFIC for taxable year ending December 31, 20182024 or in any subsequent year. Upon request, we willintend to annually inform U.S. Investors if we and any of our subsidiaries were a PFIC with respect to the preceding year. U.S. Investors should be aware of certain tax consequences of investing directly or indirectly in us if we are a PFIC. A U.S. Investor is subject to different rules depending on whether the U.S. Investor makes an election to treat us as a “qualified electing fund,” known as a QEF election, for the first taxable year that the U.S. Investor holds ordinary shares or ADSs, which is referred to in this disclosure as a “timely QEF election,” makes a “mark-to-market” election with respect to the ordinary shares or ADSs (if such election is available) or makes neither election. QEF Election. A U.S. Investor who makes a timely QEF election, referred to in this disclosure as an “Electing U.S. Investor,” with respect to us must report for U.S. federal income tax purposes his pro rata share of our ordinary earnings and net capital gain, if any, for our taxable year that ends with or within the taxable year of the Electing U.S. Investor. The “net capital gain” of a PFIC is the excess, if any, of the PFIC’s net long-term capital gains over its net short-term capital losses. The amount so included in income generally will be treated as ordinary income to the extent of such Electing U.S. Investor’s allocable share of the PFIC’s ordinary earnings and as long-term capital gain to the extent of such Electing U.S. Investor’s allocable share of the PFIC’s net capital gains. Such Electing U.S. Investor generally will be required to translate such income into Dollars based on the average exchange rate for the PFIC’s taxable year with respect to the PFIC’s functional currency. Such income generally will be treated as income from sources outside the United States for U.S. foreign tax credit purposes. Amounts previously included in income by such Electing U.S. Investor under the QEF rules generally will not be subject to tax when they are distributed to such Electing U.S. Investor. The Electing U.S. Investor’s tax basis in ordinary shares or ADSs generally will increase by any amounts so included under the QEF rules and decrease by any amounts not included in income when distributed. An Electing U.S. Investor will be subject to U.S. federal income tax on such amounts for each taxable year in which we are a PFIC, regardless of whether such amounts are actually distributed to such Electing U.S. Investor. However, an Electing U.S. Investor may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If an Electing U.S. Investor is an individual, any such interest will be treated as non-deductible “personal interest.” Any net operating losses or net capital losses of a PFIC will not pass through to the Electing U.S. Investor and will not offset any ordinary earnings or net capital gain of a PFIC recognized by Electing U.S. Investors in subsequent years (although such losses would ultimately reduce the gain, or increase the loss, recognized by the Electing U.S. Investor on its disposition of the ordinary shares or ADSs).years. So long as an Electing U.S. Investor’s QEF election with respect to us is in effect with respect to the entire holding period for ordinary shares or ADSs, any gain or loss recognized by such Electing U.S. Investor on the sale, exchange or other disposition of such ordinary shares or ADSs generally will be long-term capital gain or loss if such Electing U.S. Investor has held such ordinary shares or ADSs for more than one year at the time of such sale, exchange or other disposition. Preferential tax rates for long-term capital gain will apply to individual U.S. Investors. The deductibility of capital losses is subject to limitations. A U.S. Investor makes a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. A QEF election generally may not be revoked without the consent of the IRS. Upon request, we willintend to annually furnish U.S. Investors with information needed in order to complete IRS Form 8621 (which form would be required to be filed with the IRS on an annual basis by the U.S. Investor) and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. A QEF election will not apply to any taxable year during which we are not a PFIC but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Each U.S. Investor is encouraged to consult its own tax advisor with respect to tax consequences of a QEF election with respect to us. Mark-to-Market Election. Alternatively, if our ordinary shares or ADSs are treated as “marketable stock,” a U.S. Investor would be allowed to make a “mark-to-market” election with respect to our ordinary shares or ADSs, provided the U.S. Investor completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Investor generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the ordinary shares or ADSs at the end of the taxable year over such holder’sinvestor’s adjusted tax basis in the ordinary shares or ADSs. Thus, the U.S. Investor may recognize taxable income without receiving any cash to pay its tax liability with respect to such income. The U.S. Investor would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Investor’s adjusted tax basis in the ordinary shares or ADSs over their fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Investor’s tax basis in the ordinary shares or ADSs would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of the ordinary shares or ADSs would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the ordinary shares or ADSs would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Investor, and any loss in excess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains.
Generally, stock will be considered marketable stock if it is “regularly traded” on a “qualified exchange” within the meaning of applicable Treasury Regulations. A class of stock is regularly traded on an exchange during any calendar year during which such class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. To be marketable stock, our ordinary shares or ADSs must be regularly traded on a qualifying exchange (i) in the United States that is registered with the SEC or a national market system established pursuant to the Exchange Act or (ii) outside the United States that is properly regulated and meets certain trading, listing, financial disclosure and other requirements. A mark-to-market election will not apply to our ordinary shares or ADSs held by a U.S. Investor for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC unless our ordinary shares or ADSs cease to be marketable. A mark-to-market election generally may not be revoked without the consent of the IRS. Such election will not apply to any PFIC subsidiary that we own. Each U.S. Investor is encouraged to consult its own tax advisor with respect to the availability and tax consequences of a mark-to-market election with respect to our ordinary shares or ADSs. Default PFIC Rules. A U.S. Investor who does not make a timely QEF election or a mark-to-market election, referred to in this disclosure as a “Non-Electing U.S. Investor,” will be subject to special rules with respect to (a) any “excess distribution” (generally, the portion of any distributions received by the Non-Electing U.S. Investor on the ordinary shares or ADSs in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing U.S. Investor in the three preceding taxable years, or, if shorter, the Non-Electing U.S. Investor’s holding period for the ordinary shares or ADSs), and (b) any gain realized on the sale or other disposition of such ordinary shares or ADSs. Under these rules: | · | the excess distribution or gain would be allocated ratably over the Non-Electing U.S. Investor’s holding period for the ordinary shares or ADSs; |
| · | the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and |
| · | the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. |
If a Non-Electing U.S. Investor who is an individual dies while owning our ordinary shares or ADSs, the Non-Electing U.S. Investor’s successor would be ineligible to receive a step-up in tax basis of the ordinary shares or ADSs. Non-Electing U.S. Investors are encouraged to consult their tax advisors regarding the application of the PFIC rules to their specific situation. A Non-Electing U.S. Investor who wishes to make a QEF election for a subsequent year may be able to make a special “purging election” pursuant to Section 1291(d) of the Code. Pursuant to this election, a Non-Electing U.S. Investor would be treated as selling his or her ordinary shares or ADSs for fair market value on the first day of the taxable year for which the QEF election is made. Any gain on such deemed sale would be subject to tax under the rules for Non-Electing U.S. Investors as discussed above. Non-Electing U.S. Investors are encouraged to consult their tax advisors regarding the availability of a “purging election” as well as other available elections. To the extent a distribution on our ordinary shares or ADSs does not constitute an excess distribution to a Non-Electing U.S. Investor, such Non-Electing U.S. Investor generally will be required to include the amount of such distribution in gross income as a dividend to the extent of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) that are not allocated to excess distributions. The tax consequences of such distributions are discussed above under “— Taxation of U.S. Investors — Distributions.” Each U.S. Investor is encouraged to consult its own tax advisor with respect to the appropriate U.S. federal income tax treatment of any distribution on our ordinary shares or ADSs.
If we are treated as a PFIC for any taxable year during the holding period of a Non-Electing U.S. Investor, we will continue to be treated as a PFIC for all succeeding years during which the Non-Electing U.S. Investor is treated as a direct or indirect Non-Electing U.S. Investor even if we are not a PFIC for such years. A U.S. Investor is encouraged to consult its tax advisor with respect to any available elections that may be applicable in such a situation, including the “deemed sale” election of Code Section 1298(b)(1). of the Code. In addition, U.S. Investors should consult their tax advisors regarding the IRS information reporting and filing obligations that may arise as a result of the ownership of shares in a PFIC, including IRS Form 8621. We may invest in the equity of foreign corporations that are PFICs or may own subsidiaries that own PFICs. U.S. Investors will be subject to the PFIC rules with respect to their indirect ownership interests in such PFICs, such that a disposition of the shares of the PFIC or receipt by us of a distribution from the PFIC generally will be treated as a deemed disposition of such shares or the deemed receipt of such distribution by the U.S. Investor, subject to taxation under the PFIC rules. There can be no assurance that a U.S. Investor will be able to make a QEF election or a mark-to-market election with respect to PFICs in which we invest. Each U.S. Investor is encouraged to consult its own tax advisor with respect to tax consequences of an investment by us in a corporation that is a PFIC. The U.S. federal income tax rules relating to PFICs are complex. U.S. Investors are urged to consult their own tax advisors with respect to the purchase, ownership and disposition of ordinary shares or ADSs, any elections available with respect to such ordinary shares or ADSs and the IRS information reporting obligations with respect to the purchase, ownership and disposition of ordinary shares or ADSs. Certain Reporting Requirements Certain U.S. Investors may be required to file IRS Form 926, Return by U.S. Transferor of Property to a Foreign Corporation and IRS Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, reporting transfers of cash or other property to us and information relating to the U.S. Investor and us. Substantial penalties may be imposed upon a U.S. Investor that fails to comply. Certain U.S. Investors owning “specified foreign financial assets” with an aggregate value in excess of $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amount as may be prescribed by applicable IRS guidance) may be required to file IRS Form 8938, Statement of Specified Foreign Financial Assets, with respect to such assets with their tax returns. “Specified foreign financial assets” generally include any financial accounts maintained by foreign financial institutions, as well as any of the following but only if they areheld for investment and not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, which may include the ordinary shares or ADSs, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities. The IRS has issued guidance exempting “specified foreign financial assets” held in a financial account from reporting under this provision (although the financial account itself, if maintained by a foreign financial institution, may remain subject to this reporting requirement). U.S. Investors are urged to consult their tax advisors regarding the application of these requirements to their ownership of the ordinary shares or ADSs. If we are treated as a PFIC, U.S. Investors may begenerally are required to file annual tax returns (including on IRS Form 8621) containing such information as the U.S. Treasury requires.requires (whether or not a mark-to-market election is or has been made). A U.S. Investor that is not otherwise required to file a U.S. tax return must still file IRS Form 8621 in accordance with the instructions for the Form. Failure to file IRS Form 8621 for each applicable taxable year may result in substantial penalties and the statute of limitations on the assessment and collection of U.S. federal income taxes of such U.S. Investor for the related taxable year may not close until three years after the date on which the required information is filed. U.S. Investors should consult their tax advisors regarding the IRS information reporting and filing obligations that may arise as a result of the ownership of shares in a PFIC, including IRS Form 8621. Backup Withholding Tax and Information Reporting Requirements Generally, information reporting requirements will apply to distributions on our ordinary shares or ADSs or proceeds on the disposition of our ordinary shares or ADSs paid within the United States (and, in certain cases, outside the United States) to U.S. Investors other than certain exempt recipients, such as corporations. Furthermore, backup withholding may apply to such amounts if the U.S. Investor fails to (i) provide a correct taxpayer identification number, (ii) report interest and dividends required to be shown on its U.S. federal income tax return, or (iii) make other appropriate certifications in the required manner. U.S. Investors who are required to establish their exempt status generally must provide such certification on IRS Form W-9. Backup withholding is not an additional tax. Amounts withheld as backup withholding from a payment may be credited against a U.S. Investor’s U.S. federal income tax liability and such U.S. Investor may obtain a refund of any excess amounts withheld by timely filing the appropriate claim for refund with the IRS and furnishing any required information in a timely manner.
U.S. Investors should consult their own tax advisors concerning the tax consequences relating to the purchase, ownership and disposition of the ordinary shares or ADSs. F. Dividends and Paying Agents Not applicable. G. Statement by Experts Not applicable. H. Documents on Display We are currently subject to the information and periodic reporting requirements of the Exchange Act, and file periodic reports and other information with the SEC through its electronic data gathering, analysis and retrieval (EDGAR) system. Our securities filings, including this Annual Report andAs a foreign private issuer, all documents which were filed after September 24, 2010 on the exhibits thereto,SEC’s EDGAR system are available for inspection and copying at the public reference facilities of the SEC located at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further informationretrieval on the public reference room. The SEC also maintains aSEC’s website at http://www.sec.gov from which certain filings may be accessed.www.sec.gov. As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. In addition, since our ordinary shares are traded on the TASE, we also file periodic and immediate reports with, and furnish information to, the TASE and the ISA, or the ISA, as required under Chapter Six of the IsraelIsraeli Securities Law 1968 and the regulations enacted pursuant thereof, as applicable to a public company which also trades on the Nasdaq. Copies of our filings with the ISA can be retrieved electronically through the MAGNA distribution site of the ISA (www.magna.isa.gov.il) and the TASE website (www.maya.tase.co.il). We maintain a corporate website at www.biolinerx.com. Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report on Form 20-F. We have included our website address in this Annual Report on Form 20-F solely as an inactive textual reference. I. Subsidiary Information Not applicable. J. Annual Report to Security Holders Not applicable. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ON MARKET RISK Market risk is the risk of loss related to changes in market prices, including interest rates and foreign exchange rates, of financial instruments that may adversely impact ourOur consolidated financial position, results of operations or cash flows. We do not use derivative financial instruments for trading purposes. Accordingly, we have concluded that there is no material market risk exposure ofstatements are prepared in conformity with IFRS, as issued by the type contemplated by Item 11, and that no quantitative tabular disclosures are required.IASB. We are exposed to certain other typesa variety of market risks in the ordinary course of our business, including, but not limited to, interest rate risk, foreign exchange risk, liquidity risk and credit risk, as describeddiscussed below. We regularly assess each of these risks to minimize any adverse effects on our business as a result of those factors. See Note 3 to our consolidated financial statements, which are included elsewhere in this Annual Report, for further discussion of our exposure to these risks. Risk of Interest Rate Fluctuation Our investments consist primarily of cash, cash equivalents and short-term bank deposits. We may also invest in investment-grade marketable securities with maturities of up to three years, including commercial paper, money market funds, and government/non-government debt securities. The primary objective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk and loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. We manage this exposure by performing ongoing evaluations of our investments. Due to the short-term maturities of our investments to date, their carrying value has always approximated their fair value. It will be our policy to hold investments to maturity in order to limit our exposure to interest rate fluctuations. Foreign Currency Exchange Risk Effective January 1, 2015, ourOur reporting and functional currency is the dollar. However, we pay a significant portion of our expenses in NIS and in euro, and we expect this to continue. If the dollar weakens against the NIS or the euro in the future, there may be a negative impact on our results of operations. The revenues from our current out-licensing and co-development arrangements are payable in dollars and euros. Although we expect our revenues from future licensing arrangements to be denominated primarily in dollars, we are exposed to the currency fluctuation risks relating to the recording of our revenues in currencies other than dollars. For example, if the euro strengthens against the dollar, our reported revenues in dollars may be lower than anticipated. To date, fluctuations in the exchange rates have not materially affected our results of operations or financial condition for the periods under review.
From time to time, we have engaged in currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies, and we may continue to do so in the future. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES A. Debt Securities Not applicable. B. Warrants and Rights Not applicable. C. Other Securities Not applicable. D. American Depositary Shares Set forth below is a summary of some of the material terms of the deposit agreement among BioLineRx, The Bank of New York Mellon as depositary, or the Depositary, and the owners and holders from time to time of our ADSs. Description of the ADSs Each of our ADSs represents one15 of our ordinary shares deposited with the principal Tel Aviv office of either of Bank Hapoalim B.M. or Bank Leumi Le-Israel, as Custodian for the Depositary. Our ADSs trade on the Nasdaq. The form of the deposit agreement for the ADS and the form of American Depositary Receipt (ADR) that represents an ADS have been incorporated by reference as exhibits to this Annual Report on Form 20-F. Copies of the deposit agreement are available for inspection at the principal office of The Bank of New York Mellon, located at 101 Barclay Street, New York, New York 10286. Dividends, Other Distributions and Rights
Amounts distributed to ADS holders will be reduced by any taxes or other governmental charges required to be withheld by the custodian or the Depositary. If the Depositary determines that any distribution in cash or property is subject to any tax or governmental charges that the Depositary or the custodian is obligated to withhold, the Depositary may use the cash or sell or otherwise dispose of all or a portion of that property to pay the taxes or governmental charges. The Depositary will then distribute the balance of the cash and/or property to the ADS holders entitled to the distribution after deducting its fees and expenses, in proportion to their holdings.
Cash dividends and cash distributions. The Depositary will convert into dollars all cash dividends and other cash distributions that it or the custodian receives in a foreign currency. The Depositary will distribute to the ADS holders the amount it receives, after deducting any currency conversion expenses. If the Depositary determines that any foreign currency it receives cannot be converted and transferred on a reasonable basis, it may distribute the foreign currency (or an appropriate document evidencing the right to receive the currency), or hold that foreign currency uninvested, without liability for interest, for the accounts of the ADS holders entitled to receive it.
Distributions of ordinary shares. If we distribute ordinary shares as a dividend or free distribution, the Depositary may distribute to ADS holders new ADSs representing the ordinary shares. The Depositary will distribute only whole ADSs. It will sell the ordinary shares that would have required it to use fractional ADSs and then distribute the proceeds in the same way it distributes cash. If the Depositary deposits the ordinary shares but does not distribute additional ADSs, the existing ADSs will also represent the new ordinary shares.
Other distributions. If the Depositary or the custodian receives a distribution of anything other than cash or shares, the Depositary will, after consultation with us to the extent practicable, distribute the property or securities to the ADS holder, in proportion to such holder’s holdings upon payment of its fees. If, however, the Depositary determines that it cannot distribute the property or securities in this manner or that it is not feasible to do so, then it may distribute the property or securities by any means it thinks are equitable and practical, or it may sell the property or securities and distribute the net proceeds of the sale to the ADS holders. The Depositary may sell a portion of any distributed property that is sufficient to pay its fees.
Rights to subscribe for additional ordinary shares and other rights. If we offer our holders of ordinary shares any rights to subscribe for additional ordinary shares or any other rights, the Depositary may:
make the rights available to all or certain holders of ADSs, by means of warrants or otherwise, if lawful and practically feasible; or
attempt to sell those rights or warrants or other instruments.
In the case of a sale, the Depositary will allocate the net proceeds of the sales to the account of the ADS holders entitled to the rights. The allocation will be made on an averaged or other practicable basis without regard to any distinctions among holders.
If registration under the Securities Act of 1933, as amended, or the Securities Act, is required in order to offer or sell to the ADS holders the securities represented by any rights, the Depositary will not make the rights available to ADS holders unless a registration statement is in effect or such securities are exempt from registration. We do not, however, have any obligation to file a registration statement or to have a registration statement declared effective. If the Depositary does not make any rights available to ADS holders and cannot dispose of the rights and make the net proceeds available to ADS holders, then it will allow the rights to lapse, and the ADS holders will not receive any value for them.
Voting of the underlying shares. Under the deposit agreement, an ADS holder is entitled, subject to any applicable provisions of Israeli law, our Articles of Association and the deposited securities, to exercise voting rights pertaining to the shares represented by its ADSs. The Depositary will notify ADS holders of shareholders’ meetings and arrange to deliver our voting materials to them if we request. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must reach the Depositary by a date set by the Depositary. The Depositary will try, as far as practical, subject to the laws of Israel and of our Articles of Association, to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. The Depositary will only vote or attempt to vote as instructed or as described in the following sentence. If we asked the Depositary to solicit your instructions at least 30 days before the meeting date but the Depositary does not receive voting instructions from you by the specified date, it will consider you to have authorized and directed it to give a discretionary proxy to a person designated by us to vote the number of deposited securities represented by your ADSs. In such case, the restrictions of the Israeli Companies Law with respect to “personal interest,” as described elsewhere in this annual report, would apply as well. The Depositary’s discretionary proxy to vote on all questions to be voted upon will be given to us as described above unless we notify the Depositary that:
• we do not wish to receive a discretionary proxy;
• there is substantial shareholder opposition to the particular question; or
• the particular question would have an adverse impact on our shareholders.
We are required to notify the Depositary if one of the conditions specified above exists.
Changes affecting deposited securities. If there is any change in nominal value or any split-up, consolidation, cancellation or other reclassification of deposited securities, or any recapitalization, reorganization, business combination or consolidation or sale of assets involving us, then any securities that the Depositary receives in respect of deposited securities will become new deposited securities. Each ADS will automatically represent its share of the new deposited securities, unless the Depositary delivers new ADSs as described in the following sentence. The Depositary may distribute new ADSs or ask ADS holders to surrender their outstanding ADRs in exchange for new ADRs describing the new deposited securities.
Amendment of the deposit agreement. The Depositary and we may agree to amend the form of the ADSs and the deposit agreement at any time, without the consent of the ADS holders. If the amendment adds or increases any fees or charges (other than taxes or other governmental charges) or prejudices an important right of ADS holders, it will not take effect as to outstanding ADSs until 30 days after the Depositary has sent the ADS holders a notice of the amendment. At the expiration of that 30-day period, each ADS holder will be considered by continuing to hold its ADSs to agree to the amendment and to be bound by the deposit agreement as so amended. The Depositary and we may not amend the deposit agreement or the form of ADRs to impair the ADS holder’s right to surrender its ADSs and receive the ordinary shares and any other property represented by the ADRs, except to comply with mandatory provisions of applicable law.
Termination of the deposit agreement. The Depositary will terminate the deposit agreement if we ask it to do so and will notify the ADS holders at least 30 days before the date of termination. The Depositary may also terminate the deposit agreement if it resigns and a successor depositary has not been appointed by us and accepted its appointment within 60 days after the Depositary has given us notice of its resignation. After termination of the deposit agreement, the Depositary will no longer register transfers of ADSs, distribute dividends to the ADS holders, accept deposits of ordinary shares, give any notices, or perform any other acts under the deposit agreement whatsoever, except that the Depositary will continue to:
collect dividends and other distributions pertaining to deposited securities;
sell rights as described under the heading “Dividends, Other Distributions and Rights — Rights to subscribe for additional shares and other rights” above; and
deliver deposited securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for surrendered ADRs.
Four months after termination, the Depositary may sell the deposited securities and hold the proceeds of the sale, together with any other cash then held by it, for the pro rata benefit of ADS holders that have not surrendered their ADSs. The Depositary will not have liability for interest on the sale proceeds or any cash it holds.
Charges of Depositary We will pay the fees, reasonable expenses and out-of-pocket charges of the Depositary and those of any registrar only in accordance with agreements in writing entered into between us and the Depositary from time to time. The following charges shall be incurred by any party depositing or withdrawing ordinary shares or by any party surrendering ADRs or to whom ADRs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or deposited ordinary shares or a distribution of ADRs pursuant to the terms of the deposit agreement): taxes and other governmental charges; any applicable transfer or registration fees; certain cable, telex and facsimile transmission charges as provided in the deposit agreement; any expenses incurred in the conversion of foreign currency; a fee of $5.00 or less per 100 ADSs (or a portion thereof) for the execution and delivery of ADRs and the surrender of ADRs, including if the deposit agreement terminates; a fee of $.05 or less per ADS (or portion thereof) for any cash distribution made pursuant to the deposit agreement; a fee for the distribution of securities pursuant to the deposit agreement; in addition to any fee charged for a cash distribution, a fee of $.05 or less per ADS (or portion thereof) per annum for depositary services; a fee for the distribution of proceeds of rights that the Depositary sells pursuant to the deposit agreement; and any other charges payable by the Depositary, any of the Depositary’s agents, or the agents of the Depositary’s agents in connection with the servicing of ordinary shares or other Deposited Securities. The Depositary may own and deal in our securities and in ADSs. The Depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The Depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The Depositary may generally refuse to provide fee-attracting services until its fees for those services are paid. From time to time, the Depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the Depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the Depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the Depositary and that may earn or share fees, spreads or commissions. The Depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the Depositary or its affiliate receives when buying or selling foreign currency for its own account. The Depositary makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the Depositary’s obligations under the deposit agreement. The methodology used to determine exchange rates used in currency conversions is available upon request. Liability of Holders for Taxes, Duties or Other Charges Any tax or other governmental charge with respect to ADSs or any deposited ordinary shares represented by any ADS shall be payable by the holder of such ADS to the Depositary. The Depositary may refuse to effect transfer of such ADS or any withdrawal of deposited ordinary shares represented by such ADS until such payment is made, and may withhold any dividends or other distributions or may sell for the account of the holder any part or all of the deposited ordinary shares represented by such ADS and may apply such dividends or distributions or the proceeds of any such sale in payment of any such tax or other governmental charge and the holder of such ADS shall remain liable for any deficiency. ITEM 13. DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES Not applicable. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Not applicable. ITEM 15. CONTROLS AND PROCEDURES (a)Disclosure Controls and Procedures
a. | Disclosure Controls and Procedures |
We have performed an evaluation of the effectiveness of our disclosure controls and procedures that are designed to ensure that the material financial and non-financial information required to be disclosed to the SEC is recorded, processed, summarized and reported timely. Based on our evaluation, our management, including the Chief Executive Officer, or the CEO, and the Chief Financial Officer, or the CFO, hashave concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report are effective. Notwithstanding the foregoing, there can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be set forth in our reports. (b)Management’s Annual Report on Internal Control over Financial Reporting
b. | Management’s Annual Report on Internal Control over Financial Reporting |
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Exchange Act. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Our management, including the CEO and CFO, conducted an evaluation, pursuant to Rule 13a-15(c) promulgated under the Exchange Act, of the effectiveness, as of the end of the period covered by this Annual Report, of its internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on the results of this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2017.2023. (c)Attestation Report of Registered Public Accounting Firm
c. | Attestation Report of Registered Public Accounting Firm |
Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Ltd., our independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting, appearing under “Item 18. Financial Statements” on page F-2, and such report is incorporated herein by reference.F-2. (d) Changes in Internal Control over Financial Reporting
d. | Changes in Internal Control over Financial Reporting |
There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 20172023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16. [RESERVED] ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERTS Our Boardboard of Directorsdirectors has determined that Ms. Nurit BenjaminiMr. Rami Dar is the audit committee financial expert. Ms. BenjaminiMr. Dar is one of our independent directors for the purposes of the Nasdaq rules.Rules. In July 2011, our Boardboard of Directorsdirectors adopted a Code of Business Conduct and Ethics, or the Code of Conduct, that applies to all our employees, including without limitation our CEO, CFO and controller. Our Code of Conduct may be viewed on our website at www.biolinerx.com. A copy of our Code of Conduct may be obtained, without charge, upon a written request addressed to our investor relations department, 2 HaMa’ayan Street, Modi’in 7177871, Israel (Telephone no. +972-8-642-9100) (e-mail: info@BioLineRx.com). 119
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES Fees Paid to Independent Registered Public Accounting Firm The following table sets forth, for each of the years indicated, the fees billed by Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Ltd., our independent registered public accounting firm. | | Year Ended December 31, | | | Year Ended December 31, | | | | 2016 | | | 2017 | | | 2022 | | | 2023 | | Services Rendered | | (in thousands of U.S. dollars) | | | (in thousands of U.S. dollars) | | | | | | | | | | | | | | | Audit Fees(1) | | $ | 110 | | | $ | 110 | | | | 130 | | | 130 | | Audit-Related Fees(2) | | | – | | | | 33 | | | | 4 | | | 17 | | Tax Fees(3) | | | 21 | | | | 27 | | | | 18 | | | 52 | | All Other Fees | | | – | | | | – | | | | - | | | | - | | Total | | $ | 131 | | | $ | 170 | | | | 152 | | | 199 | |
(1) | Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or engagements, including services that generally only the independent accountant can reasonably provide. | | | (2) | Audit relatedAudit-related services relate to reports to the IIA and work regarding a public listing or offering. | | | (3) | Tax fees relate to tax compliance, planning and advice. |
Our Audit Committee, in accordance with its charter, reviews and pre-approves all audit services and permitted non-audit services (including the fees and other terms) to be provided by our independent auditors. ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Not applicable. ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS Not applicable. ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT Not applicable. ITEM 16G. CORPORATE GOVERNANCE Nasdaq Listing Rules and Home Country Practices
The Sarbanes-Oxley Act, as well as related rules subsequently implemented by the SEC, requires foreign private issuers, such as us, to comply with various corporate governance practices. In complying with the MarketplaceNasdaq Rules, of the Nasdaq Stock Market, we have elected to follow certain corporate governance practices permitted under the Companies Law and the rules of the TASE in lieu of compliance with certain corporate governance requirements otherwise required by the Marketplace Rules of the Nasdaq Stock Market. In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the MarketplaceNasdaq Rules, of the Nasdaq Stock Market, we have elected to follow the provisions of the Companies Law, rather than the MarketplaceNasdaq Rules, of the Nasdaq Stock Market, with respect to the following requirements: | • | Distribution of periodic reports to shareholders. Under Israeli law, a public company whose shares are traded on the TASE, is not required to distribute periodic reports directly to shareholders and the generally accepted business practice in Israel is not to distribute such reports to shareholders but to make such reports publicly available through a public website. We will only mail such reports to shareholders upon request. In addition, we make our audited financial statements available to our shareholders at our offices. |
| • | Quorum. While the Nasdaq Rules require that the quorum for purposes of any meeting of the holders of a listed company’s common voting stock, as specified in the company’s bylaws, be no less than 33 1/3% of the company’s outstanding common voting stock, as permitted under the Companies Law, our Articles of Association provide that a quorum of two or more shareholders holding at least 25% of the voting rights in person or by proxy is required for commencement of business at a general meeting (and, with respect to an adjourned meeting, a quorum consists of any number of shareholders present in person or by proxy). |
| • | Nomination of Directors. We follow Israeli corporate governance practices instead of the requirements of the Nasdaq Rules with regard to the nomination committee and director nomination procedures. Israeli law and practice does not require director nominations to be made by a nominating committee of our board of directors consisting solely of independent directors, as required under the Nasdaq Rules. In accordance with Israeli law and practice, directors are recommended by our board of directors for election by our shareholders (other than directors elected by our board of directors to fill a vacancy), and certain of our shareholders may nominate candidates for election as directors by the general meeting of shareholders in accordance with the Companies Law and our Articles of Association. |
| • | Compensation of Officers. We follow Israeli law and practice with respect to the approval of officer compensation, pursuant to which transactions with office holders regarding their terms of office and employment, and a transaction with a controlling shareholder in a company regarding his or her employment and/or his or her terms of office with the company, generally require the approval of the compensation committee, the board of directors and under certain circumstances (such as if the officer is a director or controlling shareholder) the shareholders, either in accordance with our compensation policy or, in special circumstances in deviation therefrom, taking into account certain considerations set forth in the Companies Law. See “Item 6.C— Directors, Senior Management and Employees — Board Practices — Compensation Committee” for information regarding the Compensation Committee, and “Item 6.C — Directors, Senior Management and Employees — Approval of Related Party Transactions under Israeli Law” for information regarding the approvals required with respect to approval of terms of office and employment of office holders, pursuant to the Companies Law. |
| • | Approval of Related Party Transactions. We follow Israeli law and practice with respect to the approval of interested party acts and transactions, as set forth in sections 268 to 275 of the Companies Law, and the regulations promulgated thereunder, which generally require the approval of the audit committee, the board of directors and, under certain circumstances (such as if the officer holder is a controlling shareholder) the shareholders, as may be applicable, for specified transactions. See “Item 6.C— Directors, Senior Management and Employees —Board Practices — Approval of Related Party Transactions under Israeli Law” for information regarding the approvals required with respect to approval of related party transactions pursuant to the Companies Law. |
98 Distribution of annual and quarterly reports
| • | Shareholder Approval. We intend to seek shareholder approval for all corporate actions requiring such approval in accordance with the requirements of the Companies Law, which are different or in addition to the requirements for seeking shareholder approval under Nasdaq Listing Rule 5635, rather than seeking approval for corporation actions in accordance with such listing rules. |
| • | Equity Compensation Plans. We do not necessarily seek shareholder approval for the establishment of, and amendments to, stock option or equity compensation plans (as set forth in Nasdaq Listing Rule 5635(c)), as such matters are not subject to shareholder approval under Israeli law and practice. However, any equity-based compensation arrangement with a director or the chief executive officer or the material amendment of such an arrangement must be approved by our Compensation Committee, board of directors and shareholders, in that order. |
Except as stated above, we currently intend to shareholders. Under Israeli law, as a public company whose shares are tradedcomply with the rules generally applicable to U.S. domestic companies listed on Nasdaq. We may in the TASE, we are not requiredfuture decide to distribute annual and quarterly reports directlyuse the foreign private issuer exemption with respect to shareholders and the generally accepted business practice in Israel is not to distribute such reports to shareholders but to make such reports publicly available through the websitesome or all of the ISA andother Nasdaq corporate governance rules. Following our home country governance practices, as opposed to the TASE. In addition, we make our audited financial statements availablerequirements that would otherwise apply to a company listed on Nasdaq, may provide less protection than is accorded to investors under Nasdaq listing requirements applicable to domestic issuers. For more information, see “Item 3.D — Key Information - Risks Related to our shareholders at our offices. Ordinary Shares and ADSs - As a foreign private issuer, we are generally exempt from the SEC’s proxy solicitation rules. permitted to follow certain home country corporate governance practices instead of applicable SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic issuers.” Quorum. While the Marketplace Rules of the Nasdaq Stock Market require that the quorum for purposes of any meeting of the holders of a listed company’s common voting stock, as specified in the company’s bylaws, be no less than 33 1/3% of the company’s outstanding common voting stock, under Israeli law, a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a shareholders meeting. Our Articles of Association provide that a quorum of two or more shareholders holding at least 25% of the voting rights in person or by proxy is required for commencement of business at a general meeting. However, the quorum set forth in our Articles of Association with respect to an adjourned meeting consists of any number of shareholders present in person or by proxy.
Independent Directors. Our Board of Directors includes two external directors in accordance with the provisions contained in Sections 239-249 of the Companies Law and Rule 10A-3 of the general rules and regulations promulgated under the Securities Act, rather than a majority of external directors. Israeli law does not require, nor do our independent directors conduct, regularly scheduled meetings at which only they are present. We are required, however, to ensure that all members of our Audit Committee are “independent” under the applicable Nasdaq and SEC criteria for independence (as a foreign private issuer we are not exempt from the SEC independence requirement), and we must also ensure that a majority of the members of our Audit Committee are unaffiliated directors as defined in the Companies Law. Furthermore, Israeli law does not require, nor do our independent directors conduct, regularly scheduled meetings at which only they are present, which the Marketplace Rules of the Nasdaq Stock Market otherwise require. If we qualify as an Eligible Company and opt to follow the exemption provided under the Amendment to the Relief Regulations regarding appointment of external directors and composition of the audit and compensation committees, we will be required at all times to comply with the U.S. rules and regulations governing the appointment of independent directors and composition of the audit and compensation committees applicable to U.S. domestic issuers instead of complying with the Companies Law provisions relating to external directors and composition of the audit and compensation committees.
Audit Committee. Our Audit Committee complies with all of the requirements under Israeli law, and is composed of two external directors, which are all of our external directors, and only one other director, who cannot be the chairman of our Board of Directors. Consistent with Israeli law, the independent auditors are elected at a meeting of shareholders instead of being appointed by the Audit Committee. If we qualify as an Eligible Company and opt to follow the exemption provided under the Amendment to the Relief Regulations regarding appointment of external directors and composition of the audit and compensation committees, we will be required at all times to comply with the U.S. rules and regulations governing the appointment of independent directors and composition of the Audit Committee applicable to U.S. domestic issuers instead of complying with the Companies Law provisions relating to external directors and composition of the Audit Committee.
Nomination of our Directors. With the exception of our external directors and directors elected by our Board of Directors due to vacancy, our directors are elected by a general or special meeting of our shareholders, to hold office until they are removed from office by the majority of our shareholders at a general or special meeting of our shareholders. See “Item 6. Directors, Senior Management and Employees — Board Practices — Board of Directors.” The nominations for directors, which are presented to our shareholders, are generally made by our directors, but nominations may be made by one or more of our shareholders as provided in our Articles of Association, under the Companies Law or in an agreement between us and our shareholders. Currently, there is no agreement between us and any shareholder regarding the nomination of directors. In accordance with our Articles of Association, under the Companies Law, any one or more shareholders holding, in the aggregate, either (1) 5% of our outstanding shares and 1% of our outstanding voting power or (2) 5% of our outstanding voting power, may nominate one or more persons for election as directors at a general or special meeting by delivering a written notice of such shareholder’s intent to make such nomination or nominations to our registered office. Each such notice must set forth all of the details and information as required to be provided in our Articles of Association.
Compensation Committee and Compensation of Officers. Israeli law, and our Articles of Association, do not require that a compensation committee composed solely of independent members of our Board of Directors determine (or recommend to the board of directors for determination) an executive officer’s compensation, as required under Nasdaq’s listing standards related to compensation committee independence and responsibilities; nor do they require that the Company adopt and file a compensation committee charter. Instead, our Compensation Committee has been established and conducts itself in accordance with provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law, and is composed of two external directors, which are all of our external directors, and one additional director, who is not the chairman of our Board of Directors or otherwise employed by the Company. If we qualify as an Eligible Company and opt to follow the exemption provided under the Amendment to the Relief Regulations regarding appointment of external directors and composition of the audit and compensation committees, we will be required at all times to comply with the U.S. rules and regulations governing the appointment of independent directors and composition of the compensation committee applicable to U.S. domestic issuers instead of complying with the Companies Law provisions relating to external directors and composition of the compensation committee. Additionally, we comply with the requirements set forth under the Companies Law, pursuant to which transactions with office holders regarding their terms of office and employment, and transaction with a controlling shareholder in a company regarding his or her employment and/or his or her terms of office with the company, may require the approval of the compensation committee, the board of directors and under certain circumstances the shareholders, either in accordance with our previously approved compensation policy or, in special circumstances in deviation therefrom, taking into account certain considerations set forth in the Companies Law. See “Item 6. Directors, Senior Management and Employees — Board Practices — Compensation Committee” for information regarding the Compensation Committee, and “Item 6. Directors, Senior Management and Employees — Approval of Related Party Transactions under Israeli Law” for information regarding the special approvals required with respect to approval of terms of office and employment of office holders, pursuant to the Companies Law, as set forth under Amendment 20. The requirements for shareholder approval of any office holder compensation, and the relevant majority or special majority for such approval, are all as set forth in the Companies Law. Thus, we will seek shareholder approval for all corporate actions with respect to office holder compensation requiring such approval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain office holder compensation, rather than seeking approval for such corporate actions in accordance with Nasdaq Listing Rules.
Approval of Related Party Transactions. All related party transactions are approved in accordance with the requirements and procedures for approval of interested party acts and transactions, set forth in sections 268 to 275 of the Companies Law, and the regulations promulgated thereunder, which require the approval of the audit committee, the compensation committee, the board of directors and shareholders, as may be applicable, for specified transactions, rather than approval by the audit committee or other independent body of our Board of Directors as required under the Marketplace Rules of the Nasdaq Stock Market.
Shareholder Approval. We seek shareholder approval for all corporate actions requiring such approval in accordance with the requirements of the Companies Law, which are different or in addition to the requirements for seeking shareholder approval under Nasdaq Listing Rule 5635, rather than seeking approval for corporation actions in accordance with such listing rules.
Equity Compensation Plans. We do not necessarily seek shareholder approval for the establishment of, and amendments to, stock option or equity compensation plans (as set forth in Nasdaq Listing Rule 5635(c)), as such matters are not subject to shareholder approval under Israeli law. Our equity compensation plan is available to our employees, none of whom are currently U.S. employees, and provide features necessary to comply with applicable non-U.S. tax laws.
ITEM 16H. MINE SAFETY DISCLOSURE Not applicable. ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. ITEM 16J. INSIDER TRADING POLICIES Pursuant to applicable SEC transition guidance, the disclosure required by Item 16J will only be applicable to the Company from the fiscal year ending on December 31, 2024. ITEM 16K. CYBERSECURITY Risk management and strategy We have developed and maintain a cybersecurity risk management program that focuses primarily on securing and safeguarding computer systems, networks, cloud services, business applications, and data and that is integrated in our overall risk management strategy and framework. We have implemented protocols to protect against cyber threats and ensure the containment and security of sensitive business data, including ongoing security reviews of critical systems, continuous monitoring of event data, and employee training programs, which processes are aligned with our overall business and operational goals and strategies. Our risk assessment occurs on an ongoing basis and covers identification of risks that could act against the company’s objectives as well as specific risks related to a compromise to the security of data. We engage a third-party to provide operational support for cybersecurity risks. This forms a critical part of our risk management strategy, facilitating effective management and mitigation of risks, and ensuring adherence to applicable regulatory and industry standards. Overall, we believe that we have established a robust framework for confidentiality, integrity, and availability of information, adhering to relevant security standards, practices, and compliance requirements. In addition, we maintain insurance to help protect against risks associated with cybersecurity threats. As of the date of this report, we do not believe that any risks from cybersecurity threats have materially affected, or are reasonably likely to materially affect, us, including our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident. For more information about these risks, please see “Item 3.D. Key Information — Risk Factors – Risks Related to Our Industry – Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business.” in this Annual Report. Our audit committee provides oversight of our cybersecurity program and helps guide our strategy for managing cybersecurity risks in the context of our overall risk management system. Our cybersecurity program is managed by our Chief Financial Officer and our internal IT team who is responsible for leading enterprise-wide cybersecurity strategy, protocols, framework, standards and processes. The Chief Financial Officer reports to our board of directors, as well as our Chief Executive Officer and other members of senior management as appropriate. ITEM 17. FINANCIAL STATEMENTS The Registrant has responded to Item 18 in lieu of responding to this Item. ITEM 18. FINANCIAL STATEMENTS See the financial statements beginning on page F-1. The following financial statements are filed as part of this Annual Report on Form 20-F together with the report of the independent registered public accounting firm.
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| The following financial information from BioLineRx Ltd.’s Annual Report on Form 20-F for the fiscal year ended December 31, 20172023 formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Financial Position at December 31, 20172023 and 2016;2022; (ii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2017, 20162023, 2022 and 2015;2021; (iii) Statements of Changes in Equity for the years ended December 31, 2017, 20162023, 2022 and 2015;2021; (iv) Consolidated Cash Flow Statements for the years ended December 31, 2017, 20162023, 2022 and 2015;2021; and (v) Notes to the Consolidated Financial Statements.Users of this data are advised, in accordance with Rule 406T of Regulation S-T promulgated by the SEC, that this Interactive Data File is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections. |
† | Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request. |
(1) | Incorporated by reference to the Registrant’s Registration StatementAnnual Report on Form 20-F (No. 001-35223) filed on July 1, 2011.February 23, 2021. |
(2) | Incorporated by reference to Exhibit 1 of the Registration Statement on Form F-6EF (No. 333-218969) filed by the Bank of New York Mellon on June 26, 2017 with respect to the Registrant’s American Depositary Shares. |
(3) | Incorporated by reference to the Registrant’s Registration Statement on Form F-1 (No. 333-179792) filed on February 29, 2012. |
(4) | Incorporated by reference to the Registrant’s Registration Statement on Form F-3 (No. 333-222332) filed on December 28, 2017. |
(5) | Incorporated by reference to the Registrant’s Annual Report on Form 20-F/A filed on May 31, 2016 |
(6) | Incorporated by reference to the Registrant’s Form 6-K filed on May 31, 2016. |
(7) | Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 23, 2015.2017. |
(8)(4) | Incorporated by reference to the Registrant’s Annual ReportRegistration Statement on Form 20-F/A20-F (No. 001-35223) filed on September 22, 2015.July 1, 2011. |
(9)(5) | Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 10, 2016. |
(6) | Incorporated by reference to the Registrant’s Annual Report on Form 20-F/A filed on May 31, 2016. |
(7) | Incorporated by reference to the Registrant’s Form 6-K filed on October 3, 2018. |
(8) | Incorporated by reference to the Registrant’s Form 6-K filed on May 27, 2022. |
(9) | Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 12, 2020. |
(10) | Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 23, 2015. |
(11) | Incorporated by reference to the Registrant’s Annual Report on Form 6-K20-F/A filed on July 31, 2017.September 22, 2015. |
(12) | Incorporated by reference to the Registrant’s Form 6-K filed on October 31, 2017.February 7, 2019. |
(13) | Incorporated by reference to the Registrant’s Form 6-K filed on January 21, 2021. |
(14) | Incorporated by reference to the Registrant’s Form 6-K filed on September 3, 2021. |
(15) | Incorporated by reference to the Registrant’s Form 6-K filed on September 15, 2022. |
(16) | Incorporated by reference to the Registrant’s Form 6-K filed on September 21, 2022. |
(17) | Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 16, 2022. |
(18) | Incorporated by reference to the Registrant’s Form 6-K filed on August 30, 2023. |
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. | BIOLINERX LTD. | | | | | | | By: | /s/ Philip A. Serlin | | | | Philip A. Serlin | | | | Chief Executive Officer | |
Date: March 6, 201826, 2024
BioLineRx Ltd. INDEX TO CONSOLIDATED FINANCIAL STATEMENTSSTATEMENTS: Audited Consolidated Financial Statements at December 31, 2017 and 2016 and for each of the three years in the period ended December 31, 2017
| | Page | | F-1F-2 | | F-3 | | F-4F-5 | | F-5F-6 | | F-6F-7 | | F-8 | | F-10 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm To the shareholdersBoard of Directors and Shareholders of BioLineRx Ltd. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheetsstatements of financial position of BioLineRx Ltd.Ltd and its subsidiaries (the “Company”) as of December 31, 20172023 and 2016,2022, and the related consolidated statements of comprehensive loss, changes in equity and cash flows, for each of the three years in the period ended December 31, 2017, 2023, including the related notes (collectively referred to as the “consolidatedconsolidated financial statements”). We also have audited the Company’sCompany's internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172023 and 2016,2022 and the results of theirits operations and theirits cash flows for each of the three years in the period ended December 31, 2017,2023 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1(c) to the consolidated financial statements, the Company has suffered recurring losses from operations and has cash outflows from operating activities that indicate that a material uncertainty exists that may cast significant doubt (or raise substantial doubt as contemplated by PCAOB standards) about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1(c). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinions
The Company’sCompany's management and Board of Directors areis responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 15(b).15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’sCompany's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits inin accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition and Determination of Standalone Selling Price – License Agreement with Hong Seng Technology Limited (“HST”) and Guangzhou Gloria Biosciences Co., Ltd. (“Gloria”) As discussed in Note 16 to the consolidated financial statements, the Company entered into a license agreement (the “License Agreement”) with HST and Gloria during the year ended December 31, 2023. The Company recognized revenue of $4.6 million (for the year ended December 31, 2023) and contract liabilities of $12.9 million (as of December 31, 2023) related to the License Agreement. The Company's performance obligations under the License Agreement include: (i) a stem-cell mobilization (“SCM”) license, (ii) support services related to SCM and (iii) a pancreatic adenocarcinoma (“PDAC”) license and support services. The Company determined the estimated standalone selling prices of the SCM license and the PDAC combined performance obligation using price offers for each indication with the assistance of a valuation specialist and determined the estimated standalone selling price of the support services for SCM using cost-plus margin. The Company recognized revenue from the SCM license at point of time and recognized revenue from the SCM support services and the PDAC license and support services over time using the input method based on a ratio between the support hours incurred to the total hours expected to be incurred until satisfying the performance obligation. The principal considerations for our determination that performing procedures relating to the determination of the standalone selling price and revenue recognition – estimated hours to complete PDAC license and support services performance obligation is a critical audit matter are there was significant judgment and estimation used by management. This in turn led to a significant auditor judgment, subjectivity, and effort in performing procedures to evaluate these assumptions. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's revenue recognition process including controls over the determination of estimated standalone selling prices and the estimated hours to complete the PDAC license and support services performance obligation. The procedures also included, among others, (i) reading the related agreements; (ii) evaluating and testing management’s process for determining the estimated standalone selling prices and the estimated hours to complete the PDAC license and support services performance obligation which included evaluating the reasonableness of the valuation methodology and significant assumptions, including the estimated expected support hours, used by management and considering the factors that can affect the accuracy of those estimates. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s model. Tel Aviv, Israel | /s/ Kesselman & Kesselman | March 6, 2018 | Certified Public Accountants (Isr.) | | A member firm of PricewaterhouseCoopers International Ltd. |
Tel Aviv, Israel | We have served as the Company’s auditor since 2003.March 26, 2024
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We have served as the Company’s auditor since 2003. BioLineRx Ltd. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | Note | | December 31, | | | | | | | | | | | 2016 | | | 2017 | | | | | | | | | | | | | | in USD thousands | | | | | | | | Assets | | | | | | | | | | | | | | | | | CURRENT ASSETS | | | | | | | | | | | | | | | | | Cash and cash equivalents | 5 | | | 2,469 | | | | 5,110 | | | | 5 | | | 10,587 | | | 4,255 | | Short-term bank deposits | 6 | | | 33,154 | | | | 44,373 | | | | 6 | | | 40,495 | | | 38,739 | | Trade receivables | | | | | | | - | | | 358 | | Prepaid expenses | | | | 255 | | | | 307 | | | | | | | 198 | | | 1,048 | | Other receivables | 16a | | | 223 | | | | 586 | | | | 18a | | | 721 | | | 830 | | Inventory | | | | 7 | | | | | | | | | | Total current assets | | | | 36,101 | | | | 50,376 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NON-CURRENT ASSETS | | | | | | | | | | | | | | | | | | | | Long-term prepaid expenses | 16b | | | 52 | | | | 61 | | | Long-term investment | 7 | | | - | | | | 1,000 | | | Property and equipment, net | 8 | | | 2,605 | | | | 2,505 | | | | 8 | | | 726 | | | 473 | | Right-of-use assets, net | | | | 10 | | | 1,772 | | | 1,415 | | Intangible assets, net | 9 | | | 181 | | | | 7,023 | | | | 9 | | | | | | | | | | Total non-current assets | | | | 2,838 | | | | 10,589 | | | | | | | | | | | | | | Total assets | | | | 38,939 | | | | 60,965 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities and equity | | | | | | | | | | | | | | | | | | | | CURRENT LIABILITIES | | | | | | | | | | | | | | | | | | | | Current maturities of long-term bank loan | 10 | | | 93 | | | | 93 | | | Current maturities of long-term loans | | | | 11 | | | 1,542 | | | 3,145 | | Contract liabilities | | | | 16 | | | - | | | 12,957 | | Accounts payable and accruals: | | | | | | | | | | | | | | | | | | | | Trade | 16c | | | 2,590 | | | | 5,516 | | | | 18b | | | 6,966 | | | 10,869 | | Other | 16c | | | 978 | | | | 1,113 | | | | 18b | | | 1,744 | | | 3,353 | | Current maturities of lease liabilities | | | | 10 | | | | | | | | | | Total current liabilities | | | | 3,661 | | | | 6,722 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NON-CURRENT LIABILITIES | | | | | | | | | | | | | | | | | | | | Long-term bank loan, net of current maturities | 10 | | | 250 | | | | 157 | | | Warrants | 11c | | | 1 | | | | 1,205 | | | | 12c | | | 4,509 | | | 11,932 | | Long-term loans, net of current maturities | | | | 11 | | | 8,626 | | | 6,628 | | Lease liabilities | | | | 10 | | | | | | | | | | Total non-current liabilities | | | | 251 | | | | 1,362 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | COMMITMENTS AND CONTINGENT LIABILITIES | 14 | | | | | | | | | | | 15 | | | - | | | - | | Total liabilities | | | | 3,912 | | | | 8,084 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | EQUITY | 11 | | | | | | | | | | | 12 | | | | | | | | Ordinary shares | | | | 1,513 | | | | 2,836 | | | | | | | 27,100 | | | 31,355 | | Share premium | | | | 199,567 | | | | 240,682 | | | | | | | 338,976 | | | 355,482 | | Warrants | | | | | | | 1,408 | | | 1,408 | | Capital reserve | | | | 10,569 | | | | 10,337 | | | | | | | 14,765 | | | 17,000 | | Other comprehensive loss | | | | (1,416 | ) | | | (1,416 | ) | | | | | | (1,416 | ) | | (1,416 | ) | Accumulated deficit | | | | (175,206 | ) | | | (199,558 | ) | | | | | | | | | | | | | Total equity | | | | 35,027 | | | | 52,881 | | | | | | | | | | | | | | Total liabilities and equity | | | | 38,939 | | | | 60,965 | | | | | | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements.
BioLineRx Ltd. BioLineRx Ltd.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | Note | | Year ended December 31, | | | | | | | | | | | 2015 | | | 2016 | | | 2017 | | | | | | | | | | | | | | | | | in USD thousands | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | REVENUES | | | | 18c | | | - | | | - | | | 4,800 | | COST OF REVENUES | | | | 18d | | | | | | | | | | | | | | GROSS PROFIT | | | | | | | - | | | - | | | 1,108 | | RESEARCH AND DEVELOPMENT EXPENSES | 16d | | | (11,489 | ) | | | (11,177 | ) | | | (19,510 | ) | | | 18e | | | (19,466 | ) | | (17,629 | ) | | (12,519 | ) | SALES AND MARKETING EXPENSES | 16e | | | (1,003 | ) | | | (1,352 | ) | | | (1,693 | ) | | | 18f | | | (1,003 | ) | | (6,462 | ) | | (25,270 | ) | GENERAL AND ADMINISTRATIVE EXPENSES | 16f | | | (3,704 | ) | | | (3,984 | ) | | | (4,037 | ) | | | 18g | | | (4,308 | ) | | (5,066 | ) | | (6,310 | ) | IMPAIRMENT OF INTANGIBLE ASSETS | | | | 9 | | | | | | | | | | | | | | OPERATING LOSS | | | | (16,196 | ) | | | (16,513 | ) | | | (25,240 | ) | | | | | | (24,777 | ) | | (29,157 | ) | | (49,694 | ) | NON-OPERATING INCOME (EXPENSES), NET | 16g | | | 1,445 | | | | 214 | | | | (260 | ) | | | 18h | | | (1,830 | ) | | 5,670 | | | (10,819 | ) | FINANCIAL INCOME | 16h | | | 457 | | | | 480 | | | | 1,169 | | | | 18i | | | 559 | | | 694 | | | 2,068 | | FINANCIAL EXPENSES | 16i | | | (106 | ) | | | (22 | ) | | | (21 | ) | | | 18j | | | | | | | | | | | | | | NET LOSS AND COMPREHENSIVE LOSS | | | | (14,400 | ) | | | (15,841 | ) | | | (24,352 | ) | | LOSS AND COMPREHENSIVE LOSS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | in USD | | | | | | | | | LOSS PER ORDINARY SHARE – BASIC AND DILUTED | 13 | | | (0.28 | ) | | | (0.28 | ) | | | (0.27 | ) | | | 14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | WEIGHTED AVERAGE NUMBER OF SHARES USED IN CALCULATION OF LOSS PER ORDINARY SHARE | 13 | | | 51,406,434 | | | | 56,144,727 | | | | 89,970,713 | | | | 14 | | | | | | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements. BioLineRx Ltd. BioLineRx Ltd.
STATEMENTS OF CHANGES IN EQUITY | | | | | | | | | | | Other comprehensive loss | | | | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | in USD thousands | | | | | BALANCE AT JANUARY 1, 2015 | | | 1,055 | | | | 167,331 | | | | 9,800 | | | | (1,416 | ) | | | (144,965 | ) | | | 31,805 | | | CHANGES IN 2015: | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of share capital, net | | | 400 | | | | 28,653 | | | | - | | | | - | | | | - | | | | 29,053 | | | Employee stock options expired | | | - | | | | 217 | | | | (217 | ) | | | - | | | | - | | | | - | | | Share-based compensation | | | - | | | | - | | | | 1,152 | | | | - | | | | - | | | | 1,152 | | | Comprehensive loss for the year | | | | | | | | | | | | | | | | | | | (14,400 | ) | | | (14,400 | ) | | BALANCE AT DECEMBER 31, 2015 | | | 1,455 | | | | 196,201 | | | | 10,735 | | | | (1,416 | ) | | | (159,365 | ) | | | 47,610 | | | CHANGES IN 2016: | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of share capital, net | | | 57 | | | | 2,126 | | | | - | | | | - | | | | - | | | | 2,183 | | | BALANCE AT JANUARY 1, 2021 | | | | 9,870 | | | | 279,241 | | | | - | | | | 12,322 | | | | (1,416 | ) | | | (277,987 | ) | | | 22,030 | | CHANGES IN 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of share capital and warrants, net | | | | 8,956 | | | | 40,476 | | | | 975 | | | | - | | | | - | | | | - | | | | 50,407 | | Warrants exercised | | | | 2,235 | | | | 18,967 | | | | - | | | | - | | | | - | | | | - | | | | 21,202 | | Employee stock options exercised | | | 1 | | | | 171 | | | | (172 | ) | | | - | | | | - | | | | - | | | | 5 | | | | 41 | | | | - | | | | (39 | ) | | | - | | | | - | | | | 7 | | Employee stock options expired | | | - | | | | 1,069 | | | | (1,069 | ) | | | - | | | | - | | | | - | | | | - | | | | 621 | | | | - | | | | (621 | ) | | | - | | | | - | | | | - | | Share-based compensation | | | - | | | | - | | | | 1,075 | | | | - | | | | - | | | | 1,075 | | | | - | | | | - | | | | - | | | | 1,495 | | | | - | | | | - | | | | 1,495 | | Comprehensive loss for the year | | | | | | | | | | | | | | | | | | | (15,841 | ) | | | (15,841 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BALANCE AT DECEMBER 31, 2016 | | | 1,513 | | | | 199,567 | | | | 10,569 | | | | (1,416 | ) | | | (175,206 | ) | | | 35,027 | | | CHANGES IN 2017: | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of share capital, net | | | 1,322 | | | | 39,376 | | | | - | | | | - | | | | - | | | | 40,698 | | | BALANCE AT DECEMBER 31, 2021 | | | | 21,066 | | | | 339,346 | | | | 975 | | | | 13,157 | | | | (1,416 | ) | | | (305,041 | ) | | | 68,087 | | CHANGES IN 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of share capital and warrants, net | | | | 6,029 | | | | (1,007 | ) | | | 433 | | | | - | | | | - | | | | - | | | | 5,455 | | Employee stock options exercised | | | 1 | | | | 328 | | | | (329 | ) | | | - | | | | - | | | | - | | | | 5 | | | | 14 | | | | - | | | | (14 | ) | | | - | | | | - | | | | 5 | | Employee stock options expired | | | - | | | | 1,411 | | | | (1,411 | ) | | | - | | | | - | | | | - | | | | - | | | | 623 | | | | - | | | | (623 | ) | | | - | | | | - | | | | - | | Share-based compensation | | | - | | | | - | | | | 1,508 | | | | - | | | | - | | | | 1,508 | | | | - | | | | - | | | | - | | | | 2,245 | | | | - | | | | - | | | | 2,245 | | Comprehensive loss for the year | | | | | | | | | | | | | | | | | | | (24,352 | ) | | | (24,352 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BALANCE AT DECEMBER 31, 2017 | | | | | | | | | | | | | | | (1,416 | ) | | | (199,558 | ) | | | | | | BALANCE AT DECEMBER 31, 2022 | | | | 27,100 | | | | 338,976 | | | | 1,408 | | | | 14,765 | | | | (1,416 | ) | | | (329,992 | ) | | | 50,841 | | CHANGES IN 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of share capital, net | | | | 3,242 | | | | 10,847 | | | | - | | | | - | | | | - | | | | - | | | | 14,089 | | Warrants exercised | | | | 1,000 | | | | 5,559 | | | | - | | | | - | | | | - | | | | - | | | | 6,559 | | Employee stock options exercised | | | | 13 | | | | 45 | | | | - | | | | (31 | ) | | | - | | | | - | | | | 27 | | Employee stock options expired | | | | - | | | | 55 | | | | - | | | | (55 | ) | | | - | | | | - | | | | - | | Share-based compensation | | | | - | | | | - | | | | - | | | | 2,321 | | | | - | | | | - | | | | 2,321 | | Comprehensive loss for the year | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BALANCE AT DECEMBER 31, 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements. BioLineRx Ltd. F - 5
CONSOLIDATED STATEMENTS OF CASH FLOWS BioLineRx Ltd.
| | | | | | | | | | | | | | | | | | CASH FLOWS - OPERATING ACTIVITIES | | | | | | | | | | Loss | | | (27,054 | ) | | | (24,951 | ) | | | (60,614 | ) | Adjustments required to reflect net cash used in operating activities (see appendix below) | | | | | | | | | | | | | Net cash used in operating activities | | | | | | | | | | | | | | | | | | | | | | | | | | CASH FLOWS - INVESTING ACTIVITIES | | | | | | | | | | | | | Investments in short-term deposits | | | (78,000 | ) | | | (44,000 | ) | | | (47,588 | ) | Maturities of short-term deposits | | | 39,873 | | | | 48,322 | | | | 49,329 | | Purchase of property and equipment | | | (97 | ) | | | (131 | ) | | | (116 | ) | Purchase of intangible assets | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | | | | | | | | | | | | | | | | | | | | | | | | | CASH FLOWS - FINANCING ACTIVITIES | | | | | | | | | | | | | Issuance of share capital and warrants, net of issuance costs | | | 50,407 | | | | 14,359 | | | | 14,089 | | Exercise of warrants | | | 10,907 | | | | - | | | | 2,928 | | Employee stock options exercised | | | 7 | | | | 5 | | | | 27 | | Proceeds from long-term loan, net of issuance costs | | | - | | | | 9,126 | | | | - | | Repayments of loans | | | (3,376 | ) | | | (2,832 | ) | | | (1,543 | ) | Repayments of lease liabilities | | | | | | | | | | | | | Net cash provided by financing activities | | | | | | | | | | | | | | | | | | | | | | | | | | DECREASE IN CASH AND CASH EQUIVALENTS | | | (4,048 | ) | | | (1,796 | ) | | | (6,108 | ) | CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | | | 16,831 | | | | 12,990 | | | | 10,587 | | EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS | | | | | | | | | | | | | CASH AND CASH EQUIVALENTS - END OF YEAR | | | | | | | | | | | | |
CONSOLIDATED CASH FLOW STATEMENTS | | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | in USD thousands | | CASH FLOWS - OPERATING ACTIVITIES | | | | | | | | | | Net loss | | | (14,400 | ) | | | (15,841 | ) | | | (24,352 | ) | Adjustments required to reflect net cash used in operating activities (see appendix below) | | | 232 | | | | 1,328 | | | | 3,805 | | Net cash used in operating activities | | | (14,168 | ) | | | (14,513 | ) | | | (20,547 | ) | | | | | | | | | | | | | | CASH FLOWS - INVESTING ACTIVITIES | | | | | | | | | | | | | Long-term investment | | | - | | | | - | | | | (1,000 | ) | Investments in short-term deposits | | | (63,130 | ) | | | (32,982 | ) | | | (44,016 | ) | Maturities of short-term deposits | | | 50,083 | | | | 42,334 | | | | 33,327 | | Maturities of restricted deposits | | | 166 | | | | - | | | | - | | Purchase of property and equipment | | | (2,683 | ) | | | (52 | ) | | | (338 | ) | Purchase of intangible assets | | | (36 | ) | | | (3 | ) | | | (3,900 | ) | Net cash provided by (used in) investing activities | | | (15,600 | ) | | | 9,297 | | | | (15,927 | ) | | | | | | | | | | | | | | CASH FLOWS - FINANCING ACTIVITIES | | | | | | | | | | | | | Issuance of share capital and warrants, net of issuance costs | | | 29,053 | | | | 2,183 | | | | 38,773 | | Proceeds of bank loan | | | 467 | | | | - | | | | - | | Repayments of bank loan | | | (31 | ) | | | (93 | ) | | | (93 | ) | Net cash provided by financing activities | | | 29,489 | | | | 2,090 | | | | 38,680 | | | | | | | | | | | | | | | INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | | (279 | ) | | | (3,126 | ) | | | 2,206 | | CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | | | 5,790 | | | | 5,544 | | | | 2,469 | | EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS | | | 33 | | | | 51 | | | | 435 | | CASH AND CASH EQUIVALENTS - END OF YEAR | | | 5,544 | | | | 2,469 | | | | 5,110 | |
The accompanying notes are an integral part of the consolidated financial statements. BioLineRx Ltd.CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED CASH FLOW STATEMENTS
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | in USD thousands | | APPENDIX | | | | | | | | | | | | | | | | | | | | Adjustments required to reflect net cash used in operating activities: | | | | | | | | | | | | | | | | | | | | Income and expenses not involving cash flows: | | | | | | | | | | Depreciation and amortization | | | 441 | | | | 482 | | | | 481 | | Long-term prepaid expenses | | | (9 | ) | | | 6 | | | | (9 | ) | Exchange differences on cash and cash equivalents | | | (33 | ) | | | (51 | ) | | | (435 | ) | Loss (gain) on adjustment of warrants to fair value | | | (1,292 | ) | | | (207 | ) | | | 127 | | Share-based compensation | | | 1,152 | | | | 1,075 | | | | 1,508 | | Interest and exchange differences on short-term deposits | | | (182 | ) | | | (387 | ) | | | (530 | ) | Interest and linkage differences on bank loan | | | 1 | | | | (1 | ) | | | - | | Warrant issuance costs | | | - | | | | - | | | | 17 | | | | | 78 | | | | 917 | | | | 1,159 | | | | | | | | | | | | | | | Changes in operating asset and liability items: | | | | | | | | | | | | | Decrease (increase) in prepaid expenses and other receivables | | | (42 | ) | | | 42 | | | | (415 | ) | Increase in accounts payable and accruals | | | 196 | | | | 369 | | | | 3,061 | | | | | 154 | | | | 411 | | | | 2,646 | | | | | | | | | | | | | | | | | | 232 | | | | 1,328 | | | | 3,805 | | | | | | | | | | | | | | | Supplementary information on interest received in cash | | | 173 | | | | 453 | | | | 494 | | | | | | | | | | | | | | | Supplementary non-cash investment (see Note 19) | | | - | | | | - | | | | 2,985 | | | | | | | | | | | | | | | Debt reconciliation for 2017: | | | | | | | | | | | | | | | Long-term bank loan | | | | | | | | Debt as of January 1, 2017 | | | 343 | | | | 1 | | | | 344 | | Cash flows | | | (93 | ) | | | 1,077 | | | | 984 | | Other non-cash movements | | | - | | | | 127 | | | | 127 | | Debt as of December 31, 2017 | | | 250 | | | | 1,205 | | | | 1,455 | |
| | | | | | | | | | | | | | | | | | APPENDIX | | | | | | | | | | | | | | | | | | | | Adjustments required to reflect net cash used in operating activities: | | | | | | | | | | Income and expenses not involving cash flows: | | | | | | | | | | Depreciation and amortization | | | 703 | | | | 654 | | | | 1,384 | | Exchange differences on cash and cash equivalents | | | (207 | ) | | | 607 | | | | 224 | | Fair value adjustments of warrants | | | 1,936 | | | | (6,425 | ) | | | 11,054 | | Share-based compensation | | | 1,495 | | | | 2,245 | | | | 2,321 | | Interest and exchange differences on short-term deposits | | | (262 | ) | | | (672 | ) | | | 15 | | Interest on loans | | | 301 | | | | 1,117 | | | | 1,148 | | Warrant issuance costs | | | - | | | | 171 | | | | - | | Exchange differences on lease liabilities | | | 55 | | | | (224 | ) | | | (42 | ) | Intangible assets impairment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Changes in operating asset and liability items: | | | | | | | | | | | | | Increase in trade receivables | | | - | | | | - | | | | (358 | ) | Increase in inventory | | | - | | | | - | | | | (1,953 | ) | Decrease (increase) in prepaid expenses and other receivables | | | 24 | | | | (650 | ) | | | (959 | ) | Increase (decrease) in accounts payable and accruals | | | (564 | ) | | | 1,888 | | | | 5,512 | | Increase in contract liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Supplemental information on interest received in cash | | | | | | | | | | | | | Supplemental information on interest paid in cash | | | | | | | | | | | | | | | | | | | | | | | Supplemental information on non-cash transactions: | | | | | | | | | | Changes in right-of-use asset and lease liabilities | | | | | | | | | | | | | Warrant issuance costs | | | | | | | | | | | | | Purchase of property and equipment | | | | | | | | | | | | | Fair value of exercised warrants (portion related to accumulated fair value adjustments) | | | | | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – GENERAL INFORMATION
BioLineRx Ltd. (“BioLineRx”), headquartered in Modi’in, Israel, was incorporated and commenced operations in April 2003.
Since incorporation, BioLineRx and its subsidiaries (collectively, the “Company”) have beenare engaged in the development (primarily in clinical stages) and commercialization of therapeutics, from pre-clinical development to advanced clinical trials, forwith a wide rangefocus on the fields of medical needs.oncology and hematology.
In February 2007, BioLineRx listedThe Company’s American Depositary Shares (“ADSs”) are traded on the NASDAQ Capital Market, and its ordinary shares are traded on the Tel Aviv Stock Exchange (“TASE”). Each ADS represents 15 ordinary shares.
The Company has two substantially wholly owned subsidiaries: (i) BioLineRx USA, Inc., incorporated in the U.S., and they have been traded onengaged in commercialization activities associated with the TASE since that time. Since July 2011, BioLineRx’s American Depositary Shares (“ADSs”) have also been traded onlaunch of motixafortide for stem-cell mobilization in the NASDAQ Capital Market.
In March 2017, the Company acquiredU.S.; and (ii) Agalimmune Ltd. (“Agalimmune”), a privately-held company incorporated in the United Kingdom, and engaged in clinical development activities with a focus on the field of immuno-oncology. SeeIn December 2023, the Company made a decision to terminate the development of AGI-134, the principal asset of Agalimmune Ltd., effective March 15, 2024 (see Note 19.9).
In September 2023, the U.S. Food and Drug Administration (“FDA”) approved motixafortide in stem cell mobilization for autologous transplantation for multiple myeloma patients, and the Company has begun to independently commercialize motixafortide in the U.S. On October 7, 2023, an unprecedented invasion was launched against Israel from the Gaza Strip by terrorists from the Hamas terrorist organization that infiltrated Israel’s southern border and other areas within the country, attacking civilians and military targets while simultaneously launching extensive rocket attacks on the Israeli civilian population. These attacks resulted in extensive deaths, injuries and the kidnapping of civilians and soldiers. In response, the Security Cabinet of the State of Israel declared war against Hamas, with commencement of a military campaign against the terrorist organization, in parallel to its continued rocket and terror attacks. In addition, Hezbollah, an Islamist terrorist group that controls large portions of southern Lebanon, has attacked military and civilian targets in Northern Israel, to which Israel has responded. To date, the State of Israel continues to be at war with Hamas and in an armed conflict with Hezbollah. The Company’s headquarters and principal development operations are located in the State of Israel. In addition, most of its key employees, officers and directors are residents of Israel. The ongoing war with Hamas has not, to date, materially impacted the Company’s business or operations. Furthermore, the Company does not expect any disruption to its programs or operations as a result of this situation. Nevertheless, at this time, it is not possible to predict the intensity or duration of Israel’s war against Hamas, nor how this conflict will ultimately affect the Company’s ongoing business and operations, nor Israel’s economy in general. F-10
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – GENERAL INFORMATION (cont.) The Company has incurred accumulated losses in the amount of $391 million through December 31, 2023, and it expects to continue incurring losses and negative cash flows from operations until its product or products reach commercial profitability. As mentioned in Note 3, Company management monitors rolling forecasts of the Company’s liquidity reserves on the basis of anticipated cash flows and seeks to maintain liquidity balances at levels that are sufficient to meet its needs. Management believes that the Company’s current cash and other resources will be sufficient to fund its projected cash requirements into 2025. The execution of an independent commercialization plan for motixafortide in the U.S. implies an increased level of expenses prior to and following launch of the product, as well as uncertainty regarding the timing of commercial profitability. Therefore, the Company’s cash flow projections are subject to various risks and uncertainties concerning their fulfilment, and these factors and the risks inherent in the Company’s operations indicate that a material uncertainty exists that may cast significant doubt (or raise substantial doubt as contemplated by PCAOB standards) on the Company’s ability to continue as a going concern. These consolidated financial statements have been engaged in drug development since its incorporation. Althoughprepared assuming that the Company has generated significant revenueswill continue as a going concern and do not include any adjustments that might result from a numberthe outcome of out-licensing transactions inthis uncertainty. Management’s plans include the past,independent commercialization of the Company’s product, as aforementioned, and, if and when required, raising capital through the issuance of debt or equity securities, or capital inflows from strategic partnerships. There are no assurances, however, that the Company cannot determine with reasonable certainty when and ifwill be successful in obtaining the level of financing needed for its operations. If the Company is unsuccessful in commercializing its products and/or raising capital, it will have sustainable profits.may need to reduce activities, or curtail or cease operations.
d. | b. | Approval of consolidated financial statements |
The consolidated financial statements of the Company for the year ended December 31, 20172023 were approved by the Board of Directors on March 6, 2018,25, 2024, and signed on its behalf by the Chairman of the Board, the Chief Executive Officer and the Chief Financial Officer. F-11
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – SIGNIFICANTMATERIAL ACCOUNTING POLICIES a. | a. | Basis of presentation |
The Company’s consolidated financial statements as of December 31, 20172022 and 2016,2023, and for each of the three years in the period ended December 31, 2017,2023, have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). The significant materialaccounting policies described below have been applied on a consistent basis for all years presented, unless noted otherwise.
The consolidated financial statements have been prepared on the basis of historical cost, subject to adjustment of financial assets andwarrant liabilities to their fair value through profit or loss.
The Company classifies its expenses on the statement of comprehensive loss based on the operating characteristics of such expenses.
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont.)
| a. | Basis of presentation (cont.)
|
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgmentmake estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity and expenses, as well as the related disclosures of contingent assets and liabilities, in the process of applying the Company’s accounting policies. Actual results could differ from those estimates. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant materialto the consolidated financial statements, are disclosed in Note 4. Actual results may differ materially from estimates and assumptions used by the Company’s management. F-12
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – MATERIAL ACCOUNTING POLICIES (cont.) b. | b. | Principles of consolidation and equity accounting |
Consolidation
Consolidated entities are all entities over which BioLineRx has control. BioLineRx controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidated entities are fully consolidated from the date on which control of such entities is transferred to BioLineRx and they are de-consolidated from the date that control ceases.
Equity method
Under the equity method of accounting, investments are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Company’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognized as a reduction in the carrying amount of the investment. When the Company’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Company does not recognize further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealized gains on transactions between the Company and its associates and joint ventures are eliminated to the extent of the Company’s interest in these entities. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Company. The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in Note 2g.
| c. | Functional and reporting currency |
Effective January 1, 2015, the Company changed itsThe functional and reporting currency toin these financial statements is the U.S. dollar (“(“dollar”, “USD” or “$”) from the New Israeli Shekel (“NIS”). This change was based on an assessment by Company management that the dollar, which is the primary currency of the economic environment in which the Company operates. Accordingly,Foreign currency transactions are translated into the functional and reporting currency of the Company in these financial statements is the U.S. dollar.
In effecting the change in functional currency to the dollar, as of January 1, 2015, all assets and liabilities of the Company were translated using the current rate method, using the dollar exchange rate as of December 31, 2014, and equity was translated using historical exchange rates at the relevant transaction dates. The resulting amounts translated into dollars for non-monetary items have been treated as their historical cost. Translation differencesdates of the transactions. Foreign exchange gains and losses resulting from the changesettlement of such transactions and from the translation of monetary assets and liabilities denominated in functional currency have been reported as a component of shareholders' equity.foreign currencies at year-end exchange rates are generally recognized in profit or loss.
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont.)
c. | d. | Cash equivalentsInventory |
CashInventory is measured at the lower cost or net realizable value. The cost of inventories includes purchase costs, packaging and cash equivalents include cash on handlabeling costs, and short-term bank deposits (upother costs incurred in bringing the inventories to three months fromtheir present location and condition. Net realizable value is the estimated selling price of the inventories in the ordinary course of business, less the estimated costs necessary to make the sale. Pre-launch inventory is held as an asset when there is a high probability of regulatory approval for the product, see Note 1a. Before that point, a provision is made against the value to its recoverable amount; the provision is then reversed at the point when regulatory approval is received.
Inventory is written down for estimated obsolescence based upon management assumptions about future demand, expiration due date of deposit) that are not restricted as to withdrawal or use, and are therefore considered to be cash equivalents.market conditions.
d. | e. | Property and equipment |
Property and equipment are stated at historical cost less depreciation. Historical cost includes expenditures that are directly attributable to the acquisition of the items. Assets are depreciated by the straight-line method over the estimated useful lives of the assets, provided that the Company’sCompany management believes the residual values of the assets to be negligible, as follows: | % | Computers and communications equipment | 20-3333 | Office furniture and equipment | 6-156 | Laboratory equipment | 15-2015 |
The assets’ residual values, methods of depreciation and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Leasehold improvements are amortized by the straight-line method over the shorter of the lease term or the estimated useful life of the improvements. F-13
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – MATERIAL ACCOUNTING POLICIES (cont.)
The Company applies the cost method of accounting for initial and subsequent measurements of intangible assets. Under this method of accounting, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.
Intellectual property The Company recognizes in its financial statements intangible assetsintellectual property developed by the Company to the extent that the conditions stipulated in paragraph o. below are met. Intellectual property acquired by the Company is initially measured at cost. Intellectual property acquiredused by the Company for development purposes and not yet generating revenues is not amortized and is tested annually for impairment. See f.g. below.
Computer software Acquired computer software licenses are capitalized based on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over the estimated useful lives of the software (3-5(5 years).
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. | g. | Impairment of non-financial assets |
Impairment testing of intellectual property is required when the Company decides to terminate or suspend the development of a project based on such intellectual property. TheIn addition, the Company performs impairment reviews on an annual basis, or more frequently if events or changes in circumstances indicate a potential impairment. Property and equipment, as well as computer software, are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized equal to the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the asset’s value in use to the Company.
The Company classifies its financial assets See Note 9 for information about an impairment loss recorded in 2023 in connection with the following categories: (i) at fair value through profit or loss and (ii) loans and receivables. The classification depends ondecision to terminate the purpose for which each financial asset was acquired. The Company’s management determines the classification of financial assets at initial recognition.AGI-134 project.
| a) | Financial assets at fair value through profit or loss |
The Company’s investment policy with regard to its excess cash, as adopted by its Board of Directors, is composed of the following objectives: (i) preserving investment principal, (ii) providing liquidity and (iii) providing optimum yields pursuant to the policy guidelines and market conditions. The policy provides detailed guidelines as to the securities and other financial instruments in which the Company is allowed to invest. In addition, in order to maintain liquidity, investments are structured to provide flexibility to liquidate at least 50% of all investments within 15 business days. Information about these assets, including details of the portfolio and income earned, is provided internally on at least a quarterly basis to the Company’s key management personnel and on a semi-annual basis to the Investment Monitoring Committee of the Board of Directors. Any divergence from this investment policy requires approval from the Board of Directors.
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont.)
| h.g. | Financial assets (cont.)Warrants
|
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These assets are included in current assets, except for installments which are due more than 12 months subsequent to the balance sheet date. Such installments are included in non-current assets. The Company’s loans and receivables include “other receivables,” “cash and cash equivalents”, and “bank deposits”. See Note 2d.
| 2) | Recognition and measurement |
Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in profit or loss. Financial assets are de-recognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortized cost using the effective interest method.
| 3) | Offsetting financial instruments |
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
Receipts in respect of warrants are classified as equity to the extent that they confer the right to purchase a fixed number of shares for a fixed exercise price. In the event that the exercise price isor the numbers of shares to be issued are not deemed to be fixed, the warrants are classified as a non-current derivative financial liability. This liability is initially recognized at its fair value on the date the contract is entered into and subsequently accounted for at fair value at each reporting date. The fair value changes are charged to non-operating income and expense on the statement of comprehensive loss. Issuance costs allocable to warrants classified as a liability are also recorded as non-operating expense on the statement of comprehensive loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – SIGNIFICANTMATERIAL ACCOUNTING POLICIES (cont.)
h. | j. | Share capitalBorrowings |
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method. With respect to long-term loans (see Note 11), a financial liability is recognized for each tranche upon drawdown. Upon initial recognition, the effective interest rate is calculated by estimating the future cash flows, including loan principal repayments, interest and royalties. The Company’s ordinary shares areroyalty feature does not meet the definition of a derivative, is not classified as equity. Incremental costs directly attributable to the issuanceseparately, and is not measured separately, since it is an integral part of new shares are shown in equity as a deductionthe loan terms and conditions and cannot be transferred or settled separately from the issuance proceeds.loan.
Determining the weighted effective interest rate requires certain judgments and estimations regarding the timing and amount of the Company’s future revenues. The loans are subsequently measured at amortized cost. Furthermore, revisions to the estimated amounts or timing of future cash flows, if necessary, may result in an adjustment of the amortized cost of the loan to reflect the present value of actual and revised estimated contractual cash flows, discounted using the original effective interest rate. This adjustment will be recognized in profit or loss as financial income or expense.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. These payablesBorrowings are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognized initiallyunless the Company has an unconditional right to defer settlement of the liability for at fair value and subsequently measured at amortized cost usingleast 12 months subsequent to the effective interest method.reporting period.
F-15
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – MATERIAL ACCOUNTING POLICIES (cont.) i. | l. | Deferred taxesRevenues |
Deferred taxes are recognized using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amountsThe Company accounts for contract revenue in the consolidated financial statements. Deferred income tax assets are recognized only to the extent that it is probable that future taxable income will be available against which the temporary differences can be utilized.accordance with IFRS 15, “Revenue from Contracts with Customers.”
As the Company is currently engaged primarily in development activities and is not expected to generate taxable income in the foreseeable future, no deferred tax assets are included in the financial statements.
Revenues incurred in connectionIFRS 15 introduces a five-step model for recognizing revenue from contracts with out-licensing of the Company’s patents and other intellectual property are recognized when all of the following criteria have been metcustomers, as of the balance sheet date:follows:
• | ·identify the contract with a customer; |
• | identify the performance obligations in the contract; |
• | determine the transaction price; |
• | allocate the transaction price to the performance obligations in the contract; and |
• | recognize revenue when (or as) the entity satisfies a performance obligation. |
Revenues from selling products In September 2023, the FDA approved motixafortide in stem cell mobilization for autologous transplantation for multiple myeloma patients, and shortly thereafter, the Company began to independently commercialize motixafortide in the U.S. The Company sells products mainly to wholesale distributors. Gross revenues are recognized at a point in time when control over the product is transferred to the distributors (upon delivery), at the gross selling price. The net revenues reflect gross revenues, reduced by amounts attributable to distributor fees, as well as accruals of chargebacks, rebates and returns. The specific considerations the Company uses in estimating these amounts relating to variable consideration are as follows: 1. | Distribution fees - The Company has transferredpays distribution fees to its three main distributors. The distribution fees are paid based on contractually determined rates from the licenseegross consideration. When the significant risksservice is received and rewardsthe products sold to distributors, it is recognized as a reduction of ownershiprevenues in the period the related revenues from the sale of the patents and intellectual property.products are recognized. |
2. | · | Rebates and patient discount programs - The Company does not retain either continuing managerial involvementoffers various rebate and patient discount programs, which result in discounted prescriptions to qualified patients. The Company estimates the degree usually associated with ownership, or effective control overallowance for these rebates, based on the patentestimated utilization of the rebate and intellectual property.discount programs, at the time the revenues are recognized. These estimates are recognized as a reduction of revenues. |
3. | · | Product returns - The Company offers customers a right of return as part of the distributor agreements. The Company estimates the amount of revenue canproduct sales that may be measured reliably.returned by its customers and records this estimate as a reduction of revenues at the time of sale, based on estimates of product returns based on its own sales information, its visibility into the inventory remaining in the distribution channel, and product dating. |
F-16
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – MATERIAL ACCOUNTING POLICIES (cont.)Revenues from licensing agreement According to IFRS 15, performance obligations are 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. IFRS 15 defines the ‘Transaction Price’ as the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services to a customer. In accordance with IFRS 15, the Company identified a number of performance obligations (components) in the contract – in respect of which revenue will be recognized separately for each component, See Note 16. The following assumptions were taken into account, as part of the revenue recognition process: 1) | Development milestones: Variable payments, contingent on achieving additional milestones, are included in the transaction price based on the most likely amount method. Amounts included in the transaction price are recognized only when it is highly probable that a materialreversal of cumulative revenues will not occur, usually upon achievement of the specific milestone, in accordance with the relevant agreement. |
2) | · | It is probable thatSales-based royalties and sales-based milestones are recognized as the economic benefits associated with the transaction will flowrelated sale occurs, due to the Company.specific exception of IFRS 15 for sales-based royalties from licensing of intellectual properties. |
| · | The costs incurred or to be incurred in respect of the sale can be measured reliably. |
Revenue from reaching additional milestones is recognized upon achievement of the specific milestone, in accordance with the relevant agreement.
Revenues in connection with rendering of services are recognized by reference to the stage of completion of the transaction as of the balance sheet date, if and when the outcome of the transaction can be estimated reliably.
Revenues from royalties are recognized on accrual basis in accordance with the substance of the relevant agreement.
F - 13
For more information, see Note 16.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – SIGNIFICANTMATERIAL ACCOUNTING POLICIES (cont.)
j. | n. | Research and development expenses |
Research expenses are charged to profit or loss as incurred.
An intangible asset arising from development (or from the development phase of an internal project) is recognized if all of the following conditions are fulfilled:
| · | technological feasibility exists for completing development of the intangible asset so that it will be available for use or sale. |
| · | it is management’s intention to complete development of the intangible asset for use or sale. |
| · | the Company has the ability to use or sell the intangible asset. |
| · | it is probable that the intangible asset will generate future economic benefits, including existence of a market for the output of the intangible asset or the intangible asset itself or, if the intangible asset is to be used internally, the usefulness of the intangible asset. |
| · | adequate technical, financial and other resources are available to complete development of the intangible asset, as well as the use or sale thereof. |
| · | the Company has the ability to reliably measure the expenditure attributable to the intangible asset during its development. |
Other development costs that do not meet the foregoing conditions are charged to profit or loss as incurred. Development costs previously expensed are not recognized as an asset in subsequent periods. As of December 31, 2017,2023, the Company has not yet capitalized development expenses.
| 1) | Pension and severance pay obligations |
Israeli labor laws and the Company’s employment agreements require the Company to pay retirement benefits to employees terminated or leaving their employment in certain other circumstances. Most of the Company’s employees are covered by a defined contribution plan under Section 14 of the Israel Severance Pay Law.
With respect to the remaining employees, the Company records a liability on its balance sheet for defined benefit plans that represents the present value of the defined benefit obligation as of each reporting date, net of the fair value of plan assets. The present value of the defined benefit liability is determined by discounting the anticipated future cash outflows, using interest rates that are denominated in the currency in which the benefits will be payable.
The amounts recorded as an employee benefit expense in respect of pension and severance pay obligations for the years 2015, 2016 and 2017 were $466,000, $523,000 and $563,000, respectively.
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont.)
| o.k. | Employee benefits (cont.)Share-based payments
|
| 2) | Vacation days and recreation pay |
Labor laws in Israel entitle every employee to vacation days and recreation pay, both of which are computed annually. The entitlement with respect to each employee is based on the employee’s length of service at the Company. The Company recognizes a liability and an expense in respect of vacation and recreation pay based on the individual entitlement of each employee.
The Company operates an equity-settled, share-based compensation plan, under which it grants equity instruments (options, restricted stock units and performance stock units) of the Company as additional consideration for services from employees.employees and service providers. The fair value of the employee services received in exchange for the grant of the equity instruments is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the equity instruments granted:granted including any market performance conditions (for example, the Company’s share price). | · | including any market performance conditions (for example, the Company’s share price); and |
| · | excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and the employee remaining with the entity over a specified time period). |
Non-market performance and service conditions are included in assumptions about the number of equity instruments that are expected to vest. The total expensePerformance stock unit expenses are recognized only if it is recognized overprobable that the vesting period, which is the period over which all of the specified vesting conditions are toperformance condition will be satisfied.achieved.
When the equity instruments are exercised, the Company issues new shares. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (at par value) and share premium when the equity instruments are exercised.
The basic loss per share is calculated by dividing the loss attributable to the holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year.
The diluted loss per share is calculated by adjusting the weighted average number of outstanding ordinary shares, assuming conversion of all dilutive potential shares. The Company’s dilutive potential shares consist of warrants issued to investors, as well as equity instruments granted to employees and service providers. The dilutive potential shares were not taken into account in computing loss per share in 2015, 20162021, 2022 and 2017,2023, as their effect would have been anti-dilutive. F - 15
The calculation of diluted loss per share as of December 31, 2023 does not include 153,154,860 and 431,954,719 of shares underlying options, and shares underlying warrants, respectively, because the effect would be anti-dilutive.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – MATERIAL ACCOUNTING POLICIES (cont.)The Company’s leases include property and motor vehicle leases. At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. Simultaneously, the Company recognizes a right-of-use asset in the amount of the lease liability. Since the interest rate implicit in the lease cannot be readily determined, the Company uses the Company’s incremental borrowing rate. The lease term is the non-cancellable period for which the Company has the right to use an underlying asset, together with both the periods covered by an option to extend the lease, if the Company is reasonably certain to exercise that option, and periods covered by an option to terminate the lease, if the Company is reasonably certain not to exercise that option. After the commencement date, the Company measures the right-of-use asset applying the cost model, less any accumulated depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease liability. Assets are depreciated by the straight-line method over the estimated useful lives of the right of use assets or the lease period, whichever is shorter, as follows: | Years | Property | 11 | Motor vehicles | 3 |
F-19
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – SIGNIFICANTMATERIAL ACCOUNTING POLICIES(cont.)
n. | q. | Changes in accounting policyNew International Financial Reporting Standards, amendments to standards and disclosuresnew interpretations: |
There were no changes in the accounting policies applied by the Company during 2017.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for reporting periods priorClassification of Liabilities as Current or Non-Current (Amendment to January 1, 2018, and have not been early adopted by the Company. The Company’s assessment of the impact of these new standards and interpretations is set out below.IAS 1)
IFRS 9, “Financial instruments,The narrow-scope amendments to IAS 1, “Presentation of Financial Statements,” addressesclarify that liabilities are classified as either current or noncurrent, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the entity’s expectations or events after the reporting date (e.g., the receipt of a waiver or a breach of covenant). The amendments also clarify what IAS 1 means when it refers to the ‘settlement’ of a liability. The amendments could affect the classification measurementof liabilities, particularly for entities that previously considered management’s intentions to determine classification and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issuedfor some liabilities that can be converted into equity. They must be applied retrospectively in July 2014. It replacesaccordance with the guidancenormal requirements in IAS 39 that relates to the classification8, “Accounting Policies, Changes in Accounting Estimates and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categoriesErrors.” The amendment should be applied retrospectively for financial assets: amortized cost, fair value through other comprehensive income, and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income. Further, the expected credit losses model replaces the incurred loss impairment model used in IAS 39. For financial liabilities, there were no changes to classification and measurement except for the recognition of changes in the Company’s own credit risk in other comprehensive income for liabilities designated at fair value through profit or loss. The standard is effective for accountingannual periods beginning on or after January 1, 2018. Adoption2024. Earlier application is permitted. The adoption of the standardamendment is not expected to have a material impact on the Company’s financial statements. as, effective January 1, 2024, the Company’s warrant liabilities will be classified in current liabilities.
IFRS 15, “RevenueDeferred Tax Related to Assets and Liabilities Arising from Contractsa Single Transaction (Amendment to IAS 12) The amendment requires companies to recognize deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences, and will require the recognition of additional deferred tax assets and liabilities. The amendment should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, entities should recognize deferred tax assets (to the extent that it is probable that they can be utilized) and deferred tax liabilities at the beginning of the earliest comparative period for all deductible and taxable temporary differences associated with Customers,” which was issuedright-of-use assets and lease liabilities, decommissioning, restoration and similar liabilities, and the corresponding amounts recognized as part of the cost of the related assets. The adoption of the amendment had no material impact on the Company’s financial statements. Material accounting Policies (Amendment to IAS 1) The amendments change the requirements in May 2014, amends revenue recognition requirementsIAS 1 with regard to disclosure of accounting policies. The amendments require entities to disclose their material rather than their significant accounting policies. Accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements. The supporting paragraphs in IAS 1 are also amended to clarify that accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and establishes principles for reportingneed not be disclosed. Accounting policy information aboutmay be material because of the nature amount, timing and uncertainty of revenue and cash flows arising from contractsthe related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information relating to material transactions, other events or conditions is itself material. These financial statements are prepared in accordance with customers. The standard replacesthe amendments to IAS 18, “Revenue” and IAS 11, “Construction Contracts” and related interpretations. The standard is1 as they were effective for annual periods beginning on or after January 1, 2018. The Company currently does not have any revenues, and will assess the impact of adopting IFRS 15 when relevant.2023.
IFRS 16, “Leases,” which was issued in January 2016, sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract and replaces the previous lease standard, IAS 17, “Leases”. IFRS 16 eliminates the classification of leases for the lessee as either operating leases or finance leases as required by IAS 17, and instead introduces a single lessee accounting model whereby a lessee is required to recognize assets and liabilities for all leases with a term that is greater than 12 months, unless the underlying asset is of low value, and to recognize amortization of lease assets separately from interest on lease liabilities in the income statement. IFRS 16 is effective from January 1, 2019, with early adoption allowed only if IFRS 15, “Revenue from Contracts with Customers,” is also applied.
At this stage, the Company is not able to estimate the impact of the new standards on the Company’s financial statements, and continues to assess the possible impact. The Company will make more detailed assessments over the next twelve months.
There are no other standards that are not yet effective and that would be expected to have a material impact on the Company in the current or future reporting periods and on foreseeable future transactions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
Based on assessments by Company management, the Company’s exposure to credit risk as of December 31, 20172023, is immaterial (see Note 3b). The activities of the Company expose it to market risk, particularlyprimarily as a result of currency risk.
The Company’s Finance Department is responsible for carrying out risk management activities in accordance with policies approved by its Board of Directors. In this regard, the Finance Department identifies, defines and assesses financial risksrisk in close cooperation with other Company departments. The Board of Directors provides written guidelines for overall risk management, as well as written policies dealing with specific areas, such as exchange rate risk, interest rate risk, credit risk, use of financial instruments and investment of excess cash.
1) | 1) | Concentration of currency risk |
The Company’s activities are partly denominated in non-dollar currencies (primarily the NIS)New Israeli Shekel, or “NIS,” and the Euro), which exposes the Company to risks resulting from changes in exchange rates.
The effect of fluctuations in various exchange rates on the Company’s income and equity is as follows:
| | December 31, 2017 | | | | Income (loss) | | | Value on | | | Income (loss) | | Sensitive instrument | | 10% increase | | | 5% increase | | | balance sheet | | | 5% decrease | | | 10% decrease | | | | in USD thousands | | NIS-linked balances: | | | | | | | | | | | | | | | | Cash and cash equivalents | | | (216 | ) | | | (113 | ) | | | 2,376 | | | | 125 | | | | 264 | | Other receivables | | | (30 | ) | | | (15 | ) | | | 325 | | | | 17 | | | | 36 | | Trade payables | | | 69 | | | | 36 | | | | (764 | ) | | | (40 | ) | | | (85 | ) | Other payables | | | 69 | | | | 36 | | | | (756 | ) | | | (40 | ) | | | (84 | ) | Total NIS-linked balances | | | (108 | ) | | | (56 | ) | | | 1,181 | | | | 62 | | | | 131 | | Euro-linked trade payables | | | (94 | ) | | | (49 | ) | | | (1,031 | ) | | | (54 | ) | | | (115 | ) | Total | | | (202 | ) | | | (105 | ) | | | | | | | | | | | | |
| | | | | | | | | Value on | | | | | | | | | | | | | | | | | | | | | | | | | NIS-linked balances: | | | | | | | | | | | | | | | | Cash and cash equivalents | | | (132 | ) | | | (69 | ) | | | 1,457 | | | | 77 | | | | 162 | | Short term deposit | | | (251 | ) | | | (131 | ) | | | 2,758 | | | | 145 | | | | 306 | | Other receivables | | | (31 | ) | | | (16 | ) | | | 344 | | | | 18 | | | | 38 | | Trade payables | | | 243 | | | | 127 | | | | (2,670 | ) | | | (141 | ) | | | (297 | ) | Other payables | | | | | | | | | | | | | | | | | | | | | Total NIS-linked balances | | | | | | | | | | | | | | | | | | | | | Euro-linked trade payables | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Value on | | | | | | | | | | | | | | | | | | | | | | | | | NIS-linked balances: | | | | | | | | | | | | | | | | Cash and cash equivalents | | | (416 | ) | | | (218 | ) | | | 4,573 | | | | 241 | | | | 508 | | Other receivables | | | (66 | ) | | | (34 | ) | | | 721 | | | | 38 | | | | 80 | | Trade payables | | | 38 | | | | 20 | | | | (416 | ) | | | (22 | ) | | | (46 | ) | Other payables | | | | | | | | | | | | | | | | | | | | | Total NIS-linked balances | | | | | | | | | | | | | | | | | | | | | Euro-linked trade payables | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | | | | | | | | | | |
The Company also maintains cash and cash equivalent balances in other currencies in amounts that are not material. | | December 31, 2016 | | | | Income (loss) | | | Value on | | | Income (loss) | | Sensitive instrument | | 10% increase | | | 5% increase | | | balance sheet | | | 5% decrease | | | 10% decrease | | | | in USD thousands | | NIS-linked balances: | | | | | | | | | | | | | | | | Cash and cash equivalents | | | (33 | ) | | | (18 | ) | | | 368 | | | | 19 | | | | 41 | | Other receivables | | | (20 | ) | | | (11 | ) | | | 223 | | | | 12 | | | | 25 | | Trade payables | | | 40 | | | | 21 | | | | (438 | ) | | | (23 | ) | | | (49 | ) | Other payables | | | 82 | | | | 43 | | | | (901 | ) | | | (47 | ) | | | (100 | ) | Total NIS-linked balances | | | 69 | | | | 35 | | | | (748 | ) | | | (39 | ) | | | (83 | ) | Euro-linked trade payables | | | 36 | | | | 19 | | | | (413 | ) | | | (21 | ) | | | (44 | ) | Total | | | | | | | | | | | (1,161 | ) | | | (60 | ) | | | (127 | ) |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (cont.)
| 1) | Concentration of currency risk (cont.) | | | |
Set forth below is certain data regarding dollar exchange rates:
| | Exchange rate of NIS per $1 | | | Exchange rate of Euro per $1 | | As of December 31: | | | | | | | 2016 | | | 3.845 | | | | 0.951 | | 2017 | | | 3.467 | | | | 0.835 | | | | | | | | | | | Percentage increase (decrease) in: | | | | | | | | | 2016 | | | (1.5 | )% | | | 3.5 | % | 2017 | | | (9.8 | )% | | | (12.2 | )% |
Set forth below is information on the linkage of monetary items: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Assets: | | | | | | | | | | | | | | | | | | | Current assets: | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | 5,685 | | | | 4,573 | | | | 329 | | | | 2,768 | | | | 1,457 | | | | 30 | | Short term bank deposits | | | 40,495 | | | | - | | | | - | | | | 35,981 | | | | 2,758 | | | | - | | Other receivables | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Current maturities of long-term loans | | | 1,542 | | | | - | | | | - | | | | 3,145 | | | | - | | | | - | | Accounts payable and accruals: | | | | | | | | | | | | | | | | | | | | | | | | | Trade | | | 4,359 | | | | 416 | | | | 2,191 | | | | 6,663 | | | | 2,670 | | | | 1,536 | | Other | | | 487 | | | | 1,257 | | | | - | | | | 1,500 | | | | 1,853 | | | | - | | Non-current liabilities | | | | | | | | | | | | | | | | | | | | | | | | | Long-term loans, net of current maturities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net balance | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2016 | | | December 31, 2017 | | | | Dollar | | | NIS | | | Other currencies | | | Dollar | | | NIS | | | GBP and other | | | | USD in thousands | | | USD in thousands | | Assets: | | | | | | | | | | | | | | | | | | | Current assets: | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | 2,097 | | | | 368 | | | | 4 | | | | 2,623 | | | | 2,376 | | | | 111 | | Short term bank deposits | | | 33,154 | | | | - | | | | - | | | | 44,373 | | | | - | | | | - | | Other receivables | | | - | | | | - | | | | - | | | | 117 | | | | 325 | | | | 144 | | Total assets | | | 35,251 | | | | 591 | | | | 4 | | | | 47,113 | | | | 2,701 | | | | 255 | | Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Current maturities of bank loan | | | 93 | | | | - | | | | - | | | | 93 | | | | - | | | | - | | Accounts payable and accruals: | | | | | | | | | | | | | | | | | | | | | | | | | Trade | | | 1,631 | | | | 438 | | | | 521 | | | | 3,018 | | | | 764 | | | | 1,734 | | Other | | | | | | | 901 | | | | 77 | | | | 99 | | | | 756 | | | | 258 | | Non-current liabilities | | | | | | | | | | | | | | | | | | | | | | | | | Long-term bank loan, net of current maturities | | | 250 | | | | - | | | | - | | | | 157 | | | | - | | | | - | | | | | 1,974 | | | | 1,340 | | | | 598 | | | | 3,367 | | | | 1,520 | | | | 1,992 | | Net asset value | | | 33,277 | | | | (749 | ) | | | (594 | ) | | | 43,746 | | | | 1,181 | | | | (1,737 | ) |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (cont.)
| 2) | Fair value of financial instruments |
As of December 31, 2017,2023, the financial instruments of the Company consist of non-derivative assets and liabilities (primarily working capital items, deposits, and deposits)current and long-term loans), as well as warrants classified as a liability. With regard to non-derivative assets and liabilities, given their nature, the fair value of the financial instruments included in working capital is generally close or identical to their carrying amount. With regard to the warrants classified as a non-current financial liability, see Note 11c(1) and 11c(2).12c. With regard to long-term loans, see Note 11.
| 3) | Exposure to market risk and management thereof |
In the opinion of Company management, the market risk to which the Company is exposed is primarily related to currency risk exposure, as mentioned above. Additionally, Company management does not consider the interest rate risk mentioned in paragraph 4 below to be material.
Company management does not consider interest rate risk to be material, as the Company holds deposits and short-term government bonds whose fair value and/or cash flows are not materially affected by changes in interest rates.
Credit risk is managed at the Company level. These risks relate to cash and cash equivalents, bank deposits trade receivables, and other receivables. The Company’s cash, cash equivalents and short-term bank deposits at December 31, 2016,2022, and 20172023 were mainly deposited with highly-ratedhighly rated major Israeli and U.S. banks. In the Company’s opinion, the credit risk associated with these balances is remote. The Company considers its maximum exposure to credit risk to be as follows: | | | | | | | | | | | | | | | Assets: | | | | | | | Cash and cash equivalents | | | 10,587 | | | | 4,255 | | Short-term bank deposits | | | 40,495 | | | | 38,739 | | Trade receivables | | | - | | | | 358 | | Other receivables | | | | | | | | | Total | | | | | | | | |
| | December 31, | | | | 2016 | | | 2017 | | | | in USD thousands | | Assets: | | | | | | | Cash and cash equivalents | | | 2,469 | | | | 5,110 | | Short-term bank deposits | | | 33,154 | | | | 44,373 | | Other receivables | | | 223 | | | | 586 | | Total | | | 35,846 | | | | 50,069 | |
F-23
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (cont.) Company management monitors rolling forecasts of the Company’s liquidity reserves on the basis of anticipated cash flows and maintainsseeks to maintain the liquidity balances at a level that is sufficient to meet its needs. BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – FINANCIAL RISK MANAGEMENT (cont.)
Although the Company has succeeded in generating significant revenues from a number of out-licensing transactions, and has recently launched commercialization of its lead program, motixafortide, in the past,last quarter of 2023, it cannot determine with reasonable certainty if and when it will become profitable on a current basis. Management believes that the Company’s current cash and other resources will be sufficient to fund its projected cash requirements into 2020. Accordingly,2025. However, in the event that the Company does not begin to generate sustainable cash flows from its operating activities in the future, the Company will need to carry out significant cost reductions and/or raise additional capital infunding. See also Note 1c regarding the future. Inabilitymaterial uncertainty that may cast significant doubt about the Company’s ability to raise additional capital would havecontinue as a material adverse effect on the financial condition of the Company.going concern.
| d. | FinancialFair value of financial instruments |
AsThe different levels of December 31, 2016 and 2017, the Company’svaluation of financial instruments consisted of loans and receivables, and warrants classifiedare defined as a liability.follows:
Level 1 | e.Quoted prices (unadjusted) in active markets for identical assets or liabilities. | | Fair value estimations | Level 2 | Inputs, other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). | | | Level 3 | Inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
In February 2012The Company utilizes valuation techniques that maximize the use of observable inputs and 2013, BioLineRx completed financing transactionsminimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk, in which it issued ADSs and warrantsits assessment of fair value. The fair value of the financial instruments included in the working capital of the Company, as well as the long-term loan, is usually identical or close to purchase additional ADSs – see Note 11c.their carrying value. The fair value of the warrants which were not tradedis based on an active market, was determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates.Level 3 measurements.
In July 2017, the Company completed a direct placement to BVF Partners L.P., its largest shareholder, for aggregate gross proceeds of $9.6 million. The placement consisted of 8,495,575 ADSs, Series A warrants to purchase an additional 2,973,451 ADSs and Series B warrants to purchase an additional 2,973,451 ADSs. See Note 11c(4) for information regarding fair value determination of the warrants, at issuance andcalculated based on the Black-Scholes model, was $11,932,000 as of December 31, 2017.2023.
For more information on the parameters used to value the warrants, see Note 12c. F-24
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (cont.) | e. | Changes in financial liabilities with cash flows included in financing activities |
| | | | | | | | | | | | | | Balance as of January 1, 2021 | | | 5,832 | | | | 10,218 | | | | 16,050 | | Changes during the year 2021: | | | | | | | | | | | | | Principal and interest payments | | | (3,814 | ) | | | - | | | | (3,814 | ) | Share premium resulting from exercise of warrants | | | | | | | (10,295 | ) | | | (10,295 | ) | Amounts recognized through profit and loss | | | | | | | | | | | | | Balance as of December 31, 2021 | | | | | | | | | | | | | Changes during the year 2022: | | | | | | | | | | | | | Net proceeds | | | 9,126 | | | | 9,075 | | | | 18,201 | | Principal and interest payments | | | (3,177 | ) | | | - | | | | (3,177 | ) | Amounts recognized through profit and loss | | | | | | | | | | | | | Balance as of December 31, 2022 | | | | | | | | | | | | | Changes during the year 2023: | | | | | | | | | | | | | Principal payments or received | | | (1,543 | ) | | | - | | | | (1,543 | ) | Amounts recognized through profit and loss | | | 1,148 | | | | 11,054 | | | | 12,202 | | Share premium resulting from exercise of warrants | | | | | | | | | | | | | Balance as of December 31, 2023 | | | | | | | | | | | | |
| f. | Fair value measurement of warrants using significant unobservable inputs (level 3) |
The following table presents the changes in level 3 instruments for the years ended December 31, 2021, 2022 and 2023: | | | | | | | | Balance as of January 1, 2021 | | | 10,218 | | Changes during 2021: | | | | | Exercises | | | (10,295 | ) | Changes in fair value through profit and loss | | | | | Balance as of December 31, 2021 | | | | | Changes during 2022: | | | | | Issuances | | | 9,075 | | Changes in fair value through profit and loss | | | | | Balance as of December 31, 2022 | | | | | Changes during 2023: | | | | | Exercises | | | (3,631 | ) | Changes in fair value through profit and loss | | | | | Balance as of December 31, 2023 | | | | |
F-25
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS As part of the financial reporting process, Company management is required to make estimates that affect the value of assets, liabilities, income, expenses and certain disclosures included in the Company’s consolidated financial statements. By their very nature, such accounting estimates are subjective and complex and consequently may differ from actual results. The accounting estimates used in the preparation of the financial statements are continually evaluated and adjusted based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. Described belowBelow are the critical accounting estimates used in the preparation of the financial statements the formulation of whichthat required Company management to make assumptions as to circumstances and events that involveinvolving significant uncertainty. In using its judgment to determine the accounting estimates, the Company takes into consideration, as appropriate, the relevant facts, past experience, the effect of external factors and reasonable assumptions under the circumstances.
BioLineRx Ltd.
Impairment of indefinite-lived intangible assets As mentioned in Notes 2f and 2g, the Company performs impairment reviews of intangible assets not subject to amortization on an annual basis, or more frequently if events or changes in circumstances indicate a potential impairment. The recoverable amount is determined using discounted cash flow calculations. The analysis estimates the future cash flows the Company expects to derive from the asset, incorporates expectations about possible variations in the amount or timing of those future cash flows, as well as the uncertainty inherent in the asset, and the risk-adjusted cash flows are then discounted using the Company’s estimated post-tax weighted average cost of capital (“WACC”). The main estimates used in calculating the recoverable amount include the WACC estimation and the amounts and timing of projected future cash flows. Such amounts and timing are influenced by the expected outcome of development activities, the probability of success and timing in gaining regulatory approval, size of the potential market and the Company’s specific market share, either via direct sales or a potential out-licensing deal. In light of the Company’s decision to terminate AGI-134, the value of its intangible asset was written off in its entirety. Following the approval and subsequent launch of motixafortide towards the end of 2023, the Company began to amortize the intangible asset related to motixafortide concurrently with related recognition of revenue (see Note 16). Fair value estimations of warrants As described in Notes 3d and 12c, the Company completed financing transactions in which it issued ADSs and warrants to purchase additional ADSs. The fair value of the warrants, which are not traded on an active market, is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. F-26
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (cont.)
Development expensesLicense revenue recognition
Development expenses are capitalized in accordance with the accounting policy described in Note 2n. The capitalization of costs is based on management’s judgment of technological and economic feasibility, which is usually achieved when a development project reaches a predefined milestone, or when the Company enters into a transaction to sell the know-how that resulted from the development process. In determining the amountamounts to be capitalized, management makes assumptionsrecognized as revenue relating to the future anticipated cash inflows fromout-licensing transaction with HST and Gloria, the assets,Company was required to use significant judgement in the following matters:
| • | The allocation of consideration between the license agreement and the SPA, based on the fair value of the Company’s shares on the date considered as the closing date of the transaction |
| • | The estimated stand-alone, selling-price value between the contract components (i.e., between the main therapeutic areas covered by the contract), as well as the performance obligations relating to each of the components |
| • | The period of time over which revenue should be recognized for each component. The revenue recognition method is the ratio of support hours to the total hours expected to be incurred. |
Recognition and measurement of allowance for rebates, chargebacks and returns The Company makes several key estimations related to gross-to-net (GTN) revenue, which are recognized as revenue reductions and for which unsettled amounts are accrued. The primary measures calculated include rebates, Medicaid and other governmental rebates, chargebacks, and returns. The allowance is calculated based on common practices in the industry and the anticipated periodestimated utilization of future benefits.rebate and chargeback programs at the time revenue is recognized. The main estimates used in recognizing and measuring this allowance relate to the volume of products sold to distributors but not yet prescribed to patients. The Company management has concluded that,periodically evaluates its estimates against actual results and updates them accordingly as of December 31, 2017, the foregoing conditions have not been met and therefore development expenses have not been capitalized for any project.necessary. If management had determined that the aforementioned conditions had been met, the capitalization of development costs would have resulted in an increase in the Company’s profit or a decrease in its loss.
NOTE 5 – CASH AND CASH EQUIVALENTS
| | December 31, | | | | 2016 | | | 2017 | | | | in USD thousands | | | | | | | | | Cash on hand and in bank | | | 969 | | | | 3,960 | | Short-term bank deposits | | | 1,500 | | | | 1,150 | | | | | 2,469 | | | | 5,110 | |
| | | | | | | | | | | | | | | | | | | | | | Cash on hand and in bank | | | 3,623 | | | | 3,154 | | Short-term bank deposits | | | | | | | | | | | | | | | | | |
The short-term bank deposits included in cash and cash equivalents bear interest at annual raterates of between 0.15%. The carrying amount of cash and cash equivalents approximates their fair value, since they bear interest at rates similar to prevailing market interest rates.4.55%. F-27
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 – SHORT-TERM BANK DEPOSITS The short-term bank deposits are primarily in US dollars and bear interest at annual rates of between 1.22%0.57% and 2.12%6.63%. NOTE 7 – LONG-TERM INVESTMENTINVENTORY The long-term investment represents the Company’s $1.0 million investment, completed in September 2017, in iPharma (H.K.) Limited (“iPharma”), a joint venture with I-Bridge Capital, a Chinese venture capital fund focused on developing innovative therapies in China. iPharma is focusing on the development of innovative clinical and pre-clinical therapeutic candidates to serve the Chinese and global healthcare markets. iPharma expects to raise the funds needed to develop its pipeline primarily from third-party investors.
F - 21
| | | | | | | | | | | | | | | | | | | | | | Raw materials | | | - | | | | 903 | | Work-in-progress | | | - | | | | 471 | | Finished goods | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 – PROPERTY AND EQUIPMENT
Set forth below are the composition of property and equipment and the related accumulated depreciation, grouped by major classifications, as well as the changes therein for the respective years:
| | Cost | | | Accumulated depreciation | | | | | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Net book value | | | | beginning | | | during | | | during | | | end of | | | beginning | | | during | | | during | | | end of | | | December 31, | | | | of year | | | year | | | year | | | year | | | of year | | | year | | | year | | | year | | | 2014 | | | 2015 | | | | In USD thousands | | | In USD thousands | | | In USD thousands | | Composition in 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Office furniture and equipment | | | 233 | | | | 177 | | | | (212 | ) | | | 198 | | | | 105 | | | | 120 | | | | (212 | ) | | | 13 | | | | 128 | | | | 185 | | Computers and communications equipment | | | 389 | | | | 78 | | | | (21 | ) | | | 446 | | | | 334 | | | | 42 | | | | (21 | ) | | | 355 | | | | 55 | | | | 91 | | Laboratory equipment | | | 626 | | | | 568 | | | | - | | | | 1,194 | | | | 328 | | | | 154 | | | | - | | | | 482 | | | | 298 | | | | 712 | | Leasehold improvements | | | 404 | | | | 1,791 | | | | (170 | ) | | | 2,025 | | | | 164 | | | | 110 | | | | (170 | ) | | | 104 | | | | 240 | | | | 1,921 | | | | | 1,652 | | | | 2,614 | | | | (403 | ) | | | 3,863 | | | | 931 | | | | 426 | | | | (403 | ) | | | 954 | | | | 721 | | | | 2,909 | |
| | Cost | | | Accumulated depreciation | | | | | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Net book value | | | | beginning | | | during | | | during | | | end of | | | beginning | | | during | | | during | | | end of | | | December 31, | | | | of year | | | year | | | year | | | year | | | of year | | | year | | | year | | | year | | | 2015 | | | 2016 | | | | In USD thousands | | | In USD thousands | | | In USD thousands | | Composition in 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Office furniture and equipment | | | 198 | | | | - | | | | - | | | | 198 | | | | 13 | | | | 12 | | | | - | | | | 25 | | | | 185 | | | | 173 | | Computers and communications equipment | | | 446 | | | | 43 | | | | - | | | | 489 | | | | 355 | | | | 53 | | | | - | | | | 408 | | | | 91 | | | | 81 | | Laboratory equipment | | | 1,194 | | | | 104 | | | | - | | | | 1,298 | | | | 482 | | | | 188 | | | | - | | | | 670 | | | | 712 | | | | 628 | | Leasehold improvements | | | 2,025 | | | | 3 | | | | - | | | | 2,028 | | | | 104 | | | | 201 | | | | - | | | | 305 | | | | 1,921 | | | | 1,723 | | | | | 3,863 | | | | 150 | | | | - | | | | 4,013 | | | | 954 | | | | 454 | | | | - | | | | 1,408 | | | | 2,909 | | | | 2,605 | |
classifications: F - 22
| | | | | | | | | | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | | | | | beginning | | | during | | | during | | | end of | | | beginning | | | during | | | during | | | end of | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Composition in 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Office furniture and equipment | | | 244 | | | | 8 | | | | - | | | | 252 | | | | 138 | | | | 27 | | | | - | | | | 165 | | | | 106 | | | | 87 | | Computers and communications equipment | | | 961 | | | | 101 | | | | - | | | | 1,062 | | | | 712 | | | | 108 | | | | - | | | | 820 | | | | 249 | | | | 242 | | Laboratory equipment | | | 1,606 | | | | 7 | | | | - | | | | 1,613 | | | | 1,578 | | | | 20 | | | | - | | | | 1,598 | | | | 28 | | | | 15 | | Leasehold improvements | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 – INTANGIBLE ASSETS NOTE 8 – PROPERTY AND EQUIPMENT (cont.Intellectual property included the following intangible assets acquired by the Company:
| - | $6.7 million recorded as a result of the acquisition of Agalimmune, primarily related to its main drug candidate, AGI-134 (see Note 1a). In December 2023, the Company made a decision to terminate the development of AGI-134. Accordingly, the intellectual property related to AGI-134 has been written-off in the 2023 financial statements. |
| - | $15.0 million associated with BL-8040 were recorded following an amendment to the in-licensing agreement with Biokine Therapeutics Ltd. ("Biokine"). This amendment reduced the payments owed by the Company on sublicense receipts (as defined in the license agreement) from 40% to 20%. This intellectual property is amortized proportionally with the revenues recognized from the licensing transaction with HST and Gloria in Asia (see Note 16), as well as in accordance with the lifespan of the patents in the U.S., following commencement of self-commercialization of motixafortide towards the end of 2023. |
Set forth below are the composition of intangible assets and the related accumulated depreciation, grouped by major classifications: | | Cost | | | Accumulated depreciation | | | | | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Net book value | | | | beginning | | | during | | | during | | | end of | | | beginning | | | during | | | during | | | end of | | | December 31, | | | | of year | | | year | | | year | | | year | | | of year | | | year | | | year | | | year | | | 2016 | | | 2017 | | | | In USD thousands | | | In USD thousands | | | In USD thousands | | Composition in 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Office furniture and equipment | | | 198 | | | | 2 | | | | - | | | | 200 | | | | 25 | | | | 35 | | | | - | | | | 60 | | | | 173 | | | | 140 | | Computers and communications equipment | | | 489 | | | | 266 | | | | - | | | | 755 | | | | 408 | | | | 30 | | | | - | | | | 438 | | | | 81 | | | | 317 | | Laboratory equipment | | | 1,298 | | | | 70 | | | | - | | | | 1,368 | | | | 670 | | | | 159 | | | | - | | | | 829 | | | | 628 | | | | 539 | | Leasehold improvements | | | 2,028 | | | | - | | | | - | | | | 2,028 | | | | 305 | | | | 214 | | | | - | | | | 519 | | | | 1,723 | | | | 1,509 | | | | | 4,013 | | | | 338 | | | | - | | | | 4,351 | | | | 1,408 | | | | 438 | | | | - | | | | 1,846 | | | | 2,605 | | | | 2,505 | |
F - 23
| | | | | Accumulated depreciation and impairment | | | | | | | Balance at | | | Additions | | | Disposal | | | Balance at | | | Balance at | | | Additions | | | Impairment | | | Balance at | | | | | | | beginning | | | during | | | during | | | end of | | | beginning | | | during | | | during | | | end of | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Composition in 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Intellectual property | | | 21,792 | | | | - | | | | 450 | | | | 21,342 | | | | 96 | | | | - | | | | 6,703 | | | | 6,799 | | | | 21,696 | | | | 14,543 | | Computer software | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 – LEASES NOTE 9 – INTANGIBLE ASSETS
| | Cost | | | Accumulated depreciation and impairment | | | | | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Net book value | | | | beginning | | | during | | | during | | | end of | | | beginning | | | during | | | during | | | end of | | | December 31, | | | | of year | | | year | | | year | | | year | | | of year | | | year | | | year | | | year | | | 2014 | | | 2015 | | | | In USD thousands | | | In USD thousands | | | In USD thousands | | Composition in 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Intellectual property | | | 193 | | | | - | | | | - | | | | 193 | | | | 96 | | | | - | | | | - | | | | 96 | | | | 97 | | | | 97 | | Computer software | | | 277 | | | | 51 | | | | - | | | | 328 | | | | 257 | | | | 16 | | | | - | | | | 273 | | | | 20 | | | | 55 | | | | | 470 | | | | 51 | | | | - | | | | 521 | | | | 353 | | | | 16 | | | | - | | | | 369 | | | | 117 | | | | 152 | |
| | Cost | | | Accumulated depreciation and impairment | | | | | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Net book value | | | | beginning | | | during | | | during | | | end of | | | beginning | | | during | | | during | | | end of | | | December 31, | | | | of year | | | year | | | year | | | year | | | of year | | | year | | | year | | | year | | | 2015 | | | 2016 | | | | In USD thousands | | | In USD thousands | | | In USD thousands | | Composition in 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Intellectual property | | | 193 | | | | - | | | | - | | | | 193 | | | | 96 | | | | - | | | | - | | | | 96 | | | | 97 | | | | 97 | | Computer software | | | 328 | | | | 57 | | | | - | | | | 385 | | | | 273 | | | | 28 | | | | - | | | | 301 | | | | 55 | | | | 84 | | | | | 521 | | | | 57 | | | | - | | | | 578 | | | | 369 | | | | 28 | | | | - | | | | 397 | | | | 152 | | | | 181 | |
| | Cost | | | Accumulated depreciation and impairment | | | | | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Net book value | | | | beginning | | | during | | | during | | | end of | | | beginning | | | during | | | during | | | end of | | | December 31, | | | | of year | | | year | | | year | | | year | | | of year | | | year | | | year | | | year | | | 2016 | | | 2017 | | | | In USD thousands | | | In USD thousands | | | In USD thousands | | Composition in 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Intellectual property | | | 193 | | | | 6,703 | | | | - | | | | 6,896 | | | | 96 | | | | - | | | | - | | | | 96 | | | | 97 | | | | 6,800 | | Computer software | | | 385 | | | | 182 | | | | - | | | | 567 | | | | 301 | | | | 43 | | | | - | | | | 344 | | | | 84 | | | | 223 | | | | | 578 | | | | 6,885 | | | | - | | | | 7,463 | | | | 397 | | | | 43 | | | | - | | | | 440 | | | | 181 | | | | 7,023 | |
F - 24
BioLineRx Ltd. | | | | | | | | | | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | Balance at | | | Additions | | | Deletions | | | Balance at | | | | | | | beginning | | | during | | | during | | | end of | | | beginning | | | during | | | during | | | end of | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Composition in 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Property | | | 2,097 | | | | - | | | | - | | | | 2,097 | | | | 582 | | | | 388 | | | | - | | | | 970 | | | | 1,515 | | | | 1,127 | | Motor vehicles | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at | | | Additions | | | Deletions | | | Interest expense | | | Exchange differences | | | Payments | | | Balance at | | | | beginning | | | during | | | during | | | during | | | during | | | during | | | end of | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Composition in 2023 | | | | | | | | | | | | | | | | | | | | | | Property | | | 1,920 | | | - | | | | - | | | | 236 | | | | (38 | ) | | | (562 | ) | | | 1,556 | | Motor vehicles | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-31
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 – LONG-TERM BANK LOANLEASES (cont.)
| | December 31, | | | | 2016 | | | 2017 | | | | In USD thousands | | | | | | | | | Loan balance | | | 343 | | | | 250 | | Less current maturities | | | (93 | ) | | | (93 | ) | | | | 250 | | | | 157 | |
The loan is denominated in dollars and bears interest at an annual rate of 3.75%. The book value of the loan approximates its fair value.
The loan is repayable in 60 monthly installments and is collateralized by certain lab equipment.
Future repayments1) | The Company leases two premises – its corporate headquarters and development facilities in Modi’in, Israel, and its U.S. commercial headquarters in Waltham, Massachusetts. |
a. | The Company leases its premises in Israel under a lease agreement entered into in August 2014. Payments under the lease commenced in June 2015, and the initial term of the lease expired in June 2020. The Company exercised its option to extend the lease through June 30, 2025, and has the option to extend the lease for two additional lease periods totaling up to five additional years, each option at a 5% increase to the preceding lease payment amount. The monthly lease payment is approximately $25,000. In addition, the Company pays building maintenance charges of approximately $8,000 per month. |
b. | The Company leases its premises in Boston under a lease agreement entered into and commenced in October 2022. The term of the lease will expire in December 2024. The monthly lease fee is approximately $24,000. |
2) | The Company has entered into lease agreements in connection with a number of vehicles. The lease periods are generally for three years. The annual lease fees, linked to the CPI, are approximately $303,000. To secure the terms of the lease agreements, the Company has prepaid two months of lease payments to the leasing companies. |
3) | As of December 31, 2023, minimum future rental payments (taking into consideration the aforementioned extension periods) under the leases are as follows: |
| | | | | | | | | | | | | | 2024 | | | 575 | | | | 161 | | | | 736 | | 2025 | | | 292 | | | | 113 | | | | 405 | | 2026 | | | 292 | | | | 26 | | | | 317 | | 2027 | | | 306 | | | | - | | | | 306 | | 2028-2030 | | | | | | | | | | | | | | | | | | | | | | | | | |
Extension and termination options are included in most of the long-term bank loan (other than current maturities)property leases. These are used to maximize operational flexibility in terms of managing the assets used in the yearsCompany’s operations. The substantial majority of extension and termination options are exercisable solely by the Company and not by the lessors. F-32
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 – LONG-TERM LOANS In October 2018, the Company entered into a $10 million loan agreement with Kreos Capital. This loan was repaid in full in September 2022. In September 2022, the Company entered into a new $40 million loan agreement with Kreos Capital (via Kreos Capital VII Aggregator SCSp). Pursuant to the new agreement, the first tranche of $10 million was drawn down by the Company upon closing. The remaining $30 million will be made available in two additional tranches subject to the achievement of pre-specified milestones. The tranches are available for drawdown at the Company’s discretion at various time points through October 1, 2024. Each tranche carries a pre-defined interest-only payment period, followed by a loan principal amortization period of up to 36 months subsequent to the balance sheet dateinterest-only period. The interest-only periods are as follows (in USD thousands):subject to possible extension based on certain pre-defined milestones. Borrowings under the financing bear interest at a fixed annual rate of 9.5% (~11.0%, including associated cash fees). As security for the loan, Kreos Capital received a first-priority secured interest in all Company assets, including intellectual property, and the Company undertook to maintain a minimum cash balance. In addition, Kreos Capital is entitled to mid-to-high single-digit royalties on motixafortide sales in the U.S., up to a pre-defined cap.
The loan's current value includes the accrual of effective interest, including estimated future royalties.
NOTE 1112 – EQUITY
As of December 31, 2016, and 2017 the Company’sThe Company’s share capital is composed of ordinary shares, as follows:
| | Number of Ordinary Shares | | | | December 31, | | | | 2016 | | | 2017 | | | | | | | | | Authorized share capital | | | 150,000,000 | | | | 250,000,000 | | | | | | | | | | | Issued and paid-up share capital | | | 57,033,355 | | | | 105,063,437 | |
| | In USD and NIS | | | | December 31, | | | | 2016 | | | 2017 | | | | | | | | | Authorized share capital (in NIS) | | | 15,000,000 | | | | 25,000,000 | | | | | | | | | | | Issued and paid-up share capital (in NIS) | | | 5,703,336 | | | | 10,506,344 | | | | | | | | | | | Issued and paid-up share capital (in USD) | | | 1,513,294 | | | | 2,836,139 | |
As of December 31, 2017, the market price on NASDAQ of BioLineRx’s ADSs was $1.09, and the market price on the Tel Aviv Stock Exchange of BioLineRx’s ordinary shares was NIS 3.79.
BioLineRx Ltd.
| | Number of Ordinary Shares | | | | | | | | | | | | | | | | | | | | Authorized share capital | | | | | | | | | | | | | | | | | | Issued and paid-up share capital | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Authorized share capital (in NIS) | | | | | | | | | | | | | | | | | | Issued and paid-up share capital (in NIS) | | | | | | | | | | | | | | | | | | Issued and paid-up share capital (in USD) | | | | | | | | |
F-33
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1112 – EQUITY (cont.)
b. | b. | Rights related to shares |
The ordinary shares confer upon their holders voting and dividend rights and the right to receive assets of the Company upon its liquidation. As of December 31, 20162022 and 2017,2023, all outstanding share capital consisted of ordinary shares.
c. | c. | Changes in the Company’s equity |
1) | 1) | In February 2012, BioLineRx issued as part of private placement,connection with the loan agreement with Kreos Capital signed in October 2018 (see Note 10), Kreos Capital received warrants to purchase up to 2,622,15763,837 ADSs at an exercise price of $3.57$14.10 per ADS. The warrants wereissued have been classified as a financial liability due to a net settlement provision. The warrant is exercisable for a termperiod of fiveten years from the date of their issuance. Since the exercise price was not deemed to be fixed, the warrants did not qualify for classification as an equity instrument and were therefore classified as a non-current derivative financial liability. The amount of the private placement consideration allocated to the warrants was approximately $4,800,000 as of the issuance date, based on their fair value as calculated on the basis of the Black-Scholes model. The changes in fair value for the two years ended December 31, 2015 and 2016, of approximately $700,000 and $110,000, respectively, have been recorded as non-operating income on the statement of comprehensive loss. The warrants expired in full in February 2017, without being exercised. |
In February 2013,The fair value of the Company issued as part of a direct placement, warrants to purchase up to 1,600,000 ADSs, at an exercise price of $3.94 per ADS. The warrants were exercisable for a term of five years from the date of their issuance. Sinceissuance, computed using the exercise price was not deemedBlack-Scholes option pricing model, amounted to be fixed, the warrants did not qualify for classification as an equity instrument and were therefore classified as a non-current derivative financial liability.$861,000. The amountfair value of the direct placement consideration allocated to the warrants was approximately $3,400,000,immaterial as calculatedof December 31, 2023 (December 31, 2022 – also immaterial), and was based on the basisthen current price of an ADS, a risk-free interest rate of 3.84%, an average standard deviation of 84.7%, and on the remaining contractual life of the Black-Scholes model, which reflected their fair value as of the issuance date. warrants.
The changeschange in fair value for the years ended December 31, 20152022 and 20162023, of approximately $600,000$36,000 and $100,000,$21,000, respectively, havehas been recorded as non-operating income on the statement of comprehensive loss. There was no change in fair value in 2017. TheAs of December 31, 2023, none of these warrants expired in full in February 2018, without beinghad been exercised. 2) | 2) | In March 2015,February 2019, the Company completed an underwritten public offering of 14,375,0001,866,667 of its ADSs and warrants to purchase 1,866,667 ADSs, at a public offering price of $2.00$8.25 per ADS and accompanying warrant. The warrants were exercisable immediately, were to expire five years from the date of issuance and had an exercise price of $11.25 per ADS. The offering raised a total of $28.8$15.4 million, with net proceeds of approximately $26.4$14.1 million, after deducting fees and expenses. The amount of the offering consideration initially allocated to the warrants was $5.0 million. Total issuance costs initially allocated to the warrants were $0.4 million. |
| 3) | In April 2017, the Company completed an underwritten public offering of 33,823,529 of its ADSs at a public offering price was $0.85 per ADS. The offering raised a total of $28.8 million, with net proceeds of approximately $26.2 million, after deducting fees and expenses. |
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – EQUITY (cont.)
| 4) | In July 2017, the Company completed a direct placement to BVF Partners L.P., its largest shareholder, for aggregate gross proceeds of $9.6 million. The placement consisted of 8,495,575 ADSs, Series A warrants to purchase an additional 2,973,451 ADSs and Series B warrants to purchase an additional 2,973,451 ADSs. The Series A warrants have an exercise price of $2.00 per ADS and are exercisable for a term of four years. The Series B warrants have an exercise price of $4.00 per ADS and are also exercisable for a term of four years. Net proceeds from the transaction were approximately $9.5 million, after deducting fees and expenses. |
The warrants issued have been classified as a non-current financial liability due to a net settlement provision. This liability was initially recognized at its fair value on the date the contract was entered into and is subsequently accounted for at fair value at each balance sheet date. The fair value changes are charged to non-operating income and expense in the statement of comprehensive loss.
The fair value of the warrants as of December 31, 2023 was immaterial (December 31, 2022 – also immaterial). The change in fair value for the year ended December 31, 2022 of $563,000 was recorded as non-operating income on the statement of comprehensive loss. The change in fair value for 2023 was immaterial. As of December 31, 2023, none of these warrants had been exercised, and they expired in February 2024. F-34
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 12 – EQUITY (cont.) | c. | Changes in the Company’s equity (cont.) | | | |
3) | In May and June 2020, the Company sold in registered direct offerings an aggregate of 7,653,145 ADSs at a price of $1.75 per ADS. The Company also issued to investors in the offerings unregistered warrants to purchase 7,653,145 ADSs. The warrants were exercisable immediately, were to expire two and half years from the date of issuance and had an exercise price of $2.25 per ADS. In addition, the Company granted to the placement agent’s designees, as part of the placement fees, warrants to purchase 382,657 ADSs. These warrants were exercisable immediately, were set to expire two and half years from the date of issuance and had an exercise price of $2.1875 per ADS. The offerings raised a total of $13.4 million, with net proceeds of $12.0 million, after deducting fees and expenses. The amount of the offering consideration initially allocated to the warrants was $5.7 million. Total issuance costs initially allocated to the warrants were $0.6 million. |
The warrants issued were classified as a financial liability due to a net settlement provision. This liability was initially recognized at its fair value on the date the contract was entered into and is subsequently accounted for at fair value at each balance sheet date. The fair value changes were charged to non-operating income and expense in the statement of comprehensive loss. Prior to their expiration in November 2022, 5,739,741 of these warrants were exercised. The change in fair value for the year ended December 31, 2022 of $1,253,000 was recorded as non-operating income on the statement of comprehensive loss. 4) | In January 2021, the Company completed an underwritten public offering of 14,375,000 of its ADSs at a public offering price of $2.40 per ADS. The offering raised total gross proceeds of $34.5 million, with net proceeds of $31.4 million after deducting fees and expenses. In addition, warrants to purchase 718,750 ADSs were granted to the underwriters. These warrants are exercisable immediately, expire five years from the date of issuance and have an exercise price of $3.00 per ADS. |
The warrants have been classified as shareholders’ equity, with initial recognition at fair value on the date issued. The total issuance costs initially allocated to the warrants were recorded as an offset to share premium. The fair value of the warrants on the issuance date was approximately $1.0 million, which was recorded as issuance costs, and computed using the Black and Scholes option pricing model, based upon the then current price of an ADS, a risk-free interest rate of approximately 0.45% and an average standard deviation of approximately 73.8%. As of December 31, 2023, none of these warrants had been exercised. F-35
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 12 – EQUITY (cont.) | c. | Changes in the Company’s equity (cont.) | | | |
5) | In September 2022, the Company completed a registered direct offering of 13,636,365 ADSs at a price of $1.10 per ADS. The Company also issued to investors in the offering unregistered warrants to purchase 13,636,365 ADSs. The warrants are exercisable immediately, expire five years from the date of issuance and have an exercise price of $1.15 per ADS. In addition, the Company granted to the placement agent in the offering, as part of the placement fee, warrants to purchase 681,818 ADSs. These warrants are exercisable immediately, expire five years from the date of issuance and have an exercise price of $1.375 per ADS. Gross proceeds from the offering totaled $15.0 million, with net proceeds of $13.5 million, after deducting fees and expenses. The offering consideration allocated to the placement agent warrants amounted to $0.4 million. |
The warrants issued to the investors have been classified as a financial liability due to a net settlement provision. This liability was initially recognized at its fair value on the issuance date and is subsequently accounted for at fair value at each balance sheet date. The fair value changes are charged to non-operating income and expense in the statement of comprehensive loss. The fair value of the warrants is computed using the Black and ScholesBlack-Scholes option pricing model. The fair value of the warrants upon issuance was computed based on the then currentthen-current price of an ADS, a risk-free interest rate of 1.66%3.62%, and an average standard deviation of 57.8%82.5%. The gross consideration initially allocated to the investor warrants amounted to $9.1 million, with total issuance costs initially allocated to the warrants amounting to $0.8 million. The fair value of the warrants amounted to $11,905,000 as of December 31, 20172023 (December 31, 2022 - $4,502,000), and was based on the then current price of an ADS, a risk-free interest rate of 2.09% and3.9%, an average standard deviation of 56.8%.
The amount86.5%, and on the remaining contractual life of the direct placement consideration initially allocated to the warrants was approximately $1.1 million. Total issuance costs allocable to the warrants were not material. warrants.
The changechanges in fair value fromfor the date of issuance throughyears ended December 31, 2017, amounting to approximately $0.1 million, has2022 and 2023 of $4,573,000 and $11,033,000, respectively, have been recorded as non-operating expense onincome (expenses) in the statement of comprehensive loss.
As of December 31, 2023, 2,545,455 of these warrants had been exercised. The placement agent warrants have been classified in shareholders’ equity, with initial recognition at fair value on the date issued, using the same assumptions as the investor warrants. 6) | 5)On August 27, 2023, the Company entered into a securities purchase agreement, pursuant to which the Company agreed to sell in a private placement an aggregate of 6,829,137 ADSs of the Company, at a purchase price of $2.136 per ADS. Aggregate gross proceeds from the sale, which were received by the Company at closing, amounted to $14.6 million, with related issuance costs amounting to approximately $0.9 million. Pursuant to IFRS 15, approximately $12.0 million of gross proceeds and $0.7 million of issuance costs were recognized as equity. (see Note 16). |
F-36
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | d. | Share purchase agreements |
| 1) | In October 2017,September 2020, the Company entered into an at-the-market (“ATM”)ATM sales agreement with BTIG,H.C. Wainwright & Co., LLC (“BTIG”HCW”), pursuant to which the Company may,was entitled, at its sole discretion, to offer and sell through BTIG,HCW, acting as sales agent, ADSs having an aggregate offering price of up to $30.0$25.0 million throughout the period during which the ATM facility remainsremained in effect. The Company willagreed to pay BTIGHCW a commission of 3.0% of the gross proceeds from the sale of ADSs under the facility. Expenses associated with establishment of the ATM facility with HCW, amounting to $0.2 million, were recorded in 2020 as non-operating expenses. In September 2021, the Company terminated the agreement. During 2021, the Company issued a total of 4,745,368 ADSs under the agreement for total gross proceeds of $18.5 million. From the effective date of the agreement through December 31, 2017, 944,966its termination, 7,381,101 ADSs were sold under the program for total netgross proceeds of approximately $1.0$24.5 million. |
| 2) | In September 2021, the Company entered into a new $25.0 million leaving an available balanceATM sales agreement with HCW under substantially identical terms to the previous agreement. Expenses associated with establishment of the ATM facility with HCW, amounting to $0.1 million, were recorded in non-operating expenses during the period. During 2023, the Company issued a total of 1,501,207 ADSs under the facilityprogram for total gross proceeds of approximately $29.0$2.9 million. From the effective date of the agreement through the issuance date of this report, 2,109,858 ADSs have been sold under the program for total gross proceeds of approximately $4.4 million asand a total fees of December 31, 2017.approximately $0.1 million. |
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – EQUITY (cont.)
1) | d. | Share purchase agreement |
In May 2014, BioLineRx and Lincoln Park Capital Fund, LLC (“LPC”), entered into a $20 million, 36-month purchase agreement, together with a registration rights agreement, whereby LPC agreed to purchase, from time to time, up to $20 million of BioLineRx’s ADSs, subject to certain limitations, during the 36-month term of the purchase agreement.
In consideration for entering into the agreement, BioLineRx paid to LPC an initial commitment fee of $300,000, paid via the issuance of 150,000 ADSs, and agreed to pay a further commitment fee of up to $500,000, pro rata, as the facility was used over time, to be paid in ADSs valued based on the prevailing market prices of BioLineRx’s ADSs at such time.
In connection with the purchase agreement, BioLineRx paid an initial cash finder’s fee to Oberon Securities of $50,000, plus an additional cash finder’s fee equal to 2.0% of the dollar amount of ADSs sold under the new agreement, up to an aggregate additional finder’s fee of $200,000.
During the year ended December 31, 2017, BioLineRx issued a total of 2,124,952 ADSs to LPC for aggregate gross proceeds of $2,130,000. In connection with these issuances, a total of 53,124 ADSs was issued to LPC as a commitment fee and a total of $43,000 was paid to Oberon Securities as a finder’s fee.
The purchase agreement with LPC expired in accordance with its terms in July 2017. On a cumulative basis, from the effective date of the purchase agreement through the date of its expiration, BioLineRx sold a total of 5,550,603 ADSs to LPC for aggregate gross proceeds of $7,000,000. In connection with these issuances, a total of 138,766 ADSs were issued to LPC as a commitment fee and a total of $140,000 was paid to Oberon Securities as a finder’s fee.
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – EQUITY (cont.)
| 1) | Share Incentive plan – general |
In 2003, BioLineRxthe Company adopted the 2003 Share Incentive Plan (the “Plan”). The Plan provides for the granting of stock options and ordinary shares to the Company’s employees, directors, consultants and other service providers. Options are issued at the determination of the Board of Directors in accordance with applicable law. The options are generally exercisable for a ten-year period and the grants generally vest over a four-year period. In 2013, the Company’s Board of Directors approved amendments to the Plan to take into account changes in laws and regulations that had occurred since its adoption and to extend the term of the plan until November 2023. In 2016, the Board of Directors approved amendments to the Plan to allow for the grant of restricted stock units (“RSUs”) and performance stock units (“PSUs”). In 2022, the Board approved certain amendments to the Plan in order to conform the Plan to U.S. tax regulations for the benefit BioLineRx USA, Inc. employees. In November 2023, the Company’s Board of Directors approved to extend the term of the plan until May 2024. PSUs representare RSUs that are linked to any one or more performance goals (in addition to, or in lieu of, time-based vesting terms) determined appropriate by the Board of Directors. Once vested, each PSU granted is equivalent to one ordinary share. The specific performance goals, as well as the time period associated with achieving such goals, are approved by the Board and are set forth in the grantee’s grant agreement. To date, each PSU grant has had fourbetween three to five performance goals on which vesting is based, each such goal being either a specified Company milestone and or the success of a specific project, with vesting of 25%20-40% on the achievement of each goal.As of December 31, 2017, it was still not ascertainable whether the performance criteria to which the granted PSUs are linked would be met. The tranche of PSUs associated with a given milestone expires 12 months after the target date established for that milestone. As of December 31, 2017,2023, 8,336,970 PSUs were vested in accordance with their original terms. F-37
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 12 – EQUITY (cont.) | e. | Share-based payments (cont.) | | | |
1) | Share Incentive plan – general (cont.) |
As of December 31, 2023, there were 10,916,097153,154,860 ordinary shares issuable upon the exercise of outstanding equity instruments under the Plan. Ordinary shares resulting from grants under the Plan confer the same rights as all other ordinary shares of BioLineRx.
Company Israelis’ employees and directors are granted options under Section 102 of the Israeli Income Tax Ordinance (the “Ordinance”), primarily under the “capital gains” track. Non-employeesIsraeli non-employees of the Company (consultants and other service providers), as well as controlling shareholders in BioLineRx (as this term is defined in Section 32(9) of the Ordinance), are granted options under Section 3(i) of the Ordinance.
In November 2014, December 2015 All non-Israeli employees and December 2017 the Company’s Board of Directors approved increases of 1.6 million, 5.0 million and 5.2 million shares, respectively, to the total pool of authorized ordinary shares reserved for purposes of the Plan and any other present or future share incentive plansnon-employees of the Company bringing the pool to an aggregate of 14.8 million shares. are granted options as non-qualifies.
As of December 31, 2017,2023, there were 3.117.7 million remaining authorized but unissued ordinary shares in the pool reserved for future share-based incentive grants.
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – EQUITY (cont.)
| e.2) | Share-based payments (cont.)
|
| 2) | Employee share incentive plan: |
The following table contains additional information concerning equity instruments granted to employees and directors under the existing share incentive plans. | | | | | | | | | | | | | | | | | | | Weighted average exercise price (in NIS) | | | | | | Weighted average exercise price (in NIS) | | | | | | Weighted average exercise price (in NIS) | | Outstanding at beginning of year | | | 35,981,579 | | | | 1.5 | | | | 40,956,214 | | | | 0.7 | | | | 89,871,858 | | | | 0.4 | | Granted | | | 6,588,200 | | | | 0.4 | | | | 53,696,305 | | | | 0.3 | | | | 64,855,380 | | | | 0.2 | | Forfeited and expired | | | (1,438,642 | ) | | | 3.0 | | | | (4,618,062 | ) | | | 0.8 | | | | (3,804,175 | ) | | | 0.7 | | Exercised | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at end of year* | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at end of year | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | Number of options | | | Weighted average exercise price (in NIS) | | | Number of options | | | Weighted average exercise price (in NIS) | | | Number of options | | | Weighted average exercise price (in NIS) | | Outstanding at beginning of year | | | 3,187,092 | | | | 9.1 | | | | 3,500,262 | | | | 8.7 | | | | 4,557,927 | | | | 6.5 | | Granted* | | | 500,800 | | | | 6.8 | | | | 2,505,684 | | | | 3.8 | | | | 7,292,560 | | | | 3.5 | | Forfeited and expired | | | (187,630 | ) | | | 11.1 | | | | (1,435,990 | ) | | | 7.2 | | | | (1,164,961 | ) | | | 6.5 | | Exercised | | | - | | | | - | | | | (12,029 | ) | | | 0.4 | | | | (34,429 | ) | | | 0.2 | | Outstanding at end of year | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at end of year | | | | | | | | | | | | | | | | | | | | | | | | |
| * | As of the December 31, 20162021, 2022 and 2017,2023, includes 222,4284,084,748, 10,482,277, and 1,178,12812,219,465 PSUs at an exercise price of 0.10 NIS (par value of ordinary shares), for which performance obligations have not been met. | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 12 – EQUITY (cont.) NOTE 11 – EQUITY (cont.)
| e. | Share-based payments (cont.) |
| 2) | Employee share incentive plan (cont.): | | | |
The total consideration received from the exercise of equity instruments during 2015, 20162021, 2022 and 20172023 was not material.
Set forth below is data regarding the range of exercise prices and weighted-average remaining contractual life (in years) for the equity instruments outstanding at the end of each of the years indicated.
| | | Year ended December 31, | | | | | 2015 | | | 2016 | | | 2017 | | Range of exercise prices (in NIS) | | | Number of options outstanding | | | Weighted average remaining contractual life (in yrs.) | | | Number of options outstanding | | | Weighted average remaining contractual life (in yrs.) | | | Number of options outstanding | | | Weighted average remaining contractual life (in yrs.) | | Up to 10.00 | | | | 2,117,886 | | | | 5.8 | | | | 3,502,043 | | | | 6.5 | | | | 9,855,697 | | | | 8.0 | | 10.01-20.00 | | | | 1,334,866 | | | | 3.8 | | | | 1,037,436 | | | | 2.4 | | | | 795,400 | | | | 4.8 | | 20.01-30.00 | | | | 10,340 | | | | 0.9 | | | | 3,278 | | | | 0.7 | | | | - | | | | - | | 30.01-40.00 | | | | 10,000 | | | | 1.6 | | | | 10,000 | | | | 0.6 | | | | - | | | | - | | Over 40.00 | | | | 27,170 | | | | 1.0 | | | | 5,170 | | | | 0.4 | | | | - | | | | - | | | | | | 3,500,262 | | | | 5.0 | | | | 4,557,927 | | | | 5.5 | | | | 10,651,097 | | | | 7.8 | |
| | | | | | | | | | | | | Range of exercise prices (in NIS) | | | Number of options outstanding | | | Weighted average remaining contractual life (in yrs.) | | | Number of options outstanding | | | Weighted average remaining contractual life (in yrs.) | | Up to 0.49 | | | | 58,488,372 | | | | 9.2 | | | | 120,593,415 | | | | 8.8 | | | 0.5-0.99 | | | | 17,175,120 | | | | 7.8 | | | | 16,147,110 | | | | 6.9 | | | 1.00-2.00 | | | | 13,668,366 | | | | 5.5 | | | | 13,149,390 | | | | 4.7 | | | 2.01-3.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The fair value of all other equity instruments granted to employees through December 31, 20172023 has been determined using the Black-Scholes option-pricing model. These values are based on the following assumptions as of the applicable grant dates: | | | | | | | | | | Expected dividend yield | | | 0 | % | | | 0 | % | | | 0 | % | Expected volatility | | | 67 | % | | | 67 | % | | | 69 | % | Risk-free interest rate | | | 1 | % | | | 4 | % | | | 4 | % | Expected life of options (in years) | | | 6 | | | | 6 | | | | 6 | |
The remaining unrecognized deferred compensation expense as of December 31, 2023 was $2.7 million. This amount will be expensed over the remaining vesting period of the equity instruments. | | 2015 | | | 2016 | | | 2017 | | Expected dividend yield | | | 0 | % | | | 0 | % | | | 0 | % | Expected volatility | | | 68 | % | | | 66 | % | | | 63 | % | Risk-free interest rate | | | 2 | % | | | 2 | % | | | 2 | % | Expected life of options (in years) | | | 5 | | | | 6 | | | | 6 | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 12 – EQUITY (cont.) NOTE 11 – EQUITY (cont.)
| e. | Share-based payments (cont.) | | | |
| e.3) | Share-based payments (cont.)
|
| 3) | Stock options to consultants |
From inception through December 31, 2014,2021, the Company issued to consultants options for the purchase of 76,5233,296,523 ordinary shares at a weighted average exercise price of NIS 21.545.23 per share. In 20152022 and 2023, the Company issued options to consultants for the purchase of 5,000 ordinary shares at a weighted average exercise price of NIS 7.62 per share. In 2016, the Company issueddid not issue additional options to consultants for the purchase of 150,000 ordinary shares at a weighted average price of NIS 4.55 per shareconsultants.
In 2017, the Company issued additional options to consultants for the purchase of 105,000 ordinary shares at a weighted average price of NIS 4.056 per share
The options to consultants generally vest over four years and may be exercised for periods of between five and ten years. As of December 31, 2017, 265,0002023, 2,725,035 options to consultants were outstanding with a weighted average exercise price of NIS 4.541.01 per share and a weighted average contractual life of 8.616.9 years. Company management estimates the fair value of the options granted to consultants based on the value of services received over the vesting period of the applicable options. The value of such services (primarily in respect of clinical advisory services) is estimated based on the additional cash compensation the Company would need to pay if such options were not granted. The value of services recorded in 2015, 2016each of the years 2021, 2022 and 2017 amounted to $40,000 each year.2023 was not material.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1213 – TAXES ON INCOME
| a. | Corporate taxation in Israel |
The taxable income of BioLineRx Ltd., not subject to benefits as detailed below, is taxed at the standard Israeli corporate tax rate, which was 26.5% in 2015, 25% in 2016 and 24% in 2017. In December 2016, legislation was enacted to further reduce the Israeli corporate tax rate to 23% for 2018 and thereafter.
As the Company has not created any deferred tax assets or liabilities (see Note 2, paragraph l),all years included in these changes have no effect on the Company’s financial statements.
| b. | Approved enterprise benefits |
In May 2012, the Israeli Tax Authority (“ITA”) approved BioLineRx’s eligibility for tax benefits as a “Benefited Enterprise” under the Law for the Encouragement The taxable income of Capital Investments, 5719-1959, as amended (the “Investments Law”), with respect to certain development programs (the “Eligible Projects”).
Subject to compliance with the applicable requirements, the portion of income eligible for benefits under the Benefited Enterprise regime will be entitledBioLineRx USA, Inc. is subject to a tax exemption for a period of two years, followed by five years at the Benefited Enterprisefederal tax rate of 25%, commencing in the first year in which BioLineRx generates taxable income after setting off losses for Israeli tax purposes from prior years (see c. below)21%. The seven-year period may not extend beyond 12 years from the beginning of the Benefited Enterprise’s election year. BioLineRx received Benefited Enterprise status with respect to Eligible Projects in the 2009 and 2012 tax years, so depending on when the Benefited Enterprise programs begin to generate taxable income, the benefits period could continue through 2023. However, any distribution of dividends derived from exempt income sourced in the Benefited Enterprise programs will be subject to a “claw back” of corporate tax at a rate no greater than 25%. In addition, dividends distributed by a publicly traded Israeli company to non-Israeli residents or Israeli individuals are generally subject to withholding tax of 25%. Under an applicable tax treaty, the withholding tax might be lower.
BioLineRx has the option to transition to a “Preferred Enterprise” regime under the Investments Law. Upon an irrevocable election made by a company, a uniform corporate tax rate will apply to all qualifying industrial income of such company, as opposed to the previous incentives under the Investments Law, which were limited to income from Benefited Enterprises during the benefits period. Under the Investments Law, when the election is made, the uniform tax rate for 2018 would be 16% for BioLineRx’s location in Israel. Preferred Enterprise profits are freely distributable as dividends, subject to a 20% withholding tax, or lower under an applicable tax treaty.
In addition, the ITA approved BioLineRx’s operations as an “Industrial Enterprise” under the Investments Law in 2012, meaning that BioLineRx is eligible for accelerated depreciation with respect to certain tangible assets belonging to its Benefited Enterprise. Should BioLineRx not meet the requirements for maintaining these benefits, they may be reduced or cancelled and, among other things, income deriving from the Eligible Projects would be subject to Israeli corporate tax at the standard rates.
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – TAXES ON INCOME (cont.)
| c.b. | Tax loss carryforwards |
As of December 31, 2015, 2016 and 2017,2023, the tax loss carryforwards of BioLineRx Ltd. were approximately $150 million, $170 million and $210 million, respectively.$304 million. The tax loss carryforwards have no expiration date. The Company has not created deferred tax assets in respect of these tax loss carryforwards. See Note 2, paragraph 1.
In accordance with Israeli tax regulations, the tax returns filed by BioLineRx Ltd. through the 20132020 tax year are considered final.
As described in Note 2, paragraph 1, the
The Company has not recognized any deferred tax assets in the financial statements, as it does not expect to generate taxable income in the foreseeable future. The reported tax on the Company’s income before taxes differs from the theoretical amount that would arise using the weighted average tax rate applicable to income of the consolidated entities as follows: | | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | | | | USD in | | | | | | USD in | | | | | | USD in | | | | | | | thousands | | | | | | thousands | | | | | | thousands | | Loss before taxes | | | 26.5 | % | | | (14,400 | ) | | | 25.0 | % | | | (15,841 | ) | | | 24.0 | % | | | (24,352 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Theoretical tax benefit | | | | | | | (3,816 | ) | | | | | | | (3,960 | ) | | | | | | | (5,962 | ) | Disallowed deductions (tax exempt income): | | | | | | | | | | | | | | | | | | | | | | | | | Loss (gain) on adjustment of warrants to fair value | | | | | | | (342 | ) | | | | | | | (52 | ) | | | | | | | 30 | | Share-based compensation | | | | | | | 305 | | | | | | | | 269 | | | | | | | | 369 | | Other | | | | | | | 14 | | | | | | | | 15 | | | | | | | | 21 | | Increase in taxes for tax losses and timing differences incurred in the reporting year for which deferred taxes were not created | | | | | | | 3,839 | | | | | | | | 3,728 | | | | | | | | 5,542 | | Taxes on income for the reported year | | | | | | | - | | | | | | | | - | | | | | | | | - | |
F - 34
| | | | | | | | | | | | | | | | | | | in USD | | | | | | in USD | | | | | | in USD | | | | | | | | | | | | | | | | | | | | | Loss before taxes | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Theoretical tax benefit | | | | | | | (6,220 | ) | | | | | | | (5,739 | ) | | | | | | | (13,941 | ) | Disallowed deductions (tax exempt income): | | | | | | | | | | | | | | | | | | | | | | | | | Loss (gain) on adjustment of warrants to fair value | | | | | | | 480 | | | | | | | | (1,478 | ) | | | | | | | 2,542 | | Share-based compensation | | | | | | | 343 | | | | | | | | 516 | | | | | | | | 534 | | Impairment of intangible asset | | | | | | | - | | | | | | | | - | | | | | | | | 1,542 | | Other | | | | | | | 11 | | | | | | | | 11 | | | | | | | | 11 | | Increase in taxes for tax losses and timing differences incurred in the reporting year for which deferred taxes were not created | | | | | | | | | | | | | | | | | | | | | | | | | Taxes on income for the reported year | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1314 – LOSS PER SHARE
The following table contains the data used in the computation of the basic loss per share:
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | In USD thousands | | Loss attributed to ordinary shares | | | (14,400 | ) | | | (15,841 | ) | | | (24,352 | ) | Number of shares used in basic calculation (in thousands) | | | 51,406 | | | | 56,145 | | | | 89,971 | | | | | | | | | | | | | | | | | in USD | | Basic and diluted loss per ordinary share | | | (0.28 | ) | | | (0.28 | ) | | | (0.27 | ) |
| | Year ended December 31, | | | | | | | | | | | | | | | | Loss attributed to ordinary shares | | | | | | | | | | | | | | | | | | | | | Number of shares used in basic calculation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic and diluted loss per ordinary share | | | | | | | | | | | | |
All outstanding options and warrants have been excluded from the calculation of the diluted loss per share for all years presented, since their effect was anti-dilutive. NOTE 1415 – COMMITMENTS AND CONTINGENT LIABILITIES
| 1) | Obligation to pay royalties to the State of Israel |
The Company is required to pay royalties to the State of Israel (represented by the Israel Innovation Authority, or IIA), computed on the basis of proceeds from the sale or license of products whose development was supported by grants from the predecessor of the IIA, the Office of the Chief Scientist. This obligation relates solely to financial participation in the development of products by the Company.
In accordance with the terms of grants provided by the IIA, the State is entitled to royalties on the sale or license of any product whose development was supported with State participation. These royalties are generally 3% in the first three years from initial repayment, 4% of sales in the three subsequent years and 5% of sales in the seventh year until repayment of 100% of the grants (linked to the dollar) received by the Company, plus annual interest at the LIBOR rate. Starting January 2024, the interest rate will be the 12-month SOFR rate as published on the first trading day of each calendar year. Under certain circumstances, the royalty rate is calculated according to a formula based on the ratio of participation by the IIA in the project to the total project costs incurred by the CompanyCompany.
In connection with the in-licensing of BL-8040 from Biokine Therapeutics Ltd. (“Biokine”), and as a condition to IIA consent to the transaction, the Company agreed to abide by any obligations resulting from funds previously received by Biokine from the IIA. The contingent liability to the IIA assumed by the Company relating to this transaction amounts to approximately $3.2 million as of December 31, 2017. The Company has a full right of offset for amounts payable to the IIA from payments due to Biokine in the future. Therefore, in the opinion of management, the likelihood of any future Company payment obligation to the IIA with regard to this matter is remote.
BioLineRx Ltd.
2) | In connection with the in-licensing of motixafortide from Biokine Therapeutics Ltd. (“Biokine”), and as a condition to IIA consent to the transaction, the Company agreed to abide by any obligations resulting from funds previously received by Biokine from the IIA. The contingent liability to the IIA assumed by the Company relating to this transaction amounts to $3.2 million as of December 31, 2023. In this regard, and in connection with the outlicensing transaction in Asia (see Note 16), as well as the commercial launch of motixafortide in the U.S., the royalty rate agreed with the IIA for motixafortide consideration received is 3.9% for sub-license consideration and 4% for direct product sales. The Company has a full right of offset for amounts payable to the IIA from all payments due to Biokine in the future. |
F-42
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1415 – COMMITMENTS AND CONTINGENT LIABILITIES (cont.)
From time to time, the Company enters into in-licensing agreements with academic institutions, research institutions and companies (the “licensors”) in connection with the development of therapeutic compounds. Pursuant to these licensing agreements, the Company generally obtains the rights for one or more therapeutic compounds in pre-clinical and early-clinicalearly clinical stages of development, in order to continue development of the compounds through more advanced stages of development and, subsequently, to manufacture, distribute and market the drugs or to out-license the development, manufacturing and commercialization rights to third parties. Such development activities are carried out by either the Company and/or by companies or institutions to which the Company has entered into an out-license agreement, subject to certain restrictions stipulated in the various agreements.
The licenses that have been granted to the Company are broad and comprehensive, and generally include various provisions and usage rights as follows: (i) territorial scope of the license (global); (ii) term of the license (unrestricted but not shorter than the life of the patent); and (iii) development of the therapeutic compound (allowing the Company to perform all development activities on its own, or by outsourcing under Company supervision, as well as out-licensing development under the license to other companies, subject to the provisions of the licensing agreements).
According to the provisions of the licensing agreements, the intellectual property rights in the development of any licensed technology, through the date the applicable license agreement is effective, remain with the licensor, while the rights in products and/or other deliverables developed by the Company after the license is granted belong to the Company. In cases where the licensor has a claim to an invention that was jointly developed with the Company, the licensor also co-owns the related intellectual property. In any event, the scope of the license also covers these intellectual property rights.
In addition, the Company generally undertakes in the licensing agreements to protect registered patents resulting from developments under the various licenses, to promote the registration of patents covering new developments in cooperation with the licensor, and to bear responsibility for all related costs. Pursuant to the various agreements, the Company generally works to register the various patents on a broad basis worldwide, and if the Company decides not to initiate or continue a patent registration proceeding in a given country, the Company is required to notify the applicable licensor to this effect and the licensor is entitled to take action for registration of the patent in such country. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1415 – COMMITMENTS AND CONTINGENT LIABILITIES (cont.)
| 2)3) | Licensing agreements (cont.) |
The consideration paid pursuant to the licensing agreements generally includes several components that may be payable over the license period and that relate, inter alia, to the progress made in research and development activities, as well as commercial success, as follows: (a) one-time, up-front payment and/or periodic payments; (b) payments through the early stages of development ( i.e.(i.e., through the end of phase 2); (c) payments upon the achievement of milestones necessary for advancing to phase 3; (d) payments from the end of a successful phase 3 trial through approval of the therapeutic compound; and e) royalties on sales of the final product resulting from development under the license or including any component thereof, ranging between 3%-5%generally less than 5% of the Company’s net sales of the product, although in specific instances (for example, with regard to motixafortide, where the royalty rate on net sales directly commercialized by the Company payable to Biokine is 10%) the royalty rate has been higher or lower than this range. In instances where the Company has out-licensed the product for further development, the Company pays a percentage of the net consideration received from the licensee (“Sublicense Receipts”) to the upstream licensor that generally range from 20% to 29.5% of such consideration, although in specific instances the percentage paid has been higher or lower than this range. These Sublicense Receipts generally take the place of most or all of the milestone and royalty payments set forth in (b) through (e) above.
The license agreements may be cancelled by the licensor only in specific circumstances, generally upon the occurrence of one of the following events: (a) the Company’s failure to meet certain milestones stipulated in the applicable license agreement and appended timetables; (b) default, insolvency, receivership, liquidation, etc. of the Company that is not imposed and/or lifted within the timeframe stipulated in the license agreement; and (c) fundamental breach of the license agreement that is not corrected within the stipulated timeframe. The Company may generally cancel a license agreement with prior notice of 30 to 90 days, due to unsuccessful development or any other cause.
The Company has undertaken to indemnify certain licensors, their employees, officers, representatives or anyone acting on their behalf for any damage and/or expense that they may incur in connection with the Company’s use of a license granted to it, all in accordance with the terms stipulated in the applicable license agreements.
Some of the license agreements are accompanied by consulting, support and cooperation agreements, pursuant to which the Company is committed to pay the various licensers a fixed monthly amount over the period stipulated in the agreement for their assistance in the continued research and development under the license. F-44
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES (cont.) | 4) | Commitments in respect of Agalimmune and Biokine |
The consideration due to Agalimmune shareholders is based on certain development and commercial milestones, including future sales of Agalimmune products. In addition, the selling shareholders of Agalimmune have certain reversionary rights in the event of a breach of the transaction agreement and certain other limited triggering events. In December 2023, the Company determined to terminate development of AGI-134 and provided notice of its intent to terminate the Agalimmune Development Agreement, effective March 15, 2024. The Company is currently awaiting the decision of Agalimmune’s founders regarding their intent to exercise their reversionary option right. In accordance with the license agreement of motixafortide with Biokine (as amended), the Company is required to pay Biokine a payment of 20% of amounts received as consideration in connection with any sublicensing or sale of the licensed technology. Biokine is also eligible to receive up to a total of $2.5 million in future milestone payments. Subject to certain limitations, if the Company independently sells products related to motixafortide, the Company will pay Biokine a royalty payment of 10% of net sales. The Company’s outstanding open purchase order commitments as of December 31, 20172023 amounted to $6.1$6.9 million.
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 – COMMITMENTS AND CONTINGENT LIABILITIES (cont.)
| a.b. | Commitments (cont.)Guarantees |
| a) | In August 2014, the Company entered into an operating lease agreement in connection with the lease of new premises. Payments under the new lease commenced in June 2015 and will expire in June 2020. The monthly lease fee is approximately $31,000 (including maintenance fees and parking). The Company has the option to extend the lease for 3 additional lease periods totaling up to an additional 10 years, each option at a 5% increase to the preceding lease payment amount. |
See Note 14b regarding a guarantee provided to secure the Company’s liability under the lease agreement.
| b) | The Company has entered into operating lease agreements in connection with a number of vehicles. The lease periods are generally for three years. The annual lease fees, linked to the CPI, are approximately $265,000. To secure the terms of the lease agreements, the Company has made certain prepayments to the leasing companies, representing approximately two months of lease payments. These amounts have been recorded as prepaid expenses. See also Note 16b. |
To secure the Company’s lease obligation on its Israeli premises, the Company has provided a bank guarantee in the amount of approximately $100,000 for the benefit of the lessor, which remains outstanding as of December 31, 2017.2023.
See Note 10a regarding equipment pledgedF-45
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES (cont.) On January 5, 2023, a putative securities class action complaint was filed in the U.S. against the Company and its Chief Executive Officer. The complaint claims that the Company made false and materially misleading statements and failed to disclose material adverse facts pertaining to its financial position with regard to the development of motixafortide and that the Company would require a loan and a securities offering to commercialize motixafortide. The complaint asserts a putative class period of February 23, 2021 to September 19, 2022, inclusive, and seeks certification as collaterala class action and an unspecified amount of damages. On July 5, 2023, an amended complaint was filed, alleging the same claims and adding the Company’s Chief Financial Officer. On September 5, 2023, the Company, its Chief Executive Officer and its Chief Financial Officer filed a motion to securedismiss the amended complaint in its entirety. The motion has been fully briefed and is sub judice. The Company also received, on February 5, 2023, a bank loan.substantially similar lawsuit and motion to approve the lawsuit as a class action in the Tel Aviv District Court. The total amount claimed in Tel Aviv, if the lawsuit is certified as a class action, is approximately NIS 113.5 million (approximately $32 million).
The outcome of both legal proceedings is uncertain at this point. Based on an initial evaluation, management of the Company believes they are without merit and intends to vigorously defend against such actions. F-46
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 16 – LICENSE AND SECURITIES PURCHASE AGREEMENTS On August 27, 2023, the Company entered into a license agreement (the “License Agreement”) with Hong Seng Technology Limited (“HST”) and Guangzhou Gloria Biosciences Co., Ltd. (“Gloria” and together with HST, the “Purchaser Parties” or the “Licensee”), pursuant to which the Company granted HST an exclusive, royalty-bearing, sublicensable license to develop and commercialize motixafortide in Asia (other than Israel and certain other countries) (collectively, the “Territory”) and to engage and authorize Gloria to perform services under the License Agreement in the Territory. In addition, the Company granted the Licensee a first offer right with respect to the grant of certain rights in motixafortide outside of the Territory. The License Agreement became effective on October 12, 2023, following fulfillment of all closing conditions. Pursuant to the terms of the License Agreement, the Licensee paid an upfront payment of $15 million, which was received by the Company at closing. The Company is also entitled to up to $49 million based on the achievement of certain development and regulatory milestones in China and Japan, and up to $197 million in sales milestones based on defined sales targets of motixafortide in the Territory. In addition, the Company is eligible to receive tiered double-digit royalties (ranging from 10-20%), on a country-by-country basis, on aggregate net sales of motixafortide in the Territory during the initial royalty term of at least 15 years, with a reduction of the royalties payable following the end of the initial royalty term, as well as upon the occurrence of certain events. In connection with the License Agreement, on August 27, 2023, the Company also entered into a securities purchase agreement (the “Purchase Agreement”) with HST and Gloria, pursuant to which the Company agreed to sell in a private placement an aggregate of 6,829,137 ADSs of the Company, at a purchase price of $2.136 per ADS. Aggregate gross proceeds from the sale, which were received by the Company at closing, amounted to $14.6 million, with related issuance costs amounting to approximately $0.9 million. No warrants were issued in the transaction. In accordance with IFRS 15, both agreements have been treated as a single unit of account, with the consideration combined and subsequently allocated between the Purchase Agreement and the License Agreement. • | TheOf the total consideration received wasamounting to $29.6 million; approximately, $12.0 million were allocated to the Purchase Agreement, and $1417.6 million were allocated to the share purchase agreement, and license agreement respectively.License Agreement |
• | Costs in the amount of $0.7 million directly attributable to the share purchase agreementPurchase Agreement were recognized as a deduction fromreduction in equity in the amount of $0.704 million. |
The Company has identified the following performance obligations in the contract, each to be recognized separately: 3. | PDAC license and related support services |
With regard to PDAC, the Company determined that the license, together with the associated support services, should be combined into a single performance obligation, since the Licensee cannot benefit from the license without the associated support services. The support services are highly specialized for the licensed product in this indication. Licensing rights for other indications and related support were deemed immaterial. F-47
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 16 – LICENSE AND SECURITIES PURCHASE AGREEMENTS (cont.) The fixed transaction price has been allocated among the performance obligations based on similar price offers received by the Company, with the assistance of a valuation specialist. The variable consideration related to the performance obligations was not taken into account in the fixed transaction price due to uncertainty. The variable consideration related to certain performance obligations was not taken into account in the fixed transaction price due to uncertainty. Revenue will be recognized in the Company’s financial statements as follows: | a. | Revenue for the SCM license was recognized in Q4 2023, upon the transfer of control over the license to the licensee, in the amount of approximately $2.0 million. |
| b. | Revenue from providing the SCM support services will be recognized using the input method, which is based on costs incurred and labor hours expended, expected to result in straight-line revenue recognition over six months, totaling approximately $0.1 million. |
| c. | Revenue from the PDAC performance obligation will be recognized over time, with the percentage of completion determined based on support hours incurred, and expected to be recognized over twelve monthsthrough the end of 2024, in the total amount of $15.5 million. |
Costs associated directly with the license agreement have been allocated to the performance obligation above and recognized concurrently with the revenue recognition. F-48
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1517 – TRANSACTIONS AND BALANCES WITH RELATED PARTIES
Transactions with related parties
Expenses:
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | In USD thousands | | Benefits to related parties: | | | | | | | | | | Compensation and benefits to senior management, including benefit component of equity instrument grants | | | 1,843 | | | | 1,912 | | | | 2,183 | | Number of individuals to which this benefit related | | | 5 | | | | 6 | | | | 6 | | Compensation and benefits to directors, including benefit component of equity instrument grants | | | 233 | | | | 316 | | | | 356 | | Number of individuals to which this benefit related | | | 7 | | | | 7 | | | | 7 | |
BioLineRx Ltd.Expenses:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | Benefits to related parties: | | | | | | | | | | Compensation and benefits to senior management, including benefit component of equity instrument grants | | | | | | | | | | | | | Compensation and benefits to directors, including benefit component of equity instrument grants | | | | | | | | | | | | |
NOTE 15 – TRANSACTIONS AND BALANCES WITH RELATED PARTIES (cont.)
Transactions with related parties (cont.)Key management compensation
Key management compensation
Key management includes directors (executive and non-executive) and executive officers. The compensation paid or payable to key management for services during each of the years indicated is presented below.
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | In USD thousands | | Salaries and other short-term employee benefits | | | 1,412 | | | | 1,609 | | | | 1,808 | | Post-employment benefits | | | 120 | | | | 129 | | | | 136 | | Other long-term benefits | | | 27 | | | | 30 | | | | 34 | | Share-based compensation | | | 517 | | | | 460 | | | | 561 | | | | | 2,076 | | | | 2,228 | | | | 2,539 | |
| | | | | | | | | | | | | | | | | | Salaries and other short-term employee benefits | | | 1,883 | | | | 2,298 | | | | 2,425 | | Post-employment benefits | | | 136 | | | | 131 | | | | 256 | | Other long-term benefits | | | 35 | | | | 35 | | | | 31 | | Share-based compensation | | | | | | | | | | | | | | | | | | | | | | | | | |
F-49
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1618 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
| | December 31, | | | | 2016 | | | 2017 | | | | In USD thousands | | Institutions | | | 198 | | | | 446 | | Other | | | 25 | | | | 140 | | | | | 223 | | | | 586 | |
| | December 31, | | | | | | | | | | | | | Advance payments | | | - | | | | 480 | | | | | 687 | | | | 245 | | Other | | | | | | | | | | | | | | | | | |
| b. | Long-term prepaid expenses |
The prepaid expenses relate to operating lease agreements in respect of the vehicles leased by the Company.
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (cont.)
| c. | Accounts payable and accruals |
| | | | | | | | | | | | | | | 1) Trade: | | | | | | | Accounts payable: | | | | | | | Overseas | | | 6,061 | | | | 7,704 | | In Israel | | | | | | | | | | | | | | | | | | 2) Other: | | | | | | | | | Payroll and related expenses | | | 931 | | | | 2,184 | | | | | 352 | | | | 662 | | Accrual for vacation and recreation pay | | | 377 | | | | 419 | | Other | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | December 31, | | | | | 2016 | | | 2017 | | | | | In USD thousands | | 1) | Trade: | | | | | | | | Accounts payable: | | | | | | | | Overseas | | | 2,152 | | | | 4,350 | | | In Israel | | | 438 | | | | 1,166 | | | | | | 2,590 | | | | 5,516 | | 2) | Other: | | | | | | | | | | Accrued expenses | | | 560 | | | | 620 | | | Accrual for vacation and recreation pay | | | 186 | | | | 215 | | | Payroll and related expenses | | | 217 | | | | 259 | | | Other | | | 15 | | | | 19 | | | | | | 978 | | | | 1,113 | |
The carrying amounts of accounts payable and accruals approximate their fair value, as the effect of discounting is not material. | d.c. | Research and development expensesRevenues |
| | | | | | | | | | | | | | | | | | License revenues (see Note 16) | | | - | | | | - | | | | 4,610 | | Product sales, net | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | In USD thousands | | Research and development services | | | 5,455 | | | | 5,501 | | | | 12,123 | | Payroll and related expenses | | | 3,754 | | | | 3,475 | | | | 5,097 | | Lab, occupancy and telephone | | | 926 | | | | 769 | | | | 920 | | Professional fees | | | 772 | | | | 678 | | | | 662 | | Depreciation and amortization | | | 414 | | | | 452 | | | | 452 | | Other | | | 168 | | | | 302 | | | | 256 | | | | | 11,489 | | | | 11,177 | | | | 19,510 | |
| e. | Sales and marketing expenses |
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | In USD thousands | | Payroll and related expenses | | | 690 | | | | 659 | | | | 817 | | Marketing | | | 243 | | | | 600 | | | | 797 | | Overseas travel | | | 70 | | | | 93 | | | | 79 | | | | | 1,003 | | | | 1,352 | | | | 1,693 | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1618 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (cont.)
| f.d. | General and administrative expensesCost of revenues |
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | In USD thousands | | Payroll and related expenses | | | 2,003 | | | | 2,172 | | | | 2,060 | | Professional fees | | | 1,053 | | | | 1,144 | | | | 1,298 | | Insurance | | | 155 | | | | 154 | | | | 210 | | Depreciation | | | 27 | | | | 30 | | | | 29 | | Other | | | 466 | | | | 484 | | | | 440 | | | | | 3,704 | | | | 3,984 | | | | 4,037 | |
| g. | Non-operating income (expenses), net |
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | In USD thousands | | Issuance costs | | | - | | | | - | | | | (133 | ) | Changes in fair value of warrants | | | 1,292 | | | | 207 | | | | (127 | ) | Cost reimbursement related to prior year | | | 153 | | | | - | | | | - | | Other | | | - | | | | 7 | | | | - | | | | | 1,445 | | | | 214 | | | | (260 | ) |
| | | | | | | | | | | | | | | | | | Cost related to license revenues | | | - | | | | - | | | | 3,230 | | Amortization of intangible asset in respect of license revenues | | | - | | | | - | | | | 450 | | Cost of product sales | | | | | | | | | | | | | | | | | | | | | | | | | |
| h.e. | Financial incomeResearch and development expenses |
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | In USD thousands | | Interest income and exchange differences | | | 457 | | | | 469 | | | | 824 | | Gain on foreign currency hedging | | | - | | | | 11 | | | | 345 | | | | | 457 | | | | 480 | | | | 1,169 | |
| | Year ended December 31, | | | | 2015 | | | 2016 | | | 2017 | | | | In USD thousands | | Exchange differences | | | 91 | | | | 8 | | | | - | | Bank commissions | | | 15 | | | | 14 | | | | 21 | | | | | 106 | | | | 22 | | | | 21 | |
BioLineRx Ltd. | | | | | | | | | | | | | | | | | | Research and development services | | | 12,088 | | | | 9,296 | | | | 4,603 | | Payroll and related expenses | | | 4,074 | | | | 4,495 | | | | 4,452 | | Lab, occupancy and telephone | | | 882 | | | | 902 | | | | 969 | | Professional fees | | | 595 | | | | 954 | | | | 935 | | Share-based compensation | | | 971 | | | | 1,198 | | | | 760 | | Depreciation and amortization | | | 660 | | | | 615 | | | | 583 | | Other | | | | | | | | | | | | | | | | | | | | | | | | | |
| f. | Sales and marketing expenses |
| | | | | | | | | | | | | | | | | | Payroll and related expenses | | | 308 | | | | 947 | | | | 8,868 | | Medical Affairs | | | - | | | | 1,316 | | | | 4,824 | | Marketing | | | 700 | | | | 1,805 | | | | 4,091 | | Office related expenses | | | - | | | | 519 | | | | 1,923 | | Market Access | | | - | | | | 1,023 | | | | 1,606 | | Business Analytics | | | - | | | | 106 | | | | 1,005 | | Travel | | | 25 | | | | 84 | | | | 986 | | Share-based compensation | | | (59 | ) | | | 112 | | | | 751 | | Professional fees | | | - | | | | 521 | | | | 745 | | Depreciation and amortization | | | - | | | | - | | | | 314 | | Other | | | | | | | | | | | | | | | | | | | | | | | | | |
F-51
BioLineRx Ltd. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 17 – STRATEGIC COLLABORATION AGREEMENT WITH NOVARTIS
In December 2014, the Company entered into a multi-year strategic collaboration agreement with Novartis Pharma AG (“Novartis”) designed to facilitate development and commercialization of Israeli-sourced drug candidates. Under the agreement, Novartis evaluates projects identified and presented by the Company for co-development and future licensing under the collaboration.
Under the terms of the agreement, Novartis acquired an initial 5,000,000 of the Company’s ADSs, representing 12.8% of the Company’s then outstanding share capital, in a private transaction at a price of $2.00 per ADS, for a total equity investment of $10 million. Novartis does not have any governance rights and has agreed to certain standstill provisions. Novartis and the Company jointly evaluate both clinical and pre-clinical stage projects presented by the Company via a Joint Steering Committee, which determines which projects to advance further in development and on what terms. Projects at or reaching the clinical stage are eligible for selection by Novartis. Upon selection of a project, Novartis will pay the Company an option fee of $5 million, as well as fund 50% of the anticipated remaining development costs associated with establishing clinical proof-of-concept, in the form of an additional equity investment in the Company. Novartis will have an exclusive right of first negotiation to license from the Company each selected project upon establishment of clinical proof-of-concept. The companies intend to develop up to three programs through clinical proof-of-concept pursuant to this collaboration.
NOTE 18 – AGREEMENT WITH PERRIGOSUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (cont.)
In December 2014, the Company entered into an exclusive out-licensing arrangement with Omega Pharma, which was later acquired by Perrigo Company plc. (“Perrigo”), for the rights to BL-5010 for OTC indications in the territory of Europe, Australia and additional selected countries. The Company retains the OTC rights to BL-5010 in the United States and the rest of the world, as well as the non-OTC rights on a global basis. Under the out-licensing arrangement with Perrigo, Perrigo is obligated to use commercially reasonable best efforts to obtain regulatory approval in the licensed territory for at least two OTC indications and to commercialize BL-5010 for those two OTC indications. In addition, Perrigo will sponsor and manufacture BL-5010 in the relevant regions. Perrigo will pay the Company an agreed amount for each unit sold, and the Company will be entitled to certain commercial milestone payments. In addition, the Company will have full access to all clinical and development data generated during the performance of the development plan and may use these data in order to develop or license the product in other territories and fields of use where the Company retains the rights.
| g. | General and administrative expenses |
BioLineRx Ltd. | | | | | | | | | | | | | | | | | | Payroll and related expenses | | | 1,408 | | | | 1,706 | | | | 2,117 | | Professional fees | | | 1,103 | | | | 1,248 | | | | 2,028 | | Insurance | | | 1,064 | | | | 1,046 | | | | 939 | | Share-based compensation | | | 583 | | | | 895 | | | | 780 | | Depreciation | | | 42 | | | | 39 | | | | 37 | | Other | | | | | | | | | | | | | | | | | | | | | | | | | |
| h. | Non-operating income (expenses), net |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | | | | | | | | | | | | | | | | | | Changes in fair value of warrants | | | (1,936 | ) | | | 6,425 | | | | (11,054 | ) | Issuance costs | | | - | | | | (762 | ) | | | - | | Other | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTE 19 – AGALIMMUNE ACQUISITION | | | | | | | | | | | | | | | | | | Interest income | | | 277 | | | | 694 | | | | 2,007 | | Exchange differences, net | | | | | | | | | | | | | | | | | | | | | | | | | |
In March 2017, the Company acquired substantially all the outstanding shares of Agalimmune Ltd. for initial consideration of approximately $6.0 million, of which $3.0 million was in cash and the remainder in the Company’s ADSs. The acquisition expanded the Company’s pipeline to include Agalimmune’s primary asset, AGI-134, a novel immuno-oncology agent for various cancer indications at the near-clinical stage of development. Due in part to the early stage of development of AGI-134 and other elements evaluated by the Company’s management as required by IFRS, the acquisition has been accounted for in the Company’s financial statements as an asset transaction. Total costs associated with bringing the asset into the Company’s pipeline include additional expenses of approximately $0.7 million, resulting in a total increase in intangibles reflected in the Company’s financial statements of approximately $6.7 million as of December 31, 2017.
| | | | | | | | | | | | | | | | | | Interest expense | | | 984 | | | | 1,786 | | | | 2,144 | | Bank commissions | | | | | | | 26 | | | | 25 | | Exchange differences, net | | | - | | | | 346 | | | | - | | | | | | | | | | | | | | |
Additional consideration may be due to Agalimmune shareholders based on certain development and commercial milestones, including future sales of Agalimmune products. In addition, the selling shareholders of Agalimmune have certain reversionary rights in the event of a breach of the transaction agreement and certain other limited triggering events.
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