United States
Securities and Exchange Commission
Washington,UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20192022

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from ____ to ____

Commission file number 001-36578

Enlivex Therapeutics Ltd.

(Exact name of Registrant as specified in its charter)

State of Israel

(Jurisdiction of incorporation or organization)

14 Einstein Street, NesNess Ziona, Israel 7403618

(Address of principal executive offices)

Mr. Oren Hershkovitz

Tel: +972.2.6208072

Email: Oren@enlivexpharm.com

Facsimile: +972.2.6208070

14 Einstein Street, NesNess Ziona, Israel 7403618

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

10,334,12618,421,852 Ordinary Shares, par value NIS 0.40 per share as of December 31, 2019

2022

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ☐    No  ☒

Yes ☐     No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐     No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are being registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statement. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.1D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ☐     Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)     Yes  ☐    No  ☒

Yes ☐     No ☒

TABLE OF CONTENTS

INTRODUCTION

Overview of Corporate Structure

On March 26, 2019 (the “Closing Date”), Bioblast Pharma Ltd., a company organized under the laws of the State of Israel (“Bioblast”), and Enlivex Therapeutics Ltd., a company organized under the laws of the State of Israel (n/k/a Enlivex Therapeutics R&D Ltd., “Enlivex R&D”), consummated a merger transaction whereby Enlivex R&D merged with a mergerwholly owned subsidiary of Bioblast, with Enlivex R&D as the surviving entity in the merger (the “Merger”). As a result of the Merger, Enlivex R&D became a wholly owned subsidiary of Bioblast. ConcurrentlyIn connection with the consummation of the Merger, on the Closing Date, Bioblast changedamended its Articles of Association (the “Amended and Restated Articles of Association”), in order to change its name from “Bioblast Pharma Ltd.” to Enlivex“Enlivex Therapeutics Ltd.” and to change its registered capital to NIS 18,000,000 divided into 45,000,000 ordinary shares with a nominal value of NIS 0.40 each. In this Annual Report on Form 20-F, when we refer to the registrant as a combination of Bioblast and Enlivex R&D after giving effect to the Merger, we use the terms “Enlivex,” the “Company,” “we,” “us,” and “ours”. When we refer to the historic business, operations and corporate status of the parent in the Merger we use the term “Bioblast” and when we refer to the historic business, operations and corporate status of the subsidiary in the Merger, we use the term “Enlivex R&D”.“ours.”

Overview of the Merger Transaction

The Merger

On the Closing Date, pursuant to an Agreement and Plan of Merger dated as of November 19, 2018 among Bioblast, Enlivex R&D and a merger subsidiary of Bioblast (the “Merger Agreement”), the Merger was consummated and Enlivex R&D became a wholly-owned subsidiary of Bioblast. The Merger was structured as a statutory merger pursuant to Sections 314-327 of the Companies Law, 5759-1999 of the State of Israel. On the Closing Date, the Company was admitted for continued listing on the Nasdaq Capital Market under the new symbol “ENLV”.

Pursuant to the Merger Agreement, upon consummation of the Merger (the “Effective Time”), each outstanding ordinary share of Enlivex R&D was converted into approximately 0.04841 ordinary shares of the Company (the “Exchange Ratio”).

In addition, all outstanding Enlivex R&D options that were unexercised immediately prior to the Effective Time, whether or not vested, were assumed by the Company, and contain the same terms, conditions, vesting and other provisions, except that each such option is now exercisable for such number of ordinary shares of the Company, as adjusted in accordance with the Exchange Ratio and otherwise in accordance with the Merger Agreement.

Following the Merger and after giving effect to a private placement consummated in connection with the Merger, the former equity holders of Enlivex R&D owned approximately 89.1% of the Company’s issued and outstanding equity, Bioblast shareholders immediately prior to the Merger owned approximately 4.016% of the Company’s issued and outstanding equity, and the Investors (as defined below) owned approximately 6.74% of the Company’s issued and outstanding equity.

Pursuant to a Contingent Value Rights Agreement (the “CVR Agreement”), Bioblast shareholders received one contingent value right (“CVR”) for each ordinary share of Bioblast held as of the record date, March 25, 2019, which CVRs entitle the holders to potential payments that the Company receives in connection with a Trehalose transaction.

The foregoing descriptions of the Merger Agreement and CVR Agreement are only summaries, do not purport to be complete and are qualified in their entirety by reference to the full text of the Merger Agreement and the CVR Agreement, copies of which are filed as exhibits to this Annual Report on Form 20-F and are incorporated by reference herein.

All references to share amounts in this Annual Report on Form 20-F have been retroactively adjusted to reflect the impact of the Exchange Ratio.

Accounting Treatment

The Merger has been treated as a reverse recapitalization of Bioblast for financial accounting and reporting purposes. As such, Enlivex R&D is treated as the acquirer for accounting and financial reporting purposes while Bioblast is treated as the acquired entity for accounting and financial reporting purposes. Further, as a result, the assets and liabilities and the historical operations that will be reflected in the Company’s future financial statements filed with the SEC will be those of Enlivex R&D, and the Company’s assets, liabilities and results of operations will be consolidated with the assets, liabilities and results of operations of Enlivex R&D.

Amendment of Articles of Association

In connection with the consummation of the Merger, on the Closing Date, the Company amended its Articles of Association (the “Amended and Restated Articles of Association”), in order to change its name from “Bioblast Pharma Ltd.” to “Enlivex Therapeutics Ltd.” and to change the registered capital of the Company to NIS 18,000,000 divided into 45,000,000 ordinary shares with a nominal value of NIS 0.40 each.

Business Description of Enlivex

The Company is a clinical stageclinical-stage macrophage reprogramming immunotherapy company, developing an allogeneic drug pipelineAllocetra^TM, a universal, off-the-shelf cell therapy designed to reprogram macrophages into their homeostatic state. Resetting non-homeostatic macrophages into their homeostatic state is critical for immune system rebalancing. Immune system rebalancing isand resolution of life-threatening conditions. These non-homeostatic macrophages contribute significantly to the severity of the respective diseases. By restoring macrophage homeostasis, Allocetra™ has the potential to provide a novel immunotherapeutic mechanism of action for life-threatening clinical indications that are defined as “unmet medical needs”, as a stand-alone therapy or in combination with leading therapeutic agents.

Macrophages are tissue-resident or infiltrating immune cells critical for innate immunity, normal tissue development, and repair of damaged tissue. Macrophages’ function is a result of their original designation, their local micro-environment, and the treatmenttype of life-threatening immunemetabolites, substances or pathogens to which they are exposed. Reprogrammed out of their homeostatic state, macrophages contribute to the pathophysiology of multiple diseases, including cancer, sepsis, and various inflammatory conditions, which involve the hyper-expression of cytokines (“Cytokine Release Syndrome”) and for which there are no U.S. Food and Drug Administration (“FDA”)-approved treatments, as well as treating solid tumors by modulating such tumors’ microenvironment.disorders.

TheWe believe the Company’s primary innovative immunotherapy, candidates are novel candidates based on the same unique mechanismAllocetra^TM, represents a paradigm shift in macrophage reprogramming, moving from targeting a specific subset of action, which inducesmacrophages or a specific pathway effecting macrophages activity, to a fundamental view of macrophage homeostasis. Restoring macrophage homeostasis may induce the immune system to rebalance itself to normal levels of operation. These candidates targetoperation, thereby promoting disease resolution.

The Company is currently focused on two main clinical indications that are defined as “unmet medical needs,” such as acute organ failure associated withverticals: sepsis and preventing or treating complications associated with bone marrow transplants (“BMT”) and/or hematopoietic stem cell transplants (“HSCTsolid tumors (the “Indications”). The Company developed a product candidate from matched-donor cells,believes that negatively-reprogrammed macrophages may be key contributors to disease severity across these two Indications, and thus effective reprogramming of these negative-reprogrammed macrophages into their respective homeostatic states may facilitate disease resolution to these Indications, some of which has historically been referred to simply as Allocetra™. This product candidate has beenare considered “unmet medical needs.” All planned and expected timelines for execution of the subject of clinical trials for preventing or treating complications associated with bone marrow transplants (“BMT”) and/or hematopoietic stem cell transplants (“HSCT”). in the Indications are subject to certain risks and uncertainties. For further discussion of risks and uncertainties related to our clinical trial in the Indications please see Item 3.D. “Risk Factors” below.

Recent Developments

Frozen Formulation Allocetra™

We now refer to this product candidate as “Allocetra™ from matched-donor cells.” The Company developed a related product candidate,completed development of frozen formulation Allocetra™ in the first quarter of 2022, which has historically been referred to as off-the-shelf Allocetra™ or “Allocetra-OTS”, whichwas twelve months ahead of schedule. While the liquid formulation of Allocetra™ has a shelf life of 96 hours, the frozen formulation is expected to have a shelf life spanning multiple years. We expect that this will substantially identical mechanismimprove the product candidate’s scalability and shipping logistics, lower its production costs, and increase profitability upon potential commercialization. Due to the early completion of action to Allocetra™ from matched-donor cells, but it does not require matched-donor cells as the source of therapeutic cells.The Company’s timeline for the continued development of frozen formulation Allocetra™, we currently utilize it in our ongoing Phase II sepsis trial going forward, rather than introducing it only at the start of a Phase III study, as previously planned. In addition, we initiated the utilization of frozen formulation Allocetra™ from matched donor cells forin our ongoing solid tumor Phase I/II trials, and plan to solely use the prevention of GvHDfrozen formulation Allocetra™ in allogeneic HSCT patients has been modified to reflect the Company’s re-prioritization of product development in light of the encouraging results of theall subsequent clinical studies.

Sepsis: Integrating Frozen Formulation Allocetra™ into Phase Ib of Allocetra-OTSII Trial, Expanding Study Population

In 2021, we initiated a placebo-controlled, randomized, dose-finding, multi-center, Phase II trial evaluating liquid Allocetra™ in patients with severepneumonia-associated sepsis. During 2022, we amended the protocol of this clinical trial to treat newly recruited patients with frozen formulation Allocetra™ and expand the study population to include patients whose septic condition stems from biliary, urinary tract, or peritoneal infections. We are planning to file another protocol amendment and submit the proposed changes to regulators in the second quarter of 2023. The amendment will include an increase in the patients’ SOFA score range, effectively allowing recruitment of patients with higher levels of sepsis severity, and a change to two cohorts (treatment and placebo) in lieu of the current four-cohort structure. The Company does not expect a material timeline delay for top-line data readouts, which are expected in Q1 2024.

Our Phase II sepsis trial is supported by previously reported positive results from a Phase Ib trial that demonstrated Allocetra’s favorable safety profile and showed vastly improved clinical outcomes, including SOFA (sequential organ failure assessment) scores, duration of hospitalization, and mortality in Allocetra-treated sepsis patients compared to a group of matched historical controls who received standard-of-care therapy. Sepsis is a life-threatening disease with no therapies approved by the U.S. Food and Drug Administration (the “FDA”) and a high unmet need. Each year, more than 1.7 million adults in the United States develop sepsis, with more than 270,000 dying of the disease.

Solid Tumors: Ongoing Clinical Trials Evaluating Allocetra™ in Patients with Solid Tumors

A major shortcoming of immunotherapeutic cancer treatments is limited efficacy against solid tumors, which represent approximately 90% of all cancer cases. We believe that this is due in large part to the negative reprogramming of macrophages in the tumor microenvironment, which results in the proliferation of pro-tumor macrophages that contribute to drug resistance, prevent disease resolution, and promote disease severity. Previously reported preclinical data from solid tumor models suggest that Allocetra™ has the potential to reprogram pro-tumor macrophages back to their homeostatic state and thereby may promote disease resolution and provide patients that do not respond well to existing FDA-approved immunotherapies with an effective treatment option. Based on these and other data, we initiated a Phase I/II trial evaluating Allocetra™ in combination with chemotherapy in patients with peritoneal metastases arising from solid cancers in the third quarter of 2022 and a Phase I/II trial evaluating Allocetra™ in combination with an immune checkpoint inhibitor in advanced-stage solid tumors in the fourth quarter of 2022.

We received a positive recommendation from the Data and Safety Monitoring Board decided(the “DSMB”) and clearance from the Israeli Ministry of Health (“IMOH”) to prioritizecontinue our Phase I/II clinical trial of Allocetra™ combined with chemotherapy in patients with peritoneal metastases arising from solid cancers. Recruitment of patients for this clinical trial has been on-track, and the Company’s cash reservescurrently expects to complete enrollment and resources on Allocetra-OTS in orderannounce data readouts by Q2 2024.

We also received a positive DSMB recommendation and IMOH clearance to generate additional clinical data, first and foremost, in a randomized, controlled sepsiscontinue our second Phase I/II clinical trial, which is evaluating Allocetra™ as monotherapy and to consider the initiationin combination with anti-PD1 checkpoint inhibitors in patients with advanced-stage solid tumors. Recruitment of smallerpatients for this clinical trials in high-value indications with an assumed pathophysiology markedly similar to that of sepsis.Because the product candidate historically referred as Allocetra-OTS is substantially identical to the product candidate formerly referred to as Allocetra™ (now“Allocetra™ from matched-donor cells”),study has been on-track, and the Company now referscurrently expects to Allocetra-OTScomplete enrollment in the intravenous-infusion monotherapy and low-dose combination cohorts by the end of Q2 2023. This study also received the U.S. Food & Drug Administration (“FDA”) clearance for an Investigational New Drug (“IND”) application at the end of 2022, as “Allocetra™”. Aswell as clearance in February 2023 from the Spanish Agency of Medicines and Medical Devices to open the study in Spain.

We also announced a resultClinical collaboration with BeiGene to evaluate the safety and efficacy of Allocetra™ in combination with tislelizumab, an anti-PD-1 immune checkpoint inhibitor, for the treatment of patients with advanced-stage solid tumors, a part of the Company’s decision, the planned continuation of additionalongoing Phase I/II clinical trials of Allocetra™ from matched-donor cells for the prevention GvHDtrial in allogeneic HSCT patients have currently been rescheduled to 2022, pending the expected results of clinical trials in sepsis and potentially other related indications during 2020-2022.with advanced-stage solid tumors.

For more information on each of Allocetra™ and Allocetra™ from matched-donor cells and a description of the respective clinical trials of Allocetra™ and Allocetra™ from matched-donor cells,Indications, see Item 4. “Information on the Company — Business—Business overview.”

BecauseManufacturing Plant Update

In the fourth quarter of 2022, we completed construction of our previously announced cGMP Allocetra™ manufacturing plant on schedule. As part of a Company-wide cost cutting program designed to extend our cash runway potentially into 2025, our planned move into the new manufacturing plant has been deferred for an approximate period of three years, and Allocetra™ from matched-donor cells are based onwe have determined to offer lease and supporting services of the same unique mechanism of action and are otherwise substantially identical, , the term Allocetra™ as used inleased space to potential clients during this Annual Report on Form 20-F refers to both Allocetra™ and Allocetra™ from matched-donor cells unless otherwise indicated.three-year period.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other U.S. Federal securities laws. These forward-looking statements include, but are not limited to:

In some cases, forward-looking statements are identified by terminology such as “may,” “will,” “could,” “should,” “expects,” “plans,” “anticipates,” “believes,” “intends,” “estimates,” “predicts,” “hope,” “targets,” “potential,” “goal” or “continue” or the negative of these terms or other comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those suggested in such forward-looking statements. These statements are current only as of the date of this Annual Report on Form 20-F and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our actual results, levels of activity, performance or achievements to be materially different from those suggested in the forward-looking statements. In addition, historic results of scientific research and clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not suggest different conclusions or that historic results referred to in this Annual Report on Form 20-F would not be interpreted differently in light of additional research, clinical and preclinical trials results. The forward-looking statements contained in this Annual Report on Form 20-F are subject to risks and uncertainties, including those discussed underin Item 3.D. - “Risk Factors” and in our other filings with the Securities and Exchange Commission (the “SEC”). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 20-F. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we do not intend to (and expressly disclaim any such obligation to) update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Annual Report on Form 20-F.

RISK FACTOR SUMMARY

Our business is subject to numerous risks and uncertainties, including those described in Item 3.D. “Risk Factors.” These risks include, but are not limited to the following:

PART ONE

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 

Not applicable.

ITEM 3. KEY INFORMATION

3.A. Selected financial data[Reserved]

Our historical financial statements are prepared in accordance with generally accepted accounting principles in the United States and are presented in U.S. dollars. The following summary financial data for the years ended December 31, 2019, 2018, 2017 and 2016 and as of December 31, 2019, 2018, 2017 and 2016 are derived from, and should be read in conjunction with, the audited financial statements, and notes thereto, appearing elsewhere in this Annual Report on Form 20-F. Selected financial data for the year ended December 31, 2015 is unaudited, and the Company could not provide audited data for such years without unreasonable effort or expense.

The information presented below is qualified by the more detailed historical financial statements set forth in this Annual Report on Form 20-F, and should be read in conjunction with those financial statements, the notes thereto and the discussion under Item 5 - “Operating and Financial Review and Prospects.”

Merger

For a description of the Merger, please see the “Introduction” appearing before Part I, Item 1 of this Annual Report on Form 20-F. The Merger was accounted for as an issuance of shares by the Company for the net assets of Bioblast Pharma Ltd., accompanied by a recapitalization. Accordingly, Enlivex R&D is reflected as the predecessor and acquirer and therefore the accompanying financial statements reflect the historical financial statements of Enlivex R&D for all periods presented and do not include the historical financial statements of pre-merger Bioblast. All historical information presented herein has been retroactively restated to reflect the effect of the merger shares exchange ratio, reverse stock split and change to the authorized number of ordinary shares in accordance with Accounting Standards Codification Topic 260, “Earnings Per Share”.

Statement of Operations Data - Year Ended December 31,

U.S. dollars in thousands, except share and per share data

Balance Sheet Data - December 31,

U.S. dollars in thousands

3.B. Capitalization and indebtednessIndebtedness

Not applicable.

3.C. Reasons for the offerOffer and useUse of proceedsProceeds

Not applicable.

3.D. Risk factorsFactors

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the risks described below before investing in our ordinary shares.

There are a number of risks and uncertainties that could affect our business and cause our actual results to differ from past performance or expected results. We consider the following risks and uncertainties to be those material to our business. If any of these risks actually occur, our business, financial condition and results of operations could suffer, and the trading price of our ordinary shares could decline. We urge investors to consider carefully the risk factors described below, in evaluating any investment in our ordinary shares andtogether with the other information contained in this Annual Report on Form 20-F.20-F, in evaluating any investment in our ordinary shares.

Risks Related to Our Financial Position and Capital Requirements

We are a clinical-stage cellmacrophage reprogramming immunotherapy company with a history of operating losses. We expect to incur additional losses in the future and may never be profitable.

We are a clinical-stage cellmacrophage reprogramming immunotherapy company with a limited operating history and no currently approved products. To date, we have focused almost exclusively on developing our related product candidates, Allocetra™ and Allocetra™ from matched-donor cells., a universal, off-the-shelf cell therapy designed to reprogram macrophages into their homeostatic stage, focusing in particular on treatment of the Indications. We have funded our operations to date primarily through proceeds from private placements of ordinary shares and convertible debt. We have no saleable products and have not generated any revenue from product sales. We have incurred losses in each year since our inception in 2005. Our loss attributable to holders of our ordinary shares for the years ended December 31, 20192022 and 20182021 was approximately $9.3$31 million and $4.2$14.4 million, respectively. As of December 31, 2019,2022, we had an accumulated deficit of approximately $25.6$83 million. Substantially all of our operating losses resulted from costs incurred in connection with our development program and from general and administrative costs.

We expect our research and development expenses to increase in connection with our planned pre-clinical studies and clinical trials. We may also incur expenses in connection with third-party studies and trials involving our product candidates or other intellectual property. In addition, if we obtain marketing approval for any of our product candidates, we will likely initially incur significant outsourced sales, marketing and manufacturing expenses, as well as continued research and development expenses. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing cell immunotherapy products, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

We have not generated any revenue from Allocetra™ or any other product candidate, and we may never be profitable.

Our ability to become profitable depends upon our ability to generate revenue in excess of our expenses. We have not generated any revenue from our development of Allocetra™, or any other product candidate. We do not know when, or if, we will generate any revenue. We do not expect to generate revenue unless and until we obtain regulatory and marketing approval of, and commercialize, Allocetra™ or Allocetra™ from matched-donor cells or any other product candidate. We will continue to incur research and development and general and administrative expenses related to our operations. We expect to continue to incur losses for the foreseeable future, and such losses will likely increase as we:

We may out-license our ability to generate revenue from our product candidates, depending on a number of factors, including our ability to:

Even if either Allocetra™, our leading product candidate, which has beenis being developed for treating organ dysfunctionsepsis and failure in sepsis patients, or Allocetra™ from matched-donor cells, which has been developed for prevention of GvHD in allogeneic HSCT patients,solid tumors, is approved for commercial sale for any indication, either product candidate may not gain market acceptance or achieve commercial success. In addition, we anticipate incurring significant costs associated with commercialization. We may not achieve profitability soon after generating product revenue, if ever. If we are unable to generate product revenue, we will not become profitable and would be unable to continue operations without additional funding.

We have not yet commercialized any products and we may never become profitable.

We have not yet commercialized any products, and we may never do so. We do not know when or if we will complete any of our product development efforts, obtain regulatory approval for any product candidates or successfully commercialize any approved products. Even if we are successful in developing products that are approved for marketing, we will not be successful unless these products gain market acceptance for appropriate indications. The degree of market acceptance of any of our planned future products will depend on a number of factors, including, but not limited to:

Physicians, patients, third-party payors or the medical community in general may be unwilling to accept, utilize or recommend coverage of, and in the case of third-party payors, cover any of our planned future products. As a result, we are unable to predict the extent of future losses or the time required to achieve profitability, if at all. Even if we successfully develop one or more products, we may not become profitable.

Our limited operating history makes it difficult to evaluate our business and prospects.

Although we have been in existence since 2005, we have a limited operating history, and our operations to date have been limited primarily to research and development, raising capital and recruiting scientific and management personnel. Therefore, it is difficult to evaluate our business and prospects. We have not yet demonstrated an ability to commercialize or obtain regulatory approval for any product candidate. Consequently, any predictions about our future performance may not be accurate, and you may not be able to fully assess our ability to complete development or commercialize our product candidates, or any future product candidates, obtain regulatory approvals or achieve market acceptance or favorable pricing for our product candidates or any future product candidates.

We have not yet commercialized any products and we may never become profitable.

We have not yet commercialized any products, and we may never do so. We do not know when or if we will complete any of our product development efforts, obtain regulatory approval for any product candidates or successfully commercialize any approved products. Even if we are successful in developing products that are approved for marketing, we will not be successful unless these products gain market acceptance for appropriate indications. The degree of market acceptance of any of our planned future products will depend on a number of factors, including, but not limited to:

Physicians, patients, third-party payors or the medical community in general may be unwilling to accept, utilize or recommend coverage of, and in the case of third-party payors, cover any of our planned future products. As a result, we are unable to predict the extent of future losses or the time required to achieve profitability, if at all. Even if we successfully develop one or more products, we may not become profitable.

We will need substantial additional capital in the future. If additional capital is not available, we will have to delay, reduce or cease operations.

We will need to raise substantial additional capital to fund our operations and to develop and commercialize our product candidates, particularly Allocetra™. Our future capital requirements may be substantial and will depend on many factors, including, but not limited to:

Based on our current operating plan, we anticipate our existing resources will be sufficient to enable us to maintain our currently planned operations, including our continued product development, through the fourth quarter of 2022.2024; however, we have a contingency plan that may potentially extend our cash runway into 2025. We will require significant additional funds to initiate and complete the FDA and the European Medicines Agency (“EMA”) approval process. However, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, including, without limitation, regulatory requests by the FDA or EMA, changes in our development strategy, delays in or an inability to execute our development plans, unsuccessful preclinical or clinical studies and losing our “Small and Medium Enterprise” status at the EMA, which entitles us to significant fee reductions. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amount of increased capital and operating expenditures associated with our anticipated clinical trials and general operations. We have no committed external sources of funds. Additional financing may not be available when we need it or on terms that are favorable to us. If adequate funds are not available to us on a timely basis, or at all, we may be required to terminate or delay planned clinical trials or other development activities for our product candidates, which would materially and adversely affect our liquidity and results of operations.

Raising additional financing may be costly or difficult to obtain, may dilute current shareholders’ ownership interests and may require that we relinquish our rights to certain of our technologies, products or marketing territories.

Any debt or equity financing that we may need may not be available on terms favorable to us, or at all. If we obtain funding through a strategic collaboration or licensing arrangement, we may be required to relinquish our rights to certain of our technologies, products or marketing territories. If we are unable to obtain required additional capital, we may have to curtail our growth plans or cut back on existing business, and we may not be able to continue operating.

We may incur substantial costs in pursuing future financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition and results of operations.

Any additional capital raised through the sale of equity or equity-linked securities may dilute our current shareholders’ ownership in us and could also result in a decrease in the market price of our ordinary shares. The terms of the securities issued by us in future capital transactions may be more favorable to new investors and may include the issuance of warrants or other derivative securities, which may have a further dilutive effect.

We are unable to estimate our long-term capital requirements due to uncertainties associated with the development and commercialization of our product candidates. If we fail to obtain necessary funds for our operations, we will be unable to develop and commercialize any of our product candidates.

We expect our long-term capital requirements to depend on many potential factors, including, among others:

If we are unable to obtain the funds necessary for our operations, we will be unable to develop and commercialize any of our product candidates, or any future product candidates, which would materially and adversely affect our business, liquidity and results of operations.

Due to our recurring operating losses, our ability to continue to operate as a going concern is dependent on additional financial support.

We devote substantially all of our efforts toward research and development activities. In the course of such activities, we have sustained operating losses and expect such losses to continue for the foreseeable future. We have no current source of revenue to sustain our present activities, and we do not expect to generate revenue until, and unless, the FDA or other regulatory authorities approve one of our product candidates and we successfully commercialize (including out-licensing) such product candidate. Accordingly, our ability to continue operating will require us to obtain additional financing to fund our operations. According to our estimates, if we are not successful in obtaining additional capital resources, there is a substantial doubt that we will be able to continue our activities beyond the fourth quarter of 2022.2024. The perception of our inability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations and could result in the loss of confidence by investors, suppliers and employees.

Our business, operating results and growth may be adversely affected by current or future unfavorable economic and market conditions due to geopolitical tensions and political, economic and military instability.

Our business depends on the economic health of the global economies. U.S. and global markets have recently experienced volatility and disruption, including as a result of the escalation of geopolitical tensions following the start of the war between Russia and Ukraine in February 2022. Furthermore, the Israeli government is currently pursuing extensive changes to Israel’s judicial system, which has sparked extensive political debate. In response to the foregoing developments, a series of civil unrests and demonstrations throughout Israel took place. Additionally, individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment in Israel including due to reluctance of foreign investors to invest or conduct business in Israel, as well as to increased currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in securities markets, and other changes in macroeconomic conditions. Such proposed changes may also adversely affect the labor market in Israel or lead to political instability or civil unrest, where we are headquartered, and our ability to raise additional funds.

If the conditions in the global economies remain uncertain or continue to be volatile, or if they deteriorate, including as a result of the impact of military conflict, such as the war between Russia and Ukraine, terrorism or other geopolitical events, such as political instability in Israel, our business, operating results and financial condition may be materially adversely affected. Economic weakness, inflation and increases in interest rates, limited availability of credit, liquidity shortages and constrained capital spending have at times in the past resulted, and may in the future result, in a challenging capital raising environment, slower adoption of new technologies and increased competition, and any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 20-F.

Risks Related to Our Business, Industry and Regulatory Requirements

We have focused substantially all of our efforts and resources on Allocetra™, and we may not obtain regulatory approval of Allocetra™.

We have invested almost all of our efforts and financial resources in the research and development of Allocetra™. As a result, our business is primarily dependent on our ability to complete the development of, obtain regulatory approval for and successfully commercialize Allocetra™. The process to develop, obtain regulatory approval for and commercialize Allocetra™ is long, complex and costly, and its outcome is uncertain.

The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of drugs and pharmaceutical products, including biologics, are subject to extensive regulation by the FDA, the EMA and regulatory agencies in other countries. These regulations differ from jurisdiction to jurisdiction. We are not permitted to market Allocetra™, or any other product candidate, in the United States until we receive approval of a biologics license application (“BLA”) from the FDA, or in the European Union until we receive a marketing authorization application (“MAA”) from the EMA, or in any foreign countries until we receive the requisite approval from the respective regulatory agencies in such countries. We have not received regulatory clearance to conduct the clinical trials that are necessary to file a BLA with the FDA or comparable applications to other regulatory authorities in other countries or received marketing approval for Allocetra™. The results of clinical trials may be unsatisfactory, even if we believe those clinical trials to be successful, the FDA, or other regulatory authorities, may not approve our BLA should we be in a position to file one.

Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The marketing approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. In particular, in many countries outside the United States, it is required that a product receives pricing and reimbursement approval before it can be commercialized. This can result in substantial delays in such countries. In other countries, product approval depends on showing superiority to an approved alternative therapy. This can result in significant expense for conducting complex clinical trials. If we fail to comply with regulatory requirements in the United States or international markets or to obtain and maintain required approvals or if regulatory approvals in the United States or international markets are delayed, our target market will be reduced and our ability to realize the full market potential of our products will be harmed.

Marketing approval in one jurisdiction does not ensure marketing approval in another, but a failure or delay in obtaining marketing approval in one jurisdiction may have a negative effect on the regulatory process in others. Failure to obtain marketing approval in other countries or any delay or setback in obtaining such approval would impair our ability to develop foreign markets for Allocetra™ or any other product candidate. This would reduce our target market and limit the full commercial potential of Allocetra™ or any other product candidate.

None of our product candidates may achieve commercial success in a timely and cost-effective manner, or ever.

Even if regulatory authorities approve any of our product candidates, they may not be commercially successful. Our product candidates may not be commercially successful because, among other things, government agencies or other third-party payors may not provide reimbursement for the costs of the product or the reimbursement may be too low to be commercially successful. Also, physicians and others may not use or recommend our product candidates, even following regulatory approval. In addition, a product approval, even if issued, may limit the uses for which such product may be distributed, which could adversely affect the commercial viability of the product. Moreover, third parties may develop superior products or have proprietary rights that preclude us from marketing our product. Physician and patient acceptance of, and demand for, our products, if we obtain regulatory approval, will depend largely on many factors, including, but not limited to, the extent, if any, of reimbursement of costs by government agencies and other third-party payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness of alternative products, and the prevalence and severity of side effects associated with such products. If physicians, government agencies and other third-party payors do not accept the use or efficacy of our products, we will not be able to generate significant revenue, if any.

Results from our clinical trials may be negative or may not replicate the results of our preclinical trials or earlier clinical trials, which could require that we abandon development of Allocetra™, our other product candidates or any future product candidates, which will significantly impair our ability to generate revenues.

Upon the completion of any clinical trial, the results might not support the outcomes sought by us. Further, success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and the results of later clinical trials may not replicate the results of prior clinical trials and preclinical testing. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, the results from the completed preclinical studies and clinical trials for Allocetra™ may not be predictive of the results we may obtain in later stage trials of Allocetra™ or clinical trials of any of our other product candidates. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain FDA or EMA, or other regulatory agency, approval for their products.

In addition, the clinical trial process may fail to demonstrate that Allocetra™ is safe and effective for its indicated uses. Any such failure may cause us to abandon Allocetra™ and may delay development of other product candidates. Any delay in, or termination or suspension of, our clinical trials will delay the requisite filings with the FDA or other regulatory agencies and, ultimately, our ability to commercialize our product candidates and generate revenues. If the clinical trials do not support our product claims, the completion of development of such product candidate may be significantly delayed or abandoned, which will significantly impair our ability to generate revenues and will materially adversely affect our results of operations.

The clinical trial process is complex and expensive, and commencement and completion of clinical trials can be delayed or prevented for a number of reasons.

We may not be able to commence or complete the clinical trials required to support our submission of a BLA to the FDA or a MAA to the EMA or any similar submission to regulatory authorities in other countries. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of any of our clinical trials. The fact that the FDA, EMA or other regulatory authorities permit a company to conduct human clinical trials is no guarantee that the trial will be successful. To the contrary, most product candidates that enter clinical trials do not prove to be successful and do not result in the filing of a BLA, MAA or similar filing. Drug candidates that prove successful at one clinical trial phase may prove unsuccessful at a subsequent phase. Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements and in part because the results of clinical trials are inherently uncertain and unpredictable. Regulatory authorities, such as the FDA, may preclude clinical trials from proceeding. Additionally, the clinical trial process is time-consuming, and failure can occur at any stage of the trials. We may encounter problems that cause us to abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed by several factors, including:

Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, the FDA or other regulatory authorities, the IRBs at the sites where such boards are overseeing a trial, or a data safety monitoring board overseeing the clinical trial at issue or other regulatory authorities due to a number of factors, including:

In addition, we or regulatory authorities may suspend our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks, or if others report that similar products pose an unacceptable risk to patients, or if the regulatory authorities find deficiencies in our regulatory submissions or the conduct of such trials. Any suspension of clinical trials will delay possible regulatory approval, if any, and adversely affect our ability to develop products and generate revenue.

We cannot be certain that the results of our potential Phase III clinical trials, even if all endpoints are met, will support regulatory approval of any of our product candidates for any indication.

Currently, the FDA, EMA and other regulatory agencies do not have any clear guidance on which endpoints of a Phase III clinical trial would be sufficient for approval of a drug for the treatment of any indication. Therefore, the development pathway for Allocetra™ and our other product candidates is not completely clear. For example, even if the FDA approves a certain primary endpoint for a pivotal clinical trial, and the trial meets that primary endpoint, the FDA may still deny approval of a BLA for various reasons. It is possible that even if the results of a potential Phase III clinical trial meet the primary endpoints for a particular product candidate, the FDA may still require longer-term studies of that product candidate prior to granting marketing approval.

Obtaining approval of a BLA, MAA or other regulatory approval, even after clinical trials that are believed to be successful is an uncertain process.

Even if we complete our planned clinical trials and believe the results to be successful, all of which are uncertain, obtaining approval of a BLA, or similar regulatory application, is an extensive, lengthy, expensive and uncertain process, and the EMA, IMOH, the FDA and other regulatory agencies may delay, limit or deny approval of our product candidates for many reasons, including:

With respect to Allocetra™ for

For example, in the treatment of organ dysfunction and failure associated with sepsis clinical vertical, before we can submit a BLA,marketing application, or similar regulatory application, to the FDA,EMA, or other regulatory authorities, as applicable, we will first be required to conduct acomplete our ongoing Phase II clinical trial and then must conduct pivotal Phase III clinical trials. With respect to Allocetra™ for the prevention of GvHD, before we can submit a BLA, or similar regulatory application, to the FDA, or other regulatory authorities, as applicable, we may first be required to conduct additional Phase II clinical trials and then must conduct pivotal Phase III clinical trials that will be substantially broader than our previously conducted Phase IIa trial. However, certain regulations in Europe may allow us to obtain conditional marketing authorization in Europe for some of our products for certain indications that are classified as unmet medical need and fall under certain guidelines. We will also need to agree on a protocol with the FDA for the clinical trials before commencing those trials in the United States. Phase III clinical trials frequently produce unsatisfactory results even though prior clinical trials were successful. Therefore, the results of the additional trials that we conduct may or may not be successful. The applicable regulatory agencies may suspend all clinical trials or require that we conduct additional clinical, nonclinical, manufacturing, validation or drug product quality studies and submit those data before considering or reconsidering the BLA,marketing application, or similar regulatory application. Depending on the extent of these, or any other studies, approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the applicable regulatory agencies to provide regulatory approval. If any of these outcomes occur, we likely would not receive approval for Allocetra™, or any of our other product candidates, and may be forced to cease operations.

Even if we obtain regulatory approval for Allocetra™, or any of our other product candidates, the approval might contain significant limitations related to the intended uses for which the product is approved, including, without limitation, restrictions related to certain labeled populations, age groups, warnings, precautions or contraindications, or an approval may be subject to significant post-marketing studies or risk mitigation requirements. If we are unable to successfully commercialize Allocetra™, or any of our other product candidates, we may be forced to cease operations.

Changes in regulatory requirements and guidance or unanticipated events during our clinical trials may occur, which may result in necessary changes to clinical trial protocols, which could result in increased costs to us, delay our development timeline or reduce the likelihood of successful completion of our clinical trials.

Changes in regulatory requirements and guidance or unanticipated events during our clinical trials may occur, and as a result, we may need to amend our clinical trial protocols. Amendments may require us to resubmit our clinical trial protocols to IRBs for review and approval, which may adversely affect the cost, timing and successful completion of a clinical trial. If we experience delays in the completion of, or if we terminate, any of our clinical trials, the commercial prospects for our affected product candidates would be harmed and our ability to generate product revenue would be delayed, possibly materially.

Our manufacturing processes are complex, delicate and susceptible to contamination, and involve biological intermediates that are subject to stringent regulations.

Blood is a raw material that is susceptible to damage and contamination and may contain human pathogens, any of which would render the blood unsuitable as raw material for further manufacturing. For instance, improper storage of blood, by us or third-party suppliers, may require us to destroy some of our raw material. If unsuitable blood is not identified and discarded prior to the release of the blood to the manufacturing process, it may be necessary to discard intermediate or finished product made from that blood or to recall any finished product released to the market or individual patients, resulting in a charge to cost of goods sold.

The manufacture of Allocetra™ is a complex and delicate process of cell collection, separation, freezing, storing, incubation, harvesting, formulating and testing, each under aseptic conditions. First, cells are collected by separation from the blood donations at collection centers and medical centers. The manufacture of Allocetra^TM and Allocetra^TM from matched donor cells differ only in the source of the blood donations. Donations for Allocetra^TM from matched donor cells come from the blood of either (i) a donor matched by his or her human leukocyte antigen (i.e., a protein found on white blood cells that is the standard genetic marker for the regulation of the immune system and is used to match donors and recipients in transplantations), (ii) the patient, or (iii) an allogeneic, unmatched donor that has undergone ex-vivo (i.e., prior to infusion) manipulation to stabilize the “early apoptosis” status of the cells for a prolonged period of time. Donations for Allocetra^TM are collected from healthy donors through apheresis. The cells sourced for either Allocetra^TM or Allocetra^TM from matched donor cells are then shipped to a manufacturing site for cryopreservation by trained personnel pursuant to current Good Manufacturing Practices (“cGMP”) requirements, FDA guidelines and our manufacturing protocol, as detailed in our Chemistry Manufacturing and Controls (“CMC”) protocols. Second, the cells are thawed, processed, prepared in an intravenous bag and tested according to our quality assurance and quality control assays and cGMP requirements. The final product is then shipped to the clinical site where it is injectedinfused into the patient within the predetermined expiration period. All shipping and handling isare pursuant to carefully controlled conditions, including controlled temperatures, as required by applicable regulations. The manufacturing sites must be certifiedregistered manufacturing facilities operating under cGMP requirements and all manufacturing activities, including cell collection, processing, testing, freezing, shipping, final product preparations, packaging and labeling, must be conducted by properly and adequately trained personnel in accordance with detailed protocols, batch records and our CMC and based on cGMP requirements and FDA, or other applicable regulatory, guidelines.

Allocetra™, and our other potential drug candidates, if any, may fail to meet our stringent specifications through a failure in one or more of these process steps. Such failure would prohibit us from releasing the drug at issue for human use until the failure is properly and sufficiently corrected and resolved. We may detect instances in which an unreleased product was produced, either internally (as is the case for small scale preclinical or early stage clinical production) or by a CMO (as would be the case for large scale production for which we would provide appropriate technology training and require EMA or FDA approval), without adherence to our manufacturing procedures or blood used in our production process was not collected, shipped, processed or stored in a compliant manner consistent with our current cGMP, or other regulations or regulatory requests, including those by the FDA.EMA. Such an event of non-compliance would likely result in our determination that the implicated product candidates should not be released and therefore should be destroyed. Even if handled properly, biologics may form or contain particulates or have other issues or problems after storage which may require destruction or recalls. The impact of such non-compliance or issues or problems would be exacerbated if our manufacturing efforts are scaled to conduct a Phase II or Phase III clinical trial in Europe, Israel or the United States, or Europe, where there may be numerous collection sites and where shipments may be made to multiple locations with large numbers of patients across a large geographical area. There can be no assurance that we can scale such a manufacturing process, including in Europe, Israel and the United States, in a cost-effective or efficient manner, or in a manner that will meet all regulatory requirements, including EMA, IMOH or FDA requirements, if at all.

While we expect to write-off small amounts of work-in-progress in the ordinary course of business due to the complex nature of blood, our processes and our product candidates, unanticipated events may lead to write-offs and other costs materially in excess of our expectations and the reserves we have established for these purposes. Such write-offs and other costs could cause material fluctuations in our liquidity and results of operations. Furthermore, contamination of our product candidates could cause consumers or other third parties with whom we conduct business to lose confidence in the reliability of our manufacturing procedures, which could adversely affect our liquidity and results of operations. In addition, faulty or contaminated product candidates that are unknowingly distributed could result in patient harm, threaten the reputation of our products and expose us to product liability damages and claims from companies for whom we do contract manufacturing.

If we or ourany potential CMOs we retain in the future fail to comply with manufacturing regulations, our financial results and financial condition could be adversely affected.

Before a BLAmarketing application is approved, or before we begin the commercial manufacture of any of our products, CMOs and other outsourced manufacturing service providers we may engage must obtain regulatory approval of their manufacturing facilities, processes and quality systems. In addition, pharmaceutical manufacturing facilities are continuously subject to inspection by the FDAEMA and foreign regulatory authorities before and after product approval. Due to the complexity of the processes used to manufacture pharmaceutical products and product candidates, any potential third-party manufacturer may be unable to continue to pass or initially pass federal, state or international regulatory inspections in a cost-effective manner.

The FDAEMA and foreign regulators require manufacturers to register manufacturing facilities. The FDAEMA and foreign regulators also inspect these facilities to confirm compliance with requirements that the FDAEMA or foreign regulators establish. We, to the extent we may manufacture our products in the future, or our materials suppliers may face manufacturing or quality control problems causing product production and shipment delays or a situation where we or the supplier may not be able to maintain compliance with the FDA’sEMA’s or foreign regulators’ requirements necessary to continue manufacturing our product candidate. Any failure to comply with FDAEMA or foreign regulatory requirements could adversely affect our clinical research activities and our ability to develop and market our product candidate and any future product candidates.

If a third-party manufacturer with whom we contract is unable to comply with manufacturing regulations, we may be subject to fines, unanticipated compliance expenses, recall or seizure of our products, total or partial suspension of production and/or enforcement actions, including injunctions, and criminal or civil prosecution. These possible sanctions would adversely affect our financial results and financial condition.

In January 2019September 2021 we completedinitiated the construction of a new facility in Israel to support the production of the Allocetra™ drug product, for any clinical trial that will be conductedwhich we completed in the EU or Israel.fourth quarter of 2022. We do not have experience in manufacturing products on a commercial scale. If, due to our lack of manufacturing experience and resources, we cannot manufacture our products on a commercial scale successfully or manufacture sufficient product to meet our expected commercial requirements, our business may be materially harmed.

In January 2019 we completed construction of a new facility in Israel for the manufacture of Allocetra™ for the planned clinical trials that will be conducted in the EU or Israel. We do not have experience in manufacturing products on a commercial scale or using automated processes and we have limited personnel. In addition, because we are not aware of any company that has manufactured Allocetra™ for clinical use, there are limited precedents from which we can learn. If we do not receive regulatory approval for Allocetra™, our costs for the construction and maintenance of the manufacturing facility may exceed revenue derived from the sale of products manufactured at such facility. If we do not have sufficient revenues to cover the costs of the manufacturing facility, we may need to shut down the facility at a loss or borrow or raise funds to maintain the facility until sufficient revenues can be generated. As part of a Company-wide cost cutting program designed to extend our cash runway potentially into 2025, our planned move into the new manufacturing plant has been deferred for an approximate period of three years, and we have determined to offer lease and supporting services of the leased space to potential clients during this three-year period, and we will not have access to the manufacturing facility during such time. We may encounter difficulties in the manufacture of our products due to our limited manufacturing experience and resources. These difficulties could delay the build-out and equipping of a commercial manufacturing facility and regulatory approval of the manufacture of our products, increase our costs or cause production delays or result in us not manufacturing sufficient product to meet our expected commercial requirements, any of which could damage our reputation and hurt our profitability. If we are unable to successfully increase our manufacturing capacity to commercial scale, our business may be materially adversely affected.

Our ability to produce safe and effective products depends on the safety of our blood supply against transmittable diseases.

Despite overlapping safeguards, including the screening of donors and GMP aseptic manufacturing under a quality controlled governing system, the risk of transmissible disease through blood products cannot be entirely eliminated. For example, because blood-derived therapeutics involve the use and purification of human blood, there has been concern raised about the risk of transmitting coronavirus (COVID-19),COVID-19, human immunodeficiency virus (“HIV”), West Nile virus, H1N1 virus or “swine flu” and other blood-borne pathogens and infectious agents through blood-derived products. There are also concerns about the future transmission of H5N1 virus, or “bird flu.” In the 1980s, thousands of hemophiliacs worldwide were infected with HIV through the use of contaminated Factor VIII.

New infectious diseases emerge in the human population from time to time. If a new infectious disease has a period during which time the causative agent is present in the bloodstream but symptoms are not present, it is possible that blood donations could be contaminated by that infectious agent. Typically, early in an outbreak of a new disease, tests for the causative agent do not exist. During this early phase, we must rely on screening of donors and patients (e.g., for behavioral risk factors or physical symptoms) to reduce the risk of blood contamination. Screening methods are generally less sensitive and specific than a direct test as a means of identifying potentially contaminated blood units.

During the early phase of an outbreak of a new infectious disease, our ability to manufacture safe products would depend on the manufacturing process’ capacity to inactivate or remove the infectious agent. To the extent that a product’s manufacturing process is inadequate to inactivate or remove an infectious agent, our ability to manufacture and distribute that product would be impaired.

If a new infectious disease were to emerge in the human population, the regulatory and public health authorities could impose precautions to limit the transmission of the disease that would impair our ability to procure blood, manufacture our product candidates or both. Such precautionary measures could be taken before there is conclusive medical or scientific evidence that a disease poses a risk for blood-derived products.

In recent years, new testing and viral inactivation methods have been developed that more effectively detect and inactivate infectious viruses in collected blood. There can be no assurance, however, that such new testing and inactivation methods will adequately screen for, and inactivate, infectious agents in the blood used in the production of our product candidates.

Our product candidates may produce undesirable side effects that we may not detect in our clinical trials, which could prevent us from achieving or maintaining market acceptance of any such product candidate and could substantially increase commercialization costs or even force us to cease operations.

Even if Allocetra™, or any of our other product candidates, receives marketing approval, we or others may later identify undesirable side effects caused by the product, and, in that event, a number of potentially significant negative consequences could result, including, without limitation:

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase commercialization costs or even force us to cease operations.

Even if Allocetra™ or any other product candidate that we are developing or may develop receives marketing approval, we will continue to face extensive regulatory requirements, and any such product may still face future development and regulatory difficulties. In addition, we are subject to government regulations and we may experience delays in obtaining required regulatory approvals to market our proposed product candidates.

Even if we receive regulatory approval to market a particular product candidate, any such product will remain subject to extensive regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and recordkeeping. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the uses for which the product may be marketed or the conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product, which could adversely affect us by reducing revenues or increasing expenses, and cause the approved product candidate not to be commercially viable. In addition, as clinical experience with a drug expands after approval, typically because it is used by a greater number and more diverse group of patients after approval than during clinical trials, side effects and other problems may be observed over time after approval that were not seen or anticipated during pre-approval clinical trials or other studies. Any adverse effects observed after the approval and marketing of a product candidate could result in limitations on the use of or withdrawal of any approved products from the marketplace. Absence of long-term safety data may also limit the approved uses of our products, if any. If we fail to comply with the regulatory requirements of the FDA,EMA, and other applicable U.S. and foreign regulatory authorities, or previously unknown problems with any approved commercial products, manufacturers or manufacturing processes are discovered, we could be subject to administrative or judicially imposed sanctions or other setbacks, including, without limitation, the following:

In addition, various aspects of our operations are subject to federal, state or local laws, rules and regulations, any of which may change from time to time. Costs arising out of any regulatory developments could be time-consuming and expensive and could divert management resources and attention and, consequently, could adversely affect our business operations and financial performance.

Delays in regulatory approval, limitations in regulatory approval and withdrawals of regulatory approval may have a material adverse effect on the Company.

If we receive marketing approval for any of our product candidates, sales will be limited unless the product achieves broad market acceptance.

The commercial success of our product candidates and any future product candidate for which we obtain marketing approval from the FDA,EMA, or other regulatory authorities, will depend on the breadth of its approved labeling and upon the acceptance of the product by the medical community, including physicians, patients and third-party payors. The degree of market acceptance of any approved product will depend on a number of factors, including, without limitation:

If any of our product candidates is approved, but does not achieve an adequate level of acceptance by physicians, third-party payors and patients, we may not generate sufficient revenue from the product, and we may not become profitable. In addition, our efforts to educate the medical community and third-party payors on the benefits of the product may require significant resources and may never be successful.

If we acquire or in-license additional technologies or product candidates, we may incur additional costs, have integration difficulties and experience other risks that could harm our business and results of operations.

We may acquire and in-license additional product candidates and technologies. Any product candidate or technologies we in-license or acquire will likely require additional development efforts prior to commercial sale, including extensive preclinical or clinical testing, or both, and approval by the FDAEMA and applicable foreign regulatory authorities, if any. All product candidates are prone to risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate, or products developed based on in-licensed technology, will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot assure you that any product candidate that we develop based on acquired or in-licensed technology that is granted regulatory approval will be manufactured or produced economically, successfully commercialized or widely accepted or competitive in the marketplace. Moreover, integrating any newly acquired or in-licensed product candidates could be expensive and time-consuming. If we cannot effectively manage these aspects of our business strategy, our business may not succeed.

The FDAEMA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found to have improperly promoted off-label uses, we may become subject to significant liability.

The FDAEMA and other regulatory agencies strictly regulate promotional claims about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDAEMA or such other regulatory agencies as reflected in the product’s approved labeling. In particular, any labeling approved by such regulatory agencies for our products, if any, may also include restrictions on use. Such regulatory agencies may impose further requirements or restrictions on the distribution or use of our products as part of a mandatory plan, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria and requiring treated patients to enroll in a registry. If we receive marketing approval for our product candidates, physicians may nevertheless prescribe our products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such “off-label” uses, we may become subject to significant liability. In particular, the U.S. federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDAEMA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.

We may be subject to extensive environmental, health and safety, and other laws and regulations in multiple jurisdictions.

Our business involves the controlled use, including through our service providers, of hazardous materials, various biological compounds and chemicals; therefore, we, our agents and our service providers may be subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewater discharges, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites. The risk of accidental contamination or injury from these materials cannot be eliminated. If an accident, spill or release of any regulated chemicals or substances occurs, we could be held liable for resulting damages, including for investigation, remediation and monitoring of the contamination, including natural resource damages, the costs of which could be substantial. We may incur substantial capital costs and operating expenses and may be required to obtain consents to comply with any environmental and health laws or regulations and the terms and conditions of any permits required pursuant to such laws and regulations, including costs incurred by us to install new or updated pollution control equipment for our service providers, modify our operations or perform other corrective actions at our facilities or the facilities of our service providers. In addition, fines and penalties may be imposed on us, our agents and/or our service providers for non-compliance with environmental, health and safety and other laws and regulations or for the failure to have, or comply with the terms and conditions of, required environmental or other permits or consents.

We expect the healthcare industry to face increased limitations on reimbursement, rebates and other payments as a result of healthcare reform, which could adversely affect third-party coverage of our products and how much or under what circumstances healthcare providers will prescribe or administer our products.

In both the United StatesEurope and in other countries, sales of our products, if any, will depend in part upon the availability of reimbursement from third-party payors, which include governmental authorities, managed care organizations and other private health insurers. Third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.

Increasing expenditures for healthcare have been the subject of considerable public attention in Europe and the United States. Both private and government entities are seeking ways to reduce or contain healthcare costs. Numerous proposals that would effect changes in the European and U.S. healthcare systemsystems have been introduced or proposed, in Congress and in some state legislatures, including reducing reimbursement for prescription products and reducing the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical products.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, (the “Medicare Modernization Act”), changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs under Medicare Part B. In recent years, Congress has considered further reductions in Medicare reimbursement for drugs administered by physicians. The Centers for Medicare & Medicaid Services (“CMS”), has issued and will continue to issue regulations to implement the new law which will affect Medicare, Medicaid and other third-party payors. Medicare, which is the single largest third-party payment program and which is administered by CMS, covers prescription drugs in one of two ways. Medicare Part B covers outpatient prescription drugs that are administered by physicians and Medicare Part D covers other outpatient prescription drugs, but through private insurers. Medicare Part A covers hospitalizations and pays hospitals a fixed fee, subject to certain limited exceptions, for treating a given ailment. Drug or biologics administered during a patient’s hospitalization are not separately reimbursed by CMS, but are paid by the hospital out of its fixed fee payment from CMS. Hospitals, therefore, may be reluctant to purchase new costly products unless those products can significantly reduce a patient’s length of stay. Medicaid, a health insurance program for the poor, is funded jointly by CMS and the states, but is administered by the states; states are authorized to cover outpatient prescription drugs, but that coverage is subject to caps and to substantial rebates. The CMS also has the authority to revise reimbursement rates and to implement coverage restrictions for some drugs. Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved products, which in turn would affect the price we can receive for those products. While the Medicare Modernization Act and Medicare regulations apply only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from federal legislation or regulation may result in a similar reduction in payments from private payors.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 (the “Affordable Care Act”), a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers and impose additional health policy reforms. The Affordable Care Act expanded manufacturers’ rebate liability to include covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, increased the minimum rebate due for innovator drugs from 15.1% of average manufacturer price (“AMP”), to 23.1% of AMP. The rebate on innovator drugs is the greater of 23.1 % of the AMP per unit or the difference between the AMP and the best price per unit and adjusted by the Consumer Price Index-Urban (“CPI-U”) based on launch date and current quarter AMP. The total rebate amount for innovator drugs is capped at 100.0% of AMP. The Affordable Care Act and subsequent legislation also narrowed the definition of AMP. Furthermore, the Affordable Care Act imposes a significant annual, nondeductible fee on companies that manufacture or import certain branded prescription drug products. Substantial new provisions affecting compliance have also been enacted, which may affect our business practices with healthcare practitioners, and a significant number of provisions are not yet, or have only recently become, effective. Although it is too early to determine the effect of the Affordable Care Act, it appears likely to continue to put pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

The Food and Drug Administration Reauthorization Act (FDARA) was signed into law on August 18, 2017. The law comprises the reauthorization of the Prescription Drug User Fee Act (PDUFA), which is intended to give the FDA the resources to sustain a predictable and efficient review process for human drugs and biologics. The current PDUFA (PDUFA VI), which includes the Fiscal Years 2018-2022, generates a new user fee program with some changes including removal of the prescription drug establishment fees and added a human prescription drug program fee, Although the establishment fee has been eliminated, the previous establishment registration and drug listing requirements are still in effect. PDUFA VI created a structure whereby human drug application fees will account for 20% and prescription drug program fees will account for 80% of the total revenue amount for that fiscal year. Previously, FDA collected human drug application and supplement fees, prescription drug establishment fees and prescription drug product fees. PDUFA VI eliminates fees for supplements as well as for establishments, though applicants will be assessed annual prescription drug program fees for prescription drug products, rather than the prescription drug product fee assessed under the previous iteration of PDUFA. In addition, PDUFA VI eliminates a provision under which applicants could apply for a waiver or refund of user fees on the basis that the fees to be paid by such person will exceed the anticipated present and future costs incurred by the Secretary in conducting the process for the review of human drug applications for such person, also known as the ‘the fees-exceed-costs waiver.

A significant component of the Affordable Care Act (ACA) is the individual mandate that obligates individuals to purchase health insurance. The 2017 Tax Cuts and Jobs Act eliminated the penalty for not doing so. A December 2018 Federal District Court in Texas has ruled that the mandate is now unconstitutional and since that provision is not severable from the ACA, this unconstitutionality applies to the entire ACT. This decision is under appeal. The U.S. Department of Health and Human Services issued a statement indicating that the decision “is not an injunction that halts the enforcement of the law and not a final judgment. Therefore, HHS will continue administering and enforcing all aspects of the ACA as it had before the court issued its decision.” The Centers for Medicare and Medicaid Services (CMS) also indicated on its healthcare.gov website that the decision does not impact enrollment or coverage on the health care exchanges for 2019. While it is business as usual for now, this decision may be far-reaching and eventually could significantly impact employer health plans, individuals, health care providers, and federal- and state-administered health programs and their coverage of and reimbursement for our product.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several categories of healthcare providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. If we ever obtain regulatory approval and commercialization of any of our product candidates, these new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates may be.

Although we cannot predict the full effect on our business of the implementation of existing legislation or the enactment of additional legislation pursuant to healthcare and other legislative reform, we believe that legislation or regulations that would reduce reimbursement for, or restrict coverage of, our products could adversely affect how much or under what circumstances healthcare providers will prescribe or administer our products. This could materially and adversely affect our business by reducing our ability to generate revenue, raise capital, obtain additional collaborators and market our products. In addition, we believe the increasing emphasis on managed care in the United States has and will continue to put pressure on the price and usage of pharmaceutical products, which may adversely impact product sales.

It will be difficult for us to profitably sell our future products, if any, if reimbursement for any such product is limited by government authorities and third-party payor policies.

In addition to any healthcare reform measures that may affect reimbursement, market acceptance and sales of our future products, if any, will depend on the reimbursement policies of government authorities and third-party payors. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the European and U.S. healthcare industry andindustries, as well as elsewhere, is cost containment. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that reimbursement will be available for our future products, if any, and, if reimbursement is available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. In addition, third-party payors are likely to impose strict requirements for reimbursement in order to limit off-label use of a higher priced drug or treatment. Reimbursement by a third-party payor may depend upon a number of factors including the third-party payor’s determination that use of a product is:

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for our future products. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our future products. If reimbursement is not available, or is available only to limited levels, we may not be able to commercialize our product candidate, or any future product candidates, profitably, or at all, even if approved.

Governments outside the United States tend to impose strict price controls, which may adversely affect our future revenues, if any.

In some countries, particularly the countries comprising the EU, the pricing of pharmaceuticals and certain other therapeutics is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

We are subject to anti-kickback laws and regulations. Our failure to comply with these laws and regulations could have adverse consequences to us.

There are extensive international and U.S. federal and state laws and regulations prohibiting fraud and abuse in the healthcare industry that can result in significant criminal and civil penalties. Such U.S. federal laws include: the anti-kickback statute, which prohibits certain business practices and relationships, including the payment or receipt of compensation for the referralgeneration of patients whose carebusiness that will be paid by Medicare or other federal healthcare programs; the physician self-referral prohibition, commonly referred to as the Stark Law; the anti-inducement law, which prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services covered by either program; the False Claims Act, which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment by the federal government, including the Medicare and Medicaid programs; and the Civil Monetary Penalties Law, which authorizes the U.S. Department of Health and Human Services to impose civil penalties administratively for fraudulent or abusive acts. In addition, the Affordable Care Act requires drug manufacturers to report to the government any payments to physicians for consulting services and the like. Many jurisdictions outside the United States have similar anti-kickback, fraud and abuse, and healthcare laws and regulations, and we could be subject to these laws and regulations to the extent that we operate in such jurisdictions.

Sanctions for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, monetary penalties, imprisonment, denial of Medicare and Medicaid payments or exclusion from the Medicare and Medicaid programs, or both, and debarment. As federal and state budget pressures continue, federal and state administrative agencies may also continue to escalate investigation and enforcement efforts to reduce or eliminate waste and to control fraud and abuse in governmental healthcare programs. Private enforcement of healthcare fraud has also increased, due in large part to amendments to the Civil False Claims Act in 1986 that were designed to encourage private persons to sue on behalf of the government. Efforts to ensure compliance with any of these federal, state and other fraud and abuse laws and regulations may involve substantial costs, and a violation of the same could have a material adverse effect on our liquidity and financial condition. An investigation into the use by physicians of any of our products, if ever commercialized, may dissuade physicians from either purchasing or using them, and could have a material adverse effect on our ability to commercialize those products.

Our market is subject to intense competition. If we are unable to compete effectively, Allocetra™ or any other product candidate that we are developing or may develop may be rendered uncompetitive or obsolete.

There are a number of products in development for the treatment or prevention of sepsis acute GvHDand solid tumors and the other autoimmune and inflammatory disorders that we are targeting or intend to target in the future, most of which are being developed by companies that are far larger than us, with significantly greater resources and more experience. Further, our industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include large, fully-integrated pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. All of these competitors currently engage in, have engaged in or may engage in the future in the development, manufacturing, marketing and commercialization of new pharmaceuticals, some of which may compete with our product candidates. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. These companies may have products in development that are superior to Allocetra™ or any other product candidate that we are developing or may develop. Key competitive factors affecting the commercial success of Allocetra™ and any other product candidates that we are developing or may develop are likely to be efficacy, time of onset, safety and tolerability profile, reliability, convenience of dosing, price and reimbursement.

Many of our potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of drug candidates, obtaining FDAEMA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than us in obtaining FDAEMA and other marketing approvals for drugs and achieving widespread market acceptance. Our competitors’ drugs may be more effective, or more effectively marketed and sold, than any drug we may commercialize, which may render Allocetra™ or any other product candidates that we are developing or may develop obsolete or uncompetitive before we can recover the expenses of developing and commercializing the product. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases and disorders we are targeting could render Allocetra™ or any other product candidates that we are developing or may develop, uncompetitive or obsolete. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.

Our competitors currently include companies with marketed products and/or an advanced research and development pipeline. Moreover, several companies have reported the commencement of research projects related to the treatment or prevention of GvHDsepsis and solid tumors. With respect to our solid tumor Indication, the development and commercialization of cancer immunotherapy products is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary rights. We face competition with respect to our current product candidate, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major biopharmaceutical companies, specialty biopharmaceutical companies, and biotechnology companies worldwide. There are a number of large biopharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of solid tumors.

Significant disruptions of information technology systems, cyberattacks and other autoimmunesecurity breaches could compromise our proprietary and inflammatory conditions, such as Crohn’s diseaseconfidential information, which could harm our business and reputation.

In the ordinary course of our business, we generate, collect and store proprietary information, including clinical trial subject, intellectual property and business information. We rely on sophisticated information technology systems, including software, cloud services and network-connected control systems, some of which are managed, hosted, provided or serviced by third parties. The secure storage, maintenance, and transmission of and access to this information is important to our operations, including our research and development efforts, and reputation. The future operation, success and growth of our business depends on streamlined processes made available through our uninhibited access to information systems, global communications, internet activity and other inflammatory bowel disorders, RA, gout, MSnetwork processes. Further, because certain employees are working remotely, our reliance on our and solid organ transplant rejection, as well asthird-party information technology systems has increased, which could increase our cybersecurity risk, create data accessibility concerns and make us more susceptible to communication disruptions, any of which could adversely impact our business operations.

Like most other companies, despite our current security measures and process controls, our information technology systems, and those of our third-party service providers, may be vulnerable to information security breaches, ransomware or extortion, mishandled data, acts of vandalism, computer viruses and interruption or loss of valuable business data. Stored data might be improperly accessed due to a variety of events beyond our control, including, but not limited to, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of access to data and information, terrorist attacks, hackers, security breaches or other security incidents, and computer viruses or attacks. A failure at any third parties who maintain our information technology systems to provide adequate and timely support could adversely affect the treatmentoperation of our information technology systems.

Hackers and data thieves are increasingly sophisticated and operate large-scale and complex attacks which may remain undetected until after they occur. Computer hackers may attempt to penetrate our computer systems or preventionthose of sepsis.our third party vendors and, if successful, misappropriate our proprietary and confidential information including e-mails and other electronic communications. In addition, an employee, contractor, or other third party with whom we do business may attempt to obtain such information, and may purposefully or inadvertently cause a breach involving such information. Any such compromise of our data security and access to, or public disclosure or loss of, confidential business or proprietary information could disrupt our operations, damage our reputation, provide our competitors with valuable information and subject us to additional costs, which could adversely affect our business.

The costs of mitigating cybersecurity risks are significant and are likely to increase in the future. These costs include, but are not limited to, retaining the services of cybersecurity providers; compliance costs arising out of existing and future cybersecurity, data protection and privacy laws and regulations; costs related to maintaining redundant networks, data backups and other damage-mitigation measures; and extra administrative costs to mitigate risk and deal with any system breaches.

We face potential product liability exposure, and, if claims are brought against us, we may incur substantial liability.

Our products and product candidates could cause adverse effects. These adverse effects may not be observed in clinical trials, but may nonetheless occur in the future. If any of these adverse effects occur, they may render our product candidates ineffective or harmful in some patients, and our sales would suffer, materially adversely affecting our business, financial conditions and results of operations.

In addition, potential adverse effects caused by our product candidates, or products, could lead to product liability claims. Product liability claims might be brought against us by consumers, healthcare providers or others coming into contact with our products. If we cannot successfully defend ourselves against product liability claims, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:

If product liability lawsuits are successfully brought against us, our insurance may be inadequate.

We have obtained liability insurance coverage for our clinical trials with limits that are customary for such trials. However, our insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for any of our product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain this product liability insurance on commercially reasonable terms. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial. A successful product liability claim, or series of claims, brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.

The product liability insurance we will need to obtain in connection with the commercial sales of our product candidates, if and when they receive regulatory approval, may be unavailable in meaningful amounts or at a reasonable cost. If we are the subject of a successful product liability claim that exceeds the limits of any insurance coverage we obtain, we would incur substantial charges that would adversely affect our earnings and require the commitment of capital resources that might otherwise be available for the development and commercial launch of our product programs.

If we are unable to obtain adequate insurance to protect our business and property against damage, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtaining adequate directors’ and officers’ liability insurance.

We may not be able to obtain insurance policies on terms affordable to us that would adequately insure our business and property against damage, loss or claims by third parties. To the extent our business or property suffers any damages, losses or claims by third parties, which are not covered, or adequately covered, by insurance, our financial condition may be materially adversely affected. If we are unable to obtain appropriate insurance, medical centers may be unwilling or unable to enter into site agreements to clinically test our candidate products.

We may be unable to maintain sufficient insurance as a public company to cover liability claims made against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers and directors to manage the Company.

We manage our business through a small number of senior executive officers. We depend on them even more than similarly-situated companies.

Our future growth and success depends on our ability to recruit, retain, manage and motivate our senior executive officers. The loss of the services of our management personnel, including without limitation, our Executive Chairman, Shai Novik, our Chief Executive Officer, Dr. Oren Hershkovitz, our VP Medical, Dr. Einat Galamidi, or our founder and Chief Scientific & Medical Officer, Prof. Dror Mevorach, or the inability to hire or retain experienced management personnel could adversely affect our ability to execute our business plan and harm our operating results.

Because of the specialized scientific nature of our business, we rely heavily on our ability to attract and retain qualified senior executive officers with scientific and technical experience. In particular, the loss of one or more of our senior executive officers could be detrimental to us if we cannot recruit suitable replacements in a timely manner. We do not currently carry “key person” insurance on the lives of members of senior management. The competition for qualified personnel in the pharmaceutical field is intense. Due to this intense competition, we may be unable to attract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel.

We incur significant costs as a result of operating as a public company, and our management devotes substantial time to compliance initiatives. We may fail to comply with the rules that apply to public companies, including Section 404 of the Sarbanes-Oxley Act of 2002, which could result in sanctions or other penalties that would harm our business.

We incur significant legal, accounting and other expenses as a public company, including costs relating to public company reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). and regulations regarding corporate governance practices. Our management and other personnel devote a substantial amount of time to ensure that we comply with all of these requirements. Moreover, the reporting requirements, rules and regulations result in considerable legal and financial compliance costs. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors (the “Board,”, or the “Board of Directors”) or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ liability insurance, on acceptable terms.

We are subject to Section 404 of The Sarbanes-Oxley Act of 2002, or Section 404, and the related rules of the SEC, which generally require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. Section 404 requires an annual management assessment of the effectiveness of our internal control over financial reporting. Prior to December 31, 2019, we were an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, and we took advantage of certain exemptions from various reporting requirements that were applicable to public companies that are emerging growth companies, including, but not limited to, the auditor attestation requirements of Section 404. We ceased to be an emerging growth company as of December 31, 2019 and are required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting as part of this Annual Report on Form 20-F for the fiscal year ended December 31, 2019.

During the course of our review and testing of our internal controls, we may identify deficiencies and be unable to remediate them before we must provide the required reports. Furthermore, if we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our shares to fall.

If our internal controls over financial reporting are not effective, the reliability of our financial statements may be questioned, and our share price may suffer.

The continuous process of strengthening our internal controls and complying with Section 404 is complicated and time-consuming. As our business continues to grow both domestically and internationally, our internal controls will become more complex and will require significantly more resources and attention to ensure our internal controls remain effective overall. During the course of its testing, our management may identify material weaknesses or significant deficiencies. If our management cannot favorably assess the effectiveness of our internal controls over financial reporting, or our independent registered public accounting firm identifies material weaknesses in our internal controls, investor confidence in our financial results may weaken, and the market price of our ordinary shares may suffer.

We will need to significantly increase the size of our organization, and we may experience difficulties in managing growth.

We may require rapid and substantial growth in order to achieve our operating plans, which will place a strain on our human and capital resources. Successful implementation of our business plan will require management of growth, which will increase management’s responsibilities. We currently have a limited number of employees, and, in order to continue the development and the commercialization of product candidates and future products, if any, we will need to substantially increase our operations, including expanding our employee base of managerial, operational and financial personnel. We currently intend to establish our manufacturing capabilities in Israel, Europe and the United States through CMOs, or through our own additional manufacturing factories as well as through clinical study management and monitoring service providers and CROs, which we may require additional funds. Any future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. To that end, we must be able to:

If we are unable to establish, scale-up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, investors may choose not to invest in us, which could cause our share price to decline and negatively impact our ability to successfully commercialize our product candidates and future product candidates.

Failure to attract and retain sufficient numbers of talented employees will further strain our human resources and could impede our growth or result in ineffective growth. If we are unable to manage our growth effectively, our losses could materially increase and it will have a material adverse effect on our business, results of operations and financial condition.

Environmental, social and corporate governance (“ESG”) issues, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition and results of operations and damage our reputation.

There is an increasing focus from certain investors, customers, consumers, employees and other stakeholders concerning ESG matters. Additionally, public interest and legislative pressure related to public companies’ ESG practices continue to grow. If our ESG practices fail to meet regulatory requirements or investor, customer, consumer, employee or other stakeholders’ evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, support for local communities, Board of Director and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency, our reputation, brand and employee retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to do business with us.

Customers, consumers, investors and other stakeholders are increasingly focusing on environmental issues, including climate change, energy and water use, plastic waste and other sustainability concerns. Concern over climate change may result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment. Changing customer and consumer preferences or increased regulatory requirements may result in increased demands or requirements regarding plastics and packaging materials, including single-use and non-recyclable plastic products and packaging, other components of our products and their environmental impact on sustainability, or increased customer and consumer concerns or perceptions (whether accurate or inaccurate) regarding the effects of substances present in certain of our products. Complying with these demands or requirements could cause us to incur additional manufacturing, operating or product development costs.

If we do not adapt to or comply with new regulations, including the SEC’s published proposed rules that would require companies to provide significantly expanded climate-related disclosures in their periodic reporting, which may require us to incur significant additional costs to comply and impose increased oversight obligations on our management and board of directors, or fail to meet evolving investor, industry or stakeholder expectations and concerns regarding ESG issues, investors may reconsider their capital investment in our Company, we may become subject to penalties, and customers and consumers may choose to stop purchasing our products, if approved for commercialization, which could have a material adverse effect on our reputation, business or financial condition.

Risks Related to Our Reliance on Third Parties

In January 2019 we completedWe expect to rely on third party manufacturers to manufacture our product candidates for purposes of clinical trials and commercial quantities of our product candidates, if and when approved for marketing by the construction of a new facility in Israelapplicable regulatory authorities.

With respect to support the production of the Allocetra™ drug product for any clinical trial that will be conducted in the EU or Israel and anticipate relying on third-party manufacturers and service providers to produce our products.

In January 2019 we completed the construction of a new facility in Israel to support the production of the Allocetra™ drug product for any clinical trial that will be conducted in the EU or Israel. For the starting material production required for future clinical trials, we expect to rely either our own manufacturing capabilities or on third-parties. We currently and in the future will rely upon blood banks and collection service facilities for the collection of starting material for the production of Allocetra™. We plan to initially rely upon hospitals, other health care providers, contract manufacturers and, potentially, collaboration partners, to manufacture commercial quantities of our product candidates, if and when approved for marketing by the applicable regulatory authorities. Although we have not yet engaged any contract manufacturers or other service providers, if and when we do, our contract manufacturers and service providers must complete technology transfer, process validation for the manufacturing process and demonstrate successful manufacturing of comparable product. If our contract manufacturers and service providers, and their respective facilities, as applicable, are not approved by the FDA,EMA, or other applicable regulatory authorities, our commercial supply of the product candidate will be significantly delayed and may result in significant additional costs. If we need to identify additional finished product manufacturers, we would not be able to do so without significant delay and likely significant additional cost.

Our and our contract manufacturers’ and other service providers’ failure to achieve and maintain high manufacturing standards, in accordance with applicable regulatory requirements, or the incidence of manufacturing errors, could result in patient injury or death, product shortages, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously harm our business. Contract manufacturers and service providers often encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. Our future contract manufacturers and service providers may not perform as agreed or may not remain in the contract manufacturing business. In the event of a natural disaster, business failure, strike or other difficulty, we may be unable to replace our manufacturing capacity or a third-party manufacturer or provider in a timely manner and the production of our product candidates would be interrupted, resulting in delays and additional costs. See also “Risk Factors—Risks Related to our Business, Industry and Regulatory Requirements—Our manufacturing processes are complex, delicate and susceptible to contamination, and involve biological intermediates that are subject to stringent regulations.”

We intend to rely primarily on third parties to market and sell Allocetra™ and any other product candidate.

We have no sales or distribution capabilities. To the extent we rely on third parties to commercialize our products, if marketing approval is obtained, we may receive less revenue than if we commercialize such products ourselves. In addition, we would have less control over the sales efforts of any third parties involved in our commercialization efforts. In the event we are unable to collaborate with a third-party marketing and sales organization to commercialize our products, particularly for broader patient populations, our ability to generate revenue will be limited.

Although we may ultimately develop a marketing and sales force with technical expertise and supporting distribution capabilities in the longer term, we do not currently intend to do so; therefore, we will be unable to directly market our products, if any, in the near future. To promote any of our potential products through third parties, we will have to locate acceptable third parties for these functions and enter into agreements with them on acceptable terms, and we may not be able to do so. Any third-party arrangements we are able to enter into may result in lower revenues than we could achieve by directly marketing and selling our potential products. In addition, to the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, as well as the terms of our agreements with such third parties, which cannot be predicted in most cases at this time. As a result, we might not be able to market and sell our products in the United States or overseas, which would have a material adverse effect on us.

Any collaboration arrangements that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our current and any future product candidates.

We have collaboration arrangements with certain medical institutions and we may determine to seek collaboration arrangements with pharmaceutical or biotechnology companies for the development and commercialization of our current and any future product candidates. We will face, to the extent that we decide to enter into future collaboration agreements, significant competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming to negotiate, document and implement. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements. Additionally, the terms of any collaborations or other arrangements that we may establish may not be favorable to us.

Any future collaborations that we enter into may not be successful. The success of our collaboration arrangements, if any, would depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations.

Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve.

Collaborations with pharmaceutical or biotechnology companies and other third parties are often terminated or allowed to expire by the other party. Any such termination or expiration could adversely affect us financially and could harm our business reputation.

We depend on third parties to conduct our clinical trials.

We currently rely, and for the foreseeable future, will continue to rely, on third parties, such as CROs, medical institutions, clinical investigators and contract laboratories to oversee most of the operations of our clinical trials and to perform data collection and analysis. As a result, we may face additional delays outside of our control if these parties do not perform their obligations in a timely fashion or in accordance with regulatory requirements. If these third parties do not successfully carry out their contractual duties or obligations and meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or for other reasons, our financial results and the commercial prospects for our product candidates or any other potential product candidates could be harmed, our costs could increase and our ability to obtain regulatory approval and commence product sales could be delayed.

The recent coronavirus outbreak may adversely affect our business, results of operations and financial condition.

In December 2019, a novel strain of coronavirus, COVID-19 (“Coronavirus”) was reported to have surfaced in Wuhan, China, and has reached multiple other countries, resulting in government-imposed quarantines, travel restrictions and other public health safety measures in China, the United States, Israel, Italy, Spain, Australia and other affected countries. The various precautionary measures taken by many governmental authorities around the world in order to limit the spread of the Coronavirus, which has had, and may continue to have, an adverse effect on the global markets and economy, including on the availability and pricing of employees, resources, materials, manufacturing and delivery efforts and other aspects of the global economy. Therefore, the Coronavirus could disrupt production and cause delays in the supply and delivery of products used in our operations, may affect our operations, including the conduct of clinical studies, or the ability of regulatory bodies to grant approvals or supervise our candidates and products, may further divert the attention and efforts of the medical community to coping with the Coronavirus and disrupt the marketplace in which we operate and may have a material adverse effects on our operations. The extent to which the Coronavirus impacts our business and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the Coronavirus and the actions to contain the Coronavirus or treat its impact, among others. The development of the Coronavirus outbreak could materially disrupt our business and operations, slow down the overall economy, interrupt our sources of supply and make it hard to adequately staff our operations, any of which could adversely affect our business, results of operations and financial condition.

Cyberattacks and other security breaches could compromise our proprietary and confidential information, which could harm our business and reputation.

In the ordinary course of our business, we generate, collect and store proprietary information, including clinical trial subject, intellectual property and business information. The secure storage, maintenance, and transmission of and access to this information is important to our operations and reputation. Computer hackers may attempt to penetrate our computer systems and, if successful, misappropriate our proprietary and confidential information including e-mails and other electronic communications. In addition, an employee, contractor, or other third party with whom we do business may attempt to obtain such information, and may purposefully or inadvertently cause a breach involving such information. While we have certain safeguards in place to reduce the risk of and detect cyberattacks, our information technology networks and infrastructure may be vulnerable to unpermitted access by hackers or other breaches, or employee error or malfeasance. Any such compromise of our data security and access to, or public disclosure or loss of, confidential business or proprietary information could disrupt our operations, damage our reputation, provide our competitors with valuable information and subject us to additional costs, which could adversely affect our business.

Risks Related to Our Intellectual Property

The failure to obtain or maintain patents, licensing agreements and other intellectual property could impact our ability to compete effectively.

To compete effectively, we need to develop and maintain a proprietary position with regard to our own technologies, intellectual property, licensing agreements, product candidates and business. Legal standards relating to the validity and scope of claims in the biotechnology and biopharmaceutical fields are still evolving. Therefore, the degree of future protection for our proprietary rights in our core technologies and any product candidates or products that might be developed using these technologies is also uncertain. The risks and uncertainties that we face with respect to our patents and other proprietary rights include the following:

We cannot be certain that patents will be issued as a result of any of our pending applications, and we cannot be certain that any of our issued patents, whether issued pursuant to our pending applications or licensed from third parties, will give us adequate protection from competing products. For example, issued patents may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope, and changes in the law may affect the utility of a pending patent application or issued patent. In addition, because publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first to make our inventions or to file patent applications covering those inventions. If any of our composition of matter patents, or pending applications, was subject to a successful challenge or failed to issue, our business and competitive advantage could be significantly affected. Our current patents will expire or they may otherwise cease to provide meaningful competitive advantage, and we may be unable to adequately develop new technologies and obtain future patent protection to preserve our competitive advantage or avoid adverse effects on our business.

Although we expect to do so, we may not be able to submit a BLAmarketing application seeking approval of Allocetra™ prior to the applicable patents’ expiration date, assuming all necessary patents are in fact issued. Moreover, we cannot be certain that we will be the first applicant to obtain an FDAEMA approval for any indication of our product candidates and we cannot be certain that we will be entitled to any other exclusivity with respect to the same. Such diminution of our proprietary position could have a material adverse effect on our business, results of operation and financial condition.

Others may obtain issued patents that could prevent us from commercializing our product candidates or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so.

In addition to patents and patent applications, we depend upon trade secrets and proprietary know-how to protect our proprietary technology. We require our employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential information to any other parties. We also require our employees and consultants to disclose and assign to us their ideas, developments, discoveries and inventions. These agreements may not, however, provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure.

We cannot predict the scope and extent of patent protection for our product candidates because the patent positions of pharmaceutical products are complex and uncertain.

Any patents issued to us will not ensure the protection of our intellectual property for a number of reasons, including, without limitation, the following:

We may not be able to enforce our intellectual property rights throughout the world. This risk is exacerbated because we expect that our product candidates will be manufactured and used in a number of countries.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. This risk is exacerbated for us because we expect our product candidates will be manufactured and used in a number of countries.

The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to life sciences. This could make it difficult for us to stop the infringement of our other intellectual property rights. For example, several foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, some countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.

Although most jurisdictions in which we have applied for, intend to apply for, or have been issued patents have patent protection laws similar to those of the United States, some of them do not. For example, in the future, we may consider doing business in South America, Eurasia, China and Indochina, and the countries in these regions may not provide the same or similar protection as that provided in the United States. Additionally, due to uncertainty in patent protection law, we have not filed applications in many countries where significant markets exist, including, without limitation, South American countries, Eurasian countries, African countries and Taiwan.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other pharmaceutical and biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical and biotechnology industries involve both technological and legal complexity. Therefore, obtaining and enforcing related patents is costly, time-consuming and inherently uncertain. In particular, the United States has recently enacted, and is currently implementing changes in the law, including wide-ranging patent reform legislation. The U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have ruled on several patent cases in recent years, and could do so again in the future, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition, the U.S. Patent and Trademark Office, or the USPTO, has implemented patentability guidelines that may render the subject matter of a patent as non-patentable based on a lack of utility. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by applicable courts and legislatures in the countries in which we may pursue patent protection, including those of the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents and the interpretations of such laws could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

We may be unable to protect the intellectual property rights of the third parties from whom we license or may license certain of our intellectual property or with whom we have entered into other strategic relationships, which could have a material adverse effect on our business, results of operations and financial condition.

Certain of our intellectual property rights are and may in the future continue to be licensed from third parties, including universities and/or strategic partners. Such third parties may not protect the intellectual property rights that we license from them and we may be unable to defend such intellectual property rights on our own (even if we contractually agree to manage, maintain and defend such rights) or we may have to undertake costly litigation to defend the intellectual property rights of such third parties. There can be no assurances that we will continue to have proprietary rights to any of the intellectual property that we license from such third parties or otherwise have the right to use through similar strategic relationships. Any loss or limitations on use with respect to such intellectual property licensed from third parties or otherwise obtained from third parties with whom we have entered into strategic relationships could have a material adverse effect on our business, results of operations and financial condition.

We may infringe on the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing, or increase the costs of commercializing, our products.

Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties. For example, there could be issued patents of which we are not aware that our products infringe. There also could be patents that we believe we do not infringe, but that we may ultimately be found to infringe. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products infringe. For example, pending applications may exist that provide support or can be amended to provide support for a claim that results in an issued patent that our product infringes.

Third parties may assert that we are employing their proprietary technology without authorization. If a court held that any third-party patents are valid, enforceable and cover our products or their use, the holders of any of these patents may be able to block our ability to commercialize our product candidates or products unless we obtained a license under the applicable patents, or until the patents expire. In addition to litigation proceedings which may be filed against us, we may not be able to enter into licensing arrangements or make other arrangements at a reasonable cost or on reasonable terms. Any inability to secure licenses or alternative technology could result in delays in the introduction of our products or lead to prohibition of the manufacture or sale of products by us.

We may be unable to adequately prevent disclosure and unauthorized use of trade secrets and other proprietary information by third parties.

Our ability to obtain and maintain patent protection and trade secret protection for our intellectual property and proprietary technologies, our products and their uses is important to our commercial success. We rely on a combination of patent, copyright, trademark and trade secret laws, non-disclosure and confidentiality agreements, licenses, assignment of inventions agreements and other restrictions on disclosure and use to protect our intellectual property rights.

We also rely on trade secrets to protect our proprietary know-how and technological advances, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and other proprietary information. These agreements, to the extent they are in place and in effect, may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information to develop products that compete with our product candidates or products or cause additional material adverse effects upon our competitive business position.

We cannot be certain that the steps that we have taken will prevent the misappropriation or other violation of our confidential information and other intellectual property, particularly in foreign countries in which laws may not protect our proprietary rights as fully as in the United States and other developed economies. Moreover, if we lose any key personnel, we may not be able to prevent these persons from impermissibly disclosing or using our technical knowledge or other trade secrets. If we are unable to maintain the security of our proprietary technology, this could materially adversely affect our competitive advantage, business and results of operations.

Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

We generally enter into non-competition agreements with our employees and certain key consultants, or our employment and consulting agreements contain non-competition provisions. These agreements, to the extent they are in place and in effect, prohibit our employees and certain key consultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished.

Our employment agreements include employees’ undertakings with respect to confidentiality and the assignment to us of intellectual property rights developed in the course of employment, as well as a waiver of royalties related to intellectual property developed by the employee during his or her employment. However, in view of recent Israeli case law, these waivers may be deemed insufficient, and our employees could be able to assert claims for compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims are successful, which in turn could impact our future profitability.

Any lawsuits relating to infringement of intellectual property rights necessary to defend ourselves or enforce our rights will be costly and time consuming.

We may be required to initiate litigation to enforce our rights or defend our activities in response to alleged infringement of a third-party. In addition, we may be sued by others who hold intellectual property rights and who claim that their rights are infringed by our product candidates or any of our future products or product candidates. These lawsuits can be very time consuming and costly. There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries generally.

A third-party may claim that we are using inventions claimed by their patents and may go to court to stop us from engaging in our normal operations and activities, such as research, development and the sale of any future products. Such lawsuits are expensive and would consume time and other resources. There is a risk that such court will decide that we are infringing the third-party’s patents and will order us to stop the activities claimed by the patents, redesign our products or processes to avoid infringement or obtain licenses, which may not be available on commercially reasonable terms. In addition, there is a risk that a court will order us to pay the other party damages for infringement.

Moreover, there is no guarantee that any prevailing patent owner would offer us a license so that we could continue to engage in activities claimed by the patent, or that such a license, if made available to us, could be acquired on commercially acceptable terms. In addition, third parties may, in the future, assert other intellectual property infringement claims against us with respect to our product candidates, technologies or other matters.

In addition, our patents and patent applications could face other challenges, such as interference proceedings, opposition proceedings and re-examination proceedings. Any of these challenges, if successful, could result in the invalidation of, or in a narrowing of the scope of, any of our patents and patent applications subject to challenge. Any of these challenges, regardless of their success, would likely be time consuming and expensive to defend and resolve and would divert our management’s time and attention.

Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which non-compliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

Risks Related to the Ownership of Our Ordinary Shares

We do not know whether a market for our ordinary shares will be sustained or what the market price of our ordinary shares will be and as a result it may be difficult for you to sell your shares.

The trading price of our ordinary shares is likely to be volatile. The following factors, some of which are beyond our control, in addition to other risk factors described in this section, may have a significant impact on the market price of our ordinary shares:

These factors may materially and adversely affect the market price of our ordinary shares, which could result in substantial losses by our investors.

In addition, the stock market in general, and the Nasdaq Capital Market and the market for biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like ours. Broad market and industry factors may negatively affect the market price of our ordinary shares, regardless of our actual operating performance. Further, a systemic decline in the financial markets and related factors beyond our control may cause our share price to decline rapidly and unexpectedly. Price volatility of our ordinary shares might be worse if the trading volume of our ordinary shares is low.

Moreover, the liquidity of our ordinary shares is limited. Among other factors, the number of ordinary shares that can be bought and sold at a given price, potential delays in the timing of executing transactions in our ordinary shares and a reduction in security analyst and media coverage of our company, if any, may result in lower prices for our ordinary shares and a larger spread between the bid and ask prices therefor. In addition, without a large float, our ordinary shares are less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our ordinary shares may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate its investment in our ordinary shares. Trading of a relatively small volume of our ordinary shares may have a greater impact on the trading price of our shares than would be the case if our public float were larger. We cannot predict the prices at which our ordinary shares will trade in the future.

We may be subject to securities litigation, which may be expensive and could divert management attention.

Companies that have experienced volatility and other negative fluctuations in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources from our business, which could materially harm our business, even if we were to successfully defend against such litigation. Any adverse determination in litigation could also subject us to significant liabilities.

Our principal shareholders, directors and officers currently own approximately 46%19.47% of our outstanding ordinary shares. They will therefore be able to exert significant controlinfluence over matters submitted to our shareholders for approval.

Our principal shareholders, directors and officers beneficially own approximately 46%19.47% of our outstanding ordinary shares. As a result, these shareholders, if they acted together, could significantly influence or even unilaterally approve matters requiring approval by our shareholders, including the election of directors and the approval of mergers or other business combination transactions. The interests of these shareholders may not always coincide with our interests or the interests of other shareholders. This significant concentration of share ownership may adversely affect the trading price for our ordinary shares because investors often perceive disadvantages in owning stock in companies with controlling shareholders.

Raising additional capital would result in dilution to our existing shareholders and may restrict our operations or require us to relinquish rights.

We may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations and licensing arrangements. To the extent that we raise additional capital through the sale of equity, convertible debt or other equity-linked securities, your ownership interest will be diluted, and the terms of the equity or equity-linked securities that we issue may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, would result in increased payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that are not favorable to us.

Our U.S. shareholders may suffer adverse tax consequences if we were to be characterized as a passive foreign investment company, or PFIC.

Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of our assets are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. There can be no assurance that we will not be classified as a PFIC in any year. If we were to be characterized as a PFIC for U.S. federal income tax purposes in any taxable year during which a U.S. Holder, as defined in “Taxation — United States Federal Income Tax Consequences”,Consequences,” owns ordinary shares, such U.S. Holder could face adverse U.S. federal income tax consequences, including having gains realized on the sale of our ordinary shares classified as ordinary income, rather than as capital gains, a loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are U.S. Holders and having interest charges apply to distributions by us and the proceeds of share sales. Certain elections exist that may alleviate some of the adverse consequences of PFIC status and would result in an alternative treatment (such as mark-to-market treatment) of our ordinary shares; however, we do not intend to provide the information necessary for U.S. holders to make “qualified electing fund elections”,elections,” or QEF elections, if we are classified as a PFIC, and, accordingly, such elections would not be available to U.S. Holders. See “Taxation — “Taxation—United States Federal Income Tax Consequences”.Consequences.”

If our internal controls over financial reporting are not effective, the reliability of our financial statements may be questioned, and our share price may suffer.

The continuous process of strengthening our internal controls and complying with Section 404 is complicated and time-consuming. As our business continues to grow both domestically and internationally, our internal controls will become more complex and will require significantly more resources and attention to ensure our internal controls remain effective overall. During the course of its testing, our management may identify material weaknesses or significant deficiencies. For example, as described in Amendment No. 2 to our Annual Report on Form 20-F for the year ended December 31, 2018, management concluded that the Company’s internal control over financial reporting and disclosure controls and procedures were not effective at December 31, 2018 due to a material weakness in internal control over financial reporting, resulting in the filing of Enlivex R&D’s historical audited financial statements for the year ended December 31, 2018 in our Annual Report on Form 20-F for the year ended December 31, 2018, filed on April 30, 2019, rather than those of Bioblast. This material weakness has been fully remediated, but any material weaknesses or significant deficiencies identified by our management in the future may not be remedied in a timely manner to meet the deadline imposed by the Sarbanes-Oxley Act. If our management cannot favorably assess the effectiveness of our internal controls over financial reporting, or our independent registered public accounting firm identifies material weaknesses in our internal controls, investor confidence in our financial results may weaken, and the market price of our ordinary shares may suffer.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our shares, our share price and trading volume could be negatively impacted.

The trading market for our ordinary shares may be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or, if they do, provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our shares, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact our share price or trading volume.

Because we do not intend to declare cash dividends on our ordinary shares in the foreseeable future, shareholders must rely on appreciation of the value of our ordinary shares for any return on their investment.

We have never declared or paid cash dividends on our ordinary shares. We currently anticipate that we will retain future earnings, if any, for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future. Moreover, the Israeli Companies Law, 1999 as amended (the “Companies Law”), imposes certain restrictions on our ability to declare and pay dividends.Payment of dividends may also be subject to Israeli withholding taxes. See Item 10.E “Taxation—Israeli Taxation Considerations” for more information. As a result, capital appreciation, if any, of our ordinary shares will be your sole source of gain for the foreseeable future. Consequently, in the foreseeable future, you will likely only experience a gain from your investment in our ordinary shares if the price of our ordinary shares increases beyond the price in which you originally acquired the ordinary shares.

We are a “foreign private issuer” under the Exchange Act, and our disclosure and reporting requirements are different than those of a U.S. domestic reporting company.

We are a “foreign private issuer” under the Exchange Act and the rules of the SEC promulgated thereunder. As a result, we are subject to the reporting requirements under the Exchange Act applicable to foreign private issuers, meaning that, among other things, we are required to file our Annual Report on Form 20-F with the SEC within four months of our fiscal year end. In addition, we are not subject to quarterly financial reporting, as would be the case for a U.S. domestic reporting company; therefore, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. We are additionally not required to comply with Regulation FD, which addresses certain restrictions on the selective disclosure of material non-public information. Also, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our ordinary shares. If we lose our status as a foreign private issuer, we will no longer be exempt from such rules and, among other things, will be required to file periodic reports and financial statements as if it were a company incorporated in the United States.

As a “foreign private issuer”,issuer,” we are permitted to follow certain home country corporate governance practices instead of otherwise applicable SEC and Nasdaq Capital Market requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the listing rules of the Nasdaq Capital Market (the “Nasdaq Listing Rules”) for U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, director nomination procedures, quorum requirements, and approval of compensation of officers.officers and distribution of periodic reports. In addition, we follow our home country law instead of the Nasdaq Listing Rules that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity basedequity-based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or greater interest in the company, and certain acquisitions of the stock or assets of another company. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the Nasdaq Capital Market may provide less protection to you than what is accorded to investors under the Nasdaq Listing Rules applicable to domestic U.S. issuers.

Our ordinary shares are traded on more than one market and this may result in price variations.

Our ordinary shares are traded on the Nasdaq Capital Market and the Tel Aviv Stock Exchange (“TASE”). Trading in our ordinary shares on these markets takes place in different currencies (U.S. dollars on Nasdaq and New Israeli Shekels (“NIS”) on the TASE) and at different times, as a result of different time zones, trading days and public holidays in the United States and Israel. The trading prices of our ordinary shares on these two markets may differ due to these and other factors. Any decrease in the price of our ordinary shares on the TASE could contribute to a decrease in the trading price of our ordinary shares on Nasdaq, and a decrease in the price of our ordinary shares on Nasdaq could likewise contribute to a decrease in the trading price of our ordinary shares on the TASE.

Risks Related to Israeli Law and Our Operations in Israel

Our headquarters and other significant operations are located in Israel and, therefore, our results may be adversely affected by political, economic and military instability in Israel.

Our executive offices are located in NesNess Ziona, Israel. In addition, the majority of our officers and several of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. Furthermore, in recent years, Israel is currentlyhas been engaged in ansporadic armed conflictconflicts with Hamas, a militiaan Islamist terrorist group and political party whothat controls the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanesean Islamist Shiite militiaterrorist group that controls large portions of southern Lebanon, and political party.with Iranian-backed military forces in Syria. In July 2014, there was an escalation in violence amongaddition, Iran has threatened to attack Israel, Hamas, the Palestinian Authoritymay be developing nuclear weapons and other groups, as well as extensivehas targeted cyber attacks against Israeli entities. Some of these hostilities along Israel’s border with the Gaza Strip, which resulted inwere accompanied by missiles being fired from the Gaza Strip into Southern Israel, as well as areas more centrally located near Tel Aviv and areas surrounding Jerusalem. This conflict, as well as a previous round of escalation which took place in November 2012, involved missile strikes against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located. The continuation of such strikes may negatively affectaffected business conditions in Israel. Since February 2011, Egypt has experienced political turbulence and an increase in terrorist activity in the Sinai Peninsula following the resignation of Hosni Mubarak as president. This included protests throughout Egypt, and the appointment of a military regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previously outlawed by Egypt), and the subsequent overthrow of this elected government by a military regime instead. Such political turbulence and violence may damage peaceful and diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countries in the region, including Syria which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflict in Syria has escalated, and evidence indicates that chemical weapons have been used in the region. Intervention may be contemplated by outside parties in order to prevent further chemical weapon use. This instability and any intervention may lead to deterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for additional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. These situations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, and airline companies may cancel or delay scheduled air travel to Israel, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.

Our commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although the Israeli government is currently committed to covering the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions generally and could harm our results of operations.

Further, in the past, the State of Israel and Israeli companies have been subjects of economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business.

For additional information on risks relating to restrictions in A campaign of boycotts, divestment, and sanctions has been undertaken against Israel, in connection with Coronavirus, See –– “The recent coronavirus outbreak maywhich could also adversely affect our business.

Furthermore, the Israeli government is currently pursuing extensive changes to Israel’s judicial system, which has sparked widespread protests across Israel and, if adopted, may negatively impact the political and business environment in Israel. Actual or perceived instability with respect to the current public dispute over changes to the Israeli legal systems or the impact thereof, may individually or in the aggregate adversely affect the Israeli economy and our ability to do business, financial condition, results of operations, growth prospects, and financial condition”.share price as well as our ability to raise additional funds.

Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.

Many Israeli citizens are obligated to perform up to one month, and in some cases more, of annual military reserve duty until they reach the age of 40 (or older, for reservists who are officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of our employees, including members of our senior management, or the employees or management of our Israeli business partners. Such disruption could materially adversely affect our business, financial condition and results of operations.

Exchange rate fluctuations between the U.S. dollar, Euro and the New Israeli Shekel currenciesNIS may negatively affect our earnings.

Our functional currency is the NIS. We incur expenses in U.S. dollars, Euros and NIS. As a result, we are exposed to the risks that the Euro anddollar because the U.S. dollar is the currency of the primary economic environment in which we operate and expect to continue to operate for the foreseeable future. The functional currency of Enlivex R&D had been the NIS; however, we reassessed Enlivex R&D’s functional currency and determined that, as of September 30, 2021, the U.S. dollar became the functional currency of Enlivex R&D rather than the NIS. Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates in effect at the applicable balance sheet date. Because we incur expenses denominated in currencies other than the U.S. dollar, predominantly the NIS and Euro, fluctuations in exchange rates among these currencies may appreciate relative tonegatively impact our earnings, particularly if the NIS or if either the Euro andappreciates against the U.S. dollar devalue relative to the NIS, that the inflation rate in the EU and in the United States may exceed such rate of devaluation of the Euro and the U.S. dollar, or that the timing of such devaluation may lag behind inflation in the EU and in the United States. In any such event, the NIS cost of our operations in the EU and in the United States would increase and our NIS-denominated results of operations would be adversely affected.dollar. The average exchange rate for the year ended December 31, 20192022 was $1.00 = Euro 0.890.94 and $1.00 = NIS 3.456. We cannot predict any future trends in the rate of inflation in the EU and in the United States or the rate of devaluation, if any, of either the Euro or the U.S. dollar against the NIS.3.519.

We received Israeli government grants for certain of our research and development activities. The terms of those grants may require us, in addition to payment of royalties, to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. We may be required to pay penalties in addition to repayment of the grants.

Our research and development efforts, during the period between 2007 and 2016 were financed in part through royalty-bearing grants, in anthe aggregate amount of approximately $3.2 million, from the Israel Innovation Authority (the “IIA”), pursuant to the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744-1984 (formerly known as the Encouragement of Industrial Research and Development Law, 5744-1984), (the “Innovation Law”). During 20192019-2022, our research and development efforts were also financed in part through royalty-bearing grants from the IIA, in anthe aggregate amount of approximately $1.11$4.56 million. With respectAs of December 31, 2022, we have not paid any royalties to such grants,the IIA and had a contingent obligation to the IIA, including interest of $9.2 million.

Under the Innovation Law as currently in effect, we are committed to pay royalties at a rate of 3% to 5% on our sales proceeds from any product that is a treatment, deviceproducts or medical kit designed for therapeutic treatments using apoptotic cellsservices based on know-how funded by the IIA research and development grants we have received (which rates may be increased under certain circumstances) up to the total amount of grants received (which may be increased under certain circumstances), linked to the U.S. dollar plus interest equal to LIBOR as it would apply to U.S. dollar deposits.12-month LIBOR.

Regardless of any royalty payment, we are further required to comply with the requirements of the Israeli Encouragement of Research, Development and Technological Innovation in the Industry Law 1984 (formerly known as the Israeli Encouragement of Industrial Research and Development Law, 1984, and related regulations, (the “Research Law”), with respect to those past grants. When a company develops know-how, technology or products using IIA grants, or is otherwise IIA-supported, theThe terms of such IIA grants and the ResearchInnovation Law restrict the transfer of such IIA-supported know-how and rights related thereto, technology and products to a third party or the transfer of manufacturing or manufacturing rights of the same outside of Israel (except for the transfer of less than 10% of the manufacturing capacity in the aggregate which requires only a notice), without the prior IIA approval. Therefore, if deemed IIA-supported, the discretionary approval of an IIA committee would be required for any transfer to third parties, which could, if we receive such approvals, result in the payment of increased royalties (both increased royalty rates and increased royalties ceilings), in cases of transfer of manufacturing outside of Israel (up to three times the amount of the IIA grants received, depending on the manufacturing volume performed outside Israel (plus accrued interest)) and/or payment of additional amounts to the IIA in cases of transfer of IIA-supported know-how outside of Israel. Furthermore, the IIA may impose certain conditions on any arrangement under which we may transfer technology or development outside of Israel (including for the purpose of manufacturing). Currently,(calculated according to a formula under the ResearchInnovation Law, there is no mechanism for the approval of licensing transactions of IIA-supported technologies to third parties outside of Israel, other than the Licensing Rules described below; however, licensing IIA-supported technologieswhich may under certain circumstances be considered a transfer of know-how and therefore require IIA approval, as described above. On May 7, 2017, the IIA published the Rules for Granting Authorization for Use of Know-How Outside of Israel (the “Licensing Rules”). The Licensing Rules enable the approval of out-licensing arrangements and other arrangements for granting of an authorization to an entity outside of Israel to use know-how developed under research and development programs funded by the IIA and any derivatives thereof. Subject to payment of a “License Fee” to the IIA, at a rate that will be determined by the IIA in accordance with the Licensing Rules, the IIA may now approve arrangements for the license of know-how outside of Israel. This allows companies that have received IIA support to commercialize know-how in a manner which was not previously available.

The transfer of IIA-supported know-how, technology or products outside of Israel may involve the payment of additional amounts depending upon the value of the transferred know-how, technology or products, the amount of IIA support, the time of completion of the development of IIA-supported know-how, technology or products, and other factors up to a maximum of six times the amount of the grants received (less paid royalties, if any, and depreciation, but no less than the total grants received), plus LIBOR and minus any royalties paid. accrued interest).

These restrictions and requirements for payment may impair our ability to sell our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of IIA-supported know-how, technology or products (such as a merger or similar transaction) may be reduced by any amounts that we may be required to pay to the IIA.

Our obligations and limitations pursuant to the ResearchInnovation Law are not limited in time and may not be terminated by us at will and the obligations pursuant to the Research Law remain in force even after we have paid all required royalties, which may require us to obtain IIA approval prior to consummating certain transactions, including licensing IIA-supported know-how, technology and products outside of Israel. Although as of the date of this Annual Report on Form 20-F we have not been required to pay any royalties or additional payments with respect to any IIA grant, there can be no assurance that we will not be required to do so in the future.royalties. Such restrictions and payments could materially restrict or limit our ability to perform or outsource manufacturing outside of Israel or otherwise transfer or license our IIA-supported know-how, technology or products, which could materially affect our business, results of operations and financial position.

Provisions of Israeli law and our Amended and Restated Articles of Association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

Provisions of Israeli law and our amended and restated articles of association could have the effect of delaying or preventing a change in control and may make it more difficult for a third-party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares. Among other things, Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the Company’s outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition an Israeli court to alter the consideration for the acquisition, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights.

Furthermore, under the ResearchInnovation Law, a recipient of IIA grants, such as us, must report to the IIA regarding any change of control or any change in the holding of its means of control of our Company which transforms any non-Israeli citizen or resident into an “interested party”,party,” as defined in the Israeli Securities Law, 1968, and in the latter event, the non-Israeli citizen or resident shallis required to execute an undertaking in favor of IIA, in a form prescribed by the IIA.

Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. See “Taxation — Item 10.E. “Taxation—Israeli Taxation Considerations” for additional information.

Our Amended and Restated Articles of Association also contain provisions that could delay or prevent changes in control or changes in our management without the consent of our Board. These provisions will include the following:

It may be difficult to enforce a judgment of a United States court against us, our officers and directors in Israel or the United States, to assert United States securities laws claims in Israel or to serve process on our officers directors and these experts.directors.

We were and continue to beare organized in Israel. Substantially all of our executive officers and directors reside outside of the United States, and all of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not necessarily be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.

Your rights, liabilities and responsibilities as a shareholder will be governed by Israeli law and will differ in some material respects from those under U.S. law.

Because we are an Israeli company, the rights and responsibilities of our shareholders are governed by our Amended and Restated Articles of Association and Israeli law, including the Companies Law. These rights, liabilities and responsibilities differ in some material respects from the rights, liabilities and responsibilities of shareholders in a U.S. corporation. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders and to refrain from abusing his, her or its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters. Israeli law provides that these duties are applicable to shareholder votes on, among other things, amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and interested party transactions requiring shareholder approval.approval under Israeli law. In addition, a controlling shareholder of an Israeli company or a shareholder who knowsis aware that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of a director or executive officer in the company or has other powers towards the company, has a duty of fairness towards the company. However, Israeli law does not define the substance of this duty of fairness. There is limited case law available to assist us in understanding the implications of these provisions that govern shareholders’ actions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.

ITEM 4. INFORMATION ON THE COMPANY

4.A. History and developmentDevelopment

We were originally incorporated on January 22, 2012 under the laws of the State of Israel as Bioblast Pharma Ltd. Upon consummation of the Merger, we changed our name to Enlivex Therapeutics Ltd. Our primary operating subsidiary, Enlivex Therapeutics R&D Ltd. was originally incorporated in September 2005 under the laws of the State of Israel as an Israeli privately held company under the name Tolarex Ltd. In February 2010, Enlivex R&D changed its to Enlivex Therapeutics Ltd., and, upon consummation of the Merger, to Enlivex Therapeutics R&D Ltd. In June 2021 Enlivex Therapeutics RDO Ltd. was established in Israel as a wholly owned subsidiary. Our principal executive offices are located at 14 Einstein Street, NesNess Ziona, Israel 7403618 and our telephone number is: +972 26208072. Our wholly owned U.S. subsidiary, Bio Blast Pharma,Enlivex Therapeutics Inc., incorporated in Delaware, has been appointed our agent in the United States, and its registered address is 1811 Silverside Road, Wilmington, Delaware 19810. Bio Blast Pharma, Inc. existed as a subsidiary of Bioblast prior to the Merger. Our website address is https://www.enlivex.com/.www.enlivex.com. The information contained on, or that can be accessed through, our website is not part of this Annual Report.Report on Form 20-F. We have included our website address herein solely as an inactive textual reference. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of this website is http://www.sec.gov. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

On March 26, 2019, we consummated the Merger. See “Introduction”.

Prior to December 31, 2019, we were an “emerging growth company” for a period of five years following the completion of our initial public offering in 2014.

Our capital expenditures for the three years ended 2019, 2018December 31, 2022, 2021 and 20172020 were insignificant. See “Operating and Financial Review and Prospects -LiquidityProspects—Liquidity and Capital Resources”.Resources.”

4.B. Business overviewOverview

The Company is a clinical stageclinical-stage macrophage reprogramming immunotherapy company, developing an allogeneic drug pipelineAllocetra^TM, a universal, off-the-shelf cell therapy designed to reprogram macrophages into their homeostatic state. Resetting non-homeostatic macrophages into their homeostatic state is critical for immune system rebalancing. Immune system rebalancing is critical for the treatmentand resolution of life-threatening immune and inflammatory conditions, which involveconditions. These non-homeostatic macrophages contribute significantly to the hyper-expressionseverity of cytokines (“Cytokine Release Syndrome”) and for which there are no U.S. Food and Drug Administration (“FDA”)-approved treatments, as well as treating solid tumors by modulating such tumors’ microenvironment. The Company’s innovative immunotherapy candidates,the respective diseases. By restoring macrophage homeostasis, Allocetra™ and Allocetra™ from matched-donor cells, arehas the potential to provide a novel immunotherapy candidates based on a uniqueimmunotherapeutic mechanism of action that targetsfor life-threatening clinical indications that are defined as “unmet medical needs.” Allocetra™ has been developedneeds”, as a stand-alone therapy or in combination with leading therapeutic agents.

Macrophages are tissue-resident or infiltrating immune cells critical for innate immunity, normal tissue development, and repair of damaged tissue. Macrophages’ function is a result of their original designation, their local micro-environment, and the type of metabolites, substances or pathogens to treat acute organ failure associated with sepsis.which they are exposed. Reprogrammed out of their homeostatic state, macrophages contribute to the pathophysiology of multiple diseases, including cancer, sepsis, and various inflammatory disorders.

We believe the Company’s primary innovative immunotherapy, Allocetra™^TM, represents a paradigm shift in macrophage reprogramming, moving from matched-donor cells has been developedtargeting a specific subset of macrophages or a specific pathway effecting macrophages activity, to prevent or treat complications associated with bone marrow transplants (“BMT”) and/or hematopoietic stem cell transplants (“HSCTa fundamental view of macrophage homeostasis. Restoring macrophage homeostasis may induce the immune system to rebalance itself to normal levels of operation, thereby promoting disease resolution.

The Company is currently focused on two main clinical verticals: sepsis and solid tumors (the “Indications”). BecauseThe Company believes that negatively-reprogrammed macrophages may be key contributors to disease severity across these two Indications, and thus effective reprogramming of these negative-reprogrammed macrophages into their respective homeostatic states may facilitate disease resolution to these Indications, some of which are considered “unmet medical needs.” All planned and expected timelines for execution of the candidatesclinical trials in the Indications are basedsubject to certain risks and uncertainties. For further discussion of risks and uncertainties related to our clinical trial in the Indications please see Item 3.D. “Risk Factors” below.

The Company had previously included treatment of COVID-19 as a clinical vertical and conducted certain trials in respect of the treatment of COVID-19; however, the Company has determined to currently focus its resources on the same unique mechanismIndications. See “—COVID-19 De-Prioritization” below.

Macrophage Reprogramming

When macrophages are negatively reprogrammed by certain diseases, they may become highly aggressive or highly passive, depending on the disease and the environment in which they reside. In their aggressive modality, macrophages can cause a systemic inflammatory response in which cytokine release composition and amplitude spirals out of action and are otherwise substantially identical, we refer to both as Allocetra™, unless indicated otherwise.control.

Cytokines are a broad and loose category of small proteins (~5–20 kDa) produced by a broad range of cells, including immune cells, and are especially important in the immune system as they promote, modulate and balance immune responses. They are released by cells and affect the behavior of other cells, and include chemokines, interferons, interleukins, lymphokines, tumor necrosis factors and others, but generally not hormones or growth factors. Cytokines are important in health and disease, specifically in host responses to infection, immune responses, inflammation, trauma, sepsis, cancer and other conditions. Cytokine Release Syndrome is a systemic inflammatory response in which cytokine release composition and amplitude spirals out of control. It is considered difficult to treat with traditional small molecules or biologics because the condition involves dozens of cytokines that induce multiple biological paths of hyper immune activity. Such hyper immune activity may result in an attack of immune killer cells (e.g., T-Cells, B-Cells and Natural Killer Cells) on healthy organs of the patient, including the heart, brain, lungs, liver, kidney and others, which may lead to organ damage, multiple organ failure and mortality.

In their passive mode, macrophages, who in their homeostatic state orchestrate proper immune reaction against certain diseases, become reprogrammed into a passive state, do not orchestrate immune response targeted at disease resolution, and in some diseases interfere with the attempts to treat patients with therapeutic agents.

The Company believes that the only approach to handling such a multi-factorial complex life-threatening situation in diseases in which one key aspect of disease severity is the negative reprogramming of macrophages is via an integrated cell-based immunotherapy that inducespositively reprograms macrophages back into their respective homeostatic state, thereby inducing the immune system to rebalance itself to normal levels of operation utilizing a mechanism of action used regularly by themacrophage-modulated proper immune system and developed through evolution.responses to disease challenges. The Company’s unique therapeutic approach is based on inducing immunotolerance and the specific normal rebalancing of the immune systemmacrophage homeostasis by infusing early and stable apoptotic cells (dying cells)Allocetra^TM into the patient. Once infused, such apoptotic the Allocetra^TM cells interact with macrophages and dendritic cells via well-defined mechanisms causing rebalancinga reprogramming of an over-agitated immune response.these negatively reprogrammed macrophages back to their homeostatic state. Using this inherent immune pathway, the Company believes that it can use Allocetra™ to shape a patient’s innate immune response to a disease, leadingdisease.

Frozen Formulation of Allocetra™

We completed development of frozen formulation Allocetra™, in the first quarter of 2022, which was twelve months ahead of schedule. While the liquid formulation of Allocetra™ has a shelf life of 96 hours, the frozen formulation is expected to have a decrease in unwanted immune response.

There are many clinical conditions in which a patient hasshelf life spanning multiple years. We expect that this will substantially improve the product candidate’s scalability and shipping logistics, lower its production costs, and increase profitability upon potential commercialization. Due to develop Cytokine Release Syndrome. Those clinical conditions include complications associated with sepsis, HSCT and several autoimmune and inflammatory conditions, such as Crohn’s disease, rheumatoid arthritis, gout and multiple sclerosis.

Immune System Triggering and Relaxation

The immune system constantly handles multiple challenges of bacterial, viral, fungal and other infections via a sophisticated elevation of immune activity utilizing enhanced cytokine releases from macrophages and dendritic cells, resulting in recruitment of antibodies and immune cells (e.g., T-Cells, B-Cells and Natural Killer Cells). Once the threat has been eliminated, the immune system rebalances itself into a normal state. Such rebalancing occurs naturally through antigen presenting cells, macrophages and dendritic cells that engulf and clear infected cells that have been instigated into apoptosis and cells from the immune system that have gone through programmed cell death, causing a decrease to normal levels of cytokines and immune activity.

Apoptosis is a natural and critical process in tissue and organ maintenance that occurs when a cell is damaged beyond repair, infected with a virus or undergoing other stressful conditions. Apoptosis involves a series of biochemical events leading to changes in cell morphology and, ultimately, cell death. Immediate removalearly completion of the dying cell is performed by antigen presenting cells, macrophages and dendritic cells. The primary functiondevelopment of dendritic cells is phagocytosis, orfrozen formulation Allocetra™, we currently utilize it in our ongoing Phase II sepsis trial going forward], rather than introducing it only at the capturing and transportation of antigens to draining lymphoid tissues. Immature dendritic cells are capable of large-scale phagocytosis of apoptotic cells.

As many as 3x10⁸ cells undergo apoptosis every hour in the human body. One of the primary “eat me” signals expressed by apoptotic cells is phosphatidylserine (PtdSer). Apoptotic cells themselves serve as major contributors to the “non-inflammatory” nature of the engulfment process, some by secreting thrombospondin-1 (TSP-1) or adenosine monophosphate and possibly other immune modulating “calm-down” signals that interact with antigen presenting cells, macrophages and dendritic cells. Apoptotic cells also produce “find me” and “tolerate me” signals to attract and immune-modulate antigen presenting cells, macrophages and dendritic cells that express specific receptors for some of these signals (Trahtemberg and Mevorach; 2017).

Injectionstart of a high volumePhase III study, as previously planned. We initiated the utilization of densely concentrated early apoptotic cells activates dendritic cells, causing themfrozen formulation Allocetra™ in our ongoing solid tumor Phase I/II trials, and plan to migrate tosolely use the lymphoid tissues, such as the spleen, where they interact with T-cells and B-cells, which are lymphocytes involvedfrozen formulation Allocetra™ in the regulation of the immune system, remove the apoptotic cells and suppress inflammation. The foregoing process induces immunotolerance, as opposed to general immunosuppression, which would otherwise make the patient more susceptible to infection and other immunological challenges.all subsequent clinical studies.

The Company’s unique therapeutic approach is based on inducing immunotolerance and the specific normal rebalancing of the immune system by infusing early and stable apoptotic cells (dying cells) into the patient. Once infused, such apoptotic cells interact with macrophages and dendritic cells via well-defined mechanisms causing rebalancing of an over-agitated immune response.Sepsis

Using this inherent immune pathway, the Company believes that it can use Allocetra™ to shape a patient’s innate immune response to a disease, leading to a decrease in unwanted immune response. During the apoptotic cell removal process, several therapeutic responses are induced, such as inflammation suppression, modulation of macrophage-directed deletion of invading pathogens and regulation of immune responses. These responses are the target of Allocetra™. The Company believes that Allocetra™ can specifically target the immune response without simultaneously diminishing the general immune capabilities of the patient or compromising the patient’s ability to respond to immunological challenges.

The Company’s current clinical development programs focus on preventing or treating complications associated with sepsis, HSCT and solid tumors. The Company’s leading product candidate, Allocetra™, has been developed for treating organ dysfunction and failure in sepsis patients. and potentially for prevention of in allogeneic HSCT patients. Allocetra™ from matched-donor cells has been developed to prevent or treat complications associated with BMT and/or HSCT. Additionally, the Company is currently examining the potential for clinical studies to evaluate the efficacy of existing immunotherapy treatments in combination with Allocetra™ for treatment of solid tumors.

Sepsis

The Company is developing Allocetra™ as an adjunctive immunomodulating cell therapy for avoiding organ failure caused by sepsis. The drug would be administered intravenously to the patient following the diagnosis of sepsis in addition to standard of care treatment.

Sepsis is a highly heterogeneous syndrome that is caused by an unbalanced immune host response to an infection. Sepsis was not clinically defined until the early 1990s when a group of key opinion leaders released the first consensus definition of sepsis. Sepsis has been defined as a systemic inflammatory response syndrome (“SIRS”) caused by an infection; and increasing severities have been designated as ’severe‘severe sepsis’ (referring to sepsis and organ dysfunction) and ’septic‘septic shock’ (referring to sepsis and refractory hypotension). In the most recent ’Sepsis-3’‘Sepsis-3’ consensus definition, sepsis is defined as a life-threatening organ dysfunction that is caused by a dysregulated host response to infection, and the term “severe sepsis” has been removed. Of note, although infection is the triggering event in this definition of sepsis, the aberrant immune response often remains after successful treatment of the infection. Sepsis imposes a substantial global burden in terms of morbidity and mortality. Nearly all patients with severe sepsis require treatment in an intensive care unit. Sepsis, which has been identified by the World Health Organization as a global health priority, has no proven pharmacologic treatment other than appropriate antibiotic agents, fluids, and vasopressors. Sepsis affects approximately 1.7 million adults in the United States each year and potentially contributes to more than 250,000 deaths. Various studies estimate that sepsis is present in 30% to 50% of hospitalizations that culminate in death (Rhee et al; 2019) Previous attempts to find a therapy for sepsis failed partially due to the parallel and complex course of biological activities that occur within a sepsis patient. For many years, a disproportionate inflammatory response to invasive infection was considered to be central to the pathogenesis of sepsis, but it is now clear that the host response is disturbed in a much more complex way, involving both sustained excessive inflammation and immune suppression, and a failure to return to normal homeostasis.

This outcome may lead to organ damage, multiple organ failure and mortality. If the immune system could be rebalanced, we believe that many of the outcomes, specifically organ damage and failure, could be prevented and significantly increase a patient’s chance of survival with reduced morbidity.

Preclinical Data, Sepsis

In its preclinical study, the Company utilized a murine cecal ligation puncture (“CLP”) sepsis model. The CLP model has been proposed to more closely replicate the nature and course of clinical sepsis, as compared to other models.

We evaluated the effect of Allocetra™ in mice, given 4 hours after the end of a CLP procedure, in combination with Ertapenem© a highly effective antibiotic commonly used for the treatment of severe or high-risk bacterial infections. Mice were monitored for clinical signs and determination of the murine sepsis score. The endpoint was defined as survival (either death or sacrifice when a total clinical score of 15 or maximum score in one of the categories was reached).

As shown in Figure 2A,1A, antibiotic treatment showed a non-significant tendency to ameliorate mortality of the mice (Ertapenem + vehicle, n=15) compared to the control group (CLP only, n=16). Treating CLP mice with the combination of antibiotics and Allocetra™ significantly delayed and prevented mortality in 60% of the animals (Ertapenem + Allocetra™, n=20, p<0.001). In comparison to the control group, the Company’s study reflected an approximately 10-fold improvement in the survival rate (p<0.001 in a log-rank analysis). As shown in Figure 2B,1B, Allocetra™ treated mice had significantly lower murine sepsis clinical scores indicating superior clinical condition. Finally, the Company correlated the clinical score to serum cytokines/chemokines in vivo measurements and as shown in Figure 2C.1C. Allocetra™ downregulated pro-inflammatory cytokines/chemokines. In the preclinical study, Allocetra™ delayed and prevented mortality in animal models with sepsis by rebalancing the immune system.

Figure 2A1A

Figure 1B

Figure 2B1C

Figure 2C

Allocetra™for the treatmentTreatment of Organ Dysfunction and Failure Associated with Sepsis

In late 2019, the Company completed its Phase Ib clinical trial of Allocetra™ (historically referred to as Allocetra OTS) in patients with severe sepsis. The Company has designed Allocetra™to eliminate the need to find matched donors as the source of the therapeutic cells. Following regulatory approval, if obtained, Allocetra™would allow the Company to manufacture therapeutic product inventory that could be used for additional clinical indications that require swift infusion of the product to patients. The first such indication Enlivex is targeting is prevention of cytokine storms and organ dysfunction associated with sepsis.

The aim of the Phase Ib clinical trial was to determine the safety and efficacy profile and tolerability of Allocetra™, in subjects admitted to the emergency room with sepsis. Allocetra™ (140x10⁶ cells/kg) was administered in either a single dose to 6 patients at day 1 or in two doses to 4 additional patients at days 1 and 3, to patients admitted to the emergency room with sepsis. Patients were followed for 28 days. The study subjects were also compared to historical controls hospitalized in the ICU, matched by age, gender, Sequential Organ Failure Assessment (SOFA) score, and infection source.

On March 18, 2020, the Company announced the final safety and efficacy data from the Company’s completed Phase Ib. The final analysis compared the clinical data of 10 patients admitted to the intensive care unit with sepsis who were administered Allocetra™upon their admission, with 37 patients who were matched controls (matched by age, gender, Sequential Organ Failure Assessment (SOFA) score, and infection source) who received only the standard of care treatment at the same hospital during 2014-2019 but did not receive Allocetra™. The clinical trial was conducted at Hadassah Medical Center, which is one of the largest and most prestigious hospitals in Israel (“Haddasah”).Israel. The Acute Physiology and Chronic Health Evaluation (APACHEII) score of the Allocetra™-treated group was 12.3,12.9, and the corresponding probability of mortality of at least one patient in that group was predicted at 85% based on the hospital’s ICU staff’s clinical assessment of each patient’s overall condition at admission. However, none (0%) of the Allocetra™-treated patients died during the 28-day study period, as compared to 27% 28-day mortality in the matched controls group. Each of the 10 Allocetra™-treated patients had between 2 to 5 dysfunctional organ systems upon admission to the ICU. All (100%) of the Allocetra™-treated patients had rapid and complete recovery from their septic conditions and of any organ dysfunction that was present upon admission to the ICU. Despite the similarity of organ-failure state (SOFA) at entry between the Allocetra™-treated patients and the matched controls group (average of 3.4 versus 3.47), not a single patient treated with Allocetra™ had any increase in organ-failure state post administration of Allocetra™, while the majority of the patients in the matched controls group had an increase in organ-failure state. The average worsening in organ-failure state of patients in the matched controls group was approximately 100% compared with their ICU hospitalization state vs zero (0%) percent worsening in organ-failure state of Allocetra™-treated patients post administration of Allocetra™ (p< <0.0001). The ICU length-of-stay for all Allocetra™-treated patients was significantly shorter than those patients who received only the standard of care, with an average of 44.7 days compared to 11.11 in the matched controls group, a 64% reduction (p<0.0001). The slowest ICU discharge of a patient treated with Allocetra™ was after 8 days, while approximately 50% of the matched controls group were still at the ICU after 28 days. Allocetra™ was shown to be safe and tolerable, with no serious unexpected severe adverse reactions and no serious adverse events.

Summary of Planned Clinical Trials of Allocetra™for the treatment of Organ Dysfunction and Failure Associated with Sepsis

In light of the encouraging results of the Phase Ib in patients with severe sepsis, the Company plans, subject to regulatory approvals, to initiate a Phase IIb or Phase II/III clinical trial with Allocetra™ for the treatment of organ dysfunction and failure associated with sepsis during 2020. The Company currently intends to enroll up to 100 patients in such a clinical trial. The Company intends, subject to the clinical trial results, to request a conditional marketing authorization from the EMA for this indication.

Complications Associated with Bone Marrow Transplants

Allocetra™ from matched-donor cells for preventing or treating complications associated with HSCT is an immunomodulation cell-therapy drug in development that involves injection of early-apoptotic cells that have been retrieved from the blood of either (i)In 2021, Enlivex initiated a donor matched by his or her human leukocyte antigen (i.e., a protein found on white blood cells that is the standard genetic marker for the regulation of the immune system and is used to match donors and recipients in transplantations), (ii) the patient, or (iii) an allogeneic, unmatched donor that has undergone ex-vivo (i.e., prior to infusion) manipulation to stabilize the “early apoptosis” status of the cells for a prolonged period of time. Allocetra™ from matched-donor cells’ specific clinical indications include (i) preventing complications associated with HSCT through an injection prior to and two weeks following the bone marrow transplantation procedure, and (ii) treatment of steroid refractory patients upon occurrence of GvHD post HSC transplantation. Systemic corticosteroids are the standard of care for the initial treatment of grade 2–4 GvHD. However, many patients with acute GvHD (“aGvHD”) do not experience sustained responses to corticosteroids which may lead to multiple organ failure and potential death, and for which 6-month survival rates among steroid-refractory patients are approximately 49% with long-term survival rates of only 5–30%.

Graft Versus Host Disease (GvHD)

Allogeneic HSCT has revolutionized the treatment of hematopoietic malignancies, inherited hematopoietic disorders, aplastic anemia, and other severe diseases (Copelan 2006). The HSCT clinical benefit is in part a result of the graft-versus-leukemia (“GVL”) effect, in which a donor immune response is targeted against recipient malignant cells. Although alloreactive donor T-cells play an important role in GVL by targeting tumor cells for elimination, the serious complication of GvHD develops when alloreactive donor cells attack healthy host tissues. Despite promising advances in HSCT methodology, including prophylactic immunosuppressive therapies, approximately 50% of HSCT recipients develop GvHD. GvHD can present as an acute disease, aGvHD, or a chronic (“cGvHD”) disease. Both aGvHD and cGvHD are inflammatory disorders initiated by the infiltration of alloreactive T cells into target organs, followed by activation of proinflammatory signaling cascades, tissue damage and organ failure. Previously, the distinction between aGvHD and cGvHD was based solely on the time of onset (i.e., during or after 100 days post-transplant). However, important pathophysiological distinctions have since been identified, requiring evaluation of clinical presentation to make an accurate disease diagnosis. The skin is the organ most typically affected at the onset of aGvHD, followed by the gastrointestinal tract and liver. Several organ systems, including the skin and gastrointestinal tract, are also affected in cGvHD, but clinical distinctions can be made to differentiate cGvHD from aGvHD in these organ systems. Additional diagnostic symptoms of cGvHD manifest in the mouth, genitalia, lungs and muscles. The target organ damage observed in aGvHD is primarily characterized by apoptosis, whereas cGvHD is associated with fibrosis and many autoimmune features, indicative of an expanded role for macrophages and B cells compared with aGvHD (Jagasia et al; 2018). The Allocetra™ from matched-donor cells clinical development program is aimed to prevent, and in some cases treat, post transplantation complications such as aGvHD.

The standard of care for treatment of complications associated with HSCT, including GvHD, often involves immune-suppressants, such as corticosteroids. Some patients do not respond to corticosteroids, and lack of any other treatment alternative leave these patients with a bleak survival prognosis. The subset of patients who do respond to corticosteroids faces the risk that the immune system may become so suppressed that the ability of the immune system to fight pathogens severely deteriorates and becomes unable to fight severe infections, which are abundant in a typical hospital setting.

The Company conducted a Phase IIa clinical study, which evaluated the safety, tolerability and preliminary efficacy profile of Allocetra™ from matched-donor cells for the prevention of complications post-HSCT. The study demonstrated that Allocetra™ from matched-donor cells has the potential to induce immune-tolerance and immune system rebalancing to normal activity levels in a patient post-HSCT, thus preventing Cytokine Release Syndrome and complications associated with HSCT, without undermining the ability of the transplanted bone marrow to attack the remainder of the cancer disease in the patient. Specifically, patients who received effective doses of Allocetra™ from matched-donor cells experienced no Cytokine Release Syndrome and no GvHD grade II-IV and were discharged from the hospital after an average duration of 21 days of hospitalization compared to an historical data expected duration of 41-45 days. In trials to date, Allocetra™ from matched-donor cells has been well-tolerated, and there has been no observable, significant adverse side effects.

Summary of Allocetra™ from matched-donor cells Clinical Trials

Phase IIa Trial: Allocetra™ from matched-donor cells for the prevention of aGvHD

After completing all pre-clinical safety and efficacy testing in animals, the Company began aplacebo-controlled, randomized, dose-finding, multi-center, Phase IIa clinicalII trial of Allocetra™ from matched-donor cells to evaluate the safety, tolerability and preliminary efficacy profile of the drug for the prevention of aGvHD in allogeneic HSCT patients at Hadassah Medical Center, Rambam and Sheba Medical Centers in Israel. The study protocol included 13 patients who were intravenously infused with ranging doses of Allocetra™ from matched-donor cells 24 hours prior to an allogeneic HSCT procedure and then monitored for 180 days following transplantation. The Company published a summary of the results from such trial in the peer-reviewed journal of the American Society for Blood and Marrow Transplantation, the Biology of Blood and Marrow Transplantation, titled “Single Infusion of Donor Mononuclear Early Apoptotic Cells as Prophylaxis for Graft-versus-Host Disease in Myeloablative HLA-Match Allogeneic Bone Marrow Transplantation: A Phase I/IIa Clinical Trial.”

The primary objective of the Phase IIa clinical trial in Israel was to determine the safety profile and tolerability, or dose limiting toxicity, of ascending doses of Allocetra™ from matched-donor cells within 180 days post-transplantation in subjects undergoing allogeneic HSCT from matched-related donors (i.e., donors’ whose tissues were immunologically compatible with the recipient). The secondary objectives of the trial were to determine (i) the success rate of allogeneic HSCT and the time to successful engraftment, (ii) the rates and severity of aGvHD following Allocetra™ from matched-donor cells infusion and (iii) the immunological function of the patient following the HSCT procedure and Allocetra™ from matched-donor cells infusion.

The Company’s clinical data from its Phase IIa trial indicate that Allocetra™ from matched-donor cells was well-tolerated at all doses administered for up to six months post-transplantation, which was the observed duration of the trial. The Company did not observe or receive reports of any definite or probable adverse effects related to Allocetra™ from matched-donor cells. Although historical data shows that approximately 50% of patients with aGvHD are expected to advance to the most severe grades of GvHD (i.e., Grades II-IV), none of the six patients treated with the two highest doses of Allocetra™ from matched-donor cells (defined as the effective doses) in the study advanced to such grades. In fact, the number of overall adverse effects decreased with Allocetra™ from matched-donor cells dose escalation, Grade I aGvHD was 50% in the same cohorts, and mild chronic GvHD was present in a number of patients. This finding might suggest that Allocetra™ from matched-donor cells treatment, as a physiological modality, reduces high grade GvHD rather than abolishing it, supporting a favorable GvL response. In this trial, Allocetra™ from matched-donor cells injections were not associated with prolongation of time to engraftment, chimerism delay (i.e., an increase in the time it takes for donor immune cells to become immunologically effective in the patient’s body), increased mortality rate or serious infections when compared with similar patients described in scientific literature. Patients who received effective doses of Allocetra™ from matched-donor cells experienced no Cytokine Release Syndrome symptoms and were discharged from the hospital after an average duration of 21 days of hospitalization compared to an expected duration of 41 days as per historical controls, the charts above summarize certain of these findings.

The FDA granted the Company’s orphan drug designation request for the active moiety, or the part of the drug responsible for the physiological or pharmacological action of the drug substance, for the prevention of aGvHD. Orphan designation qualifies the sponsor of the drug or biologic for various development incentives, including tax credits for qualified clinical testing and 7-year marketing exclusivity post commercialization. In addition, Allocetra™ from matched-donor cells received from the European Medicinal Authority (the “EMA”) an (i) Advanced Therapy Medicinal Product (“ATMP”) certification for the prevention of aGvHD, and (ii) Orphan medicinal product designation for the indication: Prevention of GvHD. This designation may provide Allocetra™ from matched-donor cells with a 10-year market exclusivity incentive upon commercialization.

Clinical trials of Allocetra™ for the prevention of aGvHD in Allogeneic HSCT Patients

The Company’s timeline for the continued development of Allocetra™ for the prevention of GvHD in allogeneic HSCT patients has been modified to reflect the Company’s re-prioritization of product development in light of the encouraging results of the Phase Ib ofevaluating liquid Allocetra™ in patients with severepneumonia-associated sepsis. The Board decided to utilizeDuring 2022, we amended the Company’s cash reserves in order to generate additional clinical data, first and foremost, in a randomized, controlled sepsisprotocol of this clinical trial to treat newly recruited patients with frozen formulation Allocetra™ and expand the study population to considerinclude patients whose septic condition stems from biliary, urinary tract, or peritoneal infections. We are planning to file another protocol amendment and submit the initiationproposed changes to regulators in the second quarter of smaller clinical trials2023. The amendment will include an increase in high-value indicationsthe patients’ SOFA score range, effectively allowing recruitment of patients with an assumed pathophysiology markedly similarhigher levels of sepsis severity, and a change to thattwo cohorts (treatment and placebo) in lieu of sepsis. Asthe current four-cohort structure. The Company does not expect a result, clinical trials of Allocetra™material timeline delay for the prevention of GvHDtop-line data readouts, which are expected in allogeneic HSCT patients have currently been rescheduled to 2022, pending the expected results of clinical trials in sepsis and potentially other related indications during 2020-2022.Q1 2024.

Solid Tumors, Macrophage Programming and Solid Cancer Treatments

The Company is also developing Allocetra™ as a next-generation solid cancer immunotherapy. While first-generation immuno-oncology therapies, such as checkpoint inhibitors, are a significant therapeutic advancement, most patients do not achieve durable clinical benefit. Companies such as Novartis, Juno and Kite have made significant advances in treatment of recurring blood cancers via Chimeric Antigen Receptor T-Cell (“CAR-T”) therapies, immunological treatments that use the body’s own immune system to treat cancerous cells. CAR-T therapies have not proven highly successful against solid tumors. Other approved compounds for solid tumors such as anti- programmedanti-programmed cell death protein 1 (“anti-PD1”) treatments have demonstrated superior efficacy but only in a small subset of the patient population.

Solid tumors are harder to treat primarily due to the complex and interconnected tumor microenvironment. The Company believes that Allocetra™ presents a significant opportunity to engage the body’s immune system, enabling anti-cancer therapies such as CAR-T, T-Cell Receptor Therapy, anti-PD1 and others to effectively treat solid tumors thus improving cure rates for patients with a variety of solid cancers.

The data from the Company’sour extensive preclinical studies showshows that the Allocetra™ cells, which have demonstrated a strongrobust safety profile in sepsis and COVID-19 clinical trials, have reprogrammed macrophage populations in the tumor microenvironment and surrounding tissues, resulting in a previous clinical trial, have not only caused a significantmajor increase in duration of survival compared with stand-alone CAR-T treatment, but also have demonstrated an ability for complete remission for some preclinical subjects.subjects and survival duration.

In the Company’s preclinical study, SCID-Bg mice were injected intra-peritoneally with 2 consecutive doses of 0.25x10⁶human HeLa-CD19-luciferase cells (HeLa cancer cells expressing CD19), on days 1 and 2 of the experiment. Mice also received 10x10⁶ Allocetra™ or vehicle, on day 9;9, 16 and 23; and 10x10⁶ CD19-CAR-T (third generation) cells or mock T cells on day 10. Mice were weighed twice a week and monitored daily for clinical signs and peritoneal fluid accumulations. Pre-scheduled sacrifices were performed to characterize the cell and macrophage sub-population profile. The rest of the mice were kept for survival analysis. The survival endpoint was defined by a score based on severe peritoneal fluid accumulation manifested as an enlarged and tense abdomen, and reduced mobility or increased respiratory effort. These preclinical findings correlated to large accumulation of HeLa cells in the peritoneum. Survival analysis was performed according to the Kaplan-Meier Log rank statistical test. The CompanyAllocetra-OTS co-administered with CAR-T significantly ameliorated survival over CAR-T alone, resulting in complete recovery of 20-40% of the treated mice as presented in Figure 2 and the table below.

Figure 2

Based on these and other data, we have initiated a Phase I/II trial evaluating Allocetra™ in combination with chemotherapy in solid peritoneal tumors in the third quarter of 2022 and a Phase I/II trial evaluating Allocetra™ in combination with an immune checkpoint inhibitor in the fourth quarter of 2022. We received a positive DSMB recommendation and IMOH clearance to continue our Phase I/II clinical trial of Allocetra™ combined with chemotherapy in patients with peritoneal metastases arising from solid cancers. Recruitment of patients has been on-track, and we currently expect to complete enrollment and announce data readouts by Q2 2024.

We also received a positive DSMB recommendation and IMOH clearance to continue our second Phase I/II clinical trial, which is evaluating Allocetra™ as monotherapy and in combination with anti-PD1 checkpoint inhibitors in patients with advanced-stage solid tumors. Recruitment of patients has been on-track, and we currently examiningexpect to complete enrollment in the potentialintravenous-infusion monotherapy and low-dose combination cohorts by the end of Q2 2023. This study also received FDA clearance for collaboratingan IND application at the end of 2022, as well as clearance in February 2023 from the Spanish Agency of Medicines and Medical Devices to open the study in Spain . We recently announced a clinical collaboration with companies developing leading potential immune therapiesBeiGene to evaluate the safety and efficacy of immune therapy treatmentsAllocetra™ in combination with Allocetra™tislelizumab, an anti-PD-1 immune checkpoint inhibitor, for the treatment of patients with advanced-stage solid tumors, a part of the Company’s ongoing Phase I/II clinical trial in patients with advanced-stage solid tumors.

COVID-19, Severe and Critical Patient Population

The Company had previously included treatment of COVID-19 as a clinical vertical and conducted certain trials in respect of the treatment of COVID-19; however, the Company has determined to currently focus its resources on the Indications. See “—COVID-19 De-Prioritization” below.

On February 3, 2021, the Company reported positive top-line results from Phase II clinical trial that evaluated Allocetra™ in severe and critical COVID-19 patients and provided a program update. The top line results of the combined analysis of a previously reported Phase Ib and the Phase II were detailed as follows:

In light of the encouraging results of the Phase Ib and Phase II clinical trials of Allocetra^TM in severe and critical COVID-19 patients, the Company initiated during 2021 a randomized, controlled Phase IIb clinical trial of Allocetra^TM in severe and critical COVID-19 patients hospitalized in medical centers in Israel and certain European countries.

COVID-19 De-Prioritization:

Due to (a) the emergence of variants that may be associated with less severe disease, (b) a more stringent regulatory environment, and (c) increased volatility of the potential business segment, we de-prioritized Allocetra’s clinical development for treatment of COVID-19 and re-allocated the program’s cash resources to our primary development priorities, sepsis and oncology. Due to slow recruitment, the total number of patients enrolled in our Phase IIb COVID-19 is insufficient to make any meaningful assessments of Allocetra’s efficacy. Patients already enrolled in this trial will continued to be followed for assessments of safety.

Accelerated Regulatory Approval Processes for Life Saving Therapies

The Company anticipates that its therapeutic drugs and their respective indications could qualify under specific accelerated regulatory paths in both the EU and the United States. Specifically for the EU, an accelerated path allowing conditional marketing approval is available for certain therapeutic drugs following a Phase II study. There is no assurance that the Company will qualify for such accelerated regulatory paths.

If the Company’s products continue to indicate that they may increase long-term survival for patients in life-threatening indications, defined as “unmet medical needs,” such as sepsis and complications following bone marrow transplantation, the Company could be eligible to initiate marketing of these drugs in the EU if it receives conditional approval, following submission of a marketing application after completion of a Phase II study to the EMA.

In general, therapeutic products are eligible for conditional marketing approval if they meet at least one of the following categories:

a. Aimed at treating, preventing or diagnosing seriously debilitating or life-threatening diseases ;diseases;

b. Intended for use in emergency situations; or