ENTX 10-Q
Entera Bio Ltd. (ENTX)
10-Q
2023-08-11
For: 2023-06-30
View Original
Added on
April 11, 2026
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
For
the quarterly period ended June
30, 2023
OR
For
the transition period from
to
Commission
file number: 001-38556
(Exact
name of Registrant as specified in its charter)
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(State
or other jurisdiction of |
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(I.R.S.
Employer |
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incorporation
or organization) |
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Identification
No.) |
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(Address
of principal executive offices) |
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(Zip
Code) |
Registrant’s
telephone number, including area code: 972 -2-532-7151
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of Each Class |
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Trading
Symbol |
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Name
of Each Exchange on Which Registered |
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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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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☒
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Smaller reporting company
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Emerging growth company
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If
an emerging growth company, 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. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes ☐
No ☒
As
of August 7, 2023, the registrant had 28,813,952
ordinary shares, par value NIS 0.0000769 per share (“Ordinary Shares”) outstanding.
Table of Contents
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CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
Quarterly Report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements,” as that term is
defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Various statements in this Quarterly Report are “forward-looking statements” within the meaning of the PSLRA and other U.S.
Federal securities laws. In addition, historic results of scientific research and clinical and preclinical trials do not guarantee that
the conclusions of future research or trials would not be different, and historic results referred to in this Quarterly Report may be
interpreted differently in light of additional research and clinical and preclinical trial results. Forward-looking statements include
all statements that are not historical facts. We have based these forward-looking statements largely on our management’s current
expectations and future events and financial trends that we believe may affect our financial condition, results of operations, business
strategy and financial needs. Forward-looking statements involve substantial risks and uncertainties. All statements, other than statements
of historical facts, included in this Quarterly Report regarding our strategy, future operations, future financial position, projected
costs, prospects, plans and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties
and are based on information currently available to our management. Words such as, but not limited to, “anticipate,” “believe,”
“contemplates,” “continue,” “could,” “design,” “estimate,” “expect,”
“intend,” “likely,” “may,” “ongoing,” “plan,” “potential,” “predict,”
“project,” “will,” “would,” “seek,” “should,” “target,” or the
negative of these terms and similar expressions or words, identify forward-looking statements. The events and circumstances reflected
in our forward-looking statements may not occur and actual results could differ materially from those projected in our forward-looking
statements. These factors include those described in “Item 1A-Risk Factors” of this Quarterly Report and in “Item 1A-Risk
Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”). Meaningful
factors which could cause actual results to differ include, but are not limited to:
| • |
Clinical development involves a lengthy and expensive
process with uncertain outcomes. We may incur additional costs and experience delays in developing and commercializing or be unable to
develop or commercialize our current and future product candidates; |
| • |
The regulatory approval processes of the U.S.
Food and Drug Administration (“FDA”) and comparable foreign authorities are lengthy, time-consuming and inherently unpredictable,
and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be materially harmed;
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| • |
Preclinical development is uncertain. Our preclinical
programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory
approvals or commercialize these programs on a timely basis or at all; |
| • |
Positive results from preclinical studies and
early-stage clinical trials may not be predictive of future results. Initial positive results in any of our clinical trials may not be
indicative of results obtained when the trial is completed or in later stage trials; |
| • |
The scope, progress and costs of developing our
product candidates such as EB613 for Osteoporosis and EB612 for Hypoparathyroidism may alter over time based on various factors such as
regulatory requirements, the competitive environment and new data from pre-clinical and clinical studies; |
| • |
The accuracy of our estimates regarding expenses,
capital requirements, the sufficiency of our cash resources and the need for additional financing; |
| • |
Our ability to continue as a going concern absent
access to sources of liquidity; |
| • |
Our ability to raise additional funds or consummate
strategic partnerships to offset additional required capital to pursue our business objectives, which may not be available on acceptable
terms or at all. A failure to obtain this additional capital when needed, or failure to consummate strategic partnerships, could delay,
limit or reduce our product development, and other operations; |
| • |
Even if a current or future product candidate
receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others
in the medical community necessary for commercial success; |
| • |
The successful commercialization of our product
candidates, if approved, will depend in part on the extent to which governmental authorities and third-party payors establish adequate
coverage and reimbursement levels and pricing policies; |
1
| • |
Failure to obtain or maintain coverage and adequate
reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate
revenue; |
| • |
If we are unable to obtain and maintain patent
protection for our product candidates, or if the scope of the patent protection obtained is not sufficiently broad or robust, our competitors
could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our product candidates
may be adversely affected; |
| • |
We are an emerging growth company, and we cannot
be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to
investors; |
| • |
Because we do not anticipate paying any cash dividends
on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain; |
| • |
Our reliance on third parties to conduct our clinical
trials and on third-party suppliers to supply or produce our product candidates; |
| • |
Our interpretation of FDA feedback and guidance
and how such guidance may impact our clinical development plan; |
| • |
Our ability to use and expand our drug delivery
technology to additional product candidates; |
| • |
Our operation as a development stage company with
limited operating history and a history of operating losses and our ability to fund our operations going forward;
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| • |
Our competitive position with respect to other
products on the market or in development for the treatment of osteoporosis and hypoparathyroidism and other disease categories we pursue;
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| • |
Our ability to establish and maintain development
and commercialization collaborations; |
| • |
Our ability to manufacture and supply enough material
to support our clinical trials and any potential future commercial requirements; |
| • |
The size of any market we may target and the adoption
of our product candidates, if approved, by physicians and patients; |
| • |
Our ability to obtain, maintain and protect our
intellectual property and operate our business without infringing misappropriating or otherwise violating any intellectual property rights
of others; |
| • |
Our ability to retain key personnel and recruit
additional qualified personnel; |
| • |
The possibility that competing products or technologies
may make any product candidates we may develop and commercialize or our oral delivery technology obsolete; |
| • |
Our ability to comply with laws and regulations
that currently apply or become applicable to our business in Israel, the United States and internationally; and |
| • |
Our ability to manage growth.
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All
forward-looking statements contained in this Quarterly Report are expressly qualified in their entirety by the cautionary statements contained
or referred to in this section. We caution investors not to rely heavily on the forward-looking statements we make. Except as required
by applicable law, we are under no duty, and expressly disclaim any obligation, to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make
on related subjects in any annual, quarterly or current reports that we file with the Securities and Exchange Commission (“SEC”).
We
encourage you to read Part II, Item 1A of this Quarterly Report and Item 1A of our 2022 Annual Report, each entitled “Risk Factors,”
and Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and
Capital Resources” of this Quarterly Report for additional discussion of the risks and uncertainties associated with our business.
There can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized,
that they will have the expected consequences to, or effects on, us. Therefore, no assurance can be given that the outcomes stated in
such forward-looking statements and estimates will be achieved.
2
PART
I.
ITEM
1. FINANCIAL STATEMENTS
ENTERA
BIO LTD.
UNAUDITED
CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
AS
OF JUNE 30, 2023
TABLE
OF CONTENTS
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CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS: |
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3 | |
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5 | |
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6 |
3
ENTERA
BIO LTD.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(U.S.
dollars in thousands, except share data)
(Unaudited)
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A s s e t s |
June 30,
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December
31, |
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2023
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2022
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| CURRENT ASSETS: | ||||||||
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Cash
and cash equivalents |
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Accounts
receivable |
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Prepaid
expenses and other current assets |
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TOTAL
CURRENT ASSETS |
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NON-CURRENT
ASSETS: |
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Property
and equipment, net |
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Operating
lease right-of-use assets |
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Deferred
income taxes |
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Funds
in respect of employee rights upon retirement |
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TOTAL
NON-CURRENT ASSETS |
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TOTAL
ASSETS |
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Liabilities
and shareholders' equity |
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CURRENT
LIABILITIES: |
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Accounts
payable |
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Accrued
expenses and other payables |
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Current
maturities of operating lease |
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TOTAL
CURRENT LIABILITIES |
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NON-CURRENT
LIABILITIES: |
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Operating lease liabilities |
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Liability
for employee rights upon retirement |
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TOTAL
NON-CURRENT LIABILITIES |
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TOTAL
LIABILITIES |
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COMMITMENTS
ANDCONTINGENCIES
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SHAREHOLDERS'
EQUITY: |
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Ordinary
Shares, NIS |
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Additional
paid-in capital |
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Accumulated
other comprehensive income |
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Accumulated
deficit |
( |
)
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(
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)
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TOTAL
SHAREHOLDERS' EQUITY |
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TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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*
Represents an amount less than one thousand US dollars
The
accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
4
ENTERA
BIO LTD.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S.
dollars in thousands, except share and per share data)
(Unaudited)
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Six Months Ended June 30, |
Three Months Ended June 30, |
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2023 |
2022 |
2023 |
2022 |
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REVENUES |
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COST OF REVENUES |
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GROSS PROFIT |
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OPERATING EXPENSES: |
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Research and development |
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General and administrative |
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Other income |
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( |
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( |
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( |
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( |
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TOTAL OPERATING EXPENSES |
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OPERATING LOSS |
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FINANCIAL INCOME, NET |
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( |
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( |
) |
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( |
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( |
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LOSS BEFORE INCOME TAX |
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INCOME TAX BENEFIT |
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( |
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( |
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NET LOSS |
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LOSS PER SHARE BASIC AND DILUTED |
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE |
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The
accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
5
ENTERA
BIO LTD
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S.
dollars in thousands, except share and per share data)
(Unaudited)
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Ordinary
shares |
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Number
of
shares
issued |
Amounts
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Additional
paid-in
capital
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Accumulated
other
Comprehensive
income
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Accumulated
deficit
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Total
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BALANCE
AT JANUARY 1, 2023 |
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(
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)
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Net
loss |
-
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(
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(
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)
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Issuance of shares under the ATM program, net of issuance costs |
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Share-based
compensation |
-
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BALANCE AT JUNE 30, 2023 |
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(
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| BALANCE AT APRIL 1, 2023 | ( |
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Net loss |
- | ( |
) | ( |
) | ||||||||||||||||||||
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Issuance of shares under the ATM program, net of issuance costs |
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Share-based compensation |
- | ||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2023 | ( |
) | |||||||||||||||||||||||
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BALANCE
AT JANUARY 1, 2022 |
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(
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)
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Net
loss |
-
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(
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(
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)
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Exercise of options to ordinary shares |
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Share-based
compensation |
-
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BALANCE
AT JUNE 30, 2022 |
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(
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)
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||||||||||||||||||
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BALANCE AT APRIL 1, 2022 |
( |
) | |||||||||||||||||||||||
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Net loss |
- | ( |
) | ( |
) | ||||||||||||||||||||
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Exercise of options to ordinary shares |
|||||||||||||||||||||||||
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Share-based compensation |
- | ||||||||||||||||||||||||
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BALANCE AT JUNE 30, 2022 |
( |
) | |||||||||||||||||||||||
* Represents an amount
less than one thousand U.S. dollars.
The
accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6
ENTERA
BIO LTD.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S.
dollars in thousands, except share and per share data)
(Unaudited)
|
Six
months ended June 30, |
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2023
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2022
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net
loss |
(
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)
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(
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)
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Adjustments
required to reconcile net loss to net cash used in operating activities: |
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Depreciation
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Deferred
income taxes |
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(
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)
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Share-based
compensation |
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Finance
income, net |
(
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)
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(
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)
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Changes
in operating asset and liabilities: |
||||||||
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Decrease
(increase) in accounts receivable |
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(
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)
| |||||
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Increase
in other current assets |
(
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)
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(
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)
| ||||
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Increase
(decrease) in accounts payable |
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(
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) | |||||
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Increase
(decrease) in accrued expenses and other payables |
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(
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)
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Decrease
in contract liabilities |
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(
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)
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Net
cash used in operating activities |
(
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)
|
(
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)
| ||||
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CASH
FLOWS FROM INVESTING ACTIVITIES: |
||||||||
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Purchase
of property and equipment |
(
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)
|
(
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)
| ||||
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Net
cash used in investing activities |
(
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)
|
(
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)
| ||||
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CASH
FLOWS FROM FINANCING ACTIVITIES: |
||||||||
|
Proceeds
from issuance of shares under the ATM program, net of issuance costs |
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| ||||
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Exercise
of options and warrants into shares |
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Net
cash provided by financing activities |
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| ||||
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DECREASE
IN CASH, CASH EQUIVALENTS AND RESTRICTED DEPOSITS |
(
|
)
|
(
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)
| ||||
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CASH,
CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT BEGINNING OF THE PERIOD |
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||||||
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CASH,
CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT END OF THE PERIOD |
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||||||
|
Reconciliation
in amounts on consolidated balance sheets: |
||||||||
|
Cash
and cash equivalents |
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||||||
|
Restricted
deposits included in other current assets |
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Total
cash and cash equivalents and restricted deposits |
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||||||
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SUPPLEMENTARY
INFORMATION ON INVESTING AND FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS:
|
||||||||
|
Operating lease right of use assets obtained in exchange for new operating lease liabilities |
||||||||
The
accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
7
ENTERA
BIO LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
NOTE
1 - DESCRIPTION OF BUSINESS
| a. |
Entera Bio Ltd. (collectively with its subsidiary,
the "Company") was incorporated on September 30, 2009 under the laws of the State of Israel and commenced operation on June 1, 2010. On
January 8, 2018, the Company incorporated Entera Bio Inc., a wholly owned subsidiary incorporated in Delaware United States. The Company
is a leader in the development and commercialization of orally delivered large molecule therapeutics for use in areas with significant
unmet medical need where adoption of injectable therapies is limited due to cost, convenience and compliance challenges for patients.
The Company’s most advanced product candidates, EB613 for the treatment of osteoporosis and EB612 for the treatment of hypoparathyroidism,
are based on its proprietary technology platform and are both in clinical development. Additionally, the Company intends to license its
oral delivery technology to biopharmaceutical companies for use with their proprietary compounds.
|
| b. |
The Company's ordinary shares, NIS
|
| c. |
Because the Company is engaged in research and
development activities, it has not derived significant income from its activities and has incurred an accumulated deficit in the amount
of $
|
8
ENTERA
BIO LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES
|
a.
|
Basis
of presentation of the financial statements |
These
unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America ("U.S. GAAP") for interim financial statements. Accordingly, they do not include all the information and
notes required by U.S. GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated financial
statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s
consolidated financial position as of June 30, 2023, the consolidated results of operations and statements of changes in shareholders'
equity for the three and six-month periods ended June 30, 2023 and 2022 and cash flows for the six-month periods ended June 30, 2023 and
2022.
The
consolidated results for the three and six-month periods ended June 30, 2023 are not necessarily indicative of the results to be expected
for the year ending December 31, 2023.
These
unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements of the
Company for the year ended December 31, 2022, as filed with the Company’s Annual Report on Form 10-K filed with the U.S. Securities
and Exchange Commission (the “SEC”) on March 31, 2023. The comparative balance sheet at December 31, 2022 has been derived
from the audited annual financial statements at that date but does not include all disclosures required by U.S. GAAP for annual financial
statements.
|
b.
|
Loss
per share |
Basic
loss per share is computed on the basis of net loss for the period divided by the weighted average number of outstanding ordinary shares
during the period.
Diluted
loss per share is based upon the weighted average number of ordinary shares and outstanding stock options and warrants, which are included
under the treasury stock method when dilutive. The calculation of diluted loss per share does not include options and warrants, exercisable
into 7,360,374
shares and 6,326,180
shares for the six months ended June 30, 2023 and 2022, respectively and 7,604,195
shares and 6,473,863
shares for the three months ended June 30, 2023 and 2022, respectively, because the effect would have been anti-dilutive.
|
c.
|
Newly
issued and recently adopted accounting pronouncements: |
Recently
issued accounting pronouncements adopted
| 1) |
In June 2016, the FASB issued ASU 2016-13 “Financial
Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current
incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range
of reasonable and supportable information to inform credit loss estimates. The guidance is effective for smaller reporting companies (as
defined by the SEC) for the fiscal year beginning on January 1, 2023, including interim periods within that year. The adoption of this
guidance did not have material impact on the Company’s consolidated financial statements.
|
9
ENTERA
BIO LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
NOTE
3 - SHARE-BASED COMPENSATION
| a. |
On January 2, 2023,
options to purchase an aggregate of
|
| b. |
On April 24, 2023,
options to purchase an aggregate of
The fair value of each
option granted is estimated at the date of grant using the Black-Scholes option-pricing model, with the following assumptions:
|
|
Six months ended June 30, 2023 |
|||
|
Exercise price
|
$
|
||
|
Dividend yield
|
|
||
|
Expected volatility
|
|
| |
|
Risk-free interest rate
|
|
| |
|
Expected life - in years
|
|
| c. |
On
April 24, 2023, options to purchase an aggregate of |
| d. |
On
June 4, 2023, options to purchase an aggregate of |
10
ENTERA
BIO LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
NOTE
4 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:
Balance
sheets:
|
June 30,
|
December 31,
|
|||||||
|
|
2023
|
2022
|
||||||
|
Prepaid expenses and other current assets: |
||||||||
|
Prepaid
expenses |
|
|
||||||
|
Other
current assets |
|
|
||||||
|
|
|
|||||||
|
June 30,
|
December 31,
|
|||||||
|
|
2023
|
2022
|
||||||
|
Accrued expenses and other payables: |
||||||||
|
Employees
and employees related |
|
|
||||||
|
Provision
for vacation |
|
|
||||||
|
Accrued
expenses |
|
|
||||||
|
|
|
|||||||
NOTE
5 - EVENTS DURING THE PERIOD
| a. |
In April 2023, the
Company entered into an amendment to its office lease agreement from 2014 to extend the period of the lease agreement for additional
As of June 30,2023, the Company recorded the related asset and obligation at the present value of lease payments over the expected terms, discounted using the lessee’s incremental borrowing rate, which was As
of June 30, 2023, the maturity of lease liabilities under our non-cancelable operating leases were as follows: |
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026
|
|
|
Total
future minimum lease payments |
|
|
Less:
interest |
(
|
|
Present
value of operating lease liabilities |
|
| b. |
On December 10, 2018,
the Company entered into a research collaboration and license agreement with Amgen (the “Amgen Agreement”) for the use of
the Company’s oral delivery platform in the field of inflammatory disease and other serious illnesses. Pursuant to the Amgen Agreement,
the Company and Amgen had agreed to use the Company’s proprietary drug delivery platform to develop oral formulations for one preclinical
large molecule program that Amgen had selected. Additionally, the Company had granted Amgen an exclusive, worldwide, sublicensable license
under certain of its intellectual property relating to its drug delivery technology to develop, manufacture and commercialize the applicable
products.
On
May 2, 2023, the Company and Amgen agreed to terminate the Amgen Agreement in accordance with its terms, effective on such date. Neither
party incurred any termination penalty or fees in connection with the termination of the Amgen Agreement. |
|
11
ENTERA
BIO LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
NOTE
6 - SUBSEQUENT EVENTS
| a. |
In connection with the Company’s initial public offering (“IPO”) in July 2018, the Company issued |
12
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis provides information we believe is relevant to an assessment and understanding of our results of operations,
financial condition, liquidity and cash flows for the periods presented below. This discussion should be read in conjunction with the
interim unaudited condensed consolidated financial statements and related notes contained elsewhere in this Quarterly Report, Part II,
Item 1A-Risk Factors in this Quarterly Report, and Item 1A-Risk Factors in our 2022 Annual Report. As discussed in the section above titled
“Cautionary Note Regarding Forward-Looking Statements,” the following discussion contains forward-looking statements that
are based upon our current expectations, including with respect to our future operations, revenues and operating results. Our actual results
may differ materially from those anticipated in such forward-looking statements as a result of various factors. Factors that could cause
or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk
Factors” included under Part II, Item 1A below, as well as in Item 1A-Risk Factors in our 2022 Annual Report.
Unless
otherwise provided, references to the “Company,” “we,” “us” and “our” refer to Entera
Bio Ltd. and its consolidated subsidiary.
Overview
Entera
is a clinical stage biopharmaceutical company and a leader in the development of orally delivered macromolecule therapeutics, including
peptides and therapeutic proteins. Currently, most protein therapies are administered via frequent intravenous, subcutaneous, or intramuscular
injections. In chronic diseases where patients require persistent management, these cumbersome, often painful and high-priced injections
can create a major treatment gap. Furthermore, from a technical standpoint, oral delivery of therapeutic proteins has historically been
challenging due to enzymatic degradation within the gastrointestinal tract, poor absorption into the blood stream and variable drug exposures.
Entera’s proprietary technology is designed to deliver orally administered proteins with sufficient bioavailability to
meet treatment goals, in a simple tablet format (around 6mm in diameter).
We
strategically focus on underserved, chronic medical conditions where oral administration of a mini tablet peptide or peptide replacement
therapy has the potential to significantly shift a treatment paradigm.
We
currently have two product candidates in the clinical stage of development: EB613 and EB612. Both candidates are first-in-class daily
mini tablets of human parathyroid hormone (hPTH (1-34), teriparatide). To date, Entera’s proprietary PTH tablets have been safely
administered to a total of 72 healthy subjects in Phase 1 studies and 153 patients across Phase 2 studies in osteoporosis and hypoparathyroidism,
two diseases that remain underserved with the current standard of care and which disproportionately affect women.
In
addition to these product candidates, we have various internal early-stage research programs targeting GLP-2, kappa opioid receptors and
hGH, among other peptides. On May 2, 2023, the results from our oral GLP-2 program were published in the International Journal of Peptide
Research and Therapeutics, “Oral Delivery Technology Enabling Gastro-Mucosal Absorption of Glucagon-Like-Peptide-2 Analog (Teduglutide)
- A Novel Approach for Injection-Free Treatment of Short Bowel Syndrome.” We believe GLP-2 represents a strong candidate for our
oral delivery platform and warrants further development as an injection -free alternative to patients suffering from short bowel syndrome
and other disorders requiring parenteral nutrition.
13
Osteoporosis
Osteoporosis
is a disease characterized by low bone mass and structural deterioration of bone tissue, which leads to greater fragility of bones and
an increase in fracture risk. Osteoporosis is most frequently associated with menopause in women, aging in both women and men and glucocorticoid
steroid use (greater than three months). The bone remodeling cycle can be separated into two distinct processes: (i) bone resorption,
where cells called osteoclasts function in the resorption of mineralized tissue; and (ii) bone formation, where cells called osteoblasts
are responsible for bone matrix synthesis and subsequent mineralization of the bone. In healthy individuals, bone resorption is matched
by new bone formation. Osteoporosis develops as the balance between bone resorption by osteoclasts and bone formation by osteoblasts is
not maintained, and not enough bone tissue is formed, leading to frail and fracture-prone bones.
Osteoporosis
is a significant health issue facing our aging population. In the United States, with respect to hip fractures alone, 21% of women who
suffer a hip fracture do not survive beyond one year, even after it is surgically repaired. Without surgery, the one-year mortality rate
is approximately 70%. Post-menopausal osteoporosis afflicts more women globally than cancer and cardiovascular disease .
Current
osteoporosis drugs may be divided into two categories: antiresorptive and anabolic. Drugs that inhibit bone resorption include oral and
injectable options such as estrogen (for postmenopausal women), oral and intravenous bisphosphonates, selective estrogen receptor modulators
(SERMs), the RANK-ligand inhibitor (denosumab) and (salmon) calcitonin. The three currently approved osteoanabolic drugs that stimulate
bone formation all require daily or monthly subcutaneous injections: teriparatide (hPTH[1-34]); abaloparatide (a PTH-related protein analog);
and romosozumab (an antibody that inhibits sclerostin and also inhibits bone resorption). It is estimated that less than 10% of
currently treated osteoporosis patients agree to injectable osteoanabolic treatment despite guideline recommendations and the approval
of generics. There are currently no FDA-approved oral anabolic treatments for osteoporosis. EB613 is positioned to potentially be the
first, once daily osteoanabolic mini tablet treatment for women with high risk post-menopausal osteoporosis and no prior fractures.
To
date, we have completed two Phase 1 clinical trials and a phase 2, 6-month, 161-patient, placebo-controlled study in which daily oral
EB613 tablets produced rapid dose-proportional increases in biochemical markers of bone formation (primary endpoint), reductions in markers
of bone resorption, and increased lumbar spine, total hip, and femoral neck Bone Mineral Density (BMD, key secondary endpoint) in postmenopausal
women with low BMD or osteoporosis. Results were reported at ASBMR 2021 as a LB oral presentation.
In
November 2018, we had a Pre-Investigational New Drug meeting with the FDA to discuss our EB613 program for the treatment of osteoporosis.
In December 2020, we announced that the FDA had approved our 2020 IND Application.
In
December 2021, we held an end-of-Phase 2 meeting (EOP2) with the FDA to review the six-month phase 2 results and a proposed Head-to-Head,
Non-Inferiority (NI) Phase 3 study design vs. Forteo® , using BMD as the primary endpoint to support an NDA submission under the
505(b)2 pathway. In the minutes from our EOP2 meeting, which we received in January 2022, the FDA agreed that the use of BMD as a primary
endpoint in our proposed phase 3 study could support an NDA and that a new fracture study would not be required. However, the FDA expressed
concern that a NI Head-to-Head phase 3 study design vs. Forteo® may not be favorable. The FDA also remarked that the ASBMR-FNIH SABRE1 program
was evaluating BMD as a surrogate endpoint for fracture risk reduction across placebo-controlled studies; and that the FNIH framework
could provide another approach to support a potential NDA for EB613.
In
early 2022, we redesigned our pivotal phase 3 study for EB613 as a placebo-controlled study with a total hip (TH) BMD primary endpoint,
following the FDA’s EOP2 remarks and emerging data from the ASBMR-FNIH SABRE program. In August 2022, we held a Type C meeting with
the FDA, and in October 2022, we announced the FDA’s concurrence on the major design elements of the protocol; and that (1) a single
Phase 3 placebo-controlled study with a TH BMD primary endpoint along with (2) a comparative
PK study vs. Forteo® could support a NDA submission of EB613 under the 505(b)(2) regulatory pathway.
In
February 2023, we submitted a revised phase 3 protocol for EB613 as part of a Type D meeting with the FDA with further detail on the statistical
evaluation of our TH BMD endpoint. On April 3, 2023, we reported that the FDA would not be opposed to Entera initiating the Phase 3 study
under the proposed FNIH BQP pathway and that the Company’s proposed PK sampling scheme seemed reasonable. Also on April 3, 2023,
we announced that we plan to continue our dialogue with the FDA and await the final qualification of the FNIH-BQP criteria and their guidance
on the statistical evaluation of our BMD endpoint before initiating a phase 3 study for EB613.
1 FNIH
BQP is also known as the ASBMR FNIH-SABRE, American Society for Bone and Mineral Research-Foundation for the National Institutes of Health
(FNIH) Strategy to Advance BMD as a Regulatory Endpoint (SABRE);
14
Hypoparathyroidism
Hypoparathyroidism
is a rare condition in which the body either fails to produce sufficient amounts of endogenous PTH or the PTH produced lacks normal biologic
activity. Individuals with a deficiency of PTH may exhibit hypocalcemia and hyperphosphatemia. Hypocalcemia can cause weakness, muscle
cramps, excessive nervousness, headaches and uncontrollable twitching and tetany. Hyperphosphatemia can result in soft tissue calcium
deposition, which may lead to severe issues, including damage to the circulatory and central nervous systems. The most common cause of
hypoparathyroidism is damage to, or removal of, the parathyroid glands due to surgery for another condition.
Our
product candidate for hypoparathyroidism, EB612, is the first oral formulation of PTH (1-34, teriparatide) hormone replacement treatment
developed in a mini tablet form. The FDA and the European Medicines Agency have granted EB612 orphan drug designation for the treatment
of hypoparathyroidism. We believe that EB612 may have inherent advantages compared to experimental daily injectable treatments, including
convenience of administration, storage, and the potential for a flexible titration schedule. In 2015, we successfully completed a Phase
2a trial for EB612, which was an open-label, multicenter pilot study, evaluating the safety, tolerability and PK of EB612 in 19 patients
who had been diagnosed with hypoparathyroidism for at least a year and were taking ≥1gr/day of calcium and alfa-calcidol 25(OH)D
20ng/ml supplementation. Patients received PTH (1-34) 0.75 mg/dose tablets qid for 4 months (NCT02152228). The study achieved its primary
and secondary endpoints, including a significant reduction in calcium supplementation (42% reduction from baseline, (p=0.001), a decline
of 23% (p=0.0003) in median serum phosphate levels two hours following the first dose that was maintained for the duration of the study,
improvement in quality of life score and maintenance of median calcium levels above the lower target level for hypoparathyroidism patients
(>7.5 mg/dL) throughout the study. There were no treatment emergent adverse events of hypercalcemia reported and no treatment-emergent
serious adverse events.
We have since developed what we believe could be an improved formulation of EB612 based on new intellectual property, tailored to optimize its PK profile and the potential for reduced daily dosing. We initiated a PK study in May 2023, which is testing various potential drug candidates based on our new platform, including several which could be developed for the treatment of hypoparathyroidism. We expect to begin reporting our results from this study during the second half of 2023.
15
Patent
Transfer, Licensing Agreements and Grant Funding
Oramed
Patent Transfer Agreement
In
2011, we entered into a patent transfer agreement with Oramed, or the Patent Transfer Agreement, pursuant to which Oramed assigned to
us all of its rights, title and interest in the patent rights Oramed licensed to us when we were originally organized, subject to a worldwide,
royalty-free, exclusive, irrevocable, perpetual and sub-licensable license granted to Oramed under the assigned patent rights to develop,
manufacture and commercialize products or otherwise exploit such patent rights in the fields of diabetes and influenza. Additionally,
we agreed not to engage, directly or indirectly, in any activities in the fields of diabetes and influenza. Under the terms of the Patent
Transfer Agreement, we agreed to pay Oramed royalties equal to 3% of our net revenues generated, directly or indirectly, from exploitation
of the assigned patent rights, including the sale, lease or transfer of the assigned patent rights or sales of products or services covered
by the assigned patent rights.
The
Israeli Innovation Authority Grants
We
have received grants of approximately $0.5 million from the Israeli Innovation Authority (“IIA”) to partially fund our research
and development. The grants are subject to certain requirements and restrictions under the Israeli Encouragement of Research, Development
and Technological Innovation in Industry Law 5477-1984, or the Research Law. In general, until the grants are repaid with interest, royalties
are payable to the Israeli government in the amount of 3% on revenues derived from sales of products or services developed in whole or
in part using the IIA grants, including EB613, EB612 and any other oral PTH product candidates we may develop. The royalty rate may increase
to 5%, with respect to approved applications filed following any year in which we achieve sales of over $70 million.
The
rate of royalties may be accelerated and the royalty liability may increase (up to three times the amount of the grant amount and the
interest), if manufacturing of the products developed with the grant money is transferred outside of the State of Israel. Moreover, a
payment of up to 600% of the grant received may be required upon the transfer of any IIA-funded know-how to a non-Israeli entity. We signed
a contract with a global contract manufacturing organization to produce and supply pills for trials performed worldwide. We believe that,
because this production is not for commercial purposes, it will not affect the royalty rates to be paid to the IIA. Should the IIA successfully
take a contrary position, the maximum royalties to be paid to the IIA will be approximately $1.5 million, which is three times the amount
of the original grant plus interest thereon. Following the signing of the Amgen Agreement, we were required to pay 5.38% of each payment
by Amgen and up to 600% of the grant received plus interest. Through June 30, 2023, we had paid royalties to the IIA in the amount of
$95 thousand related to our former research collaboration and license agreement with Amgen (the “Amgen Agreement”) and other
master service agreements.
In
addition to paying any royalties due, we must abide by other restrictions associated with receiving such grants under the Research Law
that continue to apply following repayment to the IIA.
Financial
Overview
Since our inception, we have raised a total of $84.7 million from a combination of public and private equity offerings, IIA grants and the exercise of options and warrants. Since inception, we have incurred significant losses. For the three months ended June 30, 2023 and 2022, our operating losses were $2.3 million and $3.3 million, respectively. For the six months ended June 30, 2023 and 2022, our operating losses were $4.5 million and $7.1 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future.
As
of June 30, 2023, we had an accumulated deficit of $100.0 million. Our losses may fluctuate significantly from quarter to quarter and
year to year, depending on the timing of our clinical trials, our expenditures on research and development activities and any third-party
collaborations into which we may enter.
As
a result of our recurring losses from operations, negative cash flows and lack of liquidity, management is of the opinion that there is
substantial doubt as to the Company's ability to continue as a going concern. Our independent registered public accounting firm included
an explanatory paragraph in its report on our financial statements as of, and for the year ended, December 31, 2022, expressing the existence
of substantial doubt about our ability to continue as a going concern. The unaudited condensed consolidated financial statements included
herein have been prepared assuming that we will continue as a going concern and do not include adjustments that might result from the
outcome of this uncertainty. If we are unable to raise the requisite funds, we will need to delay the initiation of certain programs and
otherwise curtail or cease operations. See “Item 1A-Risk Factors-Risks Related to Our Financial Position and Need for Additional
Capital” contained in our 2022 Annual Report.
16
As of June 30, 2023, we had cash and cash equivalents of $9.1 million. We believe that our existing cash resources will be sufficient to meet our projected operating requirements into the third quarter of 2024, which includes the capital required to fund our ongoing operations, including R&D and the completion of the Phase 1 PK study related to our new generation platform and new formulations for EB612. However, this does not include the capital required to fund our proposed Phase 3 pivotal study for EB613 in osteoporosis and comparative PK study of EB613 and Forteo®. Our ability to commence such studies will depend on finalizing discussions with the FDA and will require additional funding, which may not be available on reasonable terms, or at all. Any delay or our inability to secure such funding will delay or prevent the commencement of these studies.
In
order to fund further operations, we will need to raise additional capital. We may raise these funds through a variety of means, including
private or public equity offerings, debt financings, strategic collaborations and licensing arrangements. Additional financing may not
be available when we need it or may not be available on terms that are favorable to us.
As
of June 30 2023, we had 19 full-time employees, two part-time employees and five consultants who provide services to us on a part-time
basis. Our operations are located in Jerusalem, Israel.
Revenue
To
date, we have not generated any revenue from sales of our products, and we do not expect to receive any revenue from our product candidates
unless and until we obtain regulatory approval and successfully commercialize our products.
Under
the Amgen Agreement, from 2019 through March 31, 2023, we recognized an aggregate amount of $1.7 million in accordance with ASC 606, "Revenues
from Contracts with Customers”. As previously reported, we and Amgen mutually terminated the Amgen Agreement in May 2023.
Research
and Development Expenses
Research
and development expenses consist of costs incurred for the development of our drug delivery technology and our product candidates. Those
expenses include:
| • |
employee-related expenses, including salaries,
bonuses and share-based compensation expenses for employees and service providers in the research and development function; |
| • |
expenses incurred in operating our laboratories
including our small-scale manufacturing facility; |
| • |
expenses incurred under agreements with CROs,
and investigative sites that conduct our clinical trials; |
| • |
expenses related to outsourced and contracted
services, such as external laboratories, consulting and advisory services; |
| • |
supply, development and manufacturing costs relating
to clinical trial materials; and |
| • |
other costs associated with pre-clinical and clinical
activities. |
17
Research
and development activities are the primary focus of our business. Product candidates in later stages of clinical development generally
have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of
later-stage clinical trials. We expect that our research and development expenses will increase significantly in future periods as we
advance EB613 and EB612 into later stages of clinical development and invest in additional preclinical candidates.
Our
research and development expenses may vary substantially from period to period based on the timing of our research and development activities,
including due to the timing of initiation of clinical trials and the enrollment of patients in clinical trials. For the three months ended
June 30, 2023 and 2022, our research and development expenses were $1.2 million and $1.4 million, respectively. For the six months ended
June 30, 2023 and 2022, our research and development expenses were $2.1 million and $3.1 million, respectively. Research and development
expenses for the three and six months ended June 30, 2023 and 2022 were primarily for the development of EB613 and EB612. The successful
development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing and estimated
costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows
may commence from, any of our product candidates. This is due to numerous risks and uncertainties associated with developing drugs, including:
| • |
the uncertainty of the scope, rate of progress,
results and cost of our clinical trials, nonclinical testing and other related activities; |
| • |
the cost of manufacturing clinical supplies and
establishing commercial supplies of our product candidates and any products that we may develop; |
| • |
the number and characteristics of product candidates
that we pursue; |
| • |
the cost, timing and outcomes of regulatory approvals; |
| • |
the cost and timing of establishing any sales,
marketing, and distribution capabilities; and |
| • |
the terms and timing of any collaborative, licensing
and other arrangements that we may establish, including any milestone and royalty payments thereunder. |
A
change in the outcome of any of these variables with respect to the development of EB613, EB612 or any other product candidate that we
may develop could mean a significant change in the costs and timing associated with the development of such product candidate. For example,
if the FDA or other regulatory authority were to require us to conduct preclinical and/or clinical studies beyond those which we currently
anticipate will be required for the completion of clinical development, if we experience significant delays in enrollment in any clinical
trials or if we encounter difficulties in manufacturing our clinical supplies, then we could be required to expend significant additional
financial resources and time on the completion of the clinical development.
General
and Administrative Expenses
General
and administrative expenses consist primarily of salaries, benefits, share-based compensation and related costs for directors and personnel
in executive and finance functions. Other general and administrative expenses include D&O insurance and other insurance, professional
fees for legal and accounting services, costs associated with maintaining and prosecuting our intellectual property portfolio and business
development expenses.
Financial
Income, Net
Financial
income, net is composed primarily of exchange rate differences of certain currencies against our functional currency.
18
Taxes
on Income
We
have not generated taxable income since our inception, and, as of June 30, 2023, we had carry-forward tax losses of $71.3 million. We
anticipate that we will be able to carry forward these tax losses indefinitely to future tax years. Accordingly, we do not expect to pay
taxes in Israel until we have taxable income after the full utilization of our carryforward tax losses. We provided a full valuation allowance
with respect to the deferred tax assets related to these carry-forward losses of the Company.
The
Company’s subsidiary, Entera Bio, Inc., is taxed separately under U.S. tax laws. As of June 30, 2023, Entera Bio Inc. had tax loss
carry-forwards of $26 thousand.
Results
of Operations
Comparison
of Three Months Ended June 30, 2023 and 2022
|
|
Three
Months Ended June 30, |
Increase
(Decrease) |
||||||||||||||
|
|
2023 |
2022 |
$ |
|
% |
|||||||||||
|
|
(In
thousands, except for percentage information) |
|||||||||||||||
|
Revenues |
$ |
- |
$ |
44 |
$ |
(44 |
) |
(100 |
)% | |||||||
|
Cost of revenues |
$ |
- |
$ |
33 |
$ |
(33 |
) |
(100 |
)% | |||||||
|
Operating expenses: |
||||||||||||||||
|
Research
and development expenses |
$ |
1,209 |
$ |
1,394 |
$ |
(185 |
) |
(13 |
)% | |||||||
|
General
and administrative expenses |
$ |
1,135 |
$ |
1,880 |
$ |
(745 |
) |
(40 |
)% | |||||||
|
Other
income |
$ |
(14 |
) |
$ |
(14 |
) |
$ |
- |
- |
% | ||||||
|
Operating
loss |
$ |
2,330 |
$ |
3,249 |
$ |
(919 |
) |
(28 |
)% | |||||||
|
Financial income, net |
$ |
(5 |
) |
$ |
(60 |
) |
$ |
55 |
(92 |
)% | ||||||
|
Income tax benefit |
$ |
- |
$ |
(4 |
) |
$ |
4 |
(100 |
)% | |||||||
|
Net
loss |
$ |
2,325 |
$ |
3,185 |
$ |
(860 |
) |
(27 |
)% | |||||||
Revenue
Revenues
for the three months ended June 30, 2022 of $44,000 were mainly attributable to pre-clinical R&D services provided to Amgen under
the Amgen Agreement. We did not recognize any revenue for the three months ended June 30, 2023 due to termination of the Amgen Agreement,
effective May 2, 2023, under which we provided no revenue-generating services for 2023. We did not generate any revenues prior to entering
into the Amgen Agreement.
Cost
of Revenues
Cost
of revenues for the three months ended June 30, 2022 of $33,000 were mainly attributable to pre-clinical R&D services provided to
Amgen under the Amgen Agreement. The decrease in cost was due to the lack of revenues under the Amgen Agreement, as described above, for
the three months ended June 30, 2023.
Research
and Development Expenses
Research
and development expenses for the three months ended June 30, 2023 were $1.2 million, as compared to $1.4 million for the three months
ended June 30, 2022. We reduced pre-clinical costs by $0.2 million, which was offset by an increase of $0.2 million in materials and production
costs in preparation of our Phase 3 clinical trial for EB613. There were no special one-time payments in the current period such as the
$0.2 million payment made to a former employee pursuant to the terms of his separation agreement.
19
General
and Administrative Expenses
General
and administrative expenses for the three months ended June 30, 2023 were $1.1 million, as compared to $1.9 million for the three months
ended June 30, 2022. The decrease of $0.8 million was mainly attributable to a decrease of $0.2 million in employee compensation, including
share-based compensation, a decrease of $0.3 million in professional fees and other consultants and a decrease of $0.2 million in D&O
insurance costs.
Financial
Income, Net
Financial
income, net for the three months ended June 30, 2023 and 2022 was $5,000 and $60,000, respectively. Our financial income is composed mainly
of exchange rate differences of certain currencies against our functional currency, which is the U.S. Dollar.
Comparison
of Six Months Ended June 30, 2023 and 2022
|
|
Six
Months Ended June 30, |
Increase
(Decrease) |
||||||||||||||
|
|
2023 |
2022 |
$ |
|
% |
|||||||||||
|
|
(In
thousands, except for percentage information) |
|||||||||||||||
|
Revenues |
$ |
- |
$ |
112 |
$ |
(112 |
) |
(100 |
)% | |||||||
|
Cost of revenues |
$ |
- |
$ |
87 |
$ |
(87 |
) |
(100 |
)% | |||||||
|
Operating expenses: |
||||||||||||||||
|
Research
and development expenses |
$ |
2,140 |
$ |
3,084 |
$ |
(944 |
) |
(31 |
)% | |||||||
|
General
and administrative expenses |
$ |
2,429 |
$ |
4,052 |
$ |
(1,623 |
) |
(40 |
)% | |||||||
|
Other
income |
$ |
(27 |
) |
$ |
(27 |
) |
$ |
- |
- |
% | ||||||
|
Operating
loss |
$ |
4,542 |
$ |
7,084 |
$ |
(2,542 |
) |
(36 |
)% | |||||||
|
Financial income, net |
$ |
(27 |
) |
$ |
(104 |
) |
$ |
77 |
(74 |
)% | ||||||
|
Income tax benefit |
$ |
- |
$ |
(11 |
) |
$ |
11 |
(100 |
)% | |||||||
|
Net
loss |
$ |
4,515 |
$ |
6,969 |
$ |
(2,454 |
) |
(35 |
)% | |||||||
Revenue
Revenues
for the six months ended June 30, 2022 of $112,000 were mainly attributable to pre-clinical R&D services provided to Amgen under the
Amgen Agreement. We did not recognize any revenue for the six months ended June 30, 2023 due to finalization of third year pre-clinical
R&D services and termination of the Amgen Agreement, effective May 2, 2023. We did not generate any revenues prior to entering into
the Amgen Agreement.
Cost
of Revenues
Cost
of revenues for the six months ended June 30, 2022 of $87,000 were mainly attributable to pre-clinical R&D services provided to Amgen
under the Amgen Agreement. The decrease in cost was due to the lack of revenues under the Amgen Agreement, as described above, for the
six months ended June 30, 2023.
20
Research
and Development Expenses
Research and
development expenses for six months ended June 30, 2023 were $2.1 million, as compared to $3.1 million for the six months ended June 30,
2022. The decrease of $1.0 million was primarily due to a decrease of $0.4 million in pre-clinical activity, a decrease of $0.1 million
in share-based compensation and a decrease of $0.5 million related to a one-time payment made to a former employee pursuant to the terms
of his separation agreement.
General
and Administrative Expenses
General
and administrative expenses for the six months ended June 30, 2023 were $2.4 million, as compared to $4.1 million for the six months ended
June 30, 2022. The decrease of $1.7 million was mainly attributable to a decrease of $0.3 million in employee compensation and $0.5 million
in share-based compensation, a decrease of $0.6 million in professional fees and other consultants and a decrease of $0.3 million in D&O
insurance costs.
Financial
Income, Net
Financial
income, net for the six months ended June 30, 2023 and 2022 was $27,000 and $104,000, respectively. Our financial income is composed mainly
of exchange rate differences of certain currencies against our functional currency, which is the U.S. Dollar.
Liquidity
and Capital Resources
Since
inception, we have incurred significant losses. For the three months ended June 30, 2023 and 2022, our operating losses were $2.3 million
and $3.2 million, respectively. For the six months ended June 30, 2023 and 2022, our operating losses were $4.5 million and $7.1 million,
respectively. As of June 30, 2023, we had an accumulated deficit of $100.0 million. We expect to continue to incur significant expenses
and losses for the next several years as we advance our products through development and provide administrative support for our operations.
As
a result of our recurring losses from operations, negative cash flows and lack of liquidity, management is of the opinion that there is
substantial doubt as to the Company's ability to continue as a going concern. If we are unable to raise the requisite funds, we will need
to curtail or cease operations. See in “Item 1A-Risk Factors” in our 2022 Annual Report.
Since
our inception, we have raised a total of $84.7 million, including $25.3 million through completed or terminated at-the-market-offering
(“ATM”) programs, $14.3 million in our December 2019 private placement, $11.2 million in our IPO in 2018 and $33.9 million
in aggregate funding from a combination of grants, exercise of options and warrants and private placements of Ordinary Shares, preferred
shares and debt prior to our IPO. In addition, as of June 30, 2023, we had received approximately $1.7 million under the Amgen Agreement,
which has since been terminated. As of June 30, 2023, we had cash and cash equivalents of $9.1 million. Our primary uses of cash have
been to fund research and development, general and administrative expenses and working capital requirements, and we expect these will
continue to be our primary uses of cash.
On
September 2, 2022, we entered into a Sales Agreement with SVB Securities LLC, as sales agent, to implement an at-the-market
offering program, under which we may from time to time offer and sell up to 5,000,000 Ordinary Shares (the “SVB ATM Program”)
under our currently effective Registration Statement on Form S-3 and a related prospectus supplement forming a part thereof. The sales
agent is entitled to a fixed commission of 3% of the aggregate gross proceeds as well as reimbursement of expenses.
Funding
Requirements
We
believe that our existing capital resources will be sufficient to meet our projected operating requirements into the third quarter of
2024, which includes the capital required to fund our ongoing operations, including R&D and the completion of the Phase 1 PK study
related to the new formulation EB612. However, this does not include the capital required to fund our proposed Phase 3 pivotal study for
EB613 in osteoporosis and comparative PK study of EB613 and Forteo®. Our ability to commence such studies will depend on finalizing
discussions with the FDA and will require additional funding, which may not be available on reasonable terms, or at all. Any delay or
our inability to secure such funding will delay or prevent the commencement of these studies.
21
We
have based these estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently
expect. Because of the numerous risks and uncertainties associated with the development of our product candidates, and the extent to which
we may enter into collaborations with third parties for development of these or other product candidates, we are unable to estimate the
amounts of increased capital outlays and operating expenses associated with completing the development of our current and future product
candidates. Our future capital requirements will depend on many factors, including:
|
• |
the costs, timing and outcome of clinical
trials for, and regulatory review of, EB613, EB612 and any other product candidates we may develop; | |
|
• |
the costs of development activities for
any other product candidates we may pursue; | |
|
• |
the costs of preparing, filing and prosecuting
patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and | |
|
• |
our ability to establish collaborations
on favorable terms, if at all. | |
We
do not have any committed external sources of funds. To the extent that we raise additional capital through the sale of equity or convertible
debt securities, the ownership interest of our then-existing shareholders will be diluted, and the terms of these securities may include
liquidation or other preferences that may adversely affect our existing shareholders’ rights as shareholders. Debt financing, if
available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring
additional debt, making capital expenditures or declaring dividends and may include requirements to hold minimum levels of funding. If
we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish
valuable rights to our technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable
to us. If we are unable to raise additional funds through equity or debt financings or collaborations, when needed, we may be required
to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market
our oral PTH product candidates and any other product candidates that we would otherwise prefer to develop and market ourselves.
Our
unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2023 included elsewhere in
this Quarterly Report note that there is substantial doubt about our ability to continue as a going concern as of such date. This means
that our management has expressed substantial doubt about our ability to continue our operations without an additional infusion of capital
from external sources. The unaudited condensed consolidated financial statements have been prepared on a going concern basis and do not
include any adjustments that may be necessary should we be unable to continue as a going concern. If we are unable to finance our operations,
our business would be in jeopardy, and we might not be able to continue operations and might have to liquidate our assets. In that case,
investors might receive less than the value at which those assets are carried on our financial statements, and it is likely that investors
would lose all or a part of their investment.
22
Cash
Flows
Six
Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022
The
following table sets forth the primary sources and uses of cash for each of the periods set forth below:
|
|
Six
Months Ended June 30, (unaudited) |
|||||||
|
|
2023 |
2022 |
||||||
|
|
(In
thousands) |
|||||||
|
Net Cash used in operating
activities |
$ |
(3,168 |
) |
$ |
(7,619 |
) | ||
|
Net Cash used in investing
activities |
(12) |
(42) |
||||||
|
Net Cash provided by
financing activities |
5 |
13 |
||||||
|
Net decrease in cash
and cash equivalents |
$ |
(3,175 |
) |
$ |
(7,648 |
) | ||
Net
Cash Used in Operating Activities
Net
cash used in operating activities for the six months ended June 30, 2023 was $3.2 million, consisting primarily of our operating loss
of $4.5 million, which was partially offset by an increase of $0.3 million in our working capital and $1.0 million of share-based
compensation and depreciation expenses.
Net
cash used in operating activities for the six months ended June 30, 2022 was $7.6 million, consisting primarily of our operating loss
of $7.1 million and a decrease of $2.2 million in our working capital, which was partially offset by approximately $1.7 million
of share-based compensation and depreciation expenses.
The
decrease of $4.4 million in cash used in operating activities for the six months ended June 30, 2023 compared to the same period in 2022
was mainly attributed to a decrease of $2.6 million in our operating loss and an increase of $2.5 million in working capital, primarily
due to a decrease in payments to suppliers and services providers, which were partially offset by a decrease of $0.7 million in share-based
compensation.
Net
Cash Used in Investing Activities
Net
cash used in investing activities for the six months ended June 30, 2023 and 2022 consisted primarily of the purchase of property and
equipment.
Net
Cash Provided by Financing Activities
Net
Cash provided by financing activities for the six months ended June 30, 2023 consisted of the net proceeds of $5 thousand from the issuance
of Ordinary Shares under the SVB ATM Program.
Net
Cash provided by financing activities for the six months ended June 30, 2022 consisted of the net proceeds of $13 thousand from the issuance
of Ordinary Shares due to exercise of options .
Contractual
Obligations
On
April 17, 2023, we entered into an amendment to our lease for our principal offices in Israel to extend the lease term by
five years, or through 2028. As amended, the Company has the option to exit the lease earlier, in December 2024 and in June 2026. The
average rent over the new five-year extension is $180 thousand per year.
Other
than as disclosed above, there have not been any material changes in our assessment of material contractual obligations and commitments
as set forth in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our
2022 Annual Report.
23
Critical Accounting Policies and Estimates
See
Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting
Policies” and our consolidated financial statements and related notes included in the 2022 Annual Report for accounting policies
and related estimates we believe are the most critical to understanding our consolidated financial statements, financial condition and
results of operations and which require complex management judgment and assumptions, or involve uncertainties. The preparation of consolidated
financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue,
expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. There have been no changes to our critical accounting policies or their application since the date
of the 2022 Annual Report.
Recently
Issued Accounting Pronouncements
Certain
recently issued accounting pronouncements are discussed in Note 2 to the unaudited condensed consolidated financial statements included
elsewhere in this Quarterly Report.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
required for smaller reporting companies.
ITEM
4. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Our
management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal financial officer), has evaluated
the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act and regulations promulgated thereunder) as of June 30, 2023, which we refer to as the Evaluation Date. Based on such evaluation, those
officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.
Changes
in Internal Control over Financial Reporting
There
have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
24
PART
II – OTHER INFORMATION.
ITEM
1. LEGAL PROCEEDINGS
We
are not currently a party to any material legal proceedings.
ITEM
1A. RISK FACTORS
There
have been no material changes with respect to the risk factors disclosed in Part I, Item 1A. of our 2022 Annual Report.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
ITEM
5. OTHER INFORMATION
During
the quarter ended June 30, 2023, none of our officers or directors adopted or terminated any contract, instruction or written plan for
the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange
Act or any “non-Rule 10b5-1 trading arrangement”, as defined in Item 408 of Regulation S-K.
ITEM
6. EXHIBITS
|
Exhibit
No. |
|
Description
of Exhibits |
|
|
||
|
|
||
|
|
||
|
101.INS |
|
XBRL Instance Document. |
|
101.SCH |
|
XBRL Taxonomy Extension
Schema Document. |
|
101.DEF |
|
XBRL Taxonomy Extension
Definition Linkbase Document. |
|
101.CAL |
|
XBRL Taxonomy Extension
Calculation Linkbase Document. |
|
101.LAB |
|
XBRL Taxonomy Extension
Label Linkbase Document. |
|
101.PRE |
|
XBRL Taxonomy Extension
Presentation Linkbase Document. |
|
104 |
Cover Page Interactive
Data File (embedded within the Inline XBRL document) |
*
Furnished herewith.
25
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
|
|
ENTERA BIO LTD. |
|
|
|
|
Date: August 11, 2023 |
/s/ Miranda Toledano |
|
|
Miranda Toledano Chief Executive Officer |
|
|
(Principal
Executive Officer) |
|
|
|
|
Date: August 11, 2023 |
/s/ Dana Yaacov-Garbeli |
|
|
Dana Yaacov-Garbeli Chief Financial Officer |
|
|
(Principal
Financial and Accounting Officer) |
26